Forgive me if you don’t live in Manhattan and don’t care about Manhattan and don’t even like people from Manhattan, but I just spent the holiday there and learned of the next shoe to drop: Maintenance.
Given the chance to chat with several co-op owners, I asked the expected question: Will all the Wall Street layoffs really put a bullet in the island’s real estate market? The answers were mixed, some citing the still-high demand for housing in a city with relatively limited supply. Others were more nervous but still cited the influx of families to Manhattan after the city cleaned up its image, and still others remarked that the international influence would save the market from total catastrophe.
So I poured myself another martini and set my worries aside, until one owner piped up, “Of course I won’t be able to afford my maintenance next year.” Huh? Well, the Mayor did mention a few months back that all these job losses on Wall Street would hit the economy of the city pretty hard, which means that in order to keep things up and running, he would likely have to raise taxes.
A lot of you folks who live in the real world (i.e. not in Manhattan) may not know how the whole co-op thing works. You basically own shares in an apartment building, and your shares are manifested in the actual apartment. But since you own a part of the building, you have to pay property taxes on the building itself. Your “maintenance” is the monthly fee you pay, depending on the size of your apartment. This maintenance includes the real estate taxes, and the general workings of the building, like heating oil, water, sanitation, salaries of building employees, etc. On top of the property taxes, a lot of buildings locked in prices on heating oil when oil prices were still surging. Those hedges obviously will cost them now.
I’ve now heard that maintenance in some buildings could rise as high as 40%. Imagine if your mortgage payment went up 40% suddenly?? Now thanks to those sticky co-op boards, even during the housing boom buyers had to put money down and had to show proof of income (not to mention proof of just about every other asset in their personal baskets). So the mortgage issue doesn’t really apply. But the maintenance issue could be just as bad.
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