Market Conditions: Luxury Sales in Chicago Still Fall 14.4% YOY in 2011
Despite several condos and single family homes over $5 million selling in 2011, Crain’s is reporting that the luxury market was not as healthy as it seemed.
House and condo sales of $1 million or more in the city dropped 14.4% to 539 units, compared with 630 units in 2010.
The number of high-end condo sales in the Chicago area fell sharply, down 29% to 259 units last year, compared with 364 in 2010, but the market is not as bad as the figures might indicate, Mr. Kinney says.
Because no large, luxury new condo developments were completed in 2011, the drop largely reflected a decrease in sales of new condos, not existing ones, he says.
“With the general resale numbers, the picture isn’t as ugly,” he says. A breakdown of year-over-year numbers for high-end condo resales was not available.
Remember, two new luxury high rises at some of the highest price points in the city are due to begin closings this year so that will be bringing both sales, and inventory, into the luxury condo market.
For the entire “Chicago area” (not sure what that encompasses), house and condo sales of $1 million or more fell 8% to 1,331 from 1,446 in 2010.
It is still down 45% from the 2007 peak, when 2,430 properties over $1 million sold.
Inventory, the sign of a “healthy” market, also remains abnormally high.
In the entire Chicago area there is an 18 month supply of single family homes on the market over $1 million and a 19 month supply of condos at that same price level.
Is this lower level of luxury home sales the sign of a market bottom?
Or is this simply the new norm?
High end sales down 8% last year in the Chicago area [Crain’s Chicago Business, Mary E. Morrison, January 17, 2012]
2011 is SO long ago (in real estate terms). It is time to look to the recent past if you want an accurate gauge of what is about to occur. This story confirms what I have been seeing (and G has been posting) all over Chicago in the past 2 weeks.
http://finance.yahoo.com/news/mortgage-applications-surge-refinancing-demand-120142863.html
What is about to occur, he who never gets anything right?
The surge in applications for refis doesn’t necessarily have anything to do with the sale of high-end properties, or property sales at all. Don’t see how a wave of refinancings adds up to more high end home sales, especially since “non-conforming” loans are almost impossible to get now.
But it’s really all the low interest rates are accomplishing. These low rates are not helping sell homes, and have probably made 30-year fixed mortgages more difficult to obtain. No one wants to lend money at these rates for long terms and credit is very tight as it usually is in a bust. Almost everyone who’s getting a loan is getting an ARM, which doesn’t bode well for things a few years down the road when yet another layer of borrowers will be confronting payment shock as these loans reset to higher rates.
Well, with the Ritz Residences and Lincoln Park 2520 set to close in 2012, this should pop a bit.
“The surge in applications for refis doesn’t necessarily have anything to do with the sale of high-end properties, or property sales at all”
Yes they do. Basically, it is an indicator that there are more people out there who are confident in the market, not underwater, and able to qualify (or think they can qualify) for refinancing. It is a snapshot into the minds of current homeowners.
There is an article about “surging” mortgage applications about every 3 weeks. Unless you can tell us how it is different this time, why should anyone pay any attention to your link?
Laura,I have to respectfully disagree with you in regards to your comments about adjustable rate mortgages.
We have had sub 4% money available on 30 yr fixed rate mortgages for about 6 months now,and the majority of my clients are taking advantage of locking in these rate for 30 yrs. Most people are not even thinking about ARMS unless they are sure they will be selling in the next few years.
The fact that there hasn’t been much new development activity is irrelevant. If the underlying demand for high end condos was there there wouldn’t be a 19 month supply of high end condos right now. However, overall inventory of 2 – 3 bedroom condos is at a 7 year record low for this time of year.
Does that mean you believe the underlying demand for 2-3 BR condos is at a 7-year record high for this time of year?
My question maybe irrelevant, but what the starting annual household income level is for the over $1M luxury real estate market? $200K, $250k, $300K?
“Does that mean you believe the underlying demand for 2-3 BR condos is at a 7-year record high for this time of year?”
It means people are stuck in their 2-3 bedroom condos and don’t bother to even try selling. Underwater homeowners means less inventory, it’s been steadily dropping for years. it could be yeras before the shadow inventory trickles on to the market. By the time they do each home will likely need $100,000 in renovations/repairs. THis is a completely dysfunctional market. That’s why I’m going to remain a renter for a long time.
“Does that mean you believe the underlying demand for 2-3 BR condos is at a 7-year record high for this time of year?”
Of course not. But demand is actually quite high historically – it is at a 4 year high based upon contract activity – and then absolute inventory levels are low.
“My question maybe irrelevant, but what the starting annual household income level is for the over $1M luxury real estate market? $200K, $250k, $300K?”
It all depends on the property (tax, upkeep) and the person’s indivicual circumstance (age, marital status, kids, – other expenses). There is no appropriate and accurate “set” formula.
“My question maybe irrelevant, but what the starting annual household income level is for the over $1M luxury real estate market? $200K, $250k, $300K?”
400k IMO. You can buy it on 300k, but I don’t think you will be able to keep up.
“It means people are stuck in their 2-3 bedroom condos and don’t bother to even try selling. Underwater homeowners means less inventory, it’s been steadily dropping for years. it could be yeras before the shadow inventory trickles on to the market. By the time they do each home will likely need $100,000 in renovations/repairs. THis is a completely dysfunctional market. That’s why I’m going to remain a renter for a long time.”
By the time these people can sell their homes, the homes will be paid off. Then HD will complain that they aren’t just giving them away! 😀
the word luxury is way overused. now when people use it i giggle.
what do you guys constitute as luxury?
Luxury?
How about nails that don’t pop out of my drywall?
How about not being able to see or feel the mud and tape job from when my drywall was installed?
How about not being able to hear it when someone upstairs flushes their toilet?
I can change the appliances in my kitchen without hitting a credit card limit. Why on Earth would I consider something so easily replaced as part of the definition of luxury? Luxury lies in the stuff that’s hard to change.
“These low rates are not helping sell homes, and have probably made 30-year fixed mortgages more difficult to obtain. No one wants to lend money at these rates for long terms and credit is very tight as it usually is in a bust. Almost everyone who’s getting a loan is getting an ARM, which doesn’t bode well for things a few years down the road when yet another layer of borrowers will be confronting payment shock as these loans reset to higher rates.”
Disagree Laura. Fannie and Freddie are pumping unlimited liquidity into the 15 and 30 year markets. I’m not calling bottom, but the government will take Herculean efforts to make the housing market look better over the next 9 months to try to keep the Commissar in office. If you buy something you can afford on a 30 year mortgage at sub 4 rates and stay there for a long time, in 20 years you will laugh at how small that mortgage payment is (assuming you haven’t prepaid it). The tax bill will be a different story if you are in Crook County, but the mortgage will look really small.
“My question maybe irrelevant, but what the starting annual household income level is for the over $1M luxury real estate market? $200K, $250k, $300K?”
You could easily buy a $1MM home on a $250K-$300K annual income in todays rate environment.
“My question maybe irrelevant, but what the starting annual household income level is for the over $1M luxury real estate market? $200K, $250k, $300K?”
One of the many things this depression/recession has changed is people’s faith in the stability of their earnings. I think its less about the amount of money one makes and more about the stability. Not much difference between $200k and $300k if there is a chance it could turn into 50% of that number quickly. Monthly mortgage on an $800k 30yr loan is $3,800. Tax on a $1mm place is probably around $15k. So total yearly payments are $60.6k. That requires at least $120k in salary just to cover those expenses. If you’re making $300k but have seen layoffs at your company (ie many law firms have forced out / fired people recently) and know a layoff means a 30-50% cut in pay you will think twice about that $1mm place.
I think the world has gone crazy. People who make 300,000 purchasing a 1,000, 000 home? That is just crazy. You could never keep up with taxes, maintenance, etc. That is the mentality that got us into this mess. All of the people that I know that paid 1,000,000 or more for a home ( admittedly, only three people) paid cash. Cash. What is wrong with buying a smaller home, that you can easily afford, so that you 1) are not house poor 2) have money to actually do things and 3) are not buffetted by job losses, etc. What ever happenend to an appreciation of, say, being able to burn a mortgage payment book? Freedom from debt, worry, home maintenance is *far* better than, say, extra square footage or ‘luxury’ amenities.
endora –
Very good point!
However, the reality is that the sub-$800K houses in good school districts in the city (Lincoln Park, West Loop – Skinner, South Loop) are not so luxurious. By luxury, I mean:
1. 2 car garage
2. move-in ready
3. over 2500 sq ft
4. 3+ bedrooms
5. 2.5+ bath
“The surge in applications for refis doesn’t necessarily have anything to do with the sale of high-end properties, or property sales at all
Yes they do. Basically, it is an indicator that there are more people out there who are confident in the market, not underwater, and able to qualify (or think they can qualify) for refinancing. It is a snapshot into the minds of current homeowners.”
You can currently refi if you owe up to 125% of the value of your home I believe. In February you can refinance without even getting an appraisal. I don’t think the increase in refinancing means people are not underwater when the government is helping underwater owners to refinance.
“You could easily buy a $1MM home on a $250K-$300K annual income in todays rate environment.”
Buy it? Yes. Afford it? No.
Yes, yoss nailed it on the head, the stability of income is paramount.
homedelete-
Are you saying a stable $250K income can afford a $1M house?
“You can currently refi if you owe up to 125% of the value of your home I believe. In February you can refinance without even getting an appraisal. I don’t think the increase in refinancing means people are not underwater when the government is helping underwater owners to refinance.”
NOT TRUE (only in certain circumstances) – ask any lender
“Yes, yoss nailed it on the head, the stability of income is paramount.”
But you can say that about any level of income. If you make 100k and buy a 300k house, if you lose 1/2 of your income, you are screwed.
2.5x income is a fairly good rule of thumb. But if your income gets cut in 1/2, that suddenly becomes 5x income. That’s a problem at almost all price points.
“The tax bill will be a different story if you are in Crook County, but the mortgage will look really small.”
Hoenst question–aren’t tax bills just as high or higher relative to market value in DuPage and Lake? That’s been my observation–certainly not materially lower.
chuk –
“2.5x income is a fairly good rule of thumb. ”
2.5 is too conservative, unless you have many other loans. I would say 3x is a good starting point.
chuk, of course you can say that at any price point. But there are a lot more lower paying jobs than higher paying jobs, and I’ve seen plenty of people will higher paying jobs lose them, and they have little or no ability to secure another income stream at that same level. But if you have two people making $50k for a total of $100k, it’s not as difficult for the party that lost the job to find another $50,000 a year job. It’s the traders making $400,000 a year that can’t hack the demise of open outcry, or the laid off $150,000 a year junior biglaw associates of 2008-2011; or the mortgage brokers who used to close hundreds of loans a year; the contractor working lots of overtime; most people in teh RE industry, etc. Those higher paying jobs are difficult to replace once they’re gone.
“Hoenst question–aren’t tax bills just as high or higher relative to market value in DuPage and Lake? ”
Not in Oak Brook – there is no municipal real estate tax in oak brook (just the county component).
“Of course not. But demand is actually quite high historically – it is at a 4 year high based upon contract activity – and then absolute inventory levels are low.”
I’m curious, how are you comparing current contract totals to prior years? My look at contracts from 12/1/09 – 1/15/10 as counted on 1/18/10 for Chicago condo/th units indicates that only 78% closed (14% of them fell out and were returned to active (no contract) status and another 8% did not close or return to active status.)
Here’s what I have for 2-3BR condo/th contracts. Again, the current year total is inflated by those that will fall out and be returned to active status.
12/1/xx – 1/15/xx Chicago 2-3 BR condo/th contracts
11-12 959
10-11 802
09-10 849
08-09 613
07-08 998
06-07 1,082
I’m going to agree with HD about the higher paying jobs, as it is harder to find one at that level, and often a pay cut is in order. The hope is that there’s some sort of incentive package that will allow some increase in the future to make up for the first yr base pay sticker shock. There are a lot of jobs paying between $50,000 and $100,000. If you lose a job in that segment, you will probably not have a huge loss in pay, and may have no loss in pay depending on your field. In the $100-150K range, it’s a little more risky in potential income loss, and for $150K-300, and $300K+, income levels are much more volatile overall, even without a job loss. So, I would hope that $1M home purchaser has $100K or more in other liquid assets after the purchase to be able to cover living expenses/mortgage/taxes due to this volatility.
LOL, homedelete. Try this one:
My wife hired a small army of contract attorneys for a massive case they’ve got. With all the hours they are putting in, the contract attorneys are making over $175,000 per year – but it was made perfectly clear that when the case goes away, they go away. The other side has already tried to settle twice.
One of them bought a house that depends on 30 years of that income level.
I rarely see anyone making $300k buying $1 million dollar homes. Most making between $200-$300k usually won’t spend more than $700k. Most million dollar purchasers typically have incomes north of $400k and usually around $500k in my experience. The ratios lenders use are 28/36%. 28% of gross can go to PITI and 36% can go to PITI plus major installment/revolving debt. When you start getting north of 40% back end ratios (most lenders will go to 50%) you are very likely to be house poor unless you literally just stay home and don’t spend hardly anything on entertainment, travel, clothing, eating out, etc. However, as the income goes up, your disposable income increases dramatically, even with higher debt ratios. 50% DTI with $30k/mo income is quite different from 50% DTI and $3k/mo income.
The rule of thumb is 3-4x HH income depending on debt levels.
“Hoenst question–aren’t tax bills just as high or higher relative to market value in DuPage and Lake? ”
We’ve been over this many times. http://cribchatter.com/?p=10517#comment-156769
I haven’t updated these, but they haven’t changed much in 2010 (pay 2011.)
Effective Overall RE Tax Rates as % of Market Value
Cook County 2009:
Chicago 1.6%
Wilmette 1.7%
Barrington 1.7%
Northbrook 1.7%
Kenilworth 1.8%
Glencoe 1.9%
Niles 2.0%
Park Ridge 2.0%
Lincolnwood 2.2%
Palos Heights 2.2%
Des Plaines 2.2%
LaGrange 2.2%
Schaumburg 2.2%
Skokie 2.4%
Arlington Heights 2.4%
Palatine 2.4%
Hoffman Estates 2.4%
River Forest 2.5%
Orland Park 2.5%
Oak Lawn 2.7%
Riverside 2.7%
Oak Park 2.8%
Berwyn 2.9%
Olympia Fields 3.2%
Cicero 3.3%
Homewood 3.6%
Flossmoor = 3.8%
Maywood = 3.9%
Lansing = 3.9%
Park Forest = 5.0%
Riverdale = 5.1%
Ford Heights = 6.9%
DuPage County 2009:
Oak Brook 0.9%
Willowbrook 1.2%
Burr Ridge 1.3%
Hinsdale 1.3%
Oak Brook Terrace 1.4%
Clarendon Hills 1.5%
Downers Grove 1.5%
Elmhurst 1.6%
Westmont 1.7%
Darien 1.7%
Wood Dale 1.7%
Itasca 1.8%
Roselle 1.8%
Naperville 1.8%
Villa Park 1.8%
Bloomingdale 1.9%
Addison 1.9%
Warrenville 1.9%
Wheaton 1.9%
Glen Ellyn 2.0%
Lisle 2.0%
Elk Grove Village 2.0%
Lombard 2.0%
Wayne 2.1%
Winfield 2.1%
Bensenville 2.1%
Bolingbrook 2.3%
Woodridge 2.3%
Bartlett 2.4%
Carol Stream 2.4%
Aurora 2.5%
West Chicago 2.5%
Hanover Park 2.5%
Glendale Heights 2.7%
Lake County 2010:
Lake Forest 1.4%
Lake Barrington 1.8%
Lake Bluff 1.9%
Highwood 2.1%
Riverwoods 2.1%
Highland Park 2.1%
Libertyville 2.2%
Deerfield 2.3%
Gurnee 2.4%
Long Grove 2.4%
Vernon Hills 2.5%
Buffalo Grove 2.6%
Wauconda 2.7%
Mundelein 2.9%
Round Lake Beach 3.1%
North Chicago 3.3%
Waukegan 3.7%
Zion 3.9%
“NOT TRUE (only in certain circumstances) – ask any lender”
It is more true than your comment that an increase in refinances is due to people not being underwater. The requirements to refinance is getting more and more lax meaning that more and more people can refinance whether or not they are underwater and therefore more people are refinancing.
Certain circumstances apply to many people when certain circumstances are fannie/freddie owned and current on payments.
Fannie and Freddie are no help in the upper bracket market. They do not buy loans over $417K, or, in higher priced markets, $725K. I don’t know if Chicago properties are eligible for the higher limit, but Fannie and Freddie are no way no how going to help with loans for multi-million dollar properties. The financing is VERY tight for the high end now.
“2.5 is too conservative, unless you have many other loans. I would say 3x is a good starting point.”
That seems crazy to me, but maybe I’m just really conservative or have little faith in maintaining my current earning levels. Even thinking about a home that’s 1.5X my current income levels makes me a little nauseous. If I lost this job, I could easily be making only a third of what I do now.
“My wife hired a small army of contract attorneys for a massive case they’ve got. With all the hours they are putting in, the contract attorneys are making over $175,000 per year – but it was made perfectly clear that when the case goes away, they go away.”
Holy hell, how much are you paying these people? There are seemingly an unlimited supply of contract attorneys that are willing to work for 30 or so bucks an hour.
“I don’t know if Chicago properties are eligible for the higher limit”
Chicago is not. Covered extensively, here and elsewhere.
G – Municipal Real estate taxes in Oak Brook (in the Hinsdale Central School District) are 0 (ZERO) not 0.9%. The number you are quoting averages all the “non – Hinsdale Central School District areas of Oak Brook” – (ie Elmhurst, Villa park, and Downers Grove schools) – THOSE homes have pretty high taxes – but if you live in the Hinsdale Central area of OAk Brook YOU DON’T PAY ANY REAL ESTATE TAXES (Municipal).
“Even thinking about a home that’s 1.5X my current income levels makes me a little nauseous.”
You either make a lot of money (which would then fit one of the big points made in this thread) or you *are* way too conservative. If your HHI is $100k, you’re “nauseous” about the expense of buying a glorified shack in Plainfield, or a 2/2 in a marginal city location?
Also, think in terms of 3x *base* + any guaranteed deferred comp, rather than inclusive of non-guaranteed, or performance-based, bonuses. Then you might be a little less nauseous.
“We’ve been over this many times. http://cribchatter.com/?p=10517#comment-156769”
Thanks, G.
“In the $100-150K range, it’s a little more risky in potential income loss, and for $150K-300, and $300K+, income levels are much more volatile overall, even without a job loss. ”
Obviously, nobody here what commented on this has an income of this level or higher. Let me tell you that people who make more than 300k and lose their jobs may be able to “weather the storm” much better than someone who makes 50-100k and loses their job – that is because the 300k and up people have much more disposable income (most have saved quite a bit). In addition, going from a 500k job to 300k is easier than going from a 100k job to 50k (again, because their are compulsory expenses which eat up to 100k of your income – most of everything over that is fat/excess). I know I am not explaining this well but I hope you guys get the basics
” Municipal Real estate taxes in Oak Brook (in the Hinsdale Central School District) are 0 (ZERO)”
It’s “Effective Overall RE Tax Rates “.
Are you saying that your property tax bill is ZERO? Someone remind me of the dates of the DuPage tax sales.
If not, why don’t you just correct us on the ballpark rate that you pay, instead of endlessly repeating something of limited relevance.
Benjamon, a lot of folks are refinancing, but the reality is that the program you are speaking of was an abysmal failure. The vast majority of the borrowers who used HARP (Home Affordable Refinance Program) were actually not underwater even though that is not who the program was designed for…
Fannie/Freddie never changed the “reps and warrants” and some other behind the scenes issues caused most lenders to cap the LTV at 95% or 105% max even though technically, Fannie/Freddie allowed up to 125%. There were also issues getting 2nd mortgage holders to subordinate to new first mortgages and PMI companies weren’t playing ball. End result, total failure.
Now we have HARP 2.0 that is supposed to go into effect in March. Under the revised version, there will be more appraisal waivers and LTV restrictions removed because Fannie/Freddie changed the reps and warrants so lenders aren’t liable if the loans go bad. The loans will also be low doc too if credit and payment history is stellar. The only loans eligible are those originated prior to June 2009.
“The only loans eligible are those originated prior to June 2009.”
I wish they would remove that restriction. So if your loan was originated after that, you’ll need to refinance the old fashioned way, right?
How about a family that makes $250K and has no other debt? About a $5K monthly PITI payment on gross monthly income of $20.8K. That’s a 24% ratio. Seems to work pretty well.
anon (tfo):
“You either make a lot of money (which would then fit one of the big points made in this thread) ”
The former, and yeah, I did feel that the points above hit close to home. But I think I’m also really conservative.
3x my base and assuming we have kids and my wife stops working would still be like 850 or something, which still seems like a lot to me. I feel like our household income could easily drop to maybe half my current base, or less.
Or at least I think it’s a lot of money.
“If your HHI is $100k, you’re “nauseous” about the expense of buying a glorified shack in Plainfield, or a 2/2 in a marginal city location?”
But he’s afraid of only being able to replace a third of income. If you take him at his word, and if that risk is big enough, then he should live as if he made $33K (or whatev it is) until he’s saved more, or has less income risk, etc.
“The only loans eligible are those originated prior to June 2009.”
So if you refi’d in Dec of 2009, you miss out. Icarus gets screwed again!
“About a $5K monthly PITI payment ”
What’s your arm term?
Or, who was your broker on that 3.25% 30 -year fixed, $800k loan?
Or, how much more than 20% did you put down? And, yes, points “count” for that purpose.
Or, did you really mean ITI?
Or, really expecting your taxes to not go up?
Or, did you actually mean something closer to $5,500, and more liek 26.5%? Which should still work pretty ok.
“3x my base and assuming we have kids and my wife stops working would still be like 850 or something, which still seems like a lot to me. I feel like our household income could easily drop to maybe half my current base, or less.”
Why not just rent now? Given the family and work uncertainty.
” Municipal Real estate taxes in Oak Brook (in the Hinsdale Central School District) are 0 (ZERO)”
After a little checking, it sure looks like folks in “nice” Oak Brook pay a little over 1% (like about 101.5 bip) of “market value” implied by assessor’s “fair cash value”. Sure, the houses might sell for more, but if they did, then the assessed value would go up, too.
What’s your arm term?
Not mine, but 10 Yr ARM
Or, who was your broker on that 3.25% 30 -year fixed, $800k loan?
No broker, bank rate
Or, how much more than 20% did you put down? And, yes, points “count” for that purpose.
20% down, no points
Or, did you really mean ITI?
Nope
Or, really expecting your taxes to not go up?
Taxes can go up
Or, did you actually mean something closer to $5,500, and more liek 26.5%? Which should still work pretty ok.
Nope, but like you said, it doesn’t matter.
DZ
“Why not just rent now? Given the family and work uncertainty.”
We are intending to do so.
None of us peons in the mortgage world know why Fannie/Freddie has this fascination with June 2009 for HARP. They have been repeatedly asked, but I’ve yet to see a coherent answer as to why this date matters. So yes, Icarus. If you have refinanced post June 2009, you are no longer eligible for HARP refinancing and it will be under the standard rules.
What is ironic is that some of the HARP loans that are without a doubt riskier than new non-HARP mortgages are pricing out cheaper than solid full doc refinances.
Rumor mill is that there will be a mass refinancing of existing mortgages. I’m betting by end of 2012 or early 2013, HARP will be opened to all mortgage holders whether fannie/freddie currently own the loans or not. Probably will use the $417k cut off and/or $625k for the high cost areas.
“Taxes can go up”
Definitely not clear, but I might off of the prior year taxes, not based on the (assumed) recent-ish purchase at $1mm. Since $5k piti, with $1mm house, in Chicago, means ~$1500 (prob a little more) for T+I, and $800k serviced at $3500/mo = ~3.25% rate.
I did well in 2008 but not so hot in 2009/2010. 2011 my HH income was up about 10-15%. That’s not volatility but there were some job security issues during those 2009/2010 periods. Fortunately they’ve all worked out. Regardless of what my HH income is, if I were buying a house I would want to keep my purchase price below $300,000. It’s possible to get into an upper-middle class area for this price point and many area have significant #’s of homes for sale in this price point but there are sacrifices: older home, needs work, on a busier street, smaller lot, smaller house, etc. However, life is all about trade offs. I spend 75 % of my time at home asleep anyway.
“Obviously, nobody here what commented on this has an income of this level or higher. Let me tell you that people who make more than 300k and lose their jobs may be able to “weather the storm” much better than someone who makes 50-100k and loses their job – that is because the 300k and up people have much more disposable income (most have saved quite a bit)”
I make more than $300k / yr so that part of your statement is false. Your statement that people who make $300k can weather a storm better than people who make 100k is true assuming they have the same expenses (ie mortgage value, expense situation, etc). But this thread is about how much one needs to make to be comfortable owning a $1mm home. Someone who has made $300k / yr for 10 years is much different than someone who is making $300k for the first time. This would illustrate that their earnings volatility is low. I stand by my statement that volatility of earnings is just as important as actual earnings when determining the “safe” amount to spend on a home.
The sad thing is much of those real estate tax increases in the next 3 to 5 years will be to fund pensions. Unless rates of return increase dramatically, these will have to increase in the coming years to levels that are not sustainable without 5-7% annual RE tax increases. I have actuary friends who have told me that the math on the unfunded pension liabilities will just keep getting worse due to the low investment returns, and could reach a point where taxes are paying for current retiree benefits and there is nothing left invested.
I think a 10 year ARM is reasonable if you can get it and if the rate differential is pretty significant – not sure it is that big of a spread anymore compared to 30 yr fixed. Also, if you plan on pre-paying your mortgage down, wouldn’t you want the lowest rate? The tax deduction on interest doesn’t do that much for married filing jointly taxpayers unless you have a pretty large mortgage.
“The tax deduction on interest doesn’t do that much for married filing jointly taxpayers unless you have a pretty large mortgage.”
$800k is a pretty large mortgage.
Tax payers will revolt. They’ll start cutting back and stripping pensions. Just wait and see. The unions will go ballistic, but the smart unions will accept the changes and realize something is better than nothing. I imagine there will be talk of a constitutional amendment in the upcoming decade to reduce promised pensions. The trib has been doing stories over and over again about IL’s screwed up crony pension system. Nobody other than state employees will shed a tear for the reduction in benefits for everyone across the board. If I had a choice between $500 in my pocket or $500 in yours…guess where I’m going to put my money.
True, an $800K mortgage at 3.9% would be ~ $31K in interest in the first year compared to the standard deduction for married filing jointly of $11,900, means you get $19,000 in deductible interest, which at the 35% rate if $6,650 in tax savings. If any of these mortgage interest cap legislation goes through at the federal level (I’ve heard they want to limit it to debt of up to $500k), that would cut this savings dramatically. Just another reason not to buy a $1M home.
“why don’t you just correct us on the ballpark rate that you pay, instead of endlessly repeating something of limited relevance.”
Yep, especially when I clearly stated “Effective Overall RE Tax Rates as % of Market Value.” That guy never gets anything right.
He was referring to the municipal rate only, and not the county portion. Not an apples to apples comparison when you compare one all-in rate for one community and not the other.
“Tax payers will revolt. They’ll start cutting back and stripping pensions. Just wait and see. The unions will go ballistic, but the smart unions will accept the changes and realize something is better than nothing. I imagine there will be talk of a constitutional amendment in the upcoming decade to reduce promised pensions. The trib has been doing stories over and over again about IL’s screwed up crony pension system. Nobody other than state employees will shed a tear for the reduction in benefits for everyone across the board. If I had a choice between $500 in my pocket or $500 in yours…guess where I’m going to put my money.”
this
“Tax payers will revolt. They’ll start cutting back and stripping pensions. Just wait and see. The unions will go ballistic, but the smart unions will accept the changes and realize something is better than nothing. I imagine there will be talk of a constitutional amendment in the upcoming decade to reduce promised pensions. The trib has been doing stories over and over again about IL’s screwed up crony pension system. Nobody other than state employees will shed a tear for the reduction in benefits for everyone across the board. If I had a choice between $500 in my pocket or $500 in yours…guess where I’m going to put my money.”
Look what happened in Wisconsin – they already have a 90%+ funded pension plan and they cut collective bargaining for unions and now the governor is getting recalled. The way changes are made need to be done for the greater good of the most number of people, which at this point would point to cutting pension benefits. I think the best solutions is to raise the retirement age for all government workers who work in an office or school by 3 years, and also to eliminate any overtime or non-base salary wages from pension formulas. In the private sector people have to work longer in order to be able to retire, often up to 10 years longer than government workers – why not make the difference less?
“Tax payers will revolt. They’ll start cutting back and stripping pensions.”
Yep.
“Nobody other than state employees will shed a tear for the reduction in benefits for everyone across the board.”
That’s an exaggeration. I’m against cutting pensions of those with pensions below some level, but also *strongly* in favor of implementing a cap on pension payoyuts from *all* Illinois sources–whether that’s $75k, $150k, or whatever, you shouldn’t be able to dip into multiple pension pools and earn more in retirement than you ever did as an employee.
“He was referring to the municipal rate only, and not the county portion.”
Where is the house where you only have to to pay the municipal rate, and not the county portion?
It’s like saying my gas bill was $21.94 last month–if you ignore the delivery charge, the gas charge and the taxes, it’s true. But also irrelevant.
“He was referring to the municipal rate only, and not the county portion. Not an apples to apples comparison when you compare one all-in rate for one community and not the other.”
Yep. As anon noted, “endlessly repeating something of limited relevance.”
They need some basic rules/changes –
1. you can’t be paid your pension benefit if you retire from one government entity and then go work for another government entity.
2. overtime doesn’t factor into the pension calculation
3. Raise the retirement age by 3 years effective immediately, to be phased in over 3 years, with the exception of police and fire
4. If you annual pension benefit is less than $40K, there would be no reduction in benefits. If it’s over $40K, gradually reduce the benefit on a sliding scale, so that those earning $100K+ in benefits get the largest % cut
5. Establish pension caps – if you earn over a certain $ amount, you no longer can accrued a larger benefit. Also limit the amount that can be paid to an individual for their pension benefit annually
“I’m against cutting pensions of those with pensions below some level
F* the poor!!!
Make government workers use 401Ks like the rest of us. I will never receive a pension, so it makes me angry that I have to help fund the pensions of others.
I agree with Jenny.
They will not successfully recall Gov. Walker. There’s probably a lot of signatures from ‘mickey mouse’ and ‘donald duck’ on the petitions along with multiple signatures. Outside of a handful of really really liberal circles, Walker is well liked and respected. He did a great thing for the STate of WI and I would encourage him to run in IL and do the same thing.
“True, an $800K mortgage at 3.9% would be ~ $31K in interest in the first year compared to the standard deduction for married filing jointly of $11,900, means you get $19,000 in deductible interest, which at the 35% rate if $6,650 in tax savings. If any of these mortgage interest cap legislation goes through at the federal level (I’ve heard they want to limit it to debt of up to $500k), that would cut this savings dramatically. Just another reason not to buy a $1M home.”
You get 31k of deductible interest not (31k-11.9k) since the hypothetical homeowners will also be paying property tax and state taxes on their income. These would more than offset the standard deduction, so you may as well count the entire mortgage deduction.
“You get 31k of deductible interest not (31k-11.9k) since the hypothetical homeowners will also be paying property tax and state taxes on their income. These would more than offset the standard deduction, so you may as well count the entire mortgage deduction.”
Although this hypothetical couple may be paying AMT so maybe your (31-11.9) amount is a reasonable guess.
F the rich!
F* the poor!!!
what’s next gringozecarioca? F everyone but me? (and more punctuation!!!!!)
“Make government workers use 401Ks like the rest of us. I will never receive a pension, so it makes me angry that I have to help fund the pensions of others.”
But you’ll supposedly get social security. Government workers don’t get it, but I guess that also don’t pay into it. Anyway, I’m with you on the pension front. People don’t realize how valuable a guaranteed pension with cost of living adjustments are, that’s why it irritates me when teachers and other gov workers complaing about the low pay. A private sector employee would need to cut 30-35% of pay for to save enough to buy an annuity that adjusts for cost of living assuming you start working in your early/mid 20’s and retire at 50-55.
Russ, please keep us updated on this HAMP 2.0, because I might be interested assuming the frigin closing costs and PMI don’t explode in cost
“Make government workers use 401Ks like the rest of us. I will never receive a pension, so it makes me angry that I have to help fund the pensions of others.”
Isn’t the argument — again I’m not originally from this planet so I don’t know — that these workers salaries are less than market value compared to the private sector, so the pension makes up for it? Obviously the pension formula is wacky.
“Russ, please keep us updated on this HAMP 2.0, because I might be interested assuming the frigin closing costs and PMI don’t explode in cost”
yeah, it’s an election year. Politically induced miracles occur and that June 2009 requirement might get lost like the point of a Clio post.
” I spend 75 % of my time at home asleep anyway.”
I hope I’m not out of line by assuming you don’t have young children!
Icarus,
The tradeoff used to be lower pay for job security and fixed pension but now state and federal employees generally make more in pure salary than their private sector counterparts and adding in the pension / healthcare / job stability they now make much more. Also with rates so low the value of a fixed pension goes up so those pensions growing at 2-4% are even more valuable.
well I bought in early 2009 so I’m cool, but my rate is already low @ 4.875
“I’m curious, how are you comparing current contract totals to prior years?”
I was eyeballing the data I have. I normally assume 15% of contracts don’t close but right now 20% is a better number. If you look at it closer I get the following:
Dec 2012: 80% x 643 = 514
Dec 2011: 475
Dec 2010: 523
Dec 2009: 346
Not clear on what your data represents. Didn’t understand the codes like 11-12
“Obviously the pension formula is wacky.”
Any formula that accrues a benefit for a year of service when you were 21 and worked in the mailroom in 1979 at the same rate as your year of service and salary as a Vice President in 2012 is completely and 100% flawed.
Regarding Dupage county property taxes…my partner recently explained the formula and posted the most recent rates vs. market values here: http://blog.lucidrealty.com/2011/11/03/du-page-county-property-tax-rates/
They’re arranged alphabetically and appear to be close to G’s numbers.
The “11-12” filled in the 12/1/xx – 1/15/xx date range, i.e. 12/1/11 – 1/15/12.
I believe about 25% of current contracts in Chicago will not close. This conclusion is based on the increase in distressed sale market share since 2010 (when 22% of 12/1/09 – 1/15/10 contracts as of 1/18/10 did not close), lack of seasonality of distressed sales, and higher levels of contracts falling out for distressed properties.
“Where is the house where you only have to to pay the municipal rate, and not the county portion?”
Anon, you got it completely backwards. We pay the county protion for tax – there is no municipal tax in Oak Brook. G’s numbers were too general (as usual) and included. In general, the overall rate is about 2.9% of the assessed value (compare that to the typical 5-8% rate for almost every other community in Illinois/country). Translation for people that don’t understand – taxes in Oak Brook are about 50% of taxes anywhere else in the county/state/country.
For clarity:
(when 22% of 12/1/09 – 1/15/10 contracts counted on 1/18/10 never closed)
“G’s numbers were too general (as usual) and included. In general, the overall rate is about 2.9% of the assessed value (compare that to the typical 5-8% rate for almost every other community in Illinois/country). Translation for people that don’t understand – taxes in Oak Brook are about 50% of taxes anywhere else in the county/state/country.”
It is pretty clear how Oak Brook compares to all the other communities I listed. Unless, of course, you can’t ever get anything right.
“Anon, you got it completely backwards.”
clio never gets anything right.
“the overall rate is about 2.9% of the assessed value … compare that to the typical 5-8% rate for almost every other community in Illinois”
5 to 8% of *assessed* value? In almost every other community in Illinois? Wanna check the tax bill on your condo and revise that statement?
Would you care to wager the difference b/t 8% of my home’s assessed value and my actual tax bill that I am wrong?
Heck, even jmm could get that one right, anon. Clio can never get anything right.
Interesting argument but I am not sure it is true. One might argue that there are fewer people who qualify for high paying jobs as they are usually highly specialized so it is less likely for them to lose their jobs compared to the the lower paying ones.
“But there are a lot more lower paying jobs than higher paying jobs, and I’ve seen plenty of people will higher paying jobs lose them, and they have little or no ability to secure another income stream at that same level.”
anon (tfo) – you are an arrogant, elitist snob – completely reflected in your posts. I can’t believe nobody calls you out on it. You obviously get your sense of worth by posting here and putting everyone down (correcting them, etc.). Hope that makes you feel like a real man….
“anon (tfo) – you are an arrogant, elitist snob – completely reflected in your posts.”
Guess that’s better than your usual put downs, and about the best I can hope for from the clio-borg.
HD you claim walker will survive a recall…we’ll see. Remember much like real estate politics is shifted at the margins so voter turnout is everything. And the MSM is staunchly in bed with the union caste and working OT to make it happen.
“I have actuary friends who have told me that the math on the unfunded pension liabilities will just keep getting worse due to the low investment returns, and could reach a point where taxes are paying for current retiree benefits and there is nothing left invested.”
This is true, there are tons of articles about it. The 5 top pension funds are 50% funded. I know one that has 11 billion in assets, and 24 billion in liabilities, and the gap is growing each year. The State of IL is required to back-stop these pension funds, the state cannot default.
And in Wisconsin, people are trying to recall Governor Walker who is trying to fix this type of mess. Go figure.
“The tradeoff used to be lower pay for job security and fixed pension but now state and federal employees generally make more in pure salary than their private sector counterparts and adding in the pension / healthcare / job stability they now make much more. ”
Yep, every since people were brainwashed that “everyone” must go to college, and everyone in college thinks they are going to be a Master of the Universe, they didn’t care about public workers or their bargaining, they thought they were above them in station. Now that it’s all backfired, they suddenly focus on blue-collar and public workers doing better!
“Hope that makes you feel like a real man….”
I always assumed anon(tfo) was female, and something like a retired 58 yr. old former biologist/chemist.
“I always assumed anon(tfo) was female, and something like a retired 58 yr. old former biologist/chemist.”
That might have to go in the Wiki. Any idea what the record is for number of comments on a post?
clio: “anon (tfo) – you are an arrogant, elitist snob – completely reflected in your posts. I can’t believe nobody calls you out on it. You obviously get your sense of worth by posting here and putting everyone down (correcting them, etc.). Hope that makes you feel like a real man….”
Good god you are an awful person. Rather than admit you are wrong–or even argue the facts–you go to your fallback position on every argument: name calling and temper tantrums.
You look ridiculous.
“Any idea what the record is for number of comments on a post?”
After deletions?
Most commented building is definitely 659 Randolph.
“Rather than admit you are wrong–or even argue the facts–you go to your fallback position on every argument: name calling and temper tantrums.”
uhhh – but the funny thing is that i am NOT wrong. G and anon are completely wrong and pick apart my basic arguments on the basis of semantics/grammar and tangential topics etc. and try to divert attention from the fact that I am right. The bottom line for this ridiculous discussion is that taxes in the Hinsdale Central segment of Oak Brook are less than half the tax rate of any other city/suburb/county/state in the US. That is the bottom line, that is the truth and it can be easily verified. so stfu, be a little smarter, and read between the lines.
“taxes in the Hinsdale Central segment of Oak Brook are less than half the tax rate of any other city/suburb/county/state in the US.”
If your argument really is that it’s zero, then it would be 100% less than the tax rate of any other jurisdiction.
Since the relevant issue is total property tax rate, are you really saying that Oak Brook is lower than Honolulu? Lower than Denver? Lower by 50%, in each case? You sticking with that?
They aren’t even less than half the rate of many Chicagoland communities, as my list illustrates.
“They aren’t even less than half the rate of many Chicagoland communities, as my list illustrates.”
Good God – wtf is wrong with you?!!!! The TOTAL tax rate (not the municipal tax and not the county tax – but the TOTAL tax) is less than half the rate of most Chicagoland communities – G, you are publishing the municipal tax rate – you need to look at the total tax rate moron
Most of Indiana has lower property taxes than just about all of Illinois. People in Indiana call $2,500 a year “high taxes”. Of course, they have public services at a level that one would expect for minimum taxes.
“You are an abusive idiot, with reading comprehension problems.”
I went to U. of C., Harvard and Stanford – all schools people on this site would LOVE their children to attend. Are you saying these schools suck? Perhaps you are saying that nobody there can read? Are you stating that I am an unfit doctor? – see what it feels like when people twist your words/meaning!!!! Now leave me alone – seriously, don’t respond to my posts. I don’t need your useless irrelevant opinions.
“Most of Indiana has lower property taxes than just about all of Illinois. People in Indiana call $2,500 a year “high taxes”.”
OH GOOD LORD…no….no…no… Ican’t…. I can’t…… OK, Pete, you can’t look at overall tax amount – you have to look at tax RATE and you can’t base your argument on hearsay, perception, or opinion. You have to go with facts/data. Did anyone on this site go to school?!!!
“G, you are publishing the municipal tax rate”
No, he’s not. The effective total property tax rate for Chicago (outside special services districts) based on the assessor’s “market value” (ie, 10x the assessed value, as shown on the assessor’s website) in 2010, payable 2011 was about 1.6%, with the HO exemption.
If you want to do it on the assessed value, it was about 16%.
In either case, the “municipal” portion of that tax (ie, the portion that ALL Chicagoans pay, and NO non-Chicagoans pay) was 84.83% of that amount. So, either Chicago “city” tax was 1.357% or 13.57%.
Yes, that does include CPS, Parks, City Colleges, etc., but those *are* all municipal taxes in the city. If you insist on stripping out all the “agency” extensions, the City’s share of the total property tax bill was 18.54% of the total, meaning ~0.29% of “market” value or 2.9% of assessed value.
None of the numbers other than total tax bill/[market value or assessed value] have any relationship to the tax amounts G posted.
And Pete what increased public setvices do we have here for our outrageous property taxes here in Illinois? Far more common/better coverage by the meter maids?
“Now leave me alone – seriously, don’t respond to my posts. I don’t need your useless irrelevant opinions.”
Right back atcha. Moron.
“Far more common/better coverage by the meter maids?”
We get that courtesy of selling our parking meters to a private entity without benefit of any sort of earn out.
“I have actuary friends who have told me that the math on the unfunded pension liabilities will just keep getting worse due to the low investment returns, and could reach a point where taxes are paying for current retiree benefits and there is nothing left invested.”
I hope your actuary friends do better with their math at work. TRS had a 23.6% investment rate of return in FY 2011. Retirement systems are typically funded: teacher contribution 1/3, investment income 1/3, and state contribution, so taxes will never pay all of the pension. State, school, municipality typically do not pay social security tax that the employer typically pays, and that is why the state contributes into the pension systems. The pension systems are underfunded because the state has not made contributions (or only part of the required contribution) for almost two decades. When pension contributions are fully funded and contributions are also made to social security (combining the two systems), there is no problem with unfunded liabilities as with the Wisconsin system and the IMRF system in Illinois.
“We get that courtesy of selling our parking meters to a private entity without benefit of any sort of earn out.”
That is why Pete and the rest of the “good government costs money” crowd is stupid and have no idea what is going on.
dd, if the state only funds a small portion of what they should if any, and the fund doesn’t earn 23% annually (the average return the past 11 years is nowhere near that), major issues will arise. When a pension plan is less than 50% funded, you need a pretty high rate of return to cover that 1/3 you mentioned for investment return. Once you get below 40% funded, and have a workforce that is statistically nearing retirement in greater numbers, you get to the point where taxpayers need to anty up a larger amount than 1/3 and that is going to cause the taxpayer revolt. It will happen all over the country before Illinois, but there will be revolt if taxes increase from 5% to 10% in one year.
“Any idea what the record is for number of comments on a post?”
It’s like 250 or so.
I think it was one of those threads where the baby name was above the crib and Bob went off about how the family had to leave its north side 2/2 because junior couldn’t grow up in a condo with no garage space (or something like that.)
You know the meter lease deal is public info, right? Did any of you read it?
Chicago took those suckers for a ride. Accidentally. Every year that inflation is below average the deal gets worse.
dd: “TRS had a 23.6% investment rate of return in FY 2011.”
Wow. That’s spectacular. (Source?) That’ll go a long way to recouping their loss from 2009, which was negative 22%, according to this June 2010 report from Medill:
http://news.medill.northwestern.edu/chicago/news.aspx?id=166746
whichl reported:
“TRS has the fourth-riskiest investment portfolio for a pension fund in the U.S., with fully 81.5 percent of its investments considered risky….”
“TRS’s OTC derivatives portfolio showed that in addition to writing CDSs, the pension fund was selling swaptions and shorting international-based interest rate swaps….”
” ‘TRS basically sold insurance and now it has an enormous short volatility position…’ ”
“It isn’t clear how TRS is valuing its OTC derivatives…”
“TRS appears to be betting that long-term Treasury yields will greatly increase…”
With returns down 22% one year and up 23.6% the next, TRS would appear to have gunslingers at the helm. God bless ’em. May it all end well, even if I can’t see how going short Tbonds over the last 18 months — or last 30 years — could be a ‘winner’ today.
http://www.auditor.illinois.gov/Audit-Reports/Compliance-Agency-List/Retirement-Systems/TRS/FY11-TRS-Fin-Full.pdf pg. 23ish.
Looks like they made it all, trading derivatives on the polish zloty.
….and a plethora of swaptions …
ROFLMAO…I would hire someone with a speech impediment to be my swaption trader… That would simply just be the most disruptive thing ever. One with a temper, that liked to scream, would be all the better.
Ok.. I am actually about to piss my self right now..
“Good God – wtf is wrong with you?!!!! The TOTAL tax rate (not the municipal tax and not the county tax – but the TOTAL tax) is less than half the rate of most Chicagoland communities – G, you are publishing the municipal tax rate – you need to look at the total tax rate moron”
Clio never gets a thing right. As anon pointed out, my list is a correct comparison of overall effective tax rates as a % of market value. In other words, what the total RE tax bill would be. Only clio brought up municipal rates, which are but one component of the tax bill calc. Totally irrelevant to the discussion, too, as anon (again) correctly pointed out.
I share one of clio’s alma maters and point to clio as exhibit one that there were plenty of dimwits in attendance.
I was just about to say that the teachers pension fund made most of its returns the AIG way: underwriting CDS swaps on risky derivitives, but someone beat me to it.
Btw, the entire state of Indiana has RE tax bills capped at 1% of MV for owner occupants. There are some addl bond payments tacked on in the rusty areas, but any new debt that would push bills over the cap must be approved by voter referendum.
“but someone beat me to it.”
…and neither of you even know what a swap is…:-) ROFLMAO.. oh this is a good morning… “Thwapthon”
“CDS swaps”
appears a touch redundant as well… the credit default thwaps thwaps?
Wojo:
See link following link (Winter newsletter) for TRS FY11 rate of return.
http://trs.illinois.gov/subsections/pubs/topics/tnr.htm
If TRS only had a -29% rate of return in FY2009 (July-June), then that is far better than almost everyone else in 2009. As for derivatives, I think if you look at most mutual funds, a small percentage is invested in derivatives, so 2% in the TRS system (according to your link) is not unusual. This is not to say that TRS and most other pubic pension systems are in good shape (twenty years of not funding 1/3 of a fund will form an enormous shortfall), but the blame lies squarely on politicians, since they passed the laws allowing the sweetheart pension deals that are currently reported in the Chicago Tribune/Suntimes and did not make the state contribution for the retirement systems. Oh, and let’s not forget the shady “investment types” that were given access to public retirement systems by politicians/administrtors/fundraisers who are now serving time. Pubic pension reform is needed but until the plunder and abuses by politicians stop, taxpayers can look forward to paying more to the public pension systems.
Anon(tfo) is a nonpracticing attorney probably with other advanced degrees.
Clio speaks spanish.
“Clio speaks spanish.”
From the mouth of the great “G”: (HD) doesn’t get anything right.
“http://finance.yahoo.com/news/unemployment-claims-352-000-fewest-133912012.html”
HD – how does this bode for consumer sentiment and the spring market? Still think prices are going to decline?
http://finance.yahoo.com/news/unemployment-claims-352-000-fewest-133912012.html
“HD – how does this bode for consumer sentiment and the spring market? Still think prices are going to decline?”
I’ll answer.
Yes. Prices will continue to decline this spring. There are simply too many distressed properties on the market- and those are what are selling. Everyone else is underwater and can’t sell- but this will eventually put pressure on prices as well.
Everyone who decided a few years ago to “wait it out” and rent out their property etc.- is totally screwed. They will be underwater for a decade or more! Now what are they going to do? Many people want to sell- but simply can’t. All of those sales will be short sales in the future.
By the way- I could do distressed properties in Lakeview and Lincoln Park for every single post for a week and still there would be more of them. Price declines have spread even to the best neighborhoods now. It will take years to work through.
“Everyone who decided a few years ago to “wait it out” and rent out their property etc.- is totally screwed. They will be underwater for a decade or more! ”
I remember when you scolded me for burning money in my backyard.. was just keepin the pile small
Clio. Your bio says you speak spanish. Unless that was a lie too.
“Everyone who decided a few years ago to “wait it out” and rent out their property etc.- is totally screwed.”
The paradigm definitely shifted. A few years ago the the conventional wisdom was “price it at or below market value” and see what happens. Then it became “if you cannot afford to sell your home, don’t put it on the market in the first place.
“They will be underwater for a decade or more! Now what are they going to do? Many people want to sell- but simply can’t. All of those sales will be short sales in the future.”
Maybe, or maybe not. I think you’ll have a lot of people who will buy a “Step-Up” house they can afford and make it there “Forever House” instead of getting they actual Forever House they desire. In other words, those who can will rent their 2/1, 2/2, 3/2, etc at break even or slight loss and take on a mortgage of a bigger home though not as big as they could afford if they didn’t have to supplement the rental income of their previous home. They lucky ones will have In-towns for when they become empty nesters. The unlucky ones will send the keys back to the bank.
A few more years ago, it was “real estate only goes up” and “buy now or be priced out forever” and “don’t wait to buy, buy to wait.” Perhaps, conventional wisdom is actually a sales pitch?
The biggest thing yet to hit the accidental landlords is the temporary supply constraint created by the banks. They are increasing demand for rentals by foreclosing on the deadbeats, yet not getting the vacated units back on the market in a timely manner. Not to mention all the units that have never been occupied. This will correct itself eventually. In the meantime, the FB’s can enjoy those extra dollars of rent, since that negative cash flow will be increasing and values declining.
“anon (tfo) (January 18, 2012, 6:28 pm)
Right back atcha. Moron.”
not discounting all your other great contributions to CC but that was the best post you ever made!!!!! 🙂
““Any idea what the record is for number of comments on a post?”
It’s like 250 or so.”
This one:
http://cribchatter.com/?p=6864
has 399.
Still think the prices are going to go down?
http://finance.yahoo.com/news/rate-30-mortgage-down-record-150126043.html
I see HD was chipper and optimistic even back then:
“homedelete (June 1, 2009, 7:26 am)
The floor is when the developer rents 25% of the units to section 8 tenants…..we’re nowhere near the ‘floor’.”
“Yes. Prices will continue to decline this spring. There are simply too many distressed properties on the market- and those are what are selling. Everyone else is underwater and can’t sell- but this will eventually put pressure on prices as well.”
Sabrina, you are embarrassing yourself. Not “everyone” is underwater. In fact, the VAST VAST majority of homeowners are NOT underwater. Mostly, the people underwater are those who bought between 2004-2008 – and just because many of them are people you know (from this site, or your job, or your friends, etc.) does NOT mean that they are the rule – again, the VAST MAJORITY of homeowners are NOT underwater. Seriously, you are making a fool of yourself by stating such nonsense.
“See link following link (Winter newsletter) for TRS FY11 rate of return.
http://trs.illinois.gov/subsections/pubs/topics/tnr.htm
If TRS only had a -29% rate of return in FY2009 (July-June), then that is far better than almost everyone else in 2009.”
I’m going to disagree with that statement about the 2009 negative 29% return being “good” as the investments of a pension fund should not be 100% equities. I think that negative rate of return should probably be in the -25-30% range for that time period considering the market. Overall, the average return the past 10 years is 6.8%, which is pretty good. This year’s return is masked by the fact that the stock market fell off a cliff in Q3 and overall didn’t recover much at all through 12/31/11. I’d be interested to see the 6 month returns for the period ended 12/31/11.
I think that in order for taxpayers to pay more for pensions, reform needs to take place to significantly cut benefits especially for those receiving $100K+ annually, otherwise there will be a taxpayer revolt. It is happening all over the country and the business community is embracing it.
“In fact, the VAST VAST majority of homeowners are NOT underwater”
ok lets just say 80% of the owners of 2/2 condos are way Under underwater. and the rest have mortgages higher than thier homes current worth regardless if the have reserves to cover the gap.
I don’t know why i’m bothering but….
“In fact, the VAST VAST majority of homeowners are NOT underwater.”
What is your definition of Vast Vast majority?
” Mostly, the people underwater are those who bought between 2004-2008 – ”
And a lot of people who bought before have been caught up in the Market’s Overcorrection for the bubble prices and have seen their equity & pre-free money down payments disappear.
“There are simply too many distressed properties on the market- and those are what are selling. Everyone else is underwater and can’t sell- but this will eventually put pressure on prices as well.”
So, about 10-15% is considered “everyone”?
As far as the parking meter debacle goes, I would be really interested to know what the increase of income to the city is due to the rise in parking violations. More people than ever get tickets, then again, they’ve hired many more people to write them!
“I would be really interested to know what the increase of income to the city is due to the rise in parking violations.”
Not quite current, or complete, but:
http://theexpiredmeter.com/2011/12/parking-ticket-pace-up-30-over-last-year/
“And a lot of people who bought before (2004-08) have been caught up in the Market’s Overcorrection for the bubble prices and have seen their equity & pre-free money down payments disappear.”
Pre-2004 prices are not an overcorrection. Nope, not at all.
“Pre-2004 prices are not an overcorrection. Nope, not at all.”
then what are they? part of the bubble as well?
Yes.
“then what are they? part of the bubble as well?”
Bubble started inflating in 97 to 99–any answere therein has merit. Claim it started in ’96 or earlier, or 2000 or later, you need to dig into the data more.
’04 (or, really, 2d half of 03) was, imo, when the bubble should have popped, but instead just got a lot, lot bigger.
What anon said, although I thought it should have popped in the 2nd half of 2001.
“What anon said, although I thought it should have popped in the 2nd half of 2001.”
And that is why bubbles tend to make fools out of bears, even if they are “right”.
The bubble became a mania in 2004 as builders everywhere went crazy. Buyers too. I’m seeing pre1999 prices all over the suburbs. Property Tax increases since 1999 seem to be offsetting the decreased prices.
” I thought it should have popped in the 2nd half of 2001″
Should have, from the pov of the health of the overall economy, size of prior bubbles, etc etc etc, for sure. When you layer in the loose money of post-9-11, and the quest for yield, it makes sense that it continued past modeled expectations. Then the occ over-ruled state’s attempts to limit the worst lending excesses, etc etc in ’03 and after.
“ok lets just say 80% of the owners of 2/2 condos are way Under underwater. and the rest have mortgages higher than thier homes current worth regardless if the have reserves to cover the gap.”
OK Everyone – pay attention. THIS is the kind of nonsensical arguments you get when you send your kid to a CPS/state school education!!!! What an idiot/moron (and I’m not saying that to be insulting – that is the truth). Groove, what if I counter and say: “ok, lets just say that 10% of the owners of 2/2 condos are under water and the rest are doing fine with their payments” – does that make me win the debate?!!! GFL – I can’t take this anymore.
how can you find out the REAL percentage of people who:
1. own their home free and clear
2. are underwater
Is there anyone who has ACCURATELY compiled this data? – Yeah, I didn’t think so………. So the truth is that we really don’t know how many people are underwater or are in distressed properties. Remember, these people are going to be the people that complain the loudest, list their places and are most vocal and in the forefront of the media. The people who own their homes outright or are in a comfortable position are NOT going to waste any energy dealing with these issues (because “it doesn’t really affect them”). I think everyone would actually be SHOCKED to realize how many people are NOT underwater and are NOT doing that badly.
“I’m seeing pre1999 prices all over the suburbs”.
Not in Park Ridge.
Thanks Anon, even looking at a parking meter these days makes my blood boil. We should have marched on City Hall for this one.
“how can you find out the REAL percentage of people who:
1. own their home free and clear”
Around 40%
“2. are underwater”
Around 28%
“how can you find out the REAL percentage of people who:
1. own their home free and clear”
http://economistsoutlook.blogs.realtor.org/2011/03/15/mortgaged-and-non-mortgaged-home-owners-by-state/
Not definitive, but what is?
“OK Everyone – pay attention. THIS is the kind of nonsensical arguments you get when you send your kid to a CPS/state school education!!!! What an idiot/moron”
goes to show the reading comprehension if you abandon your fake kid and higher some stranger to live with them and raise them then send your fake child that you never see and are in another counrty to UofC/stanford/harvard then only to have them fail as a doctor and spend most their time on crib chatter calling names like a 8 year old while your fake kid’s patients are ill-served because he would rather shill his failing oakbrook/hinsdale real estate practice i hopes to ride the coattails of an inflating bubble in boston so he can in turn claim being a real estate mogul when actually dumb luck was the main factor.
all while your fake kid which you abandoned ponders why his exwife and kids are as far away from as possible and random people throw water bottles at him and need to drive a fancy car as its the only way he can get attention. he also ponder why the plastic surgery isnt turning heads like it should so turns to cribchatter to provoke attention to himself/selves. complains about a large lonely house and its upkeep cost in oakbrook but yet when he looks in the mirror and doesnt see all if it correlating…..
…..then you wonder if that cost of a “higher” education was worth it?
p.s. the run on sentences were intentional as for comedic effect in the above tragedy
“Should have, from the pov of the health of the overall economy, size of prior bubbles, etc etc etc, for sure. When you layer in the loose money of post-9-11, and the quest for yield, it makes sense that it continued past modeled expectations. Then the occ over-ruled state’s attempts to limit the worst lending excesses, etc etc in ’03 and after.”
I agree, that’s what I meant about “should have.” Lending excesses were the best bubble indicator. Once they exceeded even those utilized to achieve the 80’s NY/CA peaks, the end was near.
“actually dumb luck was the main factor.”
I tried to tell him this simple fact when he began to stink up the joint. He should be chasing other bubbles because he is lucky. Instead, he fooled himself into believing that he knows something about real estate. Dumb luck, indeed.
“actually dumb luck was the main factor.”
And the same can be said about some bears that “avoided” the bubble and are crowing about it now. Clio is a bull market genius. When the market went south, he didn’t know what to do. Certain people here are bear market geniuses. When the market eventually does goes up, they will still be waiting looking for more declines.
“need to drive a fancy car as its the only way he can get attention. he also ponder why the plastic surgery isnt turning heads like it should”
Still waiting for clio to make it to the showdown with groove. (Prob will happen when he pays up the G bet.)
OK – Groove – I have to admit – your last post was VERY funny. You win.
HD –
I know you weren’t that excited about Portage Park the last time we spoke and that you prefer OIP.
However I’m seeing some cute brick bungalows closing in Portage Park at around 100K.
Some of them do not require a lot of work.
I think you’d be happy in this price range.
I don’t think prices in OIP will ever go that low.
If you get a house for 100K in a nice part of Portage Park you could send your kids to private school.
What do you think?
Just wanted to give you a heads up.
“it makes sense that it continued past modeled expectations.”
Has anything ever occurred at the time of modeled expectation?
He should be chasing other bubbles because he is lucky.
G, please don’t tell him that. He might move here.
ze, don’t worry – I like to be in a more sanitary environment.
“Certain people here are bear market geniuses. When the market eventually does goes up, they will still be waiting looking for more declines.”
Certain? Not any of the regulars, IMO.
“Certain? Not any of the regulars, IMO.”
I can name a few. Not you though, IMO.
C’mon, name names.
So on the other thread clio admits to owning 6 Invsco specuvest condos…it all makes sense now. And clio so long as you don’t mark your real estate “investments” to market, keep up with the monthly mortgage payments and don’t attempt to sell them you should be fine.
“OK – Groove – I have to admit – your last post was VERY funny. You win.”
never hear to win just to slightly entertain.
“it all makes sense now. And clio so long as you don’t mark your real estate “investments” to market”
made that point long ago the his books are not using fair market/depreciation/capitalization/etc.
“:made that point long ago the his books are not using fair market/depreciation/capitalization/etc.”
I don’t know what all of that mumbo-jumbo means. All I know is that I have my condos and many houses paid off and I receive about 23k/month in rent and my expense for the houses/condos are about 17k – so I have 5k to blow on all the fun I want to have!!! I will continue to rent them out until the market improves, then sell – I don’t give a shit whether that is 2 years, 4 years or 10 years (and I am like most other investors out there – we have positive cash flow and don’t need to sell).
So, what, you have ~2M invested in these houses and condos, and make a whopping $72k a year? lol
“C’mon, name names.”
You mean the guy that loves the thwapthions??? 🙂
or.. the guy that was much funnier when he was drunk and unemployed?
“So, what, you have ~2M invested in these houses and condos, and make a whopping $72k a year? lol”
No – I have MORE than 2M invested!!! and who the hell cares if they only make 72k a year?!! The goal of the game in life is NOT to accumulate the most money possible. Seriously, who the f cares if you only make 1%, 2% or 0% on your investments if you are living comfortably? What more would I do w/ my money?
“What more would I do w/ my money?”
Sounds like you’re doing quite a bit more of extra work for little, no or negative yield, with your money, to me.
Bob – that USED to be the case (when I self managed). Now I employ a management company and still see a 6k return – not great at all, but OK until the market improves.
“not great at all, but OK until the market improves.”
Ha! Bob tell him again about your Sharpe of 6 last year.
“Ha! Bob tell him again about your Sharpe of 6 last year.”
I was about to but I’ve given up trying to teach him. The latest addition to my portfolio is lending club.
The Fed is about to print another $1T. So for me it’s just BPT and lending club for the time being.
you guys don’t have to “teach” me anything. I am a multimillionaire – and you are not – so please, keep the advice to yourself.
“So for me it’s just BPT and lending club for the time being.”
Have you funded any loans via lending club? If so, what has been your experience?
“Have you funded any loans via lending club? If so, what has been your experience?”
Just joined recently.
My experience has been its tough to get subprime loans funded…a lot fall out. So far only 13% of my initial deposit is in loans.
“you guys don’t have to “teach” me anything. I am a multimillionaire – and you are not – so please, keep the advice to yourself.”
No you’re not. You need to deduct mortgages from your position to arrive at net worth. You are likely far from a millionaire.
Thing is you don’t get a notification that those assigned notes moved back to available funding. You have to check the site once a day at least to re-deploy them to other notes. Only takes a few mins but a bit of a chore.
“You are likely far from a millionaire.”
I think he mentioned something about having to sell the car. Wonder if he would sell me the seats.. Would be fun mounting Clios seats in the truck.
“You are likely far from a millionaire.”
uhh – when you live in an area where your neighbor is selling a single empty lot for 2.7 million, you can rest assured that you are likely a multi multi millionaire!!!
“when you live in an area where your neighbor is selling a single empty lot for 2.7 million, you can rest assured that you are likely a multi multi millionaire!!!”
Nah, I gotta agree with Bob on both the BPT and you probably living in distress…
I’ve lived in areas where my neighbors sell their homes for $38 million. I wasn’t a multi-millionaire. You can rent in any neighborhood and get your kids in the same schools even though you’re not rich. That’s what’s so great about America.
Sabrina, you should have just removed the link since it has NOTHING to do with anything and once again is about the dreaded Oak Brook!
“Nah, I gotta agree with Bob on both the BPT and you probably living in distress…”
Yeah and lendingclub doesn’t make sense for bigwigs like you. Its not really scalable without a bunch of clerical work and part of the draw is keeping the participation rate at $25/note. Something about 1099-INTs and if a tree falls in the woods but noone sees it did it happen kinda thing. 😀
You’re right benjamon9. I don’t mind the reference to multi-millionaires though. So I removed the link.
Dave M agree with you on everything except revolt. If we have not revolted over the astounding amount of money lost with mortgages, banks, and financial shenanigans, I doubt that pensions will trigger that type of reaction.
Lots of people are underwater, not just those who bought after 2004 or bought 2/2s. People underwater include those who bought in 2000 and also those who refinanced.
Portage park, nah……I’ve got a few things up my sleve, nd I have for a while. I have long sleves like a wizard and I will perform magic in the housing depattment.
Today my client who lives in the XXXX block of south carpenter was too naive to realize that hwr mortgage lender was pretty much giving her the house despite her defaulted 75k mortgage. Houses in the area cost 6,000 to 15,000 in the area. Free house, you only have to pay the taxes and upkeep. The bank today told her that they charged off the mortgage. Amazing stuff when that same house would cost 700k in lakeview (in nicer condition of course).
HD – pardon my ignorance here, but I’m honestly curious; if the bank charged off your client’s debt, is it likely that a collection agency will buy the note and start hounding her for money? Or does that not happen with mortgages?
Bob,
I did look at lending club as well. Pretty impressive returns. Very nice idea.
But yes..$25 per clip is onerous for a guy wearing a t-shirt that says “work is damaging to your health”
chuk… you know anything about modifying ubuntu/linux thru the terminal? Anyone here on a at home linux based OS?
“HD – pardon my ignorance here”
Why pardon yourself. When he shows his, not a question to ask (very surprising for a lawyer)…he just leaves the convo and repeats the same idiocy a month later.
🙂
“I did look at lending club as well. Pretty impressive returns. Very nice idea.”
Secondary sources indicate returns are on average ~200bps below their advertised ones. Still not shabby though.
“chuk… you know anything about modifying ubuntu/linux thru the terminal? Anyone here on a at home linux based OS?”
Yes. What would you like to do?
Ze-
I’m interested to know the answer because debt collectors go after unsecured debt, IE defaulted credit cards. I’ve never come across a situation where a debt collector is going after a secured debt, in this case a charged off mortgage, but maybe I haven’t been digging deep enough.
Could be that there aren’t enough charged off mortgages floating around for the bottom feeders to get interested in.
Anonemoose… It’s a good question… I could understand you wanting to know. I was just commenting on the irony of the need to apologize for ignorance, to HD. He wears his like a badge of honor.
Chuk… Opened Ubuntu for the first time ever. Ran it as an app inside of XP SP3.. Kaspersky is a VM hog and is just annoying me now. God forbid I run windows based w/o virus and defrag everything and then some running.
So was waiting to go directly to Windows 8 when i decided to try Ubuntu. Have to say it was really nice and light. Impressed. Problem was I run multi-monitors and it didn’t find my second ATI driver. So knowing absolutely nothing, i found some code-terminal-and started playing. Don’t even know if it installs correctly how to even find it. Didn’t get it on —> wiped Ubuntu from Windows —>about to drop it on disk to install on boot —> one last try?
So I’m thinking I like this, but GUI is so much simpler than CLI that I am wondering if there is any reason I should have to teach myself a new language.. I never minded doing that.. I never wrote pretty code in any language, but somehow I persist through my own ignorance and get things working..
Had a feeling this was up your alley.. any opinion? go for it? run now?