Are Vintage Properties Out of Favor? 434 W. Oakdale in Lakeview
A month ago we chattered about this 3-bedroom vintage unit at 434 W. Oakdale in Lakeview.
See our March 2011 chatter here.
At that time, the unit had been reduced 22% from its 2005 purchase price.
It has recently been reduced another $26,000.
It is a short sale.
Recently, the listing agent posted a comment on CribChatter that despite the enormous price drop, the property was garnering little attention from buyers and she thought it was because there weren’t many people with a “taste for vintage.”
I questioned whether or not it being a short sale could also be scaring away potential buyers. She replied:
“It’s hard to say how many buyers may not be looking at Oakdale or other places that are listed as short sales. Certainly the bad experiences of many buyers trying to purchase short sales scares some away. However, in the case of Oakdale, it wasn’t a matter of showings dropping off once we listed it as a short sale. I believe it’s more a function of buyers not favoring vintage overall, and the need for a little updating on this unit. It’s such a huge place with wonderful room sizes and vintage detailing. I think it’s a real value at our current price. The bank has not approved the price yet, but I’m confident of it. Thanks.”
The unit has many of its vintage features intact including a beamed ceiling in the dining room and vintage wood moldings.
The listing agent concedes that the kitchen and one of the baths needs updating.
The kitchen has green cabinets and white appliances.
But this property is still 2300 square feet with central air, washer/dryer in the unit and covered parking in East Lakeview.
Is vintage really “out” or is it simply that any property not remodeled gets passed over now?
(And remember- the furniture won’t be there when you move in.)
Anne Laughlin at @Properties still has the listing. See the pictures here.
Unit #2: 3 bedrooms, 2 baths, 2300 square feet, covered parking
- Sold in May 1989 for $275,000
- Sold in May 1991
- Sold in September 1996 for $400,000
- Sold in September 2005 for $675,000
- Originally listed in April 2010 for $699,900
- Reduced
- Was listed in March 2011 as a “short sale” for $525,000
- Reduced
- Currently listed for $499,900
- Assessments of $389 a month
- Taxes of $9794
- Central Air
- Washer/Dryer in the unit
- Bedroom #1: 13×13
- Bedroom #2: 15×10
- Bedroom #3: 13×13
- Sun room: 18×10
This open floor plan with an uninspired, dated kitchen ruins the vintage. The overall quality is poor thus updating is needed. I think there are therefore several reasons why this is being overlooked.
Agree with Ed, nothing else to add
I like vintage, but this just doesn’t show well. Weird melange of with kitchen and dining room. But it does have a lot of space, with parking, in Nettlehurst. A buyer needs to get passed the furniture and kitchen, though, to see that.
HD (or anyone): what is the loan history on this place? How did these owners let it get to a short sale?
I think people want vintage bones with an updated interior – or more classic interior. And being a short sale definitely limits the market. There are plenty of buyers on short time tables (I don’t know why people let themselves get into this position) that can’t afford the 5 month wait.
Looks like they bought it at the peak – 1 year with 5% down. Then a year later either refinanced part of the loan or took out more money. In the end they owed at least $700K on a home they paid 675K for.
I actually like this place including the furniture. The kitchen can be updated with new appliances and refacing the cabinets for not a ton of money. don’t see any pics of the bathroom.
however, a half a million for a 3/2 when I can buy a SFH for less turns me off. Yeah not in the same location, which is the distinction. Also the short sale probably scares more people off.
I’d venture that condo units in small (2-8) condo associations are now less attractive to buyers, for valid concerns regarding “condo wars” among small groups of owners, financial instability of assocation, pending major repairwork, and relative unpredictable mortgage market if too many units are for-sale, for-rent, etc.
Small associations usually require polite, reasonable, and cooperative owners, with active participation or “put-up and shut-up” attitudes. Unfortunately that’s rarely found. Friends own unit in a small self-managed Gold Coast association for three decades, with peaceful association relations until recently. Unit configuration requires cooperation and gracious manners from owners. “War” began with arrival of two new owners five years ago, who colonized common area with personal possessions (retired sofas, toys, bikes, etc) in front of other owners’ front doors, called association president at all hours to demand immediate repairs to non-urgent items such as intercom, engaged in strenuous name-calling, allowed dog poop in common area patio, kids whacking ball on neighbors’ wall, etc. Older unit owners, long living in peace, suddenly experienced turmoil on a daily basis. There’s usually no neutral party to maintain association by-laws and civility, certainly not for a self-managed association.
I think short sales do severely limit the market. It takes away most of the common sales practice that agents are trained to do and puts a portion of that process in the banks hands. Meanwhile the banks don’t seem to care, at all. If they did the timetable to close would be 2-3 months max and not 6-12.
Executed Recorded Document Type Amount
09/23/2005 10/27/2005 MORTGAGE $540,000.00
Executed Recorded Document Type Amount
09/23/2005 10/27/2005 MORTGAGE $101,250.00
_________________________________________
$641,250 / 675,000 = 95% financed.
Dated, roughly $10,000 real estate taxes, $400 assessments, in a very congested area, and of course, a half a million dollar price tag. Again, everybody in the city with any sort of unique property or larger space in a halfway decent neighborhood thinks their property is worth half a million dollars or more. The sidelines are full of buyers who want to sell for half a million dollars or more, but they know the market is bad; so they’re simply waiting for a better market – a market that will never come. The $2,116 PI plus $389 assessments plus $833 taxes gives me a back of the envelope monthly payment of roughly $3,330 given a 20% downpayment at 4.75%. Figure the 28% gross monthly payment and that’s a $12,000 gross monthly income which is $144,000 to live in the middle unit of a vintage 2-flat, with one parking space, in a dated unit. We don’t live in NYC where Bud Fox would be happy to pay a cool mil for a two bedroom unit in a dated building and then hire his girlfriend interior decorator to rehab the place from top to bottom.
I also like vintage, but there’s vintage and there’s outdated. The kitchen is outdated and from the previous comments on the bathrooms (pictures no longer available?) it sounds like they are too.
Architect,
That is interesting – there are obviously good and bad things about every type of housing out there. Many of my friends actually prefer to live in small buildings becuase the assessments tend to be much lower (100-300 as opposed to 500-800 for bigger buildings). I guess what they don’t realize is that there may be special assessments down the road (or maybe they DO realize this but hope to be gone by then).
“There are plenty of buyers on short time tables (I don’t know why people let themselves get into this position) that can’t afford the 5 month wait.”
If you are currently renting to begin with, yes. But if you have to sell your place first then buyers want to move right into the next place. Moving once is a pain, moving twice in a short time span is a huge pain.
The subject of renting vs owning often comes up on this site. Many here question how all of the 2/2 in LP/LV are going to be sold (and to whom). Many think that most young buyers are going to rent until they can afford an SFH or big enough place for a family.
I have to think that this is untrue and unlikely to happen and think that the market WILL come back for units like this one (2-3 bedrooms in the 500-600k range). Why? because rents are skyrocketing – more importantly there aren’t any good/decent rentals out there for a decent price. We are at rental parity or above for most areas of the Gold Coast, LP and Lakeview. Renters are paying a premium to not have the hassles of owning (and coming up with a large down payment).
I recently sent letters to all of my tenants stating that I was going to raise their rents (10-20%). I gave them the option of getting out of their leases now if they wanted (I was hoping that they would take me up on the offer because rental activity is insanely high right now and I know I could get more money). Although many of the tenants were pissed and some stated they were going to move out – ALL of them decided to stay (when they found out what was out there).
Bottom line is that these people will start buying because:
1. they will get sick of being dicked around by landlords and having to move every year
2. they will realize that they are paying more to rent than to own.
3. they will get tired of the uncertainty of rent prices.
Clio- my rent was just raised $25 a month. Wow. I’m so scared. I’d better buy right now!
But the bigger question is: how will all these scared renters come up with the downpayment? We’ve chattered about this often. You’re assuming that these renters are sitting there with $75,000 in cash that they can just deploy into buying something when that isn’t even close to the truth. Many renters have trouble coming up with even a 1-month security deposit.
It will take all the renters 5 or 6 years to save the money for a downpayment and by then they’re not buying the 2/2 in Lakeview or LP. They are buying a house in the suburbs.
Also- I agree with Dan’s comment in the 504 Barry thread- that interest rates are set to skyrocket shortly. People have been lulled by the stimulus into thinking that 5% rates are “normal” when they are not. We could see them jump pretty quickly- especially as QE ends (in June) and inflation heats up. All the major central banks but the BOE and the Fed have started raising rates now.
Who will buy the $500k property when rates are at 7% or 8% or higher? There are few buyers now. There will be even fewer with higher rates. That means prices will have to fall further in order to find buyers.
Also- Clio keeps saying there are tons of properties “under contract” in Lakeview and Lincoln Park in the $500k to $800k price point. Well- if there are 10 on the market and 2 are under contract, then I suppose that means that 20% are under contract.
So?
That stat doesn’t tell you much.
If you look on redfin at this property on Oakdale- you can see very few actual sales over the last 3 months in the immediate vicinity of this unit- and even fewer near this price point (most are on the lower end.) Yes- it was the winter so some seasonality is a factor- but it’s not like sales are gangbusters.
So it looks like sales are actually pretty anemic in this “prime” part of Lakeview. We’ll have to see what happens in the next 2 or 3 months. But there are a lot of nearby properties priced in this same price range. They’re all just sitting there.
“Who will buy the $500k property when rates are at 7% or 8% or higher? There are few buyers now. There will be even fewer with higher rates. That means prices will have to fall further in order to find buyers.”
Your generation (and I am assuming that you are in your 20s or 30s) is so self-centered and myopic that you guys think that this type of economic/real estate downturn has never happened before. Well, it has happened before and real estate (yes, even the 500k properties) have done just fine.
“Also- Clio keeps saying there are tons of properties “under contract” in Lakeview and Lincoln Park in the $500k to $800k price point. Well- if there are 10 on the market and 2 are under contract, then I suppose that means that 20% are under contract.”
Huh? – look at redfin – look at 60657 and see how mnay properties are for sale and how many are under contract – there are more than 10…… (and there will be many more coming under contract with the flurry of activity seen this weekend).
“I believe it’s more a function of buyers not favoring vintage overall, and the need for a little updating on this unit.”
This unit is not really nice vintage – it’s mostly not that great vintage and a mix of weird styles and finishes. Short sales are a huge hassle, so it shouldn’t really surprise anyone that the market for this one is not huge. The price on this one doesn’t seem THAT aggressive, either. And look at those taxes. Whining about how there are no buyers for the unit you’re trying to sell is not quite but almost a BLACKLIST offense.
I had already written this in another thread discussing this property, so I just copy and paste : )
I think the furniture in this unit really do it a disservice. The terrible yellow carpet, the pink huge grandma couches, the glass table in the dining room are killers. Of course the fireplace looks pretty bad and dated too, but nothing that cannot be fixed. Dining room chairs are terrible. I just cannot stand this style of chairs and man people love them in this country. If only there were some simple formal looking chairs.
Kitchen is sad too. The white appliances, the sink, countertops and the green cabinets…
Then there is the master bedroom with those terrible window treatments (for heaven’s sake take them down) and remove the unsightly bedside table and lamps and whatever it is hanging on top of the bed.
Please remove the window treatments from the other bedroom too. Also that sad sad third bedroom with the checkered carpet, desk and the unsightly chair would look so much better if it were empty.
I don’t even know if photo 13 is a den or a study or what but it is just fugly.
I don’t mean to be unkind, but the way the place is staged makes it very hard for a young couple with perhaps small children (I assume that is the target market) to imagine themselves living here. Looks like Miss Havisham of 21st century lives here.
I have seen this unit. It is now vacant. The reason this is not selling is that NOTHING has been done to this in years. The kitchen is bad, the floor is vinyl, the room placement is awkward and the master bath is awful. It needs 150-200,000 to bring this into this century. Next door is a condo that I have not toured, but was just reduced to $699,000. Why buy this and have to do the work when the one next door is already done and has some better features?
I don’t get how this place ever sold for $675k. Good bones, but severely dated.
This place isn’t selling because:
1) It is a short sale and no one wants to put up with that potential nightmare and uncertainty.
2) It need some updating. The finishes look really dated compared to the newer stuff at a similar price point. Combine that with the somewhat grandma-ish decorating most people won’t look twice.
I don’t mind dealing with a short sale if it were a great deal. If the floors are vinyl as gardengirl says, no wonder it is not selling. This should be priced at 400K given how much renovation the unit needs. Just those closets with mirror doors are enough of buzz kill.
“It needs 150-200,000 to bring this into this century. Next door is a condo that I have not toured, but was just reduced to $699,000. Why buy this and have to do the work when the one next door is already done and has some better features?”
For $200k, you could *completely* re-do this place, and end up with nicer finishes than the neighbor, especially in the kitchen. Were 2006-vintage financing options available, that would happen, but they aren’t. Obviously wouldn’t get the gator deck, tho.
I agree, we’d also be happy to deal with a short sale for the right property. In fact in our price range short sales are pretty much all there is. It’s not the short sale that’s holding it back.
this place is looking very old and needs tons of updating and work. Avacado cabinets and countertops from the 80’s? mirrored closet doors circa 1982? come on
you can’t just hold a property and expect appreciation without putting any work into the place, especially vintage places.
“you can’t just hold a property and expect appreciation without putting any work into the place”
Seemed to work okay for the three prior owners.
Rents are sky-rocketing? 20% increases? I find that hard to believe unless you had to lower rents significantly just to get tenants into the unit in the first place. I have friends in Lakeview that just negotiated a $25 decrease in their rent this past month. The landlord didn’t really want to deal with changing over the unit and showing it to people, etc.
“you guys think that this type of economic/real estate downturn has never happened before. Well, it has happened before”
At least in this country we have never had a real estate bubble of this magnitude. Not even close and it’ll take a while longer to get back to normal.
Why do people who wish to live in a $500k SFH even view, let alone take the time to comment upon, CC threads featuring $500k condos?
Interesting how folks who are so obsessed with the end-all-be-all dream of SFH ownership take quite such an interest in condos. Could it be that you actually, deep down somewhere, recognize that the areas in which one can buy a $500k SFH are actually not at all, not even remotely, comparable to living in the areas in which many people would (still) pay upwards of $500k for a two or three bedroom condo?
“Rents are sky-rocketing? 20% increases?”
Has anyone who is renting had anything close to a 20 percent increase recently? My rent went up by only about 2 percent in my renewed lease that starts next month. I have seen very volatile rent changes in “luxury” apartments in river north etc. areas in the past. Maybe some of those are going up a lot.
“I have seen very volatile rent changes in “luxury” apartments in river north etc. areas in the past. Maybe some of those are going up a lot.”
Exactly – I am not sure about the 2-3 bedroom walk ups in west lakeview, roscoe village, bucktown, etc. – I am talking about studios -2 bedrooms in high-rises in streeterville, gold coast, lincoln park and lakeview. Rents are ridiculously high there right now.
Yikes…I echo others when I say that I LOVE vintage but not when it’s been remuddled into something like this. The formal dining room was completely destroyed by opening it up to the kitchen.
And, the other issues aside, the short sale is definitely hurting this place. It’s add a ton of waiting and complexity to the process and you always run the risk of waiting months and months for the bank to just turn down the contract price.
So it’s not being “vintage” that’s hurting this one. There’s a lot working against this particular unit.
” “Rents are sky-rocketing? 20% increases?”
Has anyone who is renting had anything close to a 20 percent increase recently? My rent went up by only about 2 percent in my renewed lease that starts next month. I have seen very volatile rent changes in “luxury” apartments in river north etc. areas in the past. Maybe some of those are going up a lot.”
I agree, based on my recent experience, I have to wonder if the hype around supposed rent increases are just that, hype.
I rent a one-bedroom in a new (3 year old) condo building, and just renewed my lease at the same rent I was paying ($1650/month). I imagine he’s happy to keep me here at the same rent; even IF he would be able to have it occupied right after I would move out, he still needs a broker to fill it (1 month rent fee), and there’s no guarantee the new tenant would be as worry-free as me (paying rent on time, no requests for any maintenance.)
“I am talking about studios -2 bedrooms in high-rises in streeterville, gold coast, lincoln park and lakeview. Rents are ridiculously high there right now.”
I don’t have much of idea of whether what you claim is true. What’s your support for this? Have you actually raised rents on your tenants by 20 percent (as opposed to not being able to persuade them to end their existing leases)? What have you seen in rents, with actual examples?
My rent remained the same at recent renewal. This IS a change from the previous 2 years, however, when it decreased by ~10% and 6%, respectively.
I suspect the comments here will be used to “prove” that the majority of cc’rs are renters.
This place will not go for over $500,000. No way. The bank will just have to sit on it for years.
There is something going on in the rental market. I just rented out one of my units for around 8% more. What was interesting is that there was a bidding war for the unit, both parties would not go very high above ask on the rent but the winner paid 6 months rent in advance plus two month security deposit.
That being said, the unit rented at a higher rate 3 years ago.
valasko I am seeing the exact same thing. In addition, my broker has been INUNDATED with calls for rentals. Almost all of the good rentals go within hours/days and there are multiple bids on them. It is absolutely insane – I haven’t seen anything like this since Boston in the 90s/early 2000s.
“Your generation (and I am assuming that you are in your 20s or 30s) is so self-centered and myopic that you guys think that this type of economic/real estate downturn has never happened before. Well, it has happened before and real estate (yes, even the 500k properties) have done just fine.”
This is just a straight up lie, anyone that has taken a serious look at the perfect storm economics/political policies that that created and now are deflating this bubble knows this has never happened in this country.
You have to list actual rental rates to really mean anything. For example, if you rented a 2 bedroom in a highrise in 2007 at $2200 per month, but in 2009 had to lower the rent/give concessions to fill the unit and rent went down to $1900, but not raised the rent to $2,100, you technically raised the rent over 10%, but are still below 2007. Who cares. You guys are hyping something that really doesn’t mean much.
“You have to list actual rental rates to really mean anything. For example, if you rented a 2 bedroom in a highrise in 2007 at $2200 per month, but in 2009 had to lower the rent/give concessions to fill the unit and rent went down to $1900, but not raised the rent to $2,100, you technically raised the rent over 10%, but are still below 2007. Who cares. You guys are hyping something that really doesn’t mean much.”
i disagree. if you listed a property that sold for $300k in 2009, and $350k in 2010 but sold for $400k in 2006, and were seeing this all over, i would say that prices may be increasing. in 2007 RE prices were a lot higher than they are today, of course rents were also going to be higher.
Please list some actual rents by year for your units. Its not like there is an across the board 10-20% increase, even for highrises. Everything is negotiable, and people need to be smart. All these condo owners out there will now think they can rent their unit for 10-20% more based on what people are spewing on here. Same thing goes for the bogus stories in the newspaper hyping real estate and rising prices for condos and rents.
“All these condo owners out there will now think they can rent their unit for 10-20% more based on what people are spewing on here. Same thing goes for the bogus stories in the newspaper hyping real estate and rising prices for condos and rents.”
Two things:
1. It is true – owners CAN expect to get several offers probably above what they are getting right now – especially if their unit is in a desirable location.
2. No owners are going to base their decisions on what is said on cribchatter.
List some actual rents by year. Otherwise this is just hype.
Some examples:
111 E. Chestnut – 2/2
2007: 3600 w/ parking
2008: 3600 w/parking
2009: 3200 w/parking
2010: 3200 w/parking
2011: 3800 w.o parking parking 300/month – rented same day
33 W State: 2/2
2008: 2700 w/ parking
2009: 2700 w/parking
2010: 2700 w/ parking
2010: 3100 w/ parking
33 W. State: 1/1
2008: 1400 w/ parking
2009: 1500 w/ parking
2010: 1275 w parking
2011: 1500 w/ parking
10 E ontario: 1/1
2008: 1600 w/parking
2009: 1500 w/ parking
2010: 1450 w/ parking
2011: 1700 w/ parking
More importantly and telling is that rentals in these areas are going the same day they are listed – with many offers.
“33 W State”
??
My rent has not increased in 3 years. I like to believe that my landlord wants to hold on to good tenants. Reality is that this probably means I was paying too much to begin with.
I do know at three work colleagues who have gone back to their landlord when it is time to renew and actually had their rent REDUCED.
“33 W State”
“??”
Delaware (at State) probably? Rents seem about right.
““33 W State”
Sorry – typing too fast – meant 33W ontario
“I do know at three work colleagues who have gone back to their landlord when it is time to renew and actually had their rent REDUCED.”
uhhh – probably not in the past month…..
again, it all depends on the type of unit and neighborhood. I haven’t increased rent on any of my houses in the suburbs and would actually consider a rent reduction to keep the tenants. This is because, with a house, there is SO much to do when someone moves out – expenses to clean a house after normal wear and tear for a year are going to be a few thousand. Then you have a possible one month period when nobody is there – so when you are talking about a house that rents for 4000k/month – you are talking about a loss of 7000k. that is why I would reduce rent to 3800 rather than lose a good tenant. but again – houses are different than condos.
“They are buying a house in the suburbs.”
Not with $5 / gal gas and hipster preferences they aren’t.
Here are some actual historical 2/2 rentals in 111 E Chestnut:
28A 1/12/2007 $3,150
28A 2/7/2007 $3,350
20A 5/16/2007 $3,150
20A 7/22/2009 $2,800
28A 12/2/2009 $3,000
24A 5/9/2010 $2,500
37A 7/30/2010 $3,350
29A 3/7/2011 $3,150
28A 3/11/2011 $3,200
55C 1/8/2007 $3,200
17C 4/18/2007 $2,550
57C 6/6/2007 $3,250
28C 9/6/2007 $3,000
30C 10/31/2007 $2,950
36C 12/10/2007 $2,800
57C 1/28/2009 $3,300
36C 9/11/2009 $2,600
57C 12/11/2009 $2,750
30C 4/26/2010 $2,300
55C 5/6/2010 $3,500
49C 5/18/2010 $4,200
“Who will buy the $500k property when rates are at 7% or 8% or higher? There are few buyers now. There will be even fewer with higher rates. That means prices will have to fall further in order to find buyers.”
Rates almost by definition mirror inflation (and consequently growth) in the economy. Wage inflation accompanies this, so people also make more. It’s not as if wages stay stagnant and you see inflation at 10%. If you did, that would lead to a massively lower standard of living. Didn’t someone conclusively analyze that rates did not hamper overall affordability through the inflation periods of the 1970s and 1980s?
Glad you agree with me that we’re headed for inflation though.
Meanwhile, while inflation kicks up, all that fixed debt devalues. Problem solved.
People were buying back in 1990 in east LP when jumbo mortgage rates were 10% plus. The conforming loan limit at the time was $187,500. If one refinanced as rates went down, and just did “rate&term” rather than “equity out” they would be in good shape now. It’s always the first few months of changing interest rates which seems to hold people back, then it becomes the norm. Hindsight helps us all, but back in 2005 when these buyers purchased and only put 5% down they no doubt thought they would never be able to afford a place if they didn’t buy with whatever they had saved. The same thing happens in the stock market over and over.
I think Clio has a good understanding of the market.
“Here are some actual historical 2/2 rentals in 111 E Chestnut:”
This is precisely why we should not just take G’s data at face value. Whether he knows it or not – he has excluded the tier of 2/2 that I own (the “k” tier). So he is able to fool many people who look at the amount of data he puts out there and who think that it MUST be accurate. Data for k rentals, please…
25K 5/3/2008 $6,000
26K 6/13/2008 $3,400
22K 4/18/2009 $2,850
26K 6/21/2009 $3,200
45K 5/15/2010 $5,000
29K 11/8/2010 $3,065
11K 3/23/2011 $3,100
Who should be trusted?
33 W Ontario sample of 2/2 tiers (I have more…):
40A 1/6/2007 $2,500
16A 2/15/2007 $2,450
24A 5/25/2007 $2,600
41A 6/10/2007 $2,700
47A 9/16/2007 $3,000
36A 12/5/2007 $2,900
19A 3/11/2008 $2,700
21A 7/11/2008 $2,700
32A 7/29/2008 $2,500
22A 8/21/2008 $2,600
52A 12/8/2008 $3,200
33A 4/9/2009 $2,250
19A 6/3/2009 $2,600
36A 7/8/2009 $2,750
47A 9/6/2009 $2,800
40A 2/25/2010 $2,450
38A 3/29/2010 $3,000
44A 4/15/2010 $2,900
24A 4/16/2010 $2,400
15A 6/22/2010 $2,350
36A 6/30/2010 $2,850
19A 7/23/2010 $2,600
38A 10/24/2010 $2,800
45A 12/7/2010 $2,800
47A 2/11/2011 $3,000
21A 2/27/2011 $2,550
37D 3/9/2007 $2,600
46D 8/16/2007 $3,000
41D 8/23/2007 $2,800
45D 11/29/2007 $3,200
47D 12/7/2007 $2,500
42D 1/17/2008 $2,600
53D 1/27/2008 $2,900
53D 3/11/2008 $2,700
55D 4/11/2008 $2,600
46D 7/23/2008 $2,600
41D 10/29/2008 $2,500
34D 4/9/2009 $3,000
34D 2/26/2010 $2,325
46D 7/16/2010 $3,000
42D 8/17/2010 $2,575
43D 10/29/2010 $2,625
35D 2/25/2011 $2,550
46D 3/31/2011 $3,300
25F 3/23/2007 $2,700
25F 3/23/2007 $2,700
52F 3/23/2007 $2,600
31F 6/8/2007 $2,550
26F 8/30/2007 $2,700
42F 9/18/2007 $3,000
38F 3/22/2008 $2,400
24F 6/19/2008 $2,700
54F 8/5/2008 $2,600
49F 9/15/2008 $2,600
50F 1/9/2009 $2,500
37F 5/1/2009 $2,450
31F 9/1/2009 $2,300
49F 11/25/2009 $2,250
56F 1/25/2010 $2,500
36F 1/27/2010 $2,400
47F 2/1/2010 $2,250
29F 6/2/2010 $2,400
24F 6/5/2010 $2,600
52F 6/24/2010 $2,300
21F 11/1/2010 $2,575
36F 3/1/2011 $2,600
Our SFHs have increased nicely (+5% on rolling YoY). I find families are actually more willing to take a rent increase because moving your goods out of a SFH on a frequent basis is more punative for the renter than it is for the landlord. Our tenants also take very good care of the units, but for kid damage, so the changeover is relatively minor plus we have a GC on retainer for these types of things.
JMM… Now you got my theory. Prices will rise, employment will stagnate with wages and standard of living…..
And i was in the no inflation camp along time but i have not seen price increases like i am seeing down here right now, and they are being absorbed… Feels like abot 20 percent in rela terms. Movies even just went up 15 percent this week…. Everything!!!
and this is with an appreciating currency.
Those taxes are obscene.
Using *recent* rental pairs some evidence of what Clio is claiming is observable:
36F 1/27/2010 $2,400
36F 3/1/2011 $2,600
46D 7/16/2010 $3,000
46D 3/31/2011 $3,300
I don’t have the time to sort the data, but those are significant circa 10% yoy moves.
This averages to: $3,802
“25K 5/3/2008 $6,000
26K 6/13/2008 $3,400
22K 4/18/2009 $2,850
26K 6/21/2009 $3,200
45K 5/15/2010 $5,000
29K 11/8/2010 $3,065
11K 3/23/2011 $3,100
Who should be trusted?”
Also, behind the headline numbers, concessions are dropping off (i.e., months free rent). That obviously is not captured.
They didn’t rise as much as clio claimed. They weren’t priced as high in 2007-08 as clio claimed. Yet, what clio is claiming is observable?
We’ll see if these rent increases will stick….
Well, 46D is up over 07/08. Big drop from 07 to 08 though (3000 to 2600). May have been some other factors (parking, etc) not captured there.
For one, I guess it may have been a 2-year lease, since it didn’t rent again in 09…
46D follows clio’s market rents?
“2007: 3600 w/ parking
2008: 3600 w/parking
2009: 3200 w/parking
2010: 3200 w/parking
2011: 3800 w.o parking parking 300/month – rented same day”
I don’t understand what you are trying to say, G – all you are doing is trying to confuse people by publishing data (with the hopes that people won’t really look at it and will trust you). It is the classic mistake that most un-intelligent people use (even in the medical field). They are unable to synthesize any meaningful conclusions so they try to fool the common man (who they know won’t analyze their data). Unbelievable – what a con you are!! Especially because this has no bearing on the topic. The fact remains that rents are increasing. That is all I was trying to point out. I don’t lie.
“10 E ontario: 1/1
2008: 1600 w/parking
2009: 1500 w/ parking
2010: 1450 w/ parking
2011: 1700 w/ parking”
Interesting to see what this building rents for, I’m curious if those are junior 1 bedrooms.
I had the opportunity to buy one as an REO for around 125k, but didn’t think with the assessment the rental return would have been enough.
I own a studio in east LV (not a high rise) coming up for rent 6/1. I’ve rented it at 100% occupancy since 2005. 05-06 $1,000 a month, 2007 $1,050. 2008 $1,100. 2009 $1,050, 2010, $1,000. My tenant this year asked me to reduce the rent to stay and I told her no. I figured she was bluffing and it will cost her at least $600 or more to move. She decided to leave which is fine with me since it’s never taken me more than 4 days to rent it. I’m going to try for $1,050 this year. We’ll see what happens…..
“I had the opportunity to buy one as an REO for around 125k, but didn’t think with the assessment the rental return would have been enough.”
Gesc – rental returns are not that great in this building – but if you get the taxes lowered (and you would) you would be looking at an approximate 6-7% rate of return (if you bought with cash). The main reason I bought here was because I know that these units are gonig to significantly appreciate in the next 10 years (*from the prices right now). That is where you will see the maximum return on your investment. In the meantime, you will enjoy the 6-7% return.
“I don’t understand what you are trying to say, G – all you are doing is trying to confuse people by publishing data (with the hopes that people won’t really look at it and will trust you). It is the classic mistake that most un-intelligent people use (even in the medical field). They are unable to synthesize any meaningful conclusions so they try to fool the common man (who they know won’t analyze their data). Unbelievable – what a con you are!! Especially because this has no bearing on the topic. The fact remains that rents are increasing. That is all I was trying to point out. I don’t lie.”
I’m happy we’ll be rid of projection bias like this in July.
Rents always go up in the warmer months because noone wants to move in the winter. It isn’t surprising to me at all rents going forward are going to be higher than in February.
Anyone who says rents are going up 20% across the board is full of poop. I recently rented a 2/2 in Streeterville for $2200/mo (down from the asking price of $2400). It had been on the market for a while and there were others in the building also languishing. I know that $2500 was the going rate in this building until recently.
Keep in mind, this is a condo building and not some corporate rental complex. I looked at a couple of those too and could not believe the outrageous asking prices for “luxury rentals” containing worse furnishings than my crappy college apartment.
I believe the owners of large corporate complexes are planting those “rents are on the rise” articles in the media, just like realtors did with “now’s the time to buy” articles. They are hoping this will get someone to cough up $3000/mo for a 2/2 with apartment-grade furnishings. Unless someone recently moved here from NYC and needed a place fast, I can’t imagine why they would fall for that BS.
As an aside, there are NO green zone condos in decent condition that can be bought at today’s prices anywhere close to rental parity (once you factor in ALL ownership expenses). If I bought instead of rented my monthly costs would nearly double. In what world does this make sense?
“I believe the owners of large corporate complexes are planting those “rents are on the rise” articles in the media, just like realtors did with “now’s the time to buy” articles. ”
Yeah – just like people are planting stories in the media (and here on cribchatter) that prices are falling and bigger price drops are coming….
“If I bought instead of rented my monthly costs would nearly double. In what world does this make sense?”
It makes a LOT of sense. You have to look at a few different things:
1. Stabilitly of a relatively fixed cost – buying is almost always going to be cheaper than renting in the long term. Rents will continue to go up while your housing costs are relatively stable with a purchase (fixed 30 year price for principal and interest). This provides many people with significant mental stability.
2. Appreciation – added bonus for buying – this, itself, could totally make it much more profitable to buy.
3. Availability – more housing stock is available for sale than rent.
4. Customization – when you buy – you are totally in charge to change or not change whatever you don’t like. This is very important to many people out there.
The biggest plus is that after 30 years, you are left with a house that is totally paid off – after 30 years of renting, you are left with nothing – this HUGE amount of money will almost always negate any losses you incurrent over the years and is the main reason why buying is better than renting. You really have to have a broader view when looking at real estate.
“there is vintage and then there is dated” YES!
caveat being that you found a place you could afford and could live in for 30 years… There are a lot of people who in youth will trade the third bedroom for granite countertops and subzeros only to get screwed when they decide they want more rooms.
“The biggest plus is that after 30 years, you are left with a house that is totally paid off – after 30 years of renting, you are left with nothing – this HUGE”
clio you’re stupid. If you take the cost differential from what you save on renting and put it into an FDIC insured account you’ll likely have more money at the end of that 30 years.
clio,
Are you paid by the NAR? If not you should be.
LOL @ clio and his 10-20% rent increases!! LOL…Again!! What an ass of a landlord! I do wonder, are you waiting for the leases to expire or are you raising the rents while their leases are still in effect?
Being a ‘landlord’ for many properties in many locations, I am not now, nor do I plan on raising ANY rents, in any areas, for a couple of years. While this might be the ‘trend’ for a few greedy asses now, it only reminds me of all of the irresponsible people who made this market crash in the first place.
Reason I am not raising any rents? There are simply too many people who have walked away from their mortgages without any concern for the mortgage holders and who are now looking at rentals. I think they believe if they ‘act fast’ their credit score will not reflect the fact they owe hundreds of thousands of dollars to banks/mortgage companies.
Why would I even want to consider taking a chance of renting my valuable units (investment + labor intensive renovation costs) to those who chose to not honor their commitments? If they got away with it once, who is to say they won’t apply this mindset to all of their commitments?
90% of my lease agreements will be coming up for renewal in the next few months and 90% of my tenants have asked how much of an increase they should be expecting on their new leases. Imagine the surprise and appreciation they felt when they were all informed there will be no increases!! Happy tenants = well cared for and much appreciated properties…and to me that is far more important than squeezing the last bit of juice out of the grape. So far, not one family has given me notice they are planning on moving…and no, NONE of my tenants have asked for a decrease in their monthly rent.
I am happy and my tenants are equally as happy with this arrangement. As much $$ as it takes for renters to move to a new place, I too am forced to spend an equal amount to ready the units for the next tenant…and I am not needing to deal with any unneeded expense at this time.
“clio you’re stupid. If you take the cost differential from what you save on renting and put it into an FDIC insured account you’ll likely have more money at the end of that 30 years.”
Problem here bob is that most american’s spend the differential, so at the end of 30 years they have nothing.
“If I bought instead of rented my monthly costs would nearly double. In what world does this make sense?”
Pete, welcome. Are you familiar with the Unicorn Criteria?
valasko:
clio’s personal net worth is over-exposed to his real estate holdings. His constant trolling on here likely reflects his wish, *and belief* that he can somehow help to re-inflate the bubble. He has used some insane and frequently debunked arguments on here to argue his position ad infinitum.
I don’t think he even believes the stuff he spouts I think he wants the bubble to inflate enough for him to get out. Not gonna happen.
“Problem here bob is that most american’s spend the differential, so at the end of 30 years they have nothing.”
Not all do. And if we’re looking at it from a numbers perspective its dumb to count a forced savings vehicle any different from an unforced one.
“Happy tenants = well cared for and much appreciated properties…and to me that is far more important than squeezing the last bit of juice out of the grape. ”
First of all, westloop – welcome back!!! I actually do appreciate and like your posts!!
Second of all, you are an idiot if you think you have some kind of friendship or great relationships with your tenants. I used to be a fool and do the same thing (invite my tenants over for pool parties, pay for landscaping once a year, buy/plant flowers) to make them happy – and they WERE – but there is no reciprocity. Once something goes wrong, all of a sudden these people get real mean real fast. Tenants (and landlords) are NOT your friends. The best thing to do is to have as little contact as possible and be as direct as possible. Treating tenants as a strict parent treats his kids is what I do and have since had great success.
“I used to be a fool and do the same thing (invite my tenants over for pool parties,”
How about inviting over your CC friends!
bob is 100 percent correct… It’s like me saying people with equity in their homes are likely to heloc it all out for a higher rate and should thus be pinished for an action that gas yet to occur. You model from a point of economic efficiency in order to keep apples to apples.
In response to Clio’s comments –
“1. Stabilitly of a relatively fixed cost – buying is almost always going to be cheaper than renting in the long term. Rents will continue to go up while your housing costs are relatively stable with a purchase (fixed 30 year price for principal and interest). This provides many people with significant mental stability.
2. Appreciation – added bonus for buying – this, itself, could totally make it much more profitable to buy.
3. Availability – more housing stock is available for sale than rent.
4. Customization – when you buy – you are totally in charge to change or not change whatever you don’t like. This is very important to many people out there.”
1. What about rising taxes and assessments? these have increased as a percentage of the monthly payment even though values have declined.
2. Appreciation depends on your time horizon. If you stay in a house for 30 years, there will be some appreciation, but probably only equal to inflation. Also, that’s assuming you keep the property up, which can cost 1-2% of the value of the property per year, which basically eats up a lot of that appreciation over the long run.
3. This is not always the case. Right now, a lot of the good supply is not for sale, as owners are “waiting it out”.
4. Customization is often limited, especially in condos. You really can only do stuff inside your unit, and often need to get approval and pay fees to the association if you are doing a renovation project.
One other point – what about changing housing needs (change in familty size) or the potential for a move to another part of Chicago area or out of state due to the job market? This often forces people to have to move and have to pay real estate commissions a couple of times, which are huge transaction costs compared to other investments. If you pay $2,000 a month in rent, and in order to buy the same unit it costs $3,600, you should just rent, and save that $1,500 and invest it over time (not all in cash savings accounts either). Once you have a good handle on your housing needs for the next 10+ years, then you should buy.
“If you pay $2,000 a month in rent, and in order to buy the same unit it costs $3,600, you should just rent, and save that $1,500 and invest it over time (not all in cash savings accounts either).”
Just wondering if this example assumes 80% LTV or some other scenario. Are people really seeing this much of a spread between monthly rent and monthly PITI on similar units?
“bob is 100 percent correct… It’s like me saying people with equity in their homes are likely to heloc it all out for a higher rate and should thus be pinished for an action that gas yet to occur. You model from a point of economic efficiency in order to keep apples to apples.”
Ze completely agree from an investment rate of return standard, but for most americas they do not have the will nor ability to save.
The typical American household, headed by a 43-year-old, has retirement savings of $18,750.
The typical pre-retiree household (age 55 and up) has a retirement savings of $60,000.
Baby boomers between the ages of 41 and 54 have typically a retirement savings of $30,000.
Baby boomers have median total household personal retirement savings of $35,000.
Baby boomers who save in a 401k have an average 401k account balance of $80,000.
There are going to be a lot of people eating cat food in their golden years.
I am not sure where people are coming from, but I believe we are at rent-own parity for 2/2s in LP / LV. 350-400k pricing versus 2000-2400 rental income. In some areas, I think we are below it.
“There are going to be a lot of people eating cat food in their golden years.”
Social security is amazingly adequate for someone who owns their home outright at retirement. 2,500 per month goes further than you’d think. Plus Wal-Mart always needs greeters.
Oh no they won’t. If you think that boomers who’ve been living on the high horse for 40 years are going to go austere living in some studio eating cat food, you’re mistaken. they’ll start dying before it’s reduced to that point.
“There are going to be a lot of people eating cat food in their golden years.”
“Baby boomers between the ages of 41 and 54 have typically a retirement savings of $30,000.”
The youngest baby boomers haven’t been 41 for several years. May as well talk about baby boomers who “feel” 29 or younger.
“Oh no they won’t. If you think that boomers who’ve been living on the high horse for 40 years are going to go austere living in some studio eating cat food, you’re mistaken. they’ll start dying before it’s reduced to that point.”
Well then I guess the funeral homes will be VERY busy!
Owning outright is the key word here. In a perfect world, boomers SHOULD own some place to live out right, I agree; but in the real world, boomers HELOC’d the hell out of their homes, or traded up, or spent the money, or invested it in other real estate. So quite a few of them (at least the ones without the fatty pensions) are going to be spending upwards of $1,000 of their $2,500 a month to pay for rent in some one or two bedroom apartment. Add in a couple of hundred for gas/insurance; then food, utilities, cable tv of course that’s all they do is sit around and watch tv in retirement b/c they’re broke…and that $2,500 a month doesn’t go very far. And once they go into medicare, their part B premiums are deducted directly from their social security checks reducing that $2,500 to roughly $2,250; and the lack of a COLA two years in a row isn’t helping either. Yup, a lot of boomers will be eating cat food. but a lot of boomers will eating well too, there are plenty of thrifty boomers too. But that’s just a consequence of living your life. Some are profligate, some are thrifty, some will do well in old age, some will be sick. The decisions you make today will affect you in the future.
“#JMM on April 11th, 2011 at 12:36 pm
“There are going to be a lot of people eating cat food in their golden years.”
Social security is amazingly adequate for someone who owns their home outright at retirement. 2,500 per month goes further than you’d think. Plus Wal-Mart always needs greeters.”
They will be busy but people who die without money have very small funerals. Smaller profit margins. But they’ll make up for it with volume.
“Well then I guess the funeral homes will be VERY busy!”
Often, you rent for what you need to live in this year, while you buy for what you need in the next 5-7 years. If you think you will have more kids, you buy a place with an extra bedroom because you won’t just live there for a year or 2, like an apartment. This is where more of the spread comes from.
“but in the real world, boomers HELOC’d the hell out of their homes, or traded up, or spent the money, or invested it in other real estate.”
No, not everyone. 1/3 of homeowners have no mortgage. True that is down somewhat from several decades ago, but it is very significant. The proportion of homeowners in retirement age w/o mortgage is higher, though not by as much as you might expect.
“and the lack of a COLA two years in a row isn’t helping either”
COLA is based on the CPI (or some derivation), so that is an irrelevant point. Why on earth should a benefit be increased in real terms? You know the difference between nominal and real right?
Point on pensions, the vast majority have no COLA. SS is an inflation protected benefit, which has significant value. True I might draw a $5,000 pension benefit, but 20 years from now that could be worth less than the SS check.
I am living proof of the demand for good rentals. We live in luxury/corporate housing with several hundred tenants. Rents have gone up 10-20% for everyone and we have all been told if we dont like….sorry. Theres a waiting list to get in.
And guess what…most of our neighbors and us included decided to renew.
“I am living proof of the demand for good rentals.”
It is amazing what crap people will rent and feel good about it. But yes, I think it is important to delineate what a good rental is.
On the SFH side it is even starker. Many, if not most, rentals are dilapidated unsellables that an owner cannot get comfortable giving away for lot value. High quality SFHs that a family can actually live in are scarce — minimum buy in seems like 5-6k in the city. Pop that a bit for a good school district. It can be unreal what people will pay for a SFH versus the cost of buying.
I guess there are a lot of people out there who make a lot yet don’t have squat to put down on a house.
Uh, COLA goes with Social Security Payments….which is what we were talking about. the pension discuss was just sort of a side comment … i’m not quite sure why you’re all upset…
“COLA is based on the CPI (or some derivation), so that is an irrelevant point. Why on earth should a benefit be increased in real terms? You know the difference between nominal and real right?”
Does anyone have any rental data for anyplace other then Gold coast / Downtwon? Absent that area all the renters I know are seeing regular decreases or no increase for several (5+ years), the flood of cheap condo’s as rentals doesnt help the long term landlords either
“There are going to be a lot of people eating cat food in their golden years.”
you always hear this, oh there are some homeless people that have to resort to eating Alpo to stay alive!….but let’s get real Chef-Boy-Ardee isn’t that much more expensive per can.
That’s why buying is more of a life stage thing. For people who are skipping the condo to save extra money and rent for 3-4 more years, it often can be a good decision. At the end of those 3-4 more years, you can have saved a lot more money and also incomes have risen more than inflation for professionals in the 28-32 age bracket, which really helps in the long run. Better to save extra money and have more of a safety valve than have to scrimp and skip vacations because you bought too much house too soon.
ramen is actually cheaper than cat food
JMM: Do SFHs cash flow for landlords in 2011? in the GZ?
“Ze completely agree from an investment rate of return standard, but for most americas they do not have the will nor ability to save.”
This is completely unrelated to the point of the economic advantages of renting vs. buying. It’s like saying: “another side benefit of owning real estate is most people are stupid and don’t save but this will force you to do so”. It is a completely irrelevant point to anyone that can save.
And we’re now seeing how well these “forced savings vehicles” are working out for the crowd that wasn’t so good at savings to begin with (FHA/subprime crowd).
I think there is a market for condo quality rentals. I’m actually surprised more landlords haven’t tapped into that market. A lot of people pay a premium to own because the place they own is nicer than a rental.
I think where a lot of folks made mistakes is they bought places that are in fact pigs with lipstick that should have just remained rentals… a la AmInvsco type places. Or they bought the inflated 2/1s with no parking/CA/WD.
There is also a severe lack of SFH rentals that are comparable to what people would like to buy. I bet a rental townhome complex in the city in a decent school district would do very well.
I do think people’s attitudes towards owning has changed though. I don’t think there is the stigma of renting like there used to be. This could be a good thing as everyone doesn’t have to be or should be a homeowner. if you are settled in for the long term, buy. If you are still transient or life is still a little uncertain, rent.
“Better to save extra money and have more of a safety valve than have to scrimp and skip vacations because you bought too much house too soon.”
I see young people out and about in their 500k McCrapBoxes in this nicer weather. For the life of me I can’t figure out how they’re getting by in any way other than family money or scrimping on everything else in life to make those payments. And I’m suspicious there are far more 500k McCrapBoxes than there are trust funds out there.
Any other midwest area 500k always went a long way–its mini-estate money for the rest of the midwest. How these valuations got applied to 2/2 condos next to the El is still beyond me.
“a la AmInvsco type places.”
What they did, IMO, was criminal and I’m surprised nothing has happened to them yet.
This is completely unrelated to the point of the economic advantages of renting vs. buying. It’s like saying: “another side benefit of owning real estate is most people are stupid and don’t save but this will force you to do so”.
Thats exactly what I am saying, most people are stupid.
And we’re now seeing how well these “forced savings vehicles” are working out for the crowd that wasn’t so good at savings to begin with (FHA/subprime crowd).
Completely agree, and thats why there will be so many people eating cat food in their golden years.
“There is also a severe lack of SFH rentals that are comparable to what people would like to buy. I bet a rental townhome complex in the city in a decent school district would do very well.”
Speaking of SFH rentals, the inventory in Oak Park is shockingly low (maybe a dozen between the MLS and Craigslist). Whenever something halfway decent comes on the market it gets rented very quickly.
“and the lack of a COLA two years in a row isn’t helping either.”
People should drink more water and the lack of a cola in two years might actually do them some good!!!
““a la AmInvsco type places.”What they did, IMO, was criminal and I’m surprised nothing has happened to them yet.
REALLY? I am probably the only one on this site that owns several AMINVESCO properties and they have done quite well for me. I know their team very well and, aside from aggressive marketing, they are no different than any other business.
They didn’t create the greed – they just used it to their benefit.
I hope that the “thousands” of readers on this site that are reading these comments are realizing that most of the people are agreeing with me that rents ARE going up and that buying in the long run is better than renting. Those are the two key points from this whole discussion.
As a resident CC housing bear (not as bearish as HD, but still), I, for one, am happy to agree that if someone is sure they will be staying in a place for 30 years, they should buy it rather than rent it – even at today’s prices.
Sure, you could park your saved money somewhere else and likely earn a bit more. But the other benefits to owning will outweigh it.
Obviously, this is an extremely rare scenario.
“The biggest plus is that after 30 years, you are left with a house that is totally paid off”
“and that buying in the long run is better than renting. ”
The people that fueled the run up in prices over the past decade weren’t exactly buying their city residences for the “long run”. And now many are F’d.
“Obviously, this is an extremely rare scenario. ”
Nobody can predict whether they will remain in a residence for thirty years. That is such a far off time horizon to give someone advice considering this as a likely scenario is foolish.
In fact the best indicator of how long mortgages tend to last are the credit markets and curiously 30 year mortgages tend to track the 10year treasury note in lock step. Sure a lot of refis might impact the duration dragging it down but even if we were to exclude the refis what is the average duration that someone who takes on a 30year mortgage lives in that residence? 12 years? Less?
I think the average term of a 30 year mortgage is around 6 years, and when ignoring re-fis, closer to 10-11.
I work for an apartment investment firm with 5,500 units. Year over year rental rates for our portfolio (which is mainly in suburban markets) have increaed 5%. In some markets we have seen 14% increases. However, when you take into account that between 2007-2010 our rental rates decreased by 5%, you’re basically seeing that rents have been flat from 2006 to today. 2006 rates were depressed due to the ability for people to buy homes. 2007-2009 rental rates were depressed due to the lack of renters (people losing their jobs and moving home, or doubling up with friends. BUT the people that didnt lose their jobs took the opportunity to SAVE $$ over the last 3 years while they had lower rents. Those people are now buying homes. (40% of our move-outs over the last 6 months are for people purchasing homes… the norm is like 10%).
“Any other midwest area 500k always went a long way–its mini-estate money for the rest of the midwest. How these valuations got applied to 2/2 condos next to the El is still beyond me.”
I agree, that’s why I believe there’s a long way down to go for these types of places in LP. I see some of these places that sold for $500k+ a few years ago that i believe will be as low as $350k or even less by Fall 2012. Which of course will have a downward effect on the ‘lesser’ places and 1 bedroom condos as well.
If you really think about it you realize how absolutely absurd the the prices on some of these $500k places really were.
“JMM: Do SFHs cash flow for landlords in 2011? in the GZ?”
Depends on your cost basis. But like I said before, we have properties MTM at 750k that gross rent over 5,500 per month. Do the NOI calculation for yourself and see. Maybe we are conservative at 750k as that is an internal MTM for tracking purposes (which is a premium to our balance sheet — our inventory is LCM, and many have been held since the 1980s).
“And I’m suspicious there are far more 500k McCrapBoxes than there are trust funds out there.”
$100k is not that much in the grand scheme of things. Grandparent dies and leaves an estate of $2M. Not hard to see a grandchild getting 100k out of that.
“Grandparent dies and leaves an estate of $2M.”
What’s the annual count for that size of estate?
“$100k is not that much in the grand scheme of things. Grandparent dies and leaves an estate of $2M. Not hard to see a grandchild getting 100k out of that.”
Far more people living in 500k condos than have grandparents with a $2M estate that even include the grandkids. In my family on both sides the money only goes down from one generation to the next (likely as long-term care costs are the big variable, and older people closer to their parents AND less likely to waste the $ ).
I’d imagine for most people that inherit money it’s the same situation (most people don’t inherit anything). Your scenario is the exception not the norm.
Basically JMM if you’re trying to have us believe that the scenario is plausible you’d have to first convince us people with $2M estate’s aren’t prudent with their money.
Reasonable and responsible grandparents ensure that some young 20-something isn’t going to inherit a straight 100k windfall. When estate’s are distributed generally it’s been my experience that granny doesn’t want to have her grand kiddos just waitin’ for her to kick the bucket for the big party.
You guys are so stupid – there are many many more people with 100k to spend on a down payment than there are 500k condos. Those that don’t have the 100k will continue to rent. That same thing has been happening for decades/centuries and will continue to happen. It isn’t that hard to understand. God damn your generation!!! Stop your whining.
“You guys are so stupid – there are many many more people with 100k to spend on a down payment than there are 500k condos.”
LOL thanks for the laugh clio. I’ve only known one person that had over 100k liquid for extended periods of time. It was an investment banker who really didn’t have time to do anything with his bonus.
Very few people have 100k liquid. Which is why we see the housing market collapse spreading to more expensive properties: people need to sell their current residence and use any equity as downpayment for the next one.
I think there are a decent amount of people with $100K liquid, but very few of them are first time buyers. Also, of those with $100K liquid, many would have to pay money at closing to sell their current place, and then also pay a down payment on their new place. This really limits the options.
“Very few people have 100k liquid.”
Bob – you are so very very wrong. I see it every fricking day in real estate. I will give you two examples. The following two properties got multiple full cash offers. Right now they are not taking any more offers but are looking to see who will go highest above asking – again with 100% cash. I asked my broker to find out how many bids there were and the listing agent said, that on the land there were so many that they stopped taking bids hours after it was on the market. Oh – and these properties aren’t even in the GZ or nice areas:
http://www.redfin.com/IL/Chicago/1718-W-Le-Moyne-St-60622/home/14107977
http://www.redfin.com/IL/Chicago/1635-W-Le-Moyne-St-60622/home/14107135
Oh – and what is interesting is that they are still listed for sale. The same thing I am seeing with MANY other properties. What is up with that?!!!
OH – while I was looking for my two properties above, look what I found:
http://www.redfin.com/IL/Chicago/1626-W-Ohio-St-60622/home/39892759
under contract within a couple of days!!!!
Bob – you are so very very wrong. I see it every fricking day in real estate. I will give you two examples. The following two properties got multiple full cash offers. Right now they are not taking any more offers but are looking to see who will go highest above asking – again with 100% cash. I asked my broker to find out how many bids there were and the listing agent said, that on the land there were so many that they stopped taking bids hours after it was on the market. Oh – and these properties aren’t even in the GZ or nice areas:
http://www.redfin.com/IL/Chicago/1718-W-Le-Moyne-St-60622/home/14107977
and:
http://www.redfin.com/IL/Chicago/1635-W-Le-Moyne-St-60622/home/14107135
Oh – and what is interesting is that they are still listed for sale. The same thing I am seeing with MANY other properties. What is up with that?!!
I had to split them up because it said the comment was awaiting moderation
Both short lots, the Ohio one *absurdly* so.
And Le Moyne was clearly priced to create an auction.
And Le Moyne is in WP, which usually gets included in GZ.
Here is another teaser properties that they are not taking any more bids on but is still listed for sale:
http://www.redfin.com/IL/Chicago/849-N-Franklin-St-60610/unit-720/home/26812267
and another one that they won’t allow me to bid on because it is already under contract even if they have not marked it as such:
http://www.redfin.com/IL/Chicago/849-N-Franklin-St-60610/unit-719/home/26812268
“Both short lots, the Ohio one *absurdly* so.
And Le Moyne was clearly priced to create an auction.
And Le Moyne is in WP, which usually gets included in GZ.”
Whatever- the point was that even for these horrible properties there are multiple people offering above asking with 100% cash. People on CC refuse to believe that it is true – so I am giving examples. I could go on and on – and these are only properties that I am bidding on!!!! Just think about how many more properties and more people with more money there are. It is because of this type of experience that I am confident that prices are not going to go down and that NOW is the time to buy (actually – I don’t believe that – I think the time to buy was a few months ago). We are past the bottom.
I actually see quite a few parents gifting some serious down payments. Probably 25% of my deals involve gifts. I have four in my pipeline now that have >20% down payments from parents. I’ve also seen quite a few sizable trusts/investment accounts.
While I don’t have any hard stats, just what I see from my client base, I’ve been pretty surprised at the number of people who inherit decent sums of money and/or get generous gifts from parents.
not as short as this one!
http://www.redfin.com/IL/Chicago/1160-E-54th-St-60615/home/13950285
yeah, it’s a rowhouse so it’s gonna be narrow. but im talking depth here.
that one on ohio is the same house as the humboldt park one we chattered about before (think it was on maplewood or so); someone commented they would be doing a bunch of them
more from the shortest lots contest, aka TFAANI (The First Annual Anti-anon(tfo) Invitational):
http://www.redfin.com/IL/Chicago/5722-N-Wayne-Ave-60660/home/13410029
Serious contender:
http://www.redfin.com/IL/Chicago/5712-N-Magnolia-Ave-60660/home/13409565
“not as short as this one!”
That one is 80% as long and doesn’t claim a 2-car garage. I don’t really believe that there’s a garage there, as I don’t think the 10′ in front + 40′ of house + 20′ of garage leaves that much backyard.
56×47:
http://www.redfin.com/IL/Chicago/3710-N-Hoyne-Ave-60618/home/13389818
An old favorite, the Barn on Bell.
37×32:
http://www.redfin.com/IL/Chicago/4309-N-Bell-Ave-60618/home/13389805
At some point these things are really just coach houses masquerading as SFHs. I can show you coach houses with similar lots but they’re recorded in the MLS as condos.
This one isn’t a small lot, but its listing description is just too much fun to leave out.
http://www.redfin.com/IL/Chicago/1241-W-Early-Ave-60660/home/13410589
so, in other words, nobody on here really is in the market and wants to discuss what is going on in real estate today. people just want to talk about short lots, complain about this or that and display their ability to find properties on redfin.
Ah yes, the Barn. An oldie but goodie. Shame they don’t have the super-classy-ski-lodge interior pics still up.
Lighten up, Clio. Who doesn’t like looking at funny/interesting listings? Why else would they be here??
Anyway, I appreciate you posting properties as opposed to your usual nonsensical yelling at HD. Other than Ohio, though, it seems as though they’re all for investors (one is an empty lot, ferchristsake), whereas this conversation started discussing rental parity and then first-time homebuyers.
Here’s a dup down in East Village that sold above 2006 pricing and same as 2007 sale.
http://www.redfin.com/IL/Chicago/1012-N-Wood-St-60622/unit-1/home/12714919
Built in 2000 and based on the pics I’d say no renovations since then. Is this just an incredibily luck seller, or is this due to the lack of decent properties availible?
That is an interesting case, Chris. What’s your theory?
(you got a link with pics? I don’t see em on the redfin link)
“What’s the annual count for that size of estate?”
There are statistics, but I am not sure they capture the true data. Easier to use the millionaire household data in cook county.
Besides a lot of lifetime gifting goes on anyway. This is one reason why the estate tax has been labeled the only truly voluntary tax in the IRC.
“LOL thanks for the laugh clio. I’ve only known one person that had over 100k liquid for extended periods of time. It was an investment banker who really didn’t have time to do anything with his bonus.”
You need to meet more people.
For an investment banker of any reasonable level, $100k after tax is a crappy bonus anyway. But I doubt you are rubbing elbos with the principals at Blair.
I think the answer is, people have more money than you think.
“I think the answer is, people have more money than you think.”
I’ll just say I won’t be surprised when that McCrapBox on Sheffield that is listed for 500k goes into distress (next door is a distressed comp listed for 250k).
The top 1% has a lot. The next 19% has some. Everybody else has shit. We know how much money they have and for 4 out of 5 people, it’s not much. And with demographic changes, it’s only going to get worse.
“I think the answer is, people have more money than you think.”
“I’ll just say I won’t be surprised when that McCrapBox on Sheffield that is listed for 500k goes into distress (next door is a distressed comp listed for 250k).”
…and you will have NO chance in hell of buying it because it will go for above asking and for all cash…..
all of you who are waiting for the “deals” are in for a rude awakening. I have been telling you for months that ANY and EVERY deal that is out there will be bought with cash and will be bought for above asking PERIOD. Don’t shoot the messenger – but you all would be doing yourself a big favor if you realize this and live in the real world,
“…and you will have NO chance in hell of buying it because it will go for above asking and for all cash…..”
You are an idiot. With each passing day I become less clear how to respond to your trolling. But rest assured I’ll be here laughing as your RE empire crumbles. Easy come, easy go, clio, and you’ve only seen the easy come part.
Please take a look at this:
http://en.wikipedia.org/wiki/Household_income_in_the_United_States
Less than 2% of people in this country make over quarter of a million and around 15% of the population makes above 100K. So in a country of 300M people, 2% makes a huge number of people, i.e., 6M. So if you mingle in a circle of people who have high incomes, say doctors, bankers and so on, yup many of them will have 100K cash at hand. Also remember many of these folks have parents who were not bums either (at least in the most likely scenario). Now if you run in a circle of rest of the 98% of the society (it is an overwhelmingly larger group than 2%) then few of them have 100K at hand.
So really unless you quantify your statements, the argument is somewhat meaningless. I surmise there are way more 500-800K properties than folks than can afford them these days and that is what Sabrina has been telling all along. Now of course many of those properties are undesirable, hence the few who look great will sell even in a bad market as some folks really want to buy. Those few do not make the market of course, but Clio is right that picky buyers are not finding the deals they like either.
I really encourage people to get in their cars and drive around the neighborhoods of Chicago. Go to the middle class neighborhoods of the Northwest and Southwest sides. You can drive for miles (for hours at a time.) That is how big this city is. And that is how many people don’t have $100k sitting around to buy a house.
The people “without” outnumber those “with”. Most of the suburbs are also pretty middle class. You all mock me when I mention Berwyn- but it is just 9 minutes via metra from Union Station, has historic housing stock, and you can buy a house for $100k. That is affordable housing.
Thank goodness.
For the sake of the country- we have to go back to where housing is not over 25% of your income (and hopefully lower.) So people can spend their money on other things- rather than four walls.
Since when is $400k a “middle class” home? Even WITH record low interest rates?
It’s not.
Maybe that’s why even the “prestige” suburbs are now seeing huge price reductions. There are deals all over Highland Park, Deerfield, Northbrook, Downers Grove, LaGrange, Western Springs etc.
If the city prices don’t come down further- homebuyers WILL go out further to get more house (and a yard.) High gas prices be d*mned. They’ll live within walking distance of metra.
“I actually see quite a few parents gifting some serious down payments. Probably 25% of my deals involve gifts. I have four in my pipeline now that have >20% down payments from parents. I’ve also seen quite a few sizable trusts/investment accounts.”
Russ- the only people in their 30s I know buying right now are buying because the parents are gifting the downpayment. It’s anywhere from $100k to $200k.
Otherwise, these 30 somethings with $150k in combined income (and no kids) don’t have a dime saved.
But these few buyers are a blip in the bigger housing market. They can’t sustain the market. And many of them are leaving behind unsold condos (that they’re now renting out- where the parents ALSO gifted them the now lost downpayment on.) Eventually- they’ll tire of being landlords and will have to dump the condo.
What is interesting about this property is that just 6 years ago no one thought twice about paying $675,000 for the space with the exact same layout and finishes (and other issues.) Now- suddenly- it is not even good enough at $499,000.
My, my.
How much has changed.
It’s move in ready (and “new”) – or it won’t sell. Even for a 25% discount.
Housing was a cash cow during bubble, people put 5% in and sold in 3-4 years and made money even after paying all the fees. That ship has sailed now and doubt will be back in even a decade if ever.
“What is interesting about this property is that just 6 years ago no one thought twice about paying $675,000 for the space with the exact same layout and finishes (and other issues.) Now- suddenly- it is not even good enough at $499,000.”
I really like how this picture is worth a 1000 words:
http://www.seodisco.com/images/home-values.gif
Um, I’m sure this has already been beat to death, but:
“I recently sent letters to all of my tenants stating that I was going to raise their rents (10-20%). I gave them the option of getting out of their leases now if they wanted (I was hoping that they would take me up on the offer because rental activity is insanely high right now and I know I could get more money).”
LMFAO!!!! Ya, ‘kay.
And I know I’m tardy for the party, but I do not think that these units lingering is an aversion to vintage; if anything I find that vintage is a huge selling point to a substantial market of prospectives. The problem is that the asking price is more than what they perceive they should pay.
It’s all about perception: everyone wants the adorable, historic, architecture and internal/external preservations that are far removed from whatever they grew up in, but they ALSO have the perception that they’re somehow gentrifiers, nobly taking up “unwanted old things” rather than recognizing the market history and development of the GZ.
This goes for both sales and rental, by the by.
I’d expand further, but I guess I’ll digest the 100+ comments following this epic clio quote first.
I’m late to the party today and the comments have strayed, but I want to take a second to defend this property. I haven’t seen it and I’m not in the market anymore, but I think a lot of the comments are grossly unfair. I’m looking at you miumiu. I don’t like rounded arms on sofas either, but this isn’t a furniture blog. Realistically, it would cost WAY less than 150k to make this place great and 50k would probably make it look pretty good. Even painting the cabinets and throwing the kitchen/dining room wall back up would make a huge difference. I don’t know if the price is right – probably not because it hasn’t sold, but the comments here led me to believe that this place is horrible and I think with a minimal investment it could be pretty nice.
“Russ on April 11th, 2011 at 1:14 pm
I think there is a market for condo quality rentals. I’m actually surprised more landlords haven’t tapped into that market. A lot of people pay a premium to own because the place they own is nicer than a rental.”
There is, but it is small. And no, a lot of people do NOT pay a premium for “condo quality” because they sacrifice space to have “condo quality.” That type of thinking is exactly what has boned a lot of owners by defaulting to “cherry cabinets and granite? It’s MINE!” and dealing with split-faced block and other constructive issues as opposed to the vintage unit with an older kitchen and yet a more solidly constructed and preserved building. Or dealing with being a “lowly renter” that is somehow sub-human because they cannot tell their friends and relatives they have MADE IT! and are a homeowner.
There is a select market segment that does command “condo quality” — whatever that term means. Does it mean doorman? Pool? Granite? “Stainless” (in most cases this means a cheap stick-on to a black appliance)? Yeah, get back to me on what that means; such a pithy term.
If the market for “condo quality apartments” was so hot, then let me introduce you to my charming friend, Sloop, who would love to be connected with this bull meme. Let me introduce you to some vintage rentals in ELP that over-invested in “condo quality” kitchens for ~$1,200/mo when you can find comps without the cosmetic dazzle for ~$800/mo?
Most, if not all, conversation about rentals here comes from a place of COMPLETE ignorance of the rental market, or one-off anecdotes from private landlords that play with fire.
To top it off, I’d love to have clio discuss the CRLTO with me as he puffs his chest about ~15% rental increases and the amazing treasures that can be found within the enigmatic rental market. X marks the spot, baby.
“To top it off, I’d love to have clio discuss the CRLTO with me as he puffs his chest about ~15% rental increases and the amazing treasures that can be found within the enigmatic rental market”
uhh – what do you want to discuss?
@Sidelined Buyer, first off 150K is not a minimal investment for a 500K property.
It is a lot of cash. Secondly, you are right in principle that furniture should not matter, but they do change the perception of the buyers. Most of us are not interior designers so the first impressions of the place impacts our decision whether or not to even take the trouble to go see the place. Thirdly, my comments are not only about the furniture, for instance, unattractive window treatments detract from the feel of the room or show casing a space.
I don’t know about the price either as I am not interested in this hood, but man the decor does not help this place.
“clio on April 11th, 2011 at 9:57 pm
uhh – what do you want to discuss?”
Showing practices.
Security Deposit interest rates.
Security Deposit returns.
Heating cost disclosures, if applicable.
There’s a starter list.
sorry – why the f would I want to discuss those things with you? Are you renting from me? I don’t think so – I screen my tenants pretty well.
Miumiu, the 150k comment was directed at Jennifer (I think), who said she thought it would take 150-200k. I was poining out that 150k is a big amount of money and could probably make this place pretty high-end, but that 50k or even some cosmetic changes would make it pretty nice. I just hate to see a dog kicked while it’s down. These people are already taking a hit (maybe not in down payment but certainly in credit score and maybe self-esteem).
“clio on April 11th, 2011 at 10:10 pm
sorry – why the f would I want to discuss those things with you? Are you renting from me? I don’t think so – I screen my tenants pretty well.”
An admission of ignorance. Depending on any and every single one of the topics I presented, any abrogation can (and in the case of S.D.’s will) result in giant fines for you and major headaches.
You said it yourself: landlords and tenants cannot be friends. So even the “kindly private landlord” archetype, renting out so they don’t have a foreclosure, can be destroyed under the CRLTO because most private landlords are completely ignorant to it and will rarely ever know their tenants. Even if so? Horror stories abound.
Best find a great attorney, clio, before one of your renters paying you a ~15% premium over last year decides to make the CRLTO a most pressing issue and literally buys the farm — your farm property in the exurbs via their damages, ‘natch.
Just some friendly advice.
You are right about that. I just feel staging can help a lot. My friend was selling his condo (a pretty much barren bachelor pad) and had no luck, I persuaded him to put 15K into staging it and bam it sells (ok is under contract) in 2 weeks. I didn’t want to be mean. I just feel removing couple of side tables, window treatments and perhaps painting he kitchen cabinets are not terribly difficult and could help the seller.
” I just hate to see a dog kicked while it’s down. These people are already taking a hit (maybe not in down payment but certainly in credit score and maybe self-esteem).”
Not me, but I do think the kitchen needs a facelift at the bare minimum, even painting either the cabinets or the walls (having both green just makes it worse). And I didn’t see the bathroom but there were mentions of Don Johnson rolled up sleeves which didn’t sound good!
I agree that staging could help this place massively, but I don’t know if that’s all it will take.
Funny how we’re still enamored with 30-year MORTGAGES…in an era in which 30-year MARRIAGES are an endangered species!
Can’t help but wonder how many starry-eyed couples who bought homes in 1981 are holding “burn the mortgage parties” in those very same structures this year.
What we really mean,of course, is the 30-year AMORTIZATION which seems to be a comfortable “norm” for the typical homeowner’s budget.
Not too long ago some lenders were suggesting 40-year amorts. Their rationale was this: “What does your car loan guy ask you – how much you can afford for the car, or how much you can afford for the monthly payment?”
Flash forward to now – seems like the monthly payment on a “30” is what we still mostly feel comfortable with.
Few ever understood that taking a 5/1 was the same shorting interest rates.. not to mention the rollover risk.
“1. Stabilitly of a relatively fixed cost – buying is almost always going to be cheaper than renting in the long term. Rents will continue to go up while your housing costs are relatively stable with a purchase (fixed 30 year price for principal and interest). This provides many people with significant mental stability.”
Clio.. I think this is the best thing you ever said here.. I’d add in a “probably” and maybe an “at near rent/purchase parity”… but close enough.
Sorry Jennifer! I should have scrolled back. I think we all agree on the staging. I don’t know what has me so sensitive these days. I’m happy to see prices returning to a level of affordability, but I find the human toll staggeringly depressing. I am also saddened by a lot of the comments here that express unrestrained glee at the misfortune of others. Miumiu, was it you who posted a few months ago about being a little more emotional due to pregnancy? When is the baby coming? Perhaps that’s what has gotten into me too.
“Few ever understood that taking a 5/1 was the same shorting interest rates.. not to mention the rollover risk.”
That’s not really accurate – there are many ways to model an ARM. (For me, I usually ignored the rollover risk (assuming you mean the ability/cost to enter into a product at market rates upon expiration), but this might not be appropriate for all buyers.) An adjustable rate product is also a bet that the savings over comparable products exceed the expected present cost of that money upon the expiration of the period. If the rates for substitute produce are much higher, your savings may far exceed additional finance costs for even much higher interest rates upon the expiration of the period. When they were at their most attractive, the gap between 30 year fixed and 5/1 ARMs was close to 200 bps, especially for jumbo and super-jumbo products.
Sure, many people treated ARMs as an appropriate product because they were the only product, when packaged with various options (interest only, 110% LTV, negative amortization) with which people can “afford” the real estate they wanted, but that doesn’t make them inherently bad products or only a pure interest rate short.
@Sidelined Buyer, I totally agree with you that it is sad to see people’s distress. I was just lucky I was in school in the height of the boom. Otherwise I for sure was not any wiser than anybody else who is under water.
Congrats if you are expecting. It is a tough ride though. I am due end of May and looking forward to it (not the labor part of course…hehe)
An adjustable rate product is also a bet that the savings over comparable products exceed the expected present cost of that money upon the expiration of the period.
I concur, if rates are same or lower you did well, if above not so well… thus long/short
“An adjustable rate product is also a bet that the savings over comparable products exceed the expected present cost of that money upon the expiration of the period.”
Not so true. Say you go to refi and yield curve is out at 10yr 7% with the front even higher (we have seen this before, but I could say 20% since I am just trying to prove long/short).
You go to refi and you may be sitting on 30 more years of principal you are picking up over 7% for entire term. At this point whats the NPV diff of what you gave up not locking in 30 yrs at 5%.
Now you can say you would wait and refi but thats a hypothetical, you might never again be able to, who knows. Point is you are in worse shape because you were short rates.
oops my not so true left out where you said at much higher rates even… my bad…
Thanks Miumiu. Our second is due this summer also.