Market Conditions: IAR Blames the Weather for February Housing Slowdown

The February sales data is finally out and mirroring what is happening in the rest of the country, sales fell year over year.

From the Illinois Association of Realtors:

The city of Chicago saw a 3.5 percent year-over-year home sales decline in February 2014 with 1,361 sales, down from 1,411 in February 2013. The median price rose to $175,000 versus $156,050 in February 2013, an annual increase of 12.1 percent.

Here is the sales data for February going back to 1997 (courtesy of G). It is slightly different from the IAR’s data:
[unordered_list style="bullet"]

  • 1997: 881 sales
  • 1998: 991
  • 2000: 1383
  • 2001: 1151
  • 2002: 1677
  • 2003: 1566
  • 2004: 1814
  • 2005: 2228
  • 2006: 1855
  • 2007: 1703
  • 2008: 1454
  • 2009: 870
  • 2010: 1257
  • 2011: 1092
  • 2012: 1250
  • 2013: 1378 (1411 per IAR)
  • 2014: 1361 (IAR data)

[/unordered_list]
Here is the Median Price Data also going back to 1997 (thanks G!):
[unordered_list style="bullet"]

  • 1997: $117,000
  • 1998: $132,000
  • 1999: $143,750
  • 2000: $161,500
  • 2001: $180,200
  • 2002: $212,000
  • 2003: $215,000
  • 2004: $229,900
  • 2005: $268,900
  • 2006: $267,500
  • 2007: $270,000
  • 2008: $290,000
  • 2009: $218,125 (with 31% being REO/Short Sales)
  • 2010: $176,000 (with 46% being REO/Short Sales)
  • 2011: $150,250 (with 50% being REO/Short Sales)
  • 2012: $140,300 (with 52% being REO/Short Sales)
  • 2013: $158,000
  • 2014 $175,000 (IAR data)

[/unordered_list]
The Condo/Townhouse sales data since 2008 (thanks to G again):
[unordered_list style="bullet"]

  • 2008: 1087 sales, median price of $314,900
  • 2009: 451 sales, median price of $280,000 (with 18% being REO/Short Sales)
  • 2010: 660 sales, median price of $250,000 (with 33% being REO/Short Sales)
  • 2011: 604 sales, median price at $193,500 (with 46% being REO/Short Sales)
  • 2012: 692 sales, median price at $165,250 (with 50% being REO/Short Sales)
  • 2013: 779 sales, median price at $200,000
  • 2014: Not separated out by IAR this year

[/unordered_list]
“February’s weather was not anymore welcoming to buyers than January in Chicago. People do not want to go shopping for homes in unseasonably cold weather,” said Matt Farrell, president of the Chicago Association of REALTORS® and managing partner of Urban Real Estate.

“Buyers are, however, ready to move and as homes come on the market, they are aggressively making their best offers. Median pricing is up, signaling a strong market on the rise.  As sellers get their homes show-ready for a spring market, we believe these homes, too, will move quickly, if priced right,” Farrell added.

“The combination of increasing median prices and mixed signals from sales continued in February,” noted Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory of the University of Illinois.  “Clearly, the dismal, persistent winter weather dampened enthusiasm for the housing market in early 2014; however, the forecast for month-to month-sales indicates positive trends for the next three months.”

The press release didn’t address affordability even though mortgage rates and median price were significantly higher year over year.

The monthly average commitment rate for a 30-year, fixed-rate mortgage for the North Central region was 4.32 percent in February 2014, down from 4.46 percent in January, according to the Federal Home Loan Mortgage Corp. In February 2013 it averaged 3.49 percent.

The 10-year is also on the move again which means mortgage rates could be volatile over the next several months.

Will April be a hot month in Chicago’s housing market once the weather breaks?

Or is this slowdown here to stay in 2014?

Weather and lower inventory impact February; Illinois home sales but median prices see annual gain [Illinois Association of Realtors, Press Release, March 20,2 014]

215 Responses to “Market Conditions: IAR Blames the Weather for February Housing Slowdown”

  1. So we are back to normal (non bubble) levels.

  2. “Will April be a hot month in Chicago’s housing market once the weather breaks?”

    Define “hot”? Average days on market? Yes. Number of sales? No. Inventory is horrible. The only way it gets better is with higher prices.

  3. http://www.illinoisrealtor.org/sites/illinoisrealtor.org/files/City-of-Chicago_1.pdf

    chuk is correct. inventory is down 23% from last year and days on the market down to 67.

  4. Here is some in depth analysis of home prices in submarkets of Cook County.
    http://www.housingstudies.org/data/ihs-price-index/cook-county-house-price-index-fourth-quarter-2013/

  5. Supply down, days on market down, prices up, rates up.

    Good time to be a homeowner.

    Except, the city, county, state, CPS, CPD, CFD, library, parks, CTA, and all pensions are broke. If there is a massive property tax hike to make up for the out of control spending and obligations, will that significant hurt prices. Such as a 50% property tax increase.

  6. “Such as a 50% property tax increase.”

    Based on what? Every taxing jurisdiction (except CPS, which isn’t allowed to under state law) *doubling* their levy? Ain’t gonna happen.

    Bigger (as in more likely to happen) concern is a huge cut in the ‘current’ school budget, cuts to cop/fire head count, every other week garbage pickup, etc etc. Basically, current services going away, in order to pay for past services. Of course, if the city’s headcount gets cut dramatically, the projected pension shortfall decreases, too.

  7. “Ain’t gonna happen.”
    Of course not, pensioners will be taking the brunt of all this.

  8. “pensioners”

    Well, the current pensioners aren’t going to get hit with much, apart from ‘free medical’ cuts, and near future retirees won’t suffer too much, either. But there’s going to be some sort of reckoning about the currently on-going transition in how public employee pensions are calculated and funded.

  9. Color video of Chicago from the 1940′s found in an estate sale:

    http://vimeo.com/88065833

  10. “Of course not, pensioners will be taking the brunt of all this.”

    Under the state constitution, the “pensioners” cannot take the brunt of it. Don’t you get it? It’s illegal to change the conditions of the deal once they entered into it. The pensioners will be fine.

    The state legislature has already changed the conditions of the deal for future pensioners. They will get less, have to work more years and have to pay in a bigger portion of their own income into the system. It WILL shore up the system but that will be like 20 or 30 years later. Right now- it’s too late. We can’t pay the benefits due to those who are retired right now.

  11. “Based on what? Every taxing jurisdiction (except CPS, which isn’t allowed to under state law) *doubling* their levy? Ain’t gonna happen.”

    Wow- I can’t believe the really educated people on this blog have NO IDEA what is about to happen in a year’s time in the city of Chicago with its pension obligations. If the educated people have no idea, what about everyone else? Lol.

    In 2010, the state legislature, in its infinite wisdom, passed a law that required cities with underfunded pension liabilities to start making extra payments into those funds by 2015 in order to shore them up so that those pension funds didn’t go under when the baby boomers started collecting. Essentially, it gave them 5 years to plan for this to happen.

    The City of Chicago is just one of many cities across the state now facing the first of the extra payments (the Tribune did a whole expose several years ago detailing which cities were worse off. Many suburban towns are also in dire straits and facing the same deadline.)

    The City of Chicago’s pension fund for its police/firefighters/librarians etc. is funded at only 36%. It is $20 billion short. Under the 2010 law, the city has to start paying the extra payment in 2015. That payment is about $600 million. Currently, Chicago property taxes take in $800 million which goes to pay current bills. The $600 million payment is essentially the entire budget of the police and fire departments.

    No tickets from cameras in front of schools is going to get the city $600 million by next year.

    Rahm really won’t have much of a choice. (CPS’ pension fund, by the way, is a separate entity and it is funded at 80% so its not in such dire straits.)

    Where does he get the money? There’s really only one place.

    Unfortunately, this isn’t a one time payment and we’re done. The extra money will be needed year after year for a decade or more. This is what happens when you don’t fund the pension system for essentially 20 years. We are now going to pay the price.

    Rahm is trying to convince the state legislature in the spring session which is starting soon to give Chicago relief. He will likely beg them to reconsider and postpone the mandated payment. He already recently warned it will mean doubling the property taxes.

    But, again, at some point, we HAVE to fund it.

    Good times are ahead. And some people may get relief by moving to some interior suburbs- but, as I said, some of those are in just as bad of shape. Choose wisely if you’re looking to buy in the burbs!

  12. “chuk is correct. inventory is down 23% from last year and days on the market down to 67.”

    Yes- this was FEBRUARY’S data. According to Crain’s, inventory in the Chicagoland area is up 6% for the first two weeks of March compared to the first two weeks of March of last year.

    Inventory is starting to come on the market now- as it should. I still expect it will be lower than we’ve seen in recent years but hopefully better than last year. If some of the accidental landlords really DO start to list, then that should help a little bit.

  13. Did anyone else see NAR’s press release about the national existing home sales for February?

    I’m shocked that NAR is actually conceding that affordability is starting to bite in many areas now and it’s not just weather that’s slowing sales.

    Also, first time home buyers made up just 28% of buyers last month. That was up 2% from January’s 26% but down from last year’s 30%. Usually about 45% of home sales are from first time buyers.

    Where are they all? Why aren’t they buying?

    We called here at CribChatter years ago: the younger people have too much debt! Specifically student loans.

    From NAR:

    NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, said student debt appears to be a factor in the weak level of first-time buyers. “The biggest problems for first-time buyers are tight credit and limited inventory in the lower price ranges,” he said. “However, 20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. In our recent consumer survey, 56 percent of younger buyers who took longer to save for a downpayment identified student debt as the biggest obstacle.”

    Brown notes the survey results are for recent homebuyers. “It’s clear there are other people who would like to buy a home that are not in the market because of debt issues, so we can expect a lingering impact of delayed home buying,” Brown added.
    http://www.realtor.org/news-releases/2014/03/february-existing-home-sales-remain-subdued

  14. IMHO much of home inaffordability derives from the real estate taxes and insurance. I know a guy buying a $300,000 house in northwest cook county. The taxes are $10,000 a year. There’s no chance of getting them reduced either – that’s just the going rate for the neighborhood. Heck, I pay over $8,000 a year for my tiny crapshack in a flood prone area. My P+I is only $1,300 a month but taxes and insurance rise the payment up over $2,000 a month.

  15. Sabrina, here is the story on state pensions.
    http://illinoispolicy.org/wp-content/files_mf/1378219637Edgar_Lessons_report.pdf#
    The system doesn’t work and can’t without huge population growth. The pensioners will bare the brunt of the pain, regardless of what the state constituion says.

  16. The IL constitution says that the benefits cannot be reduced but not that the benefits cannot be taxed. The easiest solution is to enact a pension tax and have current pensioners pay back into the system. The idea of doubling the real estate tax is ludicrous. Not only would it not work but it would decimate the city.

  17. “Wow- I can’t believe the really educated people on this blog have NO IDEA what is about to happen in a year’s time in the city of Chicago with its pension obligations. If the educated people have no idea, what about everyone else?”

    You mean, like you? Who clearly also has no idea.

    For my property taxes to double bc of an increase in the City of Chicago’s levy, the City’s levy would have to increase SIX fold. THAT is why it’s stooooooooopid to talk about taxes doubling. Using the numbers *you* present, the City’s levy has to go up “only” 75%–which translates to a 15% increase in the tax bill.

    Is a 15% (or 20%, if Rahm is closer to right) increase very painful? No doubt. But it is nowhere close to the apocalypse of a doubling of the tax bill.

  18. “The idea of doubling the real estate tax is ludicrous.”

    An it’s inaccurate. The “doubling” Rahm discusses is of the City’s levy, which would result in a ~20% increase. Which would *still* leave the city with one of the lowest effective rates in the metro.

  19. So is it a good idea to try and sell this fall with no new condos coming on the market in the immediate future and before the property tax increase shows up on our bill.

  20. What effect would an increase in property tax have on the rental market? Rental rates are not tied to actual costs of ownership, so would a lot of current rentals hit the market if cost of ownership increases? All of those accidental landlords who are barely breaking even on a monthly basis may no longer be able to do so. It would certainly affect some people, but would it be enough people to affect the entire real estate market?

  21. “For my property taxes to double bc of an increase in the City of Chicago’s levy, the City’s levy would have to increase SIX fold. THAT is why it’s stooooooooopid to talk about taxes doubling. Using the numbers *you* present, the City’s levy has to go up “only” 75%–which translates to a 15% increase in the tax bill.”

    We have to come up with $600 million in less than a year. Current property taxes are $800 million. Add on another $600 million to that.

    THAT will NOT be fun.

    Right now, people are being foreclosed on in the HAMP program (after they were nearly foreclosed on 4 years ago) because they can’t pay $150 more a month because their mortgage rates, which were artificially brought down to like 2.5%, are going to rise to like 3.5% this year. OMG. If they can’t afford $150 more a month, how are they going to afford ANY kind of increase in their property taxes?

    Um…they’re not.

    This blog is hilarious. So many people in here are unrealistic about what is really going on out there.

    By the way- I heard on the radio today that they are selling lots for $1 in Englewood. Is that true? Such a HUGE divide between the rich and poor in Chicago now. It’s almost scary.

  22. “The IL constitution says that the benefits cannot be reduced but not that the benefits cannot be taxed. The easiest solution is to enact a pension tax and have current pensioners pay back into the system. The idea of doubling the real estate tax is ludicrous. Not only would it not work but it would decimate the city.”

    Wow- you are REALLY smoking some crack if you think they can tax the pension benefits of those getting it and somehow come up with $600 million in just the city of Chicago alone. There is $20 BILLION missing from the pension fund. Who’s going to fund that? We ALL are.

    Wow. It’s amazing how clueless everyone is of the doom that is coming. We have to pay the piper at some point. They haven’t been paying for 20 years. Why do you think Daley retired? He didn’t want anything to do with the nightmare that is coming.

  23. By the way- in case you all want to see what is going on with median income, mortgage applications and existing home sales, the last chart here pretty much tells you all you need to know. As incomes have stagnated over the last few years, both sales and mortgage apps have dropped like a rock, despite record low mortgage rates.

    Home prices aren’t cheap enough with current incomes to support a housing “recovery.”

    http://confoundedinterest.wordpress.com/2014/03/22/freddie-mac-outlines-4-positive-indicators-for-a-full-housing-recovery-not-met/

  24. By the way- there are a lot of properties coming on the market we’ve either covered before on CC (which sold once before) or which never sold but are back to try again.

    If I can get a decent connection, I’ll try and post some of them next week.

  25. Sabrina,
    Why so negative? Really, why do you fight with everyone spinning any piece of information you can? You remind me of Fox News when they talk about Obama. He could cure cancer and they would say he did it too slow. Stop already and write a long post about how you were wrong and actually buying in the better areas of the city was the right thing to do.

  26. Just now catching up on all this. “No tickets from cameras in front of schools is going to get the city $600 million by next year.”

    You haven’t seen my speeding tickets. They’re going to get that much from me alone. 30 MPH? Are you kidding me? They want traffic crawling through this city?

    Forget all the affordability and inequality chatter. Regardless of what is going on the net effect is that prices are rising and they have been for a reason. Demand > supply and it still is. It has to be that prices are still too low for many people to be ABLE to sell. If I had a dime for everyone who contacted me to see IF they could sell…

    And low supply is definitely keeping a lid on sales. It’s not because of a shortage of buyers believe me. And contract activity is down so of course sales are going to be down the next few months. See the second graph here: http://www.chicagonow.com/getting-real/2014/03/chicago-housing-market-merely-coasting-in-neutral-in-february/

  27. “If I can get a decent connection, I’ll try and post some of them next week.”

    Please put fixing the commenting lag on your list too. Makes participating here really hard, even for the more dedicated among us. [And I'm really only making this comment so I can see what Gary wrote without waiting a half hour.]

  28. ” how are they going to afford ANY kind of increase in their property taxes?”

    They aren’t. But property taxes aren’t “doubling”–which is all anyone ever says about it “taxes are going to have to double”– either.

  29. “You haven’t seen my speeding tickets. They’re going to get that much from me alone. ”

    You better slow down, Gary, or that’s another 2 years before you can move somewhere warm.

  30. The bond markets are pretty efficient but since you seem to know more than every other investor, now is your GOLDEN opportunity to short Chicago markets before everyone else!

    Put your money where your mouth is! Dare ya! A dare to all the doomsday touters. Forget about the Oracle of Omaha we have our own future legends being born on this blog comment right here! Short Chicago, long hell fire and brimstone..

    Let’s talk doomsday when bond yields are 20%. Till then it’s business as usual.

  31. Steve Heitman on March 24th, 2014 at 3:09 pm

    Sabrina,
    Why so bitter on everything? Will anything but the complete collapse of Chicago make you happy? I have a bottle of anti-bitter pills I want to mail you. What is your address?

    Your spinning of any and every data point reminds me quite a bit of my nightly intake of Fox News. You may want to see if they need some good talent. You would do well.

  32. “Define “hot”? Average days on market? Yes. Number of sales? No. Inventory is horrible. The only way it gets better is with higher prices.”
    Are higher prices the only way to alleviate the issue of inventory? Maybe some sellers need to realize they’ll have to take a haircut. I hope to be a first time buyer but as things stand right now it looks like I’ll again be sitting on the sidelines, as I did in the first RE boom.

  33. “Maybe some sellers need to realize they’ll have to take a haircut.”
    I think they already realize this. The problem is that many of them can’t afford to sell without a short sale but don’t want that on their record. So they just keep renting it out losing a little bit (or a lot) of money every month.

  34. “Are higher prices the only way to alleviate the issue of inventory?”

    Well, there are 2 ways. Voluntary sales and forced sales. Another housing crash would increase inventory because the bank would be taking units and putting them up for sale. As far as voluntary sales go, the weak hands that panicked and sold the bottom (or were forced to due to real life events) have already sold. Those that held on were most likely holding on for higher prices. If they are still holding on, that means they still want higher prices.

  35. “Are higher prices the only way to alleviate the issue of inventory?”

    There are tons of people in the GZ that are still going to sell for less than they paid in the last 10 years (and sometimes longer than that). Unless they sell for a loss (which some are doing because they have equity- even if it’s not as much as they would like and they are losing money on the purchase) then they are waiting it out to see if they can “break even.”

    But that’s assuming that prices continue to rise while mortgage rates rise. Maybe. If inventory remains super tight and buyers are that desperate- then sellers will get their crazy ask prices.

    And there are some CRAZY asking prices out there.

    The CRA-CRA has hit some sellers.

    But good for them. If they can get over the bubble prices- more power to them.

  36. “Are higher prices the only way to alleviate the issue of inventory?”

    The majority of sellers are still losing money. Some are able to list because they’re not underwater- but they will sell for less than they paid in the last 15 years. Those sellers just aren’t going to get as much as they would have liked to get.

    Then there are those who will still have to bring a check to the closing OR if they sell, they will breakeven or only make like $10k and that won’t be enough to get into the next property. So they are trapped and have to wait until prices rise.

    Of course, while they are waiting for that to happen, mortgage rates will also rise making it more expensive for them to sell and for them to buy the next property. It’s a vicious cycle.

    The housing market is far from healed. It’s actually really, really distorted. The press reports on the median price rising and everyone gets all excited but the sales in the upper bracket are skewing the data.

  37. “The housing market is far from healed. It’s actually really, really distorted.”

    How is it distorted? I agree though about the median prices. The press routinely reports those numbers as though they represent price changes.

  38. “How is it distorted?”

    1. Record low interest rates kept artificially low by the Fed
    2. Foreclosures kept off the market by the banks to keep prices elevated (I don’t blame them on this one)
    3. Investors making up 30%+ of the market (way above the norms)
    4. All cash buyers making up 25%+ of the market (15%+ above the norms)
    5. First time buyers under 30% – when they normally make up to 50% of ALL buyers

    That’s just the beginning.

    But, unfortunately, prices never dropped enough and now that they’ve spiked, the market is wackier than ever because of affordability issues. People can’t buy a more expensive house if they’re not making more money. And they’re not.

    We’re in Bubble 2.0. It’s just a different bubble than before with different players but housing is distorted once again. We’ll never learn.

  39. Although the Fed is keeping rates low I don’t believe they could do this on their own. I think the market is happy at these levels. Every time something goes wacky overseas our rates go down. That’s not the Fed.

    Foreclosures are not being kept off the market, they are just slow to be processed. And the inventory of foreclosures has declined dramatically.

    Investors are in the market because prices are too low. They are not distorting the market. They are keeping it from being distorted. Same with all cash buyers – and that’s tied to low interest rates. Nothing better to do with your money.

    First time buyers not buying…why should we worry about that? The market is doing fine without them.

    Prices didn’t fall enough? Chicago is well below the long term trend line. I think they fell too far and are adjusting upward.

  40. “Although the Fed is keeping rates low I don’t believe they could do this on their own. I think the market is happy at these levels. Every time something goes wacky overseas our rates go down. That’s not the Fed.”

    Wow. Gary- the Fed was buying $85 billion a month!!! That is the ONLY reason rates went down. They artificially juiced the market. Now, they’re pulling back and tapering those purchases so mortgage rates will now go up to where they should be if the Fed wasn’t the market. No one knows exactly where that is- could be 3.5% or 4% on the 10-year. It’s definitely over 5% on mortgage rates for a 30-year.

    What happens then?

    Lol.

    The Fed knew what they were doing which is why they did it. The housing market remained morbid with rates over 5%. So they juiced it. And now we will all pay the price.

    What is REALLY fascinating is that the market is slowing even with rates below 5%. We don’t even have “high” rates and already homebuyers are priced out. The only reason this market is alive at all is because of investors. Take away those 20% of buyers and things are pretty grim. And, again, that’s with the 30-year at 4.5% or whatever it’s at. Lol.

    If we weren’t all going to have more pain the whole scenario would be amusing.

    But NOTHING we are seeing in the housing market right now is “normal”.

  41. “Wow. Gary- the Fed was buying $85 billion a month!!! That is the ONLY reason rates went down”

    No.

  42. we are one stock market correction away from having the ten year sub 2.5%, where you think the smart foreigners are putting their funds, into chinese or euro crap? LOL!

    the only way we see rates over 3% for an extended period of time is if the world economy suddenly improves drastically, which it hasn’t been doing over the last 6 years at all, it has been a slooooooow ride

  43. “But, unfortunately, prices never dropped enough…”
    I think this is a crazy statement. Evidence: Rent vs Buy went from Rent (2002-2007) to strongly in favor of Buy (and still is). Investors piling into the Chicago market (a group of actors that wouldn’t invest unless prices had “dropped enough”). The quick rebound in prices from the bottom. Just because prices didn’t drop enough for YOU to buy doesn’t mean they didn’t drop enough. Further evidence: non-buyers remorse among those that were correct about the coming housing crash in 2003-6 but didn’t act fast enough / realize the opportunity near the bottom. It must be very painful to have been correct about the crash but not to have been able to financially benefit.

  44. “Further evidence: non-buyers remorse among those that were correct about the coming housing crash in 2003-6 but didn’t act fast enough / realize the opportunity near the bottom. It must be very painful to have been correct about the crash but not to have been able to financially benefit.”

    Bingo. AKA Bear Market Genius.

  45. ““The housing market is far from healed.”
    It depends on ones definition of healed. I would say volumes normalizing / pricing stabilizing / fewer distressed sales / more money down is a pretty good definition of healed.

    ““How is it distorted?”
    1. Record low interest rates kept artificially low by the Fed
    2. Foreclosures kept off the market by the banks to keep prices elevated (I don’t blame them on this one)
    3. Investors making up 30%+ of the market (way above the norms)
    4. All cash buyers making up 25%+ of the market (15%+ above the norms)
    5. First time buyers under 30% – when they normally make up to 50% of ALL buyers”
    1. I agree but rates are low everywhere. Also – as discussed many times – higher rates doesn’t necessarily mean lower housing prices as it depends on WHY rates are higher.
    2. Seems rational and not “distorted” to me.
    3. Who cares if investors are buying properties? It means it is better to Buy than Rent.
    4. Seems like a good thing for the health of housing and also runs counter to #1. If rates are so low and attractive why are fewer people taking advantage of that?
    5. Makes sense considering #3 and #4. Also we have talked many times about the reasons for first time buyers to be more cautious having seen the major crash just a few years ago. Is it really surprising that they are choosing to rent rather than buy? This also affects #3 as it drives rents higher.
    A different market from before the crash != distorted.

  46. Calling for a bubble at this point makes you look like an idiot sabrina, sorry but it is almost like you are 100% forgetting the bubble from just a few years ago when you say dumb crap like that! Do you not remember the NINJA loans, 105% financed, Heloc-mania, gangbangers frauding, people offering people that just left sales meetings to buy the house they just bought, it was insanity… right now people are complaining about how hard it is to get a mortgage (its really not if you have anywhere from 5-10% down with good credit even, 20-25% is a sure thing) so there is very little speculation at this point. Builders are building large downtown rentals like crazy because they are dumb and usually slow to the market as large buildings take tons of red tape and planning. New smaller building condos and townhomes are selling like hotcakes right now!

  47. ““Wow. Gary- the Fed was buying $85 billion a month!!! That is the ONLY reason rates went down”

    No.”

    Yeah, the all-powerful Fed. If the Fed has *that* much control, then why haven’t they pulled the right strings to bring the whole economy back, and get some wage increases, too?

  48. “Do you not remember the NINJA loans, 105% financed, Heloc-mania, gangbangers frauding, people offering people that just left sales meetings to buy the house they just bought, it was insanity”

    Only the last one is a sign of a bubble; you can certainly have a bubble without anything like the first 4, tho they are the primary reason that things got so out of hand.

  49. “What is REALLY fascinating is that the market is slowing even with rates below 5%.”
    Because inventory is so low.
    “We don’t even have “high” rates and already homebuyers are priced out.”
    SOME homebuyers are priced out. There will always be some. But this can NOT be true in general because if it were true then prices would NOT be rising.
    “The only reason this market is alive at all is because of investors. Take away those 20% of buyers and things are pretty grim. And, again, that’s with the 30-year at 4.5% or whatever it’s at. Lol.”
    Investors are a legitimate part of the market. Their participation shows that prices are not too high.

  50. If investor %age is so high, we can not be in a bubble… if we are in a bubble, speculators outnumber the investors by definition…

  51. If investors are the ones mostly buying properties then by definition is can not be a bubble. A bubble happens only when speculators run rampant and overpower investors.

  52. “A bubble happens only when speculators run rampant and overpower investors.”

    And, in retrospect, all of the “investors” get tarred as speculators.

    It’s all in perspective–”speculators” mostly think of themselves as ‘investors’ with relatively short hold periods, but the investors with longer time horizons will call them speculators whether or not there is a bubble.

  53. Steve Heitman on March 26th, 2014 at 3:31 pm

    Sabrina,
    Do you want a housing and stock market crash? Just admit it… you want us all to suffer so you feel better. Is this accurate? It sure sounds like it.

  54. Bubble might be too strong of a word; but frothy is the way things are looking. Sabrina’s mood to the market these days appears to be more of a startled dumbfoundedness; quite frankly, I don’t blame her. We’ve gone from full blow 1 in 100 year bubble; to terminal illness; to frothy again in less than a decade. I personally think that when China crashes hard (And it will, like every advancing economy does at some point early in its life span) that’s going to cause some pain over here. Not 2008 Lehman pain, but definitely pain that will be felt when the debt that binds China is unbound.

  55. gringozecarioca on March 27th, 2014 at 9:03 am

    “It’s all in perspective–”speculators” mostly think of themselves as ‘investors’ with relatively short hold periods”

    “mostly” ..nah.. true speculators are very happy to see themselves for what they are.. no need to ever complicate the boundary with words like “investor” …not when one is too busy doing Gods work :-)

  56. Are you ready for Obamacare for the housing market?

    “I’m here from the government and I’m here to help.”

    Bill to replace Fannie, Freddie with new housing-loan structure

    http://finance.yahoo.com/news/bill-replace-fannie-freddie-housing-120000054.html

  57. ” true speculators are very happy to see themselves for what they are”

    With dirt, it’s a loaded term. Which is why RE speculators tend to make up a bunch of different names for what they do.

    People like you are just asset-based gamblers–calling you ‘speculators’ is just a sop to social niceties.

  58. “Are you ready for Obamacare for the housing market?

    Bill to replace Fannie, Freddie with new housing-loan structure”

    Yeah, and there are bills ‘introduced’ for all sorts of other stupid shi…stuff that *also* have no hope of passage. That’s just Maxine trying to get some free national attention and an easy talking point in an election year.

    The house bill from the Rs is possible, and so is the senate bill. Maxine’s has less chance of passing than something we crowdsource here.

  59. If Maxine wrote it then it must make no sense at all. Is she the dumbest person in congress or what?

  60. “The house bill from the Rs is possible, and so is the senate bill. Maxine’s has less chance of passing than something we crowdsource here.”

    Yeah, I just figured I would stir the pot.

  61. Funny thing (well, sad really) is that Maxine was one of the many who denied the problems at fannie in the first place!Here watch this 15 second video from Sept. 10, 2003… https://www.youtube.com/watch?v=3sKpzmojjfU

  62. gringozecarioca on March 27th, 2014 at 12:54 pm

    ” just a sop to social niceties.”

    social niceties rarely extend beyond the moment the other people at the restaurant realize it was our table responsible for the guy in the Harvard tie parading around the restaurant with his balls sticking out his fly… saying “this is what I think of Skull and Bones”

    5k will get the Harvard guy to do it almost every time. With Yalies though, free!! . Another man asking them to show their package is generally all you need.

  63. Maxine has a long list of greatest hits on Youtube. My favorite was when she was grilling bankers about a Rolling Stone article and all those fees they charge. You know…those fees. The bankers couldn’t figure out how to politely tell her that she had her head up her ass.

  64. “social niceties rarely extend beyond the moment the other people at the restaurant realize”

    that y’all are degenerate gamblers, willing to make anything into a prop bet. Yet they *still* won’t call you ‘degenerate gamblers’. qed.

  65. “We’ve gone from full blow 1 in 100 year bubble; to terminal illness; to frothy again in less than a decade.”

    It’s not even a decade HD. It’s 6 years. I would laugh except it’s really frightening the ramifications of it all. Do people really think 13% appreciation or 20% appreciation in one year is normal? It’s not. It’s yet another sign of the distortions of the stimulus.

    But some people believe the bubble never burst at all. That we’ve basically had one continuous bubble over the last decade and that the worst of it is yet to come (in housing).

    Who knows? But it really comes down to affordability. You can’t get blood from a stone. And with mortgage rates rising, that means unless Americans suddenly get BIG pay raises, housing prices are going to fall again.

    Nationally, pending home sales have fallen 8 months in a row. Gee- wonder what happened exactly 8 months ago? Oh yeah- mortgage rates went up about 1% and it stalled everything. And this is with rates still below 5%. Imagine what will happen when they’re above 5%?

  66. “A bubble happens only when speculators run rampant and overpower investors.”

    No. People always get the definition of “bubble” wrong. You really need to read the great Kindleberger book that is the bible of all things about bubbles called Manias, Panics and Crashes.

    “A bubble involves a non-sustainable pattern of price changes or cash flow.”

    This is also how he describes a bubble:

    “The bubble involves the purchase of an asset, usually real estate or
    a security, not because of the rate of return on the investment but in
    anticipation that the asset or security can be sold to someone else at an
    even higher price; the term ‘the greater fool’ has been used to suggest
    the last buyer was always counting on finding someone else to whom the
    stock or the condo apartment or the baseball cards could be sold.”

  67. “What is REALLY fascinating is that the market is slowing even with rates below 5%.”
    “Because inventory is so low.”

    Um…no.

    Nationally, inventory is now up double digits over this time last year. The first two weeks of this month, in the Chicagoland area, inventory was up 6%.

    Inventory is NOT the problem. It is higher than a year ago.

  68. “SOME homebuyers are priced out. There will always be some. But this can NOT be true in general because if it were true then prices would NOT be rising.”

    Gary- prices are NOT rising. Not any more. The median price that the IAR puts out every month is going up simply because of the mix. More expensive properties are selling than cheaper ones. So the median tells us nothing.

    Is the person who bought for $400,000 a year ago selling for more right now? I’m not seeing it. In fact, from what I’m seeing, those trying to sell right now are getting less than a year ago.

    I told everyone to sell last year. That was the “hot” market. It’s not coming back in 2014. If you wanted to sell for maximum price, your chance is gone.

  69. “Do you not remember the NINJA loans, 105% financed, Heloc-mania, gangbangers frauding, people offering people that just left sales meetings to buy the house they just bought, it was insanity”

    You need an expansion of credit in some way. Over the last 5 years, the Fed has taken over the roll that banks used to play and has expanded the credit line through its balance sheet by over $3 trillion. It has caused asset class distortions in stocks, bonds, art and housing- basically worldwide (thanks to other Central Banks also joining in on the fun.) How it will end- no one knows. The Fed is the lender of last resort. Once they take the punch bowl away, the credit creation will have to come from somewhere. But where?

  70. Oh- and remember all those sideline buyers who were going to rush in when rates rose?

    Yeah. That’s right. That’s the biggest myth in real estate. There is NO SUCH THING as the sideline buyer. Housing sales have fallen for months now.

    Thank goodness that stupid myth has been put to rest.

  71. “Gary- prices are NOT rising. Not any more. The median price that the IAR puts out every month is going up simply because of the mix. More expensive properties are selling than cheaper ones.”

    I never pay any attention to median prices other than an indication of neighborhood interest. I’m talking about Case Shiller. SFH prices up 10.8% YOY for January and condos up 16.1%. In another post you asked if this was normal. Yes it is when prices fall too far. Forget the nation. I only talk about Chicago. We are still well below the long term trend line from 1987 – 2000.

  72. “Inventory is NOT the problem. It is higher than a year ago.”
    I’m only talking about Chicago. It is remarkably lower than it was a year ago. It is below a 4 month supply. Listings may be up somewhat but they are getting sucked up immediately.

  73. “The bubble involves the purchase of an asset, usually real estate or
    a security, not because of the rate of return on the investment but in
    anticipation that the asset or security can be sold to someone else at an
    even higher price; the term ‘the greater fool’ has been used to suggest
    the last buyer was always counting on finding someone else to whom the
    stock or the condo apartment or the baseball cards could be sold.”

    and how exactly is having qualified buyers living in places, or investors buying for cash flow purposes fitting that definition? it isn’t… and you keep saying mortgage rates are rising… they aren’t rising! How many flips do you see these days that aren’t actual useful rehabs of an old crap shack? are people buying new construction and selling it the day they close at a profit? no. Not today…

  74. Sabrina,
    Your definition you listed of a “bubble” directly contradicts your other posts where investors are buying the majority of the properties. Investors look at yield to determine the price the will pay for a house. Obviously there is cash flow value based on their valuation.

    And as far as the market being “hot”, every 3 and up property in the West loop is selling in days with at least 5 bids. The market in Chicago is just fine.

    You told everyone to rent in 2008 & 2009 when prices were bottomed. You were wrong then and you are wrong now. What did I tell you in 2008 when the financial crisis hit? Buy a quality property with utility in Lincoln Park and you will be fine. And… those that listed are more than fine. They are up 10%!

  75. gringozecarioca on March 28th, 2014 at 6:32 am

    “those that listed (sp) are more than fine. They are up 10%!”

    …and those that replied to you that there were better-easier places to put your money, did much – much better :-)

    “degenerate gamblers”
    degenerate – yes.
    gambler – arguable, on a case by case basis.

  76. “You told everyone to rent in 2008 & 2009 when prices were bottomed. ”

    I think you missed her revisionist history. She now says she was telling everyone to buy and only turned bearish this year.

  77. “We are still well below the long term trend line from 1987 – 2000.”

    Gary:

    how much does the trend line change if you change your start/end? If you used 84-97, say?

    Also, what happens if you adjust the trend line to reflect real dollars?

  78. Don’t really have time to rerun it but look at the second graph here: http://www.chicagonow.com/getting-real/2014/03/case-shiller-chicago-home-prices-drifted-down-slightly-in-january/ It fits that entire time period pretty well.

    As for the real dollars…you could do that but you’d end up with the same result. Everything gets lowered by the same percent – the trend line and the actual prices. We would still be well below the trend line.

  79. “how much does the trend line change if you change your start/end? If you used 84-97, say?”
    you want robustness checks? [not really commenting, mostly just me'ing to see the additional comments]

  80. “It fits that entire time period pretty well.”
    Maybe, but also fairly obvious doing @fo’s period with a linear trend would hit more or less where we are currently.

    “As for the real dollars…you could do that but you’d end up with the same result. Everything gets lowered by the same percent – the trend line and the actual prices. We would still be well below the trend line.”
    Not when inflation fluctuates. Think of a model with zero real growth. If inflation is zero, nominal line is flat. Then if inflation takes off at the end, nominal line will take off and continue going upwards. If you then use it to project subsequent periods that go back to zero inflation you’d be way off, but not if you had done the trend in real terms, which would have remained flat.

  81. “Don’t really have time to rerun it ”

    Thought you might have dropped into a speadsheet.

  82. dz’ing

  83. sabrina did get bullish for a little while. maybe 2011 or 12. It was a little after bizarro HD hit the scene which I think was about the time he bought in PR. Remember she had the story of fixing up a relatives place, getting it up to date and it moving quickly. Not sure when she turned bearish again.

    Steve Heitman just flat disappeared during the down years but now he’s back tooting his horn.

    I wonder about clambo

  84. Gary that trendline, I dont know how much it can tell you. prices stuck to it for 13 years and then went haywire? I wouldn’t put too much faith in the predictive value of the first 13 years, cant you go back further?

  85. “Not when inflation fluctuates. Think of a model with zero real growth. If inflation is zero, nominal line is flat. Then if inflation takes off at the end, nominal line will take off and continue going upwards. If you then use it to project subsequent periods that go back to zero inflation you’d be way off, but not if you had done the trend in real terms, which would have remained flat.”

    Yeah, that’s pretty basic. I’m embarrassed on your behalf, Gary.

    Aggregate inflation (using dumb CPI) from 87-00 = 1.5158
    Aggregate inflation since = 1.3634

    So, using 2000 = 100 (which looks to be a little above Gary’s trend line), ’87 real $ value should be 65.97–which also looks to be slightly above gary’s trendline–but, eyeballing, it’s a good enough fit that the 87-00 trendline is basically inflation +/- a handful of bips. On a real $ basis, CS-Chi Jan-87 ~= CS-Chi Jan-00

    Push that out to now (ie, assume that the trendline = actual CPI, rather than 87-00 CPI), and we would expect 136.34–which is about 10% ahead of where we actually are. So, yeah, still undervalued in real $$ based on history, but not nearly as large of a gap. And it would emphasize how far down the bottom was.

    Using real $ would also show that 91-92 was a substantial bottom, as well, but using nominal, and gray’s trendline, it looks like nothing happened.

  86. “Thought you might have dropped into a speadsheet.”
    It is but I’d have to figure out exactly what time period I used before. Kinda busy right now. Will get to other comments later.
    “I wouldn’t put too much faith in the predictive value of the first 13 years, cant you go back further?”
    No, this is all the data that Case Shiller has. The implicit growth is like 3.3, 3.5, 3.7% per year. Don’t remember which but basically inflation over that period, which seems reasonable.

    So the claim that inflation has diminished since then is valid and on that basis we should bring the trend line down – unless we believe that the inflation of labor and building materials is higher. Don’t know.

  87. “No, this is all the data that Case Shiller has.”

    It isn’t as easy to manipulate, and would require a base year adjustment, and a guesstimate for the 2d half of 1986, and is only quarterly, BUT this:

    http://dido.wss.yale.edu/P/cd/d08b/d0851.pdf

    goes back to 1970 using (basically? exactly? close enough without getting into all the details?) the same methodology.

  88. So that data stops in 1986. Yeah, pretty messy to work with.

  89. “Yeah, that’s pretty basic. I’m embarrassed on your behalf, Gary.”
    Thanks, since you are embarrassed for me I don’t need to be.

    Look, someone could/ has made a career out of analyzing this data. If you really want to accurately account for inflation then you would use a region specific inflation index for construction costs. I did a quick check of construction costs at the national level and in the last 3 years they are up 10.3%. I welcome a more robust analysis of the data if someone here wants to do it.

    I just checked my trendline and it has a 3.7% annual growth rate in it. Is that so unreasonable? If building cost inflation has been recently running below that do we really believe it’s going to stay that low? Shiller looked at the 100 or so year nominal growth rate in housing costs. Didn’t he come up with something in the 3s?

  90. “sabrina did get bullish for a little while. maybe 2011 or 12.”

    I beg to differ. I started on this board around Jan 2011 and was active daily until I bought my places in Feb/March 2012. The entire time I argued with Sabrina why I was buying and she and G were calling me a knifecatcher and telling me I should rent. She was in NO way bullish.

  91. “sabrina did get bullish for a little while. maybe 2011 or 12. It was a little after bizarro HD hit the scene which I think was about the time he bought in PR. Remember she had the story of fixing up a relatives place, getting it up to date and it moving quickly. Not sure when she turned bearish again.
    Steve Heitman just flat disappeared during the down years but now he’s back tooting his horn.
    I wonder about clambo”

    I’m coming around to the idea of a CC meet up. 3 years ago it would have been more harm than good; but these days, all that’s in the past, the site is a memory of what it once was. anybody up?

  92. I think it would be interesting. I’ve actually met a few people here and there from CC but have not met most. Some of the ones I’ve met have left the board.

  93. gringozecarioca on March 29th, 2014 at 8:21 am

    “http://www.chicagonow.com/getting-real/2014/03/case-shiller-chicago-home-prices-drifted-down-slightly-in-january/”

    Keepin it simple…I see 3 trendlines..

    1- start with point somewhere ever so slightly above blue line in ’87, connect to point on blue line around Mar ’98, connect to point on blue line about Oct ’09. This would be good long-term. Would expect move up into this line, probably w/in 5-6 yrs.

    2- Point on blue line mid ’99, touch low points on little dips in blue line in ’01 and ’02. (This line is now meaningless)

    3- Point in Jan ’08 to point in Mar 10 and point in Oct 11.

    4- Would start trying to build line off low in Jan ’12 to lil low in Feb ’13 but need more time before this is worth anything beyond use of this line as a trailing stop if I were long..

  94. rising mortgage rates… hah right…

    http://finance.yahoo.com/news/yellen-strongly-defends-easy-fed-140932753.html

  95. “I’m coming around to the idea of a CC meet up.”
    I’d consider it,. I’ve met a few people here through Milkster and apparently Groove and I were at the same high school for at least a year. I’ve become more of a lurker here since the site updates.

  96. “apparently Groove and I were at the same high school”

    Wait–groove showed up? Didn’t go to the wrong AutoZone?

  97. Is this the end of Zombie Cribchatter?

  98. I was going to see if we could go a week with no posts… anon you fail

  99. “I was going to see if we could go a week with no posts”

    Well, maybe if Groove actually answered his email, I would have heard about that.

  100. I guess there is no point now that the Green Zone has been officially defined

    http://www.chicagonow.com/adventures-house-hunting/2014/03/the-green-zone-litmus-test/

  101. “Amazing Graphic Shows Chicago’s Middle Class Disappear Before Your Eyes”

    http://chicago.cbslocal.com/2014/04/03/amazing-graphic-shows-chicagos-middle-class-disappear-before-your-eyes/

  102. I was actually just about to post that link myself but you beat me to it, chuk

    As an aside, I emailed the editor at CBS and asked them to change their sensational headline to the more factual “Green Zone Border Now West of Western”

    I haven’t heard anything back yet.

  103. And what do we make of this?

    http://www.chicagobusiness.com/realestate/20140403/CRED0701/140409919/to-get-that-home-more-buyers-paying-over-asking-price?r=1884A2289467B0U

  104. Here is a link to the source of that map.
    http://danielkayhertz.com/2014/03/31/middle-class/

  105. Funny, but I just commented on that story over on the Crain’s site. It pisses me off. Why do realtors underprice these properties and why do sellers hire agents that underprice these properties. And what really pisses me off is that when these agents do their listing presentations they brag about how quickly they sell properties and their list to sell price ratio and sellers fall for this.

  106. I wish all properties were underpriced. I’d rather get into a bidding war for an underpriced property and pay the real ‘value’ than to wait months and months for overpriced home to finally come back down to reality.

    and what’s with the hyperaggressive listing prices these days? I’m seeing numerous older homes in my area listed for $400 a sq ft when the median is still at like $225. Then the realtors bump up the sq footage by including the basement, the patio, the attic….and it bring the price psf back to like $300. Not just one property; but like over half the properties ive seen in various area have been pulling this stunt and it’s an old stunt, indeed, but it’s gotten WAY more popular just in the past few weeks. Stupid, nobody is fooled by that anymore. Yet these dumb realtors are like old dogs, can’t learn new tricks.

  107. The thing is that when properties are underpriced it’s only good for the winning bidder. There isn’t enough time for good price discovery because they go before all eligible buyers have had a chance to consider it. So those buyers lose and the seller loses.

  108. “rising mortgage rates… hah right…”

    Either QE ends and the Fed raises rates because the economy is actually doing well … OR… the economy goes into the shitter and so does the housing market as rates stay low.

    Which would you like to see?

    I don’t understand how all of you realistically think mortgage rates aren’t going to rise? If they don’t- it’s because things SUCK!

  109. “I’m coming around to the idea of a CC meet up. 3 years ago it would have been more harm than good; but these days, all that’s in the past, the site is a memory of what it once was. anybody up?”

    Yes- the site isn’t what it was. I’m lucky if I post once a month! I’m in fucking Asia living my life.

    That’s what’s so hilarious. No one here has any idea what it’s like to run a website every day, 365 days a year. I couldn’t even take a vacation! It was nuts. I was burned out. While Asia isn’t my cup of tea- this has been great for me. I needed a change of pace. I got so sick of looking at old, depressing inventory at the end of 2013 in Chicago. And I missed 2 of the polar vorices! And from what I can see from afar- it’s not much better in 2014 (sorry buyers- you’re screwed again.)

    I ran the site because Joe, on the site which will not be named, wouldn’t let housing bears post on his site because prices were never going to go lower. All those high priced lawyers were going to save the market. But the site is NOT my life. It’s a hobby.

    But things are picking up again. The housing bubble is back! I can’t even believe some of the prices I’m seeing on Chicago real estate now. Ha! ha! Can’t wait to be back in town to see how this is all going to blow up.

    And what’s with the apartment towers? Literally every day Crain’s seems to announce a new one. Last year it was 4,000 new apartments going up and now I think it’s 6,000. Why isn’t anyone else even concerned about this? How many 25 year olds have $2,000 a month with their $50,000 student loan bills?

    Ha! ha!

    Can’t wait to see how that is all going to turn out.

  110. “sabrina did get bullish for a little while. maybe 2011 or 12.”

    Chuk hasn’t been on this site long enough to know what was going on. I was bullish for years as long as you had a long time horizon (I was NEVER bullish about the dumb 20-somethings buying $400,000 2/2s because they’re going to live there 3 years before they have a baby.) I told people for years that there were deals (and covered MANY of them on this site.)

    Look around at all the listings in LP and Lakeview and North Center right now. 60% or more of them are STILL going to lose money on the sale even with the price increases of the last year. Be smart people! If you’re 28 and you’re getting married- really ask yourself. How long will we live here before we have a baby? How will it be to lug the baby stroller up three flights of stairs? How hard will it be to lug the baby down the staircase to put him in the car?

    Real estate is for the long term. It’s not for 3 years or even 5 years. You’ll lose money. Rates have nowhere to go up. Housing prices will not be rising from here unless salaries significantly move higher. The person buying your place in 5 years with rates 2% or 3% higher won’t be able to pay what you paid and still pay $2500 a month.

    There were plenty of deals over the years I’ve run this site. I used to do the “is this a deal?” post numerous times a week. We would debate it ALL THE TIME. I haven’t done many “is this a deal?” posts in the last year because there aren’t many. And now that prices have spiked 10-20% (or more) and incomes haven’t risen at all- too many people are priced out. It’s the antithesis of a deal.

    People should be renting now. It’s way cheaper than buying (at least in the downtown high rises.)

  111. “The thing is that when properties are underpriced it’s only good for the winning bidder. There isn’t enough time for good price discovery because they go before all eligible buyers have had a chance to consider it. So those buyers lose and the seller loses.”

    That’s just a realtor’s perspective. the rest of the world call it an auction, and it’s how real property is sold in many parts of the western world.

  112. No, in an auction you set an auction date far enough into the future that people have a chance to check it out and plan for it. Then you accommodate all the interested bidders to let them see the property. These are pop-up auctions with no warning and no specific deadline. Whenever the listing agent feels like shutting it down they do – usually 3 days after it hits the market. So all the bidders that actually work for a living and travel get shut out.

  113. “And as far as the market being “hot”, every 3 and up property in the West loop is selling in days with at least 5 bids. The market in Chicago is just fine.”

    Multiple bids doesn’t mean the market is “hot.” It means it’s imbalanced. Sales will be down this year in Chicago and nationally because mortgage apps are down. There aren’t enough investor/cash buyers to make up the difference.

    You said to buy in 2008 and you’d be just fine?

    You mean like these people who followed your advice and are going to lose money?

    1438 W. Altgeld: bought in 2008 for $1.251 million. Listed for $1.295 million
    2702 N. Lehmann #1s: bought in July 2008 for $772,500. Listed for $790,000

    I could list dozens more that bought in 2008 who are listed now and who will LOSE MONEY.

    What about those who bought in the last few years since 2008? Still losing money. I can find dozens and dozens of examples all over the GZ. There are some that are making it (and more seem to be in the high rises downtown than in LP and Lakeview) but more are losing money than making it. They are LUCKY if they are breaking even.

    In fact, having just looked at the listings on Redfin, I would say it’s higher than 60% are losing money. I would put it at 70%.

  114. “and how exactly is having qualified buyers living in places, or investors buying for cash flow purposes fitting that definition?”

    Everyone assumes that housing prices will only go up from here. I haven’t heard a single person saying they are going to go lower in the next year, two years, three years. In fact, I’m the only bear on this site which proves my point. So all of you bulls attack, attack, attack. But that’s a sign that things are getting very bubblicious indeed.

    It’s like everyone saying on here that rents (and housing prices) can keep going up forever, regardless of income increases. Look at the hard data. Incomes aren’t rising. They’re actually declining.

    It’s when people DON’T believe that’s it’s a good sign. Kind of with the stock market right now. I just read an article on some financial website talking about retirement and a 52 year old guy said he won’t be able to retire at 65 because he’s not getting the return he wants because he’s in all bonds. He said something like, “the stock market is going to crumple” so he’s not in it. Lol.

    Now THAT’S a bullish sign.

  115. “I’m only talking about Chicago. It is remarkably lower than it was a year ago.”

    I was only talking about Chicago too Gary. It was up the first few weeks of the month. Inventory is NOT lower than a year ago. But sales are because prices have skyrocketed and people are priced out (again.) Yeah- this makes tons of sense.

    The prices are crazy. Have you been looking around at what is selling? It’s nuts. But it’s not sustainable. Wow- the Fed has gone and messed up things really good this time. It’s not going to end well.

  116. The fact that inventories are so low relative to demand is an indication that prices will go up. They were high as prices were coming down. The only way to get more supply is higher prices. It makes little sense for reluctant landlords, who are making money, to bring money to the table to sell their places. You have to entice them with higher prices.

  117. “SFH prices up 10.8% YOY for January and condos up 16.1%. In another post you asked if this was normal. Yes it is when prices fall too far.”

    The only “normal” thing about the price increases was the Fed pushing the mortgage rates down to record lows. As soon as they rose even 1% (let alone to the levels they should be at) the whole carnival ride stopped spinning. Sales have been down 8 months straight. In some areas, prices are actually declining month over month. Sales are down. We’re going back to where we came- which is a depressed market.

    Housing prices, even in Chicago which wasn’t as bad as other areas of the country, never got low enough.

  118. “The only way to get more supply is higher prices.”

    How can you have higher prices that people can’t pay?

    So the scenario HAS to be that prices rise SO HIGH, I mean, a 2/2 in Lakeview selling for $600,000 (oh wait- that’s happening already)- that EVERYONE ELSE decides they MUST list to finally cash in. So they all do- with thousands of properties being listed in a short period of time. But there aren’t enough buyers at those levels (there aren’t enough buyers even now) so they all sit there, flooding the market, until prices come down to something that is affordable. But wait- all those sellers won’t sell at the lower price point (because they’re underwater and/or don’t want to take a loss) so they withdraw their units from the market.

    Yeah- that sounds normal to me.

    We really don’t know what is going to happen. We are in unchartered territory. At no time in the last 50 years have we seen market conditions like these.

    All we know is that sales have slowed, prices aren’t going up, inventory is up slightly (but not enough), 25% of people are still underwater and mortgage rates are going up. Oh- and they’re building 6,000 luxury apartments downtown.

  119. By the way, inventories are low on the West Coast too. You know what’s happening there? Prices have risen so high that sales are plunging.

    Because you can’t get blood from a stone.

  120. “Inventory is NOT lower than a year ago.”

    5th graph. Inventory is down.

  121. “How can you have higher prices that people can’t pay?”

    People CAN pay and ARE paying. How else could prices have risen over the last year? How else could stuff be selling so fast?

  122. “People CAN pay and ARE paying. How else could prices have risen over the last year? How else could stuff be selling so fast?”

    Huh- let’s see.

    1000 properties on the market and 100 sell.

    The next year, 400 properties on the market and 80 sell.

    Is the market “hotter” the second year with falling sales?

    And why do you think prices are rising? They rose last year but that stopped months ago. Prices aren’t rising year over year now except for a few greedy sellers who are listing just a year later to test the market (I should do a couple posts on those sellers.) Maybe they’ll get it. Good for them. But the vast majority- not so much.

    A lot of luxury properties are selling which is why the median is rising. Everything for a middle income buyer- not so much.

    What I’m noticing is that properties in the GZ listed under $350,000 are selling pretty quickly (because that’s considered “affordable” still) but those over $400,000 are much slower to move unless in pristine condition or new. They’re selling- but it’s taking longer. There just aren’t enough buyers of the $450,000 2/2 anymore.

  123. “Inventory is NOT lower than a year ago.”

    “5th graph. Inventory is down.”

    Sorry. Inventory is higher than a year ago. And sales are lower. Mortgage applications make it very clear that sales will be lower for 2014 than 2013. March is the peak month for apps and they are down double digits from a year ago.

    Why is that again? Oh wait- mortgage rates rose 1% and housing prices are now anywhere from 10% to 25% or more higher. Who in their right mind would buy now?

  124. “Sorry. Inventory is higher than a year ago.”
    Did you look at the graph? What numbers are you looking at? You have to look at month’s of supply.

  125. “1000 properties on the market and 100 sell.
    The next year, 400 properties on the market and 80 sell.
    Is the market “hotter” the second year with falling sales?
    And why do you think prices are rising? They rose last year but that stopped months ago.”
    Quite possibly the market is hotter if properties are selling faster and buyers can’t find what they are looking for. And the numbers are more like 1000 properties with 200 sales vs. 540 properties with 180 sales. The fact that fewer people are selling tells me that potential sellers are placing a higher value on their properties. So many feel like they may get better pricing next year.

    And it’s too soon to say if prices aren’t rising any more. Give it a few more months. I’m betting we will see continued strong YOY numbers.

  126. “Chuk hasn’t been on this site long enough to know what was going on.”

    Not only was I on the site long enough, all of your historical nonsense is available to read. Just because I didn’t read it in 2009, doesn’t mean I didn’t read it. You are a perma bear. You were “right” when the market collapsed. You’ve been dead wrong since it started to recover. Period.

  127. “I don’t understand how all of you realistically think mortgage rates aren’t going to rise? If they don’t- it’s because things SUCK!”

    How do you think the economy was for the last 2-3 years?

  128. “I could list dozens more that bought in 2008 who are listed now and who will LOSE MONEY.”

    Ah, more nonsense and inability to perform BASIC math. It really is no wonder you’ve been so wrong. Hint: do you think they would have been able to live for free for the last 6 years?

    Hmm, let’s see, would you rather “lose” 100k on the sale of a house or spend 300k on rent?

  129. “Prices aren’t rising year over year now except for a few greedy sellers who are listing just a year later to test the market (I should do a couple posts on those sellers.)”
    Where does Sabrina get her statistics?

  130. “After a winter slowdown, the job market hit a milestone in March as the private sector finally recovered all the jobs lost in the 2008 financial crisis.”

    http://money.cnn.com/2014/04/04/investing/march-jobs-report/index.html?hpt=hp_t2

  131. “I could list dozens more that bought in 2008 who are listed now and who will LOSE MONEY.”

    Losing money, after entry/exit costs, with a less than 7 year hold, is what happened in a “normal” market for *decades*. That is *also* happens on the backside of a bubble–with a buy date that is *in* the bubble–is simply common sense.

    “Hmm, let’s see, would you rather “lose” 100k on the sale of a house or spend 300k on rent?”

    Where’s this mortgage loan that, net of tax effects, zeroes out my (net of equity) cost of carrying my house? That’s ~10 years of rent–if nothing else, that’s $50,000 in property taxes, and $10,000 in ‘excess’ property insurance, too. Plus probably $100k in interest. So, really, it’s more like $200-225 v $300, ignoring the likelihood of needing new appliances/mechanicals/roof in that 10 year period as an owner, and also assuming out assessments. “Losing” $100k takes the calculus from ‘pretty strong toward owning over 10 years’ to ‘neutral-ish’.

  132. I was of course not using real numbers. Just pointing out that selling a house for less than what you paid doesn’t mean you “lost”. You may still have made out better financially than if you rented. It’s not as simple as saying “Oh, they bought from 725k and sold for 700k, those idiots made a big mistake!!!”

  133. No one here has any idea what it’s like to run a website every day, 365 days a year.”
    I will take that bet sweetcheeks!

  134. And I didn’t mean to imply that the only cost was the loss on the house. The problem is, Sabrina is busy mocking the buyers for “losing” money on the sale while patting the renters on the back for not buying. The reality is, when you run the numbers, those buyer likely made out as well as or better than the renter. Why isn’t she mocking the renter too then if the buyer made such a poor financial decision? So I don’t think it was 66% cheaper to buy than rent, but her knee jerk reaction to call it a mistake because they sold for less than they bought for is just plain stupid.

    I bought a truck for 30k. I sold it for 12k. Should I have rented from Hertz for 10 years instead? After all, I “lost” 18k on it.

  135. Re Ick’s blog: “Schools: public schools are decent enough to send kids if private/parochial is not an option.”

    It’s getting closer to true for GZ, as schools have improved, but has never been a requirement.

  136. “While Asia isn’t my cup of tea- this has been great for me. ”

    What’s wrong with Asia? I’m going to Asia soon. Maybe a meetup there.

  137. “So I don’t think it was 66% cheaper to buy than rent, but her knee jerk reaction to call it a mistake because they sold for less than they bought for is just plain stupid.”

    As my son is fond of saying recently, two wrongs don’t make a right.

  138. “her knee jerk reaction to call it a mistake because they sold for less than they bought for is just plain stupid.”

    Well, I don’t disagree, but it’s more a strawman than anything–she’s arguing that the buyers made a “mistake” because some people here were (apparently) saying late 2008 was a ‘good time to buy’, and (apparently) that “good time to buy must equal ‘making a *net* profit on one’s purchase v sale price of ones’ primary residence” or some similar construct.

    As you point out, it can be a “good time to buy” EVEN THO one will end up selling the house for less than one paid for it. But Sabrina doesn’t see it that way (prob, mostly, bc of the natural biases that Ze mentioned, and we all have to lesser or greater extents about one thing or another). The question to pose to Sabrina is: If you pay $100 for a stock with $5 annual dividends, and sell it after 10 years for $90 (net of sales costs on both ends), did you lose money? Would you have been better off putting the money in a 10-year CD yielding 2.5%? bc that’s pretty much the same scenario (net economically) you are describing Chuk.

  139. Sabrina – you always struck me as a rational thinker in the past. What has driven you to ignore quantitative facts for qualitative drivel?
    “Multiple bids doesn’t mean the market is “hot.” It means it’s imbalanced.”
    A hot market occurs because there is an imbalance. It is the very definition of imbalanced.
    “Either QE ends and the Fed raises rates because the economy is actually doing well … OR… the economy goes into the shitter and so does the housing market as rates stay low.”
    So you agree that mortgage rates could rise and housing prices also rise? (economy does well and rates higher)
    “It’s like everyone saying on here that rents (and housing prices) can keep going up forever, regardless of income increases. Look at the hard data. Incomes aren’t rising. They’re actually declining.”
    Incomes and rents will probably go up forever because money keeps being printed. It is called inflation and is a generally persistent phenomenon in paper currencies over long periods of time. Also – incomes are rising for the 1% and if we’re talking about the GZ and near-GZ then that is who we really care about.
    “Housing prices, even in Chicago which wasn’t as bad as other areas of the country, never got low enough.”
    Again – this is not a rational statement based in fact but your opinion. What is a fact is that after the bubble popped the rent vs buy comparison went from strongly rent to strongly to buy. I personally side with objective analysis rather than conjecture.
    “We really don’t know what is going to happen. We are in unchartered territory. At no time in the last 50 years have we seen market conditions like these.”
    Then why do you insist that your predictions that 1. Mortgage rates will go higher and 2. If they do go higher housing prices will suffer are correct? I agree we don’t really know what is going to happen.
    I feel like you have become the new clio – minus the lambo of course. Here are my current thoughts:
    1. Rents are very high – there is a lot of supply coming. They will probably go down.
    2. Housing prices are currently rational vs rents and it is cheaper to buy than rent (holding period matters of course).
    3. Rents coming down could negatively affect housing prices. However, since we are still in buy zone in the buy vs rent equation rents could go down without hitting prices.
    4. I don’t now where mortgage rates are going (and neither does anyone else) and don’t know if higher mortgage rates will hurt housing prices (and neither does anyone else because it depends on why they are higher).
    5. We are in a period of shifting dynamics. More people are moving to the city (and those moving here are wealthier) and the new rental buildings will be absorbed but will cause rents to decline a bit.
    These are my views based on data. I could definitely be wrong on any or all of them but the data isn’t an opinion – its just numbers.

  140. “So you agree that mortgage rates could rise and housing prices also rise? (economy does well and rates higher)”

    Unlikely that, if rates higher, housing prices statistically higher *in constant dolalrs*.

    Of course, the constant dollar thing shows how bad (many/most) pre-Lehamn 2008 purchasers have really done, if attempting to sell today. Sabrina’s two (Stevo-picked) properties are asking less than purchase, in constant dollars, so even a full-ask offer is about 10% ‘loss’, after costs..

  141. “People should be renting now. It’s way cheaper than buying (at least in the downtown high rises.)”

    What utter nonsense. Let’s look at the other property I am looking at buying now.

    Cost = 210k.
    80% financed at 2.875% = $400 per month interest
    HOA = 250
    Taxes = 200
    Insurance = 50
    ————————–
    $900 per month. Not to mention the writeoff for taxes/interest.

    This unit is currently rented at $1600 per month

  142. “As my son is fond of saying recently, two wrongs don’t make a right.”

    Yes, but there is also a lesser of two evils. Unless of course you were willing to live in a cardboard box.

  143. “Sabrina – you always struck me as a rational thinker in the past. What has driven you to ignore quantitative facts for qualitative drivel?”

    This is what happens when people refuse to admit they are wrong. They try to twist the facts to support their rigid beliefs. Sabrina has one mindset (bear market genius) and will continue that way until she is “right” again. Maybe she can say “I told you so” again in 2019.

  144. “What utter nonsense. Let’s look at the other property I am looking at buying now.
    Cost = 210k.
    80% financed at 2.875% = $400 per month interest
    HOA = 250
    Taxes = 200
    Insurance = 50
    ————————–
    $900 per month. Not to mention the writeoff for taxes/interest.”

    And this is the same kind of math that the accidental landlords are looking at – except they would have to pay money to sell their homes. So they don’t sell and that’s why supply is low and that’s why prices will tend to rise.

    This unit is currently rented at $1600 per month

  145. “The question to pose to Sabrina is: If you pay $100 for a stock with $5 annual dividends, and sell it after 10 years for $90 (net of sales costs on both ends), did you lose money? Would you have been better off putting the money in a 10-year CD yielding 2.5%? bc that’s pretty much the same scenario (net economically) you are describing Chuk.”

    Yes, that is a much better way to frame it.

  146. “$900 per month. Not to mention the writeoff for axes/interest.
    This unit is currently rented at $1600 per month”

    Seems odd that people would not pay more to buy this.

  147. “Yes, but there is also a lesser of two evils.”
    “Yes, that is a much better way to frame it.”

    So, there was apparently a third way. Though, truth be told, my eyes kinda glazed over reading through @fo’s analogy.

  148. “Seems odd that people would not pay more to buy this.”

    What do you think 1/1′s with parking rent for downtown? $1400-1800
    What do you think they sell for? 200-250k (unless you get into higher end buildings)
    And there is another unit in this same tier in the building that is currently rented for $1800.

    This is why either prices will rise or rents will come down until the rent vs buy equation is more balanced.

  149. ““So you agree that mortgage rates could rise and housing prices also rise? (economy does well and rates higher)”
    Unlikely that, if rates higher, housing prices statistically higher *in constant dolalrs*.
    Of course, the constant dollar thing shows how bad (many/most) pre-Lehamn 2008 purchasers have really done, if attempting to sell today. Sabrina’s two (Stevo-picked) properties are asking less than purchase, in constant dollars, so even a full-ask offer is about 10% ‘loss’, after costs..”
    Are we now supposed to caveat / footnote every number we state with our future inflation assumptions? Jeez. Its easier / cleaner to discuss regular dollars and let each person use their own inflation expectations. Regardless – there is the possibility that Treasury rates increase / mortgage rates increase / housing prices after inflation increase – in fact that has happened since last March! Regarding pre-Lehman purchasers – are you comparing to renting or just housing as an investment? I would guess if the price is withing 5% of the price they paid 6 years ago the math will say they saved a small amount of $$ buying vs renting. But it depends on so much (rates / taxes / cc / insurance / etc.) it is tough to generalize.

  150. “This is why either prices will rise or rents will come down until the rent vs buy equation is more balanced.”

    I see, so your comparison is just looking at the cost of renting today? Also, if prices were expected to go up, wouldn’t people be willing to pay more now?

  151. “I see, so your comparison is just looking at the cost of renting today?”

    Of course. It compares TODAY’S rental prices against TODAY’S sales prices.

    “Also, if prices were expected to go up, wouldn’t people be willing to pay more now?”

    I expected prices to go up after 2012 and I paid the absolute bottom price for my condos. So, the answer is obviously no. Also, who said prices were expected to go up? Prices could go down, and rent could go down even more. No one has a crystal ball. My “prediction”: prices pull back slightly here, and then resume their normal historically boring path for 5 or so years until the next crisis/disaster/etc. There is still a large gap in the rent vs buy equation (thought not as big as it was at “the bottom”). Until that gap closes, buying would be the more favorable path IMO (assuming you HAVE to do one or the other).

  152. “It compares TODAY’S rental prices against TODAY’S sales prices.”
    That’s the correct comparison?

    “I expected prices to go up after 2012 and I paid the absolute bottom price for my condos.”
    Would you have been willing to pay more if you had to?

    “Also, who said prices were expected to go up? Prices could go down, and rent could go down even more.”
    Not I. I said “if”. Of course, if I were expecting rent to go down signficantly, I’d worry if I had the correct input in my comparison.

  153. “That’s the correct comparison?”

    Yes. Sabrina said it was much cheaper to rent than buy right now.

    “Would you have been willing to pay more if you had to?”

    No.

    “Not I. I said “if”. Of course, if I were expecting rent to go down signficantly, I’d worry if I had the correct input in my comparison.”

    I only explained what would close the gap. I am not expecting rents to go down significantly, so I am using the correct inputs for my predictions. If that is correct or not, only time till well.

  154. “I am not expecting rents to go down significantly, so I am using the correct inputs for my predictions.”
    I thought it didn’t matter what you expected to happen, just what was true, TODAY.

  155. But, enough of all this already, where is Sabrina living in Asia that she’s having such a miserable time?

  156. “I thought it didn’t matter what you expected to happen, just what was true, TODAY.”

    Who said that?

  157. dz’ing again

  158. “Who said that?”
    I thought you did, but nevermind, what’s important now is where is sabrina living and why is she not having a better time.

  159. “dz’ing again”
    Yeah, one of the worst things about this lag is when I go to the effort of eponymizing, sometime I just find a whole bunch of back and forth blather.

  160. “are you comparing to renting or just housing as an investment? I would guess if the price is withing 5% of the price they paid 6 years ago the math will say they saved a small amount of $$ buying vs renting. But it depends on so much (rates / taxes / cc / insurance / etc.) it is tough to generalize.”

    Given the context of the statement–regarding mortgage rates and house prices both rising at same time–should be clear which.

    But, yeah, tough to generalize.

    Who was it that was arguing that Case-Shiller is expressed in constant dollars? I’d like to present more irrefutable facts that it is not.

  161. ” where is Sabrina living in Asia that she’s having such a miserable time?”

    What’s the “Asia” equivalent of Park Ridge? Dubai?

  162. “What’s the “Asia” equivalent of Park Ridge? Dubai?”
    No way that a normal person would say asia if they were in dubai. I’m taking “asia” to mean e asia or I guess se asia. And I only include se asia bc my guess will be singapore. But certainly not the arabian peninsual or the subcontinent.

  163. gringozecarioca on April 4th, 2014 at 2:04 pm

    “what’s important now is where is sabrina living and why is she not having a better time.”

    …after all the hard work of running a website, she took the path to easy riches offered her by miumiu, and went to work as a ladyboy at miumius’ family brothel just on the outskirts of Quingdao.

  164. “Given the context of the statement–regarding mortgage rates and house prices both rising at same time–should be clear which.”
    Taint obvious to me.
    “Who was it that was arguing that Case-Shiller is expressed in constant dollars? I’d like to present more irrefutable facts that it is not.”
    Wasn’t me. Case Shiller doesn’t adjust for inflation – he leaves it up to the end user to adjust if they want. It was base 100 in Jan 2000. It is now 165.5. That is the 20 city index.

  165. Meanwhile this guy has been trying to get $400K for his place since 2009.

    http://www.redfin.com/IL/Chicago/3934-N-Kostner-Ave-60641/home/13459751?utm_medium=email&utm_content=address&utm_campaign=instant_listings_update&utm_source=myredfin

  166. “No way that a normal person would say asia if they were in dubai.”

    Well, we are talking about someone from the Orland/Flossmoor area.

    How ’bout Ulan Bator? Uzbekistan?

  167. gotta be India or China

    or perhaps she joined the cannibalistic tribes of papua new guinea and is suffering from kuru?

  168. ‘Also – incomes are rising for the 1% and if we’re talking about the GZ and near-GZ then that is who we really care about.’
    ‘We are in a period of shifting dynamics. More people are moving to the city (and those moving here are wealthier) and the new rental buildings will be absorbed but will cause rents to decline a bit.’

    Yes, this! Sabrina, and others here, tend to paint a RE portrait with the broadest of brushes. And it’s true, a factory closing in OH, what the FEDs do with interest rates, what Case Shiller says, or what will become of a 27 year old with massive college debts, all have implications on the overall health of the RE market and on the US economy itself. But in the GZ, the near-GZ, or the future GZ’s of Chicago or any other major city, those broad brushes just don’t hold up, as wealth and where that wealth wants to now live creates its own reality. I totally believe Gary if he says properties are selling quickly and inventory is low, regardless of what the official overall Chicago numbers may or may not show. On the other hand, if his market was based in the Englewood perhaps he’d have another story to tell.

    No longer are there small pockets of the city that house the haves, and then there’s everyone else that matters. It’s now expanding pockets of the city that house the haves that matter, and then there’s everyone else. Can the city survive this change that by most credible demographics will only become more intense? Just look at NY, SF, and even London where this trend is years ahead of ours. Bullish on Chicago as a whole for the long term? For me, a soft yes. Bullish on Chicago’s GZs right now *and* for the long term? Most certainly yes.

  169. “Taint obvious to me.”

    ok, yeah, prob not as I wrote it. As a straight up investment, in the way Sabrina keeps considering it.

  170. Can’t let this thread die. Just did my March recap. Sales down 4.4% but IAR will report a decline of 6.9%. Interesting factoid on the spike in median prices in this post: http://www.chicagonow.com/getting-real/2014/04/chicago-real-estate-market-home-sales-drop-in-march/ Still very low inventories and slow contract activity.

  171. “While median home sale prices rose by 27% year over year the median sales prices of condos and townhomes rose only 4.4% and the median sales prices of single family homes actually declined by 1.5%.”

    I always like your market updates Gary, thanks. Can you explain this quote?

  172. Thanks :)

    I figured those stats would blow people’s minds. They are correct numbers. I should probably dig into them further but I suspect the reason you get such a peculiar result is from the way medians are calculated. Condos and townhomes have a higher median price than SFHs and condos and townhomes were a higher percentage of the total sales this year than last. So I suspect the combined effect results in a much higher overall median price when neither group by itself really went up that much. Also, median prices are determined by a single sale so if there are large gaps between closely ranked sales you could end up with large changes. It’s a pretty flawed measure.

  173. “So I suspect the combined effect results in a much higher overall median price when neither group by itself really went up that much.”
    To take a simplistic example, suppose that there’s a single type of SFH and single type of condo. And suppose in the first period the condo price is 100 and the SFH price is 200. If the median sale is a condo, the median overall price will be 100. Suppose prices go down for both, to 75 and 150. If sales shift so that the median sale is now an SFH, then the median overall price would have increased by 50 percent, from 100 to 150, while the prices of condos and SFHs both declined by 25 percent. This is an issue not just with the median but the mean as well. The distribution of properties sold shifts between the periods and any statistic is going to reflect that change in distribution as well as changes in prices. As the illustrative example and Gary’s real-world example show, the effect of the change in distribution can dominate.

  174. “Sales down 4.4% but IAR will report a decline of 6.9%.”

    Thanks for the update Gary. They HAVE to be down because mortgage apps are down. In fact, I thought March was at a record low for originations. So unless all cash investor buyers were buying up a storm, you’re going to have fewer sales. And while Chicago DOES have investor buyers, there just aren’t enough of them to make up for the lack of those who are seeking out mortgages.

  175. “But in the GZ, the near-GZ, or the future GZ’s of Chicago or any other major city, those broad brushes just don’t hold up, as wealth and where that wealth wants to now live creates its own reality.”:

    WOW. I LOVE this site right now. The bubble is alive and well and growing and growing.

    Jay- why don’t you just say: “it’s different this time.”

    ha! ha!

    Wow- we are going to crash hard again. The “wealth” is artificial. It has been created by the Fed and the Central Banks of the globe. The Fed’s balance sheet has gone from $800 million to $4 trillion in just 5 years. That’s the credit creation this time around and it’s not going to be pleasant when it ends. (or DOES it end? Maybe the Fed just keeps pumping.)

    What does it do with 40% of the MBS market? What happens then?

    Did you know that in Southern California, the land of all that “wealth”, that 47% of the population has liquid assets of less than $3,000?

    Did you know that sales, and prices, are now dropping in Beijing and Shanghai, even with all that “wealth” as Chinese buyers figure out that nothing goes up forever? Sure they’re just moving their money to the California coast. But this buyer is no different than the Japanese buyer in 1989 or the strawberry picker who got a loan for $750,000 in 2005.

  176. “This is what happens when people refuse to admit they are wrong. They try to twist the facts to support their rigid beliefs. Sabrina has one mindset (bear market genius) and will continue that way until she is “right” again. Maybe she can say “I told you so” again in 2019.”

    Nope. It is all of you who refuse to see what the Fed has done to this housing market. It is massively distorted away from the norms. Remember those? You buy within your income with a downpayment. Wait- no one has gotten pay raises in a decade and no one has a downpayment!

    But don’t worry, an “investor” will buy up all the properties and we’ll all be saved!

    I heard a piece with Sam Zell where he was talking about how the big private equity funds made the right trade by buying up the foreclosed homes 2 or 3 years ago but that that was a one time trade. It is over. So if that equity fund sells a house in its inventory, it cannot replace it (because the numbers won’t work now with prices spiking) so the private equity firms do not have a viable business for the long haul. And ultimately, they will discover being a landlord is an expensive proposition and want to sell all of those properties even though they are denying that right now.

  177. “4. I don’t now where mortgage rates are going (and neither does anyone else) and don’t know if higher mortgage rates will hurt housing prices (and neither does anyone else because it depends on why they are higher).”

    If you honestly think the Fed ends it’s $85 billion a month- it’s TRILLION DOLLAR PROGRAM- and that it will have NO IMPACT whatsoever on mortgages, then I have a bridge in Brooklyn to sell you.

    That is like saying that QE had no economic impact on anything whatsoever. That the Fed was borrowing OUR MONEY for the last 2 years for no reason whatsoever. Money that we have to pay back (or our children or our grandchildren.) What they are doing is creating debt. What don’t people understand about what the Fed is doing?

    Ask an economist where the 10-year would be without the Fed buying. Well over 4%. I’ve seen estimates of 4.5%. That would put the 30-year fixed at over 6%.

    BUT- perhaps investors are really THAT nervous that the economy is going to go into the tank. So they buy bonds and keep rates low. Then we’re stuck with another recession which dooms the housing market anyway.

    The speculation going on in the housing market right now is just enormous. People waiting in lines to buy property again in some cities. The whole, “buy now or be priced out forever” in “normal” cities like Austin or Denver. If you aren’t seeing it- ask Gary. He’ll tell you. Every agent I talk to right now says it’s “insane.”

  178. My problem with the housing bulls is that it’s real money to all these buyers. That $50,000 they saved up to buy a few years ago that is now $25,000 is real money lost to them. And it sucks. Because to save that much money again will take them years and years.

    People just don’t have cash. They don’t have much of anything- even in the GZ. And as prices rise, mortgage apps will continue to fall. You can’t get blood from a stone. All of the national stats show the disconnect. And rates aren’t even above 5% yet! OMG. Just wait until they are. The housing market will get even worse.

    What was it that Zillow just said about the spring selling season? It’s “slow.”

    Ya think? Prices are too high. No one can buy at these levels.

  179. “Prices are too high. No one can buy at these levels.”
    That’s ridiculous. Prices wouldn’t be this high if no one could buy at these levels. You wouldn’t have the bidding frenzy that is occurring at underpriced properties. And yes there are frenzies but that’s because inventory is so low and many properties are underpriced.

  180. “You wouldn’t have the bidding frenzy that is occurring at underpriced properties. And yes there are frenzies but that’s because inventory is so low and many properties are underpriced.”

    Why are they underpriced? All I am seeing is a bunch of new record high prices all over the GZ. In fact, I hardly see anything “underpriced” at all.

    Prices are way too high. It’s why the 2/2s at $450,000 are sitting there with no offers 30 days out. If inventory is so low, why aren’t they selling immediately?

    I’ve seen a few properties in the last month that were priced “correctly” (I wouldn’t say “underpriced”) that went under contract right away but that simply was because they were affordable. I don’t know if there was a bidding war as they haven’t closed yet.

    Prices are too high. If they weren’t, sales wouldn’t be dropping. Everyone wants to buy. They MUST buy. Why are properties even being de-listed? I see it every day though.

  181. First you say “The speculation going on in the housing market right now is just enormous. People waiting in lines to buy property again in some cities. The whole, “buy now or be priced out forever” in “normal” cities like Austin or Denver. If you aren’t seeing it- ask Gary. He’ll tell you. Every agent I talk to right now says it’s “insane.””

    Then you say “Prices are way too high. It’s why the 2/2s at $450,000 are sitting there with no offers 30 days out.”

    Both statements can not be true. In reality a ton of properties are selling way too quickly – 2 -3 days. Those are underpriced de facto in my opinion. Then some just sit. Those are overpriced.

  182. By the way- speaking of inventory- this is the first time I’ve seen like 4 or 5 of those under $500k single family homes in that gated community in Lakeview at 1800 W. Diversey on the market at the same time.

    Also, several townhouses on at the same time at 1801 W. Diversey. Several units testing the water at 1921 W. Diversey.

    And there are 6 units currently on the market in the Regal Lofts at 1735 W. Diversey. I don’t remember the last time there was that many in that building at the same time.

    This is all good. We need more inventory and owners are figuring out that prices have jumped and now is the time to sell.

  183. “Both statements can not be true. In reality a ton of properties are selling way too quickly – 2 -3 days. Those are underpriced de facto in my opinion. Then some just sit. Those are overpriced.”

    It’s only insane in some parts of the market. Anything deemed “affordable” is hot. What does that mean? In the GZ that is under $300,000. I know someone selling under $300,000 in the Gold Coast. 20 showings the first week but just one offer. They’re taking it because the offer was good enough and they just want to sell. No bidding war there but it was definitely busy with people looking.

    Most of what I’m watching isn’t going under contract in 2 to 3 days. But maybe we’re watching different stuff.

  184. I think it’s a bimodal distribution. Market times are rising. I think sellers and realtors don’t know how to price stuff so some flies off the shelf and some just sits. And many realtors will take a listing at any price so they’re no help.

  185. “And many realtors will take a listing at any price so they’re no help.”

    ha! Yeah. This is true.

    But isn’t it also a lot of sellers just saying “maybe there is an investor who is dumb enough to pay what I’m asking. All it takes is one” so they are listing WAY higher than the comps would suggest?
    s

  186. Most likely it’s a seller being unrealistic or focusing on what they need and a realtor that is an enabler.

  187. I read an article yesterday, but I can’t find the link today, saying that in many markets the PE investors have stopped buying because it’s gotten too expensive. They say they can no longer buy, renovate, and rent at a profit given current housing prices.

  188. “Nope. It is all of you who refuse to see what the Fed has done to this housing market.”

    Doesn’t matter why you are wrong. Just that you’re wrong….

  189. “They say they can no longer buy, renovate, and rent at a profit given current housing prices.”

    Of COURSE they are saying this. Prices are too high now. They have completely pulled out of Phoenix and Las Vegas which is why sales have plunged over 25% in both markets year over year and median prices have been down 3 months in a row.

    Blackstone has said they have stopped buying in California (nothing on the market there anyway and paying $500,000 for a 2/1 with 900 square feet just doesn’t make any sense.) They are still buying in Atlanta and Chicago though.

  190. “I read an article yesterday, but I can’t find the link today, saying that in many markets the PE investors have stopped buying because it’s gotten too expensive.”

    There have been articles saying that since late last year. Not all of them have stopped buying, and some of it is (inevitably) that their sellers (mainly the foreclosing lenders) have stopped being interested in giving bulk discounts. Bet there are a number of lenders still willing to give a bulk discount on Chicago properties, esp with the coming tax increases.

  191. “I read an article yesterday, but I can’t find the link today, saying that in many markets the PE investors have stopped buying because it’s gotten too expensive.”

    There have been articles saying that since late last year. Not all of them have stopped buying, and some of it is (inevitably) that their sellers (mainly the foreclosing lenders) have stopped being interested in giving bulk discounts. Bet there are a number of lenders still willing to give a bulk discount on Chicago properties, esp with the coming tax increases.

  192. “I heard a piece with Sam Zell where he was talking about how the big private equity funds made the right trade by buying up the foreclosed homes 2 or 3 years ago but that that was a one time trade. It is over. So if that equity fund sells a house in its inventory, it cannot replace it (because the numbers won’t work now with prices spiking) so the private equity firms do not have a viable business for the long haul. And ultimately, they will discover being a landlord is an expensive proposition and want to sell all of those properties even though they are denying that right now.”
    Funny that you know the housing market better than private equity funds. I assume you are unfamiliar with PE funds. They have very long lock ups. They traditionally don’t invest in rental properties – their normal area of expertise is buying cheap companies and extracting value. These rental funds were set up specifically to take advantage of the abnormal supply demand dynamics of the time (banks were bulk sellers / cap rates were very high). They get a commitment for X amount of money and draw it from investors as they invest it. If they only use a portion of X then investors don’t get additional capital draws. They then pay out the cash flows and manage the portfolio. If prices rise and the cap rate declines they will sell properties where it makes sense. These are not hedge funds with quarterly liquidity and therefore will not turn sellers for technical reasons (ie redemptions). They will turn seller for ECONOMIC reasons (ie prices are too high relative to rental income). I know – I am invested in several PE funds. Some of the 2008 funds haven’t drawn down their full commitments yet. To say PE funds don’t have a viable business shows your lack of knowledge about the space. They are raising record amounts for their core strategies (LBOs).

  193. Yoss: Don’t try to inject facts into an emotional argument.

    Someone will point out that you’re validating Zell’s view, so I’ll give that the preemptive “So what? Doesn’t mean it’s not a viable business.” on your behalf.

  194. Sabrina you contradict yourself more than the bible… so which is it, Investors have stopped buying, but are buying in Chicago, inventory is too low, prices are too high, but properties are flying off the shelves, but nobody is buying these homes at these prices? WTF!

  195. “Sabrina you contradict yourself more than the bible… so which is it, Investors have stopped buying, but are buying in Chicago, inventory is too low, prices are too high, but properties are flying off the shelves, but nobody is buying these homes at these prices? WTF!”

    Lol, and the bible is tough to beat, but Sabrina is trying her hardest!

  196. What did vlajos say?

  197. “Did you know that in Southern California, the land of all that “wealth”, that 47% of the population has liquid assets of less than $3,000?”

    Cite? Other than Mitt?

    Why would California be any different than the rest of the country? 47% is (basically) the portion of Californians who don’t own property–coincidence?

  198. “February’s data showed the continued trend of declining origination activity we’ve been observing since mid-2013, with monthly originations falling to their lowest recorded point since at least 2000,” said Blecher. “In spite of this decline, residential real estate sales have remained strong due at least in part to investor activity and the fact that cash sales account for almost half of all transactions. ”

    http://www.marketwatch.com/story/black-knights-february-mortgage-data-monthly-loan-originations-lowest-on-record-95-percent-of-rate-reduction-modifications-still-face-resets-2014-04-07?reflink=MW_news_stmp

    There’s something going on out there; but I can’t heads or tails of it. There are bulls like jay-z and chuk-d; and bears like laura and sabrina. I’m more like anon(tfo), somewhere in between. There’s something going on when demand from non-cash buyers is drying up and first time home buyers are a small share of the market (not referenced in the article). I have plenty of friends, in their 30′s, who haven’t owned yet; sat out the bubble; sat out the bust; and are sitting out the recent bubble. They have money to buy but they can’t make heads or tails of anything either. Weird times we’re in.

  199. I’m hardly a “bull” now. I am in the process of selling one of the places I bought in 2012. I believe the market will dip slightly this year.

  200. gringozecarioca on April 10th, 2014 at 7:14 am

    “I have plenty of friends, in their 30?s, who haven’t owned yet; sat out the bubble; sat out the bust; and are sitting out the recent bubble. They have money to buy but they can’t make heads or tails of anything either. ”

    Up-Down.. who cares.. I couldn’t imagine not owning something. Just feels like a nice QOL hedge.

  201. “Just feels like a nice QOL hedge.”

    and who doesn’t appreciate a nice hedge

  202. “and who doesn’t appreciate a nice hedge”

    I dug up all the 1950′s arbor vitae on my front lawn ;)

  203. “Just feels like a nice QOL hedge.”

    QOL and tens of thousands of dollars underwater; or rent and deal with vintage. The decision is easy for a lot of people. I understand why the market is slow. These people I know, at least through my anecdotal stories, show that people aren’t as willing to jump into/plunge into the market head first like they were 10 years ago, say in 2014. That’s why demand has been lagging a bit.

  204. QOL turbo-chargerer!

  205. ” who doesn’t appreciate a nice hedge”

    Not that kind of hedge, Icky.

  206. “These people I know, at least through my anecdotal stories, show that people aren’t as willing to jump into/plunge into the market head first like they were 10 years ago, say in 2014″

    Anecdata. As in “Anecdata shows that the 25-34 cohort of today are less likely to jump into the market than in 2004.”

  207. “Not that kind of hedge, Icky.”

    Glad someone here still has a sense of humor. Obviously Park Ridge/Long Grove has deadened HD’s perception.

  208. I also was going to make a joke about preferring the brazilian maintained hedges but whatever…

  209. “Park Ridge/Long Grove has deadened HD”

    While generally true, I believe he was just being subtle.

    And isn’t it actually Ford Heights?

  210. gringozecarioca on April 10th, 2014 at 1:16 pm

    “Glad someone here still has a sense of humor. ”

    I think Sabrina removed my ladyboy comment (probably hit too close to home), so no more jokes for Ze…

    Sonies.. origins.com, download of Dead Space… one of the best games ever.. Free!!

  211. I was being subtle.

    and anecdata is not a real word. But irregardless is!

  212. “anecdata is not a real word”

    More real than “homedelete”– it’s a portmanteau that has a clear meaning. And it’s more reliable than the anecdotes that go in to it.

  213. Isnt portmanteau somewhere on the bay side of door county? or maybe it’s in the UP. I forget.

  214. TNX breaking its 200dma to the downside after busting its 50dma last week

    Lookin good for low mortgage rates the rest of the year at least…

  215. “Isnt portmanteau somewhere on the bay side of door county?”

    I believe that it is also a type of coat ‘fashionable’ (such as that might apply to anything related to ‘sconsin) to wear in Door County.

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