Market Conditions: January Sales Fall 10.2%- Is Low Inventory to Blame?

Hans Christian Anderson statute

The Illinois Association of Realtors is out with the January home sales data.

It was the largest home sales decline in 3 years.

The city of Chicago saw year-over-year home sales decline 10.2 percent in January 2018 with 1,414 sales, compared to 1,574 in January 2017. The median price of a home in the city of Chicago in January 2018 was $265,000, up 3.9 percent compared to January 2017 when it was $255,000.

Sales Data Since 2006 (thanks to G for the older data):

  • January 2006: 2009 sales and median price of $258,000
  • January 2007: 1850 sales and median price of $279,900
  • January 2008: 1203 sales and median price of $290,000
  • January 2009: 918 sales and median price of $205,000
  • January 2010: 1237 sales and median price of $195,000
  • January 2011: 1034 sales and median price of $150,000
  • January 2012: 1123 sales and median price of $149,000
  • January 2013: 1521 sales and median price of $157,000
  • January 2014: 1383 sales and median price of $200,750
  • January 2015: 1348 sales and median price of $220,000
  • January 2016: 1398 sales and median price of $227,750
  • January 2017: 1574 sales and median price of $255,000
  • January 2018: 1414 sales and median price of $265,000

Sales of condos fell more than sales of single family homes yoy:

  • 748 condos which was down 15.9%
  • 666 single family homes which was down 2.6%

Inventory in the city of Chicago continued to fall, declining another 10.9% to 6952 properties from 7802 in January 2017.

Days on the market also fell 7.3% to 51 from 55 days.

“While prices and month-over-month sales are forecast to increase over the next three months, there is some concern about the continuing inventory challenge,” said Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) at the University of Illinois. “However, the pending sales index in January found more homes under contract than a year ago.”

“Based on the present trends in the housing market, we anticipate a competitive spring for buyers,” Rebecca Thomson, president of the Chicago Association of REALTORS® and Vice President of Agent Development at @properties, said. “With decreasing market time, sellers will need to be mindful of pricing strategically. If their home is not moving quickly, a proactive price adjustment may help them protect their overall investment without risking the stigma of a longer-than-average market time. With how quickly inventory is moving, an overpriced listing could get left behind.”

The 30-year fixed mortgage rate averaged 4.03 versus 3.95 in December 2017 and 4.15% a year ago.

Is the lack of inventory the only thing holding back this housing market?

And why aren’t developers addressing the shortfall?

Illinois home prices increase in January; sales lower amid tight inventory [Illinois Association of Realtors, Press Release, February 21, 2018]

110 Responses to “Market Conditions: January Sales Fall 10.2%- Is Low Inventory to Blame?”

  1. And why aren’t developers addressing the shortfall?

    What shortfall?

    You post about how many tower cranes are up in Chicago and the high numbers of apartment building coming on line over the next few years and there’s a shortfall?

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  2. Unfortunately for those looking to buy, the economics of building apartments vs condo remain too compelling. Financing is much easier (although getting more challenging) and the investment horizon much quicker. I see developers cashing out equity via a sale or refinance almost immediately upon completion. With a condo the return of equity would take much longer…

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  3. Rising rates will keep people in their homes even more than before, 30 year mortgages are up to 4.5%

    Not sure how much longer rates will rise but this will be a big negative for the short term

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  4. Sonies beat me to it by 4 minutes. I’m already having this conversation with potential sellers. If you are currently financed well below 4% and you will have to get a new mortgage at 4.5%…

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  5. difference on a 4 and 4.5 30 year on 500k is like 200 bucks
    3.5 and 4.5 is 300 bucks

    now that isn’t a huge amount, your taxes have probably increased that much over the last few years, but it will put a bit of pressure on the higher end of housing for those that like to take out big mortgages

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  6. You forgot to mention the double digit property tax increases for the last three years that will continue for the next five years that are hurting sales and prices.

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  7. “difference on a 4 and 4.5 30 year on 500k is like 200 bucks
    3.5 and 4.5 is 300 bucks”

    AKA 6% and 13% higher. Or the ‘same thing’ as paying an extra $30k, or $65k, above the $500k.

    You could just say “just pack a lunch, and walk instead of Ubering 10 blocks, and it’s like you’re *saving* money.”

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  8. I was talking to a broker friend, he was complaining that there is simply nothing on the market for people to buy in the City. He has plenty of buyers looking for homes though. The IL realtor numbers certainly support this.

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  9. I’m sure with the Trump tax cuts people can find a few extra hundo to deal with it

    but yeah taxes can fuck off for real

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  10. I’d be fine with the income and property tax increases if it meant better transit and roads, better schools, better public services and mental health care. The problem is ALL of the money is going to pay for outrageous public sector union pensions and health care costs, along with their sweetheart salaries. The number of students in Chicago and Illinois has fallen quite a bit over the past decade and will continue to do so. Yet, we are paying more and more for education, which is really just pensions and benefits. Preckwinkle just gave another sweetheart deal away to prison guards (although their job sucks).

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  11. One of my properties 2/2 breached the $10k mark. I’m thinking of selling as the economics aren’t as favorable as before. 10yrs ago, taxes were $6-7k. Then the assessor really dropped the ball and I was paying $1200/yr for 3yrs or so. It then jumped back to the $5-6k range. I think 2015/2016 it reached $9k. 2017, we are definitely over $10k and I don’t think I can boost rent to cover it,sure so my margins get hit and I’m starting to think of dumping this property for something else.

    With taxes going up and borrowing costs rising, I’m thinking now’s the time to extract equity.

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  12. “The problem is ALL of the money is going to pay for outrageous public sector union pensions and health care costs, along with their sweetheart salaries. The number of students in Chicago and Illinois has fallen quite a bit over the past decade and will continue to do so.”

    The Social Security issue is the same. Not enough new folks paying off the old folks with the sweet heart deals.

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  13. “Mike HG on February 22nd, 2018 at 10:52 am
    You forgot to mention the double digit property tax increases for the last three years that will continue for the next five years that are hurting sales and prices.”

    id love to see a CC discussion on North Shore real estate on how it could be impacted in the next 5 years. you have taxes, which are already sky high, going up. and you have two incentives (mortgage interest/RE tax deductions) for owning an “average” $1mm+ home in Winnetka going away. you also have a demographic landscape up there that is sure to increase supply as baby boomers retire and head south or to cheaper, smaller residences.

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  14. Keef17x

    Do you think some of the Western Suburbs (Hinsdale, Western Springs, LaGrange, Downers Grove, Elmhurst, etc.) will also struggle?

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  15. I think the North Shore and other desirable burbs centered around a small village/business district and public transportation will be fine. The young urban professional Millenials will move to the burbs too when they have kids.

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  16. “I think the North Shore and other desirable burbs centered around a small village/business district and public transportation will be fine. The young urban professional Millenials will move to the burbs too when they have kids.”

    the average house is ~1.3mm in Winnetka. Winnetka is probably fine as it is the creme de la creme and isnt that large. But the North Shore as a whole is pretty big and still hasnt recovered the values seen prior to the Financial Crisis.

    1) Demographics: The NS population is much older as a result of the cost of housing up there. As those residents retire in greater and greater numbers, supply increases and pressure is put on prices.
    2) Taxes: These communities have some of the highest tax rates in the entire country. The vast majority of these people are upper middle/upper middle class who were the main beneficiary of itemized deductions like SALT/Mortgage Int deductions. These are now gone.
    3) The next generation (Millenials) seem to favor city living moreso than Boomers. This is, imo, one reason the Green Zone of the city has recovered more quickly post-2008 than the North Shore.
    4) Millenials are worse off financially than Boomers were at a comparable age. They are paid less, many are underemployed, and advancing less quickly (due to Boomers staying in the workforce longer).
    5) As a follow-up to #4, Millienials, as a group, own less real estate than Boomers did, and dont have the equity in homes needed to step up into more expensive homes like those found on the North Shore. As Millienials (many of whom are now 30 years old and up) continue to enter the real estate market over the next decade, they will do so as first time buyers and how many have the $250,000 necessary for 20% down on a home in Winnetka?
    6) Studies show Millienials are better savers than Boomers thus far. They dont value “things” like Boomers do. A large, ostentatious home would seem to be low on their priority list.

    Of course, the above is very unscientific. It is just my opinion based on what I have read and anecdotally observed as a 33 year old who grew up in the aforementioned suburbs. And yes, I’d like the real estate up there to come down because I’m one of the few of my generation with substantial home equity as a result of buying in the Green Zone near the bottom of the market and substantial financial assets outside of my home. And yes, I’d like to buy what was once a $1.5mm home for $1mm in the next 5 years. But I do share some of what Millienials seem to value. I dont want to, and will not, be burdened with an unaffordable mortgage, insane real estate taxes, etc when I could be saving and putting that money into better income producing assets. So, I am talking my own book to an extent. But I think what I’m saying makes sense. Time will tell if I’m right or wrong.

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  17. “Do you think some of the Western Suburbs (Hinsdale, Western Springs, LaGrange, Downers Grove, Elmhurst, etc.) will also struggle?”

    No. They have the same “amenities” as Lincoln Square and Southport.

    Potbelly’s
    Starbucks
    Trader Joe’s
    An old time movie theater that has been renovated
    A burger joint of some kind (take your pick: smashburger, five guys etc.)
    A diner
    Chipotle

    And instead of the brown line, it has the metra which gets you to Union Station during rush hour in 15-30 minutes (depending on the station.)

    To top it off, it also has the thing that all parents want: top schools. Some of the best in the state are along that Metra line and your kid doesn’t have to “test” into any of them.

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  18. “The Social Security issue is the same. Not enough new folks paying off the old folks with the sweet heart deals.”

    What person has a “sweetheart deal” on SS?

    It’s based on what you’ve earned in your lifetime.

    And yes, there aren’t enough people paying into the system because it wasn’t designed for the largest generation of people, the Baby Boomers, to live until 80.

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  19. “I was talking to a broker friend, he was complaining that there is simply nothing on the market for people to buy in the City.”

    It’s tight, for sure. All depends on price range, neighborhood etc.

    Heck, I haven’t even been able to do a post on this blog on some neighborhoods because there’s literally almost nothing on the market in some of them.

    It should get better as spring goes along though.

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  20. “Not sure how much longer rates will rise but this will be a big negative for the short term”

    Fed’s trying to get back to “normal” which would be 4% on the fed fund rate.

    That will take a couple of years.

    But that means 6%+ mortgage rates.

    We could see 3.5% this year in the 10-year which would translate into 5% mortgage rates.

    Suddenly, it’s not going to be so fun to sell a property every 3 years. All of us have been indoctrinated on falling rates, not rising. It’ll definitely impact behavior. We may see people live in homes for 20 years again. Shocking!

    That means condos could take a hit, especially the traditional starter ones like 1 and 2 bedroom units. Lofts could get hit too.

    But we’ll see. We’re not there yet. And those buying right now had already locked in much lower rates.

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  21. “What shortfall?”

    Please tell me the last time developers built a condo high rise anywhere downtown that wasn’t a “luxury” building- or anywhere in the city for that matter. There’s desperate demand for condos in some areas and they’re not building to match it.

    Also desperate demand for single family homes and townhouses. Plenty of land for them to be built. Cheap land too. Why aren’t they?

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  22. “We may see people live in homes for 20 years again.” People actually live in their homes longer now than they used to. http://economistsoutlook.blogs.realtor.org/2016/10/13/tenure-in-home-has-steadily-increased-in-last-30-years/

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  23. “Also desperate demand for single family homes and townhouses. Plenty of land for them to be built. Cheap land too. Why aren’t they?”

    I know of about 500 new SFHs that sold through the MLS in the 12 months ending last July/ August. OK. Maybe that’s not much in a city the size of Chicago. Why not more? Maybe there’s a skilled labor shortage? Don’t know.

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  24. “Please tell me the last time developers built a condo high rise anywhere downtown that wasn’t a “luxury” building- or anywhere in the city for that matter. There’s desperate demand for condos in some areas and they’re not building to match it.”

    Thanks for moving the goal posts.

    I’m sure there’s all kinds of demand for a full amenity, 2,000sf green zone condo w/ low assessments for under $250M. Too bad you cant build them for that in the areas that these folks want to live

    “Also desperate demand for single family homes and townhouses. Plenty of land for them to be built. Cheap land too. Why aren’t they?”

    How is it desperate?

    Same as above, the price points that the majority of these folks can afford doesnt lend itself to making the investment in locations/price point that the majority want/can afford.

    If there so much demand, cheacp land you being a real estate expert, why dont you go out and start developing SFH/Townhomes/Non-luxury Condos? Should be super easy money, right?

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  25. “I know of about 500 new SFHs that sold through the MLS in the 12 months ending last July/ August. OK. Maybe that’s not much in a city the size of Chicago. Why not more? Maybe there’s a skilled labor shortage? Don’t know.”

    Gary – can you break this out by Hood & average price?

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  26. Maybe because a lot of homeowners would like to sell but are still “under water” mortgage-wise and would rather tough it out than go through the miserable “short sale” process?

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  27. “Do you think some of the Western Suburbs (Hinsdale, Western Springs, LaGrange, Downers Grove, Elmhurst, etc.) will also struggle?”

    No. Who wants to live so far away, especially when those big corporate campuses are now moving to the city? I think the North Shore will always be desirable because of the lake and the proximity to the city. I really don’t understand the point of these western suburbs. That area seems more suited for the lower middle class, looking for a bargain and willing to give up convenience.

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  28. “No. Who wants to live so far away, especially when those big corporate campuses are now moving to the city? I think the North Shore will always be desirable because of the lake and the proximity to the city. I really don’t understand the point of these western suburbs. That area seems more suited for the lower middle class, looking for a bargain and willing to give up convenience.”

    this is exactly why Lake Forest and Lake Bluff are in such rough shape relative to Winnetka/Glencoe/Wilmette, imo.

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  29. “Millenials are worse off financially than Boomers were at a comparable age. They are paid less, many are underemployed, and advancing less quickly”

    Also, homes in “better” burbs are relatively more expensive compared to incomes, even for those who are doing well.

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  30. I’m pretty sure you can get from Downers Grove to downtown via Metra in under 35 minutes on a few trains rah rush hour. For Hinsdale, Western Springs, LaGrange, etc, it’s as quick as 18-25 minutes. That’s faster than commuting from the north side of the city via the brown line or from the north shore via Metra.

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  31. “Fed’s trying to get back to “normal” which would be 4% on the fed fund rate.”

    not going to happen, we’ll have a recession triggered from anything above 2-3% and then they will lower rates again…

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  32. Google thinks the commute from Hinsdale to downtown is over an hour on public transportation. Western Springs is 46 minutes from their metra stop to Union Station. Despaines is 44 minutes and Lagrange is 40 minutes. Basically, you’re wasting at least 80 minutes per day commuting. That would be unacceptable to large swaths of the population. I could see dealing with the commute if you’re getting a great deal by living out there, but why pay a premium to be so far from work?

    I also wouldn’t live in Lincoln Square either though. I have no desire to live in a far flung Chicago neighborhood.

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  33. Metra commuters never tell you how long it takes to get to the station and then get to the office.

    My door to door is 30 minutes generally from Lincoln Square.

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  34. Jenny, kids change everything. Your priorities will be different. A 45 commute to have a yard, more space, and good public schools is a small sacrifice. As Sabrina mentioned, most of the desirable burbs have the same exact amenities… to be frank some suburbs are even more walkable than some of the city neighborhoods.

    Vast majority are going to head to the burbs once the bun is in the oven. Most of the city types tend to prefer suburbs with the metra / el and a walkable downtown village from what I see with my clients who are at that stage in life. The biggest reason is public schools, plus you just need the space.

    Millenials will be making the trek to the burbs just like everyone before them. No one wants to raise 2 kids in a 1200 sqft condo. Chicago ain’t Manhattan and the vast majority won’t make it high enough in their careers to afford a true single family in LP, Bucktown, etc.

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  35. “metra which gets you to Union Station during rush hour in 15-30 minutes”

    20 minutes is the express time to LaGrange. There isn’t a burb that’s a 15 minute Metra trip with ‘good’ schools.

    That said:

    “Who wants to live so far away”

    the west suburbs are closer/more accessible to much of the good in the Chicago area than the north shore is, the lake excepted, of course.

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  36. “Google thinks the commute from Hinsdale to downtown is over an hour on public transportation.”

    Train time is as little as 31 minutes. The rest is about where in ‘downtown’ you’re going to/coming from–which also applies if using CTA.

    And, of course, ignoring the trip from your ‘burban house to the Hinsdale metra station.

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  37. A brand new 4/2.5, two car garage house two blocks from Belmont in Metra is under contract for $599k.

    https://www.redfin.com/IL/Downers-Grove/4910-Cross-St-60515/home/18055406

    5 minutes walk to the station, 32 minutes train downtown (6:31, 6:57, 7:17, 7:37, or 7:56) 8 minutes walk from the train to your office (I walk fast). 45 minutes door to door.

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  38. Surprised to look at Downers Grove Henry Puffer vs. CPS Waters school in Lincoln Square. Water is a better school academically.

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  39. “5 minutes walk to the station”

    tehgoog sez it’s 800 yard to the platform. You really walk 10 minute miles?

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  40. “My door to door is 30 minutes generally from Lincoln Square.”

    I call BS unless you explain your commute in more detail.

    I used to commute from North/Cleveland on the Brown line. I would walk to the Sedgwick stop 7:50-8am’ish, squeeze myself onto one of the trains and exit and Quincy. Walk to Willis Tower. That took me 30min going to work.

    Friend of mine from Hinsdale and I’ve done this commute with him.

    10min – Walk to train before scheduled departure. ~3min buffer.
    22min – Express train to Union station
    5min – Exit Union station
    15min – Walk from Union to work (not willis tower)

    That’s 52min on a 22min Metra train.

    It takes me 45min to get to Western and Belmont in rush hour around 5PM in a car from Wacker and Lake.

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  41. I used to work with a guy who lived in Arlington Heights. We worked east of Ogilvie station. He would regularly beat me home (I lived on the north side). He said the part of his after-work commute that took the most time was getting out of the Metra parking lot.

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  42. https://www.redfin.com/IL/Chicago/2622-W-Wilson-Ave-60625/home/13488989

    Compare that downers grove house to this one in Ravenswood. Feel free to judge distance to transit to the loop, schools, yard and home size, neighborhood amentities, etc. I know which one I would choose.

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  43. “What person has a “sweetheart deal” on SS?

    It’s based on what you’ve earned in your lifetime.”

    Not what I meant. SS isn’t a sweet heart deal, the point was to show that income for social security can’t keep up with payments. Income for pensions also can’t keep up with payments. State and county pensions are the “Sweet heart” deals. The amount paid into it from the workers doesn’t come close to the benefit they receive when they retire.

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  44. “https://www.redfin.com/IL/Downers-Grove/4910-Cross-St-60515/home/18055406

    5 minutes walk to the station, 32 minutes train downtown (6:31, 6:57, 7:17, 7:37, or 7:56) 8 minutes walk from the train to your office (I walk fast). 45 minutes door to door.”

    Looks like 0.4 miles to home from the station. Going downtown the walk is longer. That will be more than a 10min walk with a buffer.

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  45. https://www.redfin.com/IL/Chicago/2622-W-Wilson-Ave-60625/home/13488989

    This home is in Waters. Which is a better school than Hentry Puffer in DG. Waters low income kids perform better than Puffer low income kids. Waters non low income kids perform a lot better than Puffer non low income kids.

    Commute from there to downtown is a breeze, just transfer at Belmont.

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  46. “Do you think some of the Western Suburbs (Hinsdale, Western Springs, LaGrange, Downers Grove, Elmhurst, etc.) will also struggle?”

    No but I also think the era of big gains is over so they wont go much higher. Elmhurst has absolutely exploded in value, it cant keep going up forever but before prices get much higher it will probably spill over into neighboring suburbs like Villa Park or Lombard. The attraction is it’s actually pretty close to the Loop compared to North Shore suburbs, the express train from Elmhurst is 15 min. to Northwestern Station. Thats better than most EL stations. These Western Suburbs are family based, cute and interesting downtowns with more than just national chains to offer (despite what someone posted), decent parks and great schools. Thats the appeal.

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  47. ^ Oh and I should add that the value propostion for a lot people in that bracket who stayed in the city is being destroyed by the property tax increases in the city. The 2 income household with 1.5 kids could justify the smaller space in the city vs a place like Elmhurst in the past because they paid 50% the property tax. It’s now on par and that kills the city’s advantage for most people with kids. I know our taxes are up 54% from 4 years ago, it’s asinine and suicidal for Chicago.

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  48. My taxes have gone up by the amount my home’s value has increased. But that’s Lincoln Square. My home has gained much more value than a home in Elmhurst or DG in the last 5 years.

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  49. “the express train from Elmhurst is 15 min. to Northwestern Station”

    The 7:57am departure is a scheduled 26 minutes, and is the shortest inbound.

    The 5:42 pm departure is a scheduled 24 minutes, and is the shortest outbound.

    Is this 15 minute express train operated by someone other than Metra?

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  50. “These Western Suburbs are family based, cute and interesting downtowns with more than just national chains to offer (despite what someone posted), decent parks and great schools. Thats the appeal.”

    Crains did an article about how all the “cute boutique” streets in Chicago are now e-commerce store fronts.

    Armitage, Southport etc are all national chain stores.

    “My taxes have gone up by the amount my home’s value has increased. But that’s Lincoln Square. My home has gained much more value than a home in Elmhurst or DG in the last 5 years.”

    Was your home properly valued 5yrs ago? 5yrs is not a long time in general and even shorter when compared against the 3yr cycle.

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  51. “Is this 15 minute express train operated by someone other than Metra?”

    Beat me to it! LOL

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  52. We have never won a RE tax challenge, so I assume the assessor thinks we are properly valued. My taxes have actually gone up less than my home’s value now that I look at it. Taxes up 20% in the last 6 years. I could easily sell my home for 40% more than what we paid for it though and that’s netting out the central AC we put in.

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  53. “There isn’t a burb that’s a 15 minute Metra trip with ‘good’ schools.”

    I need to correct that. Oak Park is 16 minutes, and has good schools. But that’s it.

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  54. My experience is that suburbanites lie about commute times. As demonstrated above. And almost always ignore commute to and from Metra stations. That likely adds at least 30 minutes to a suburban commute.

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  55. My taxes are less than I should be paying based on my home’s value. On the other hand, my taxes have still gone up by more than 50% over the last 3 years. It’s ridiculous. I don’t use most city services. I get little to nothing for my property taxes. It feels like the city is trying to force people out of their homes just so retirees can lead upper middle class lifestyles.

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  56. Suburban Commuter Math (SCM) is now part of common core.

    Take your total commuting time
    Subtract the time driving to the metra station
    Subtract the time looking for parking at the metra station
    Subtract the time waiting for the train
    Subtract the time getting out of the station downtown
    Subtract the time walking to the building you work in

    Voila! The answer is 20 minutes!

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  57. “Gary – can you break this out by Hood & average price?”

    Actually I did. Back in August: http://www.chicagonow.com/getting-real/2017/08/new-single-family-home-construction-in-chicago-hottest-neighborhoods-of-2017/

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  58. True Commute:

    7 min/3 block walk to Hubbard Woods Metra in Winnetka.
    37 or 38 minute train (7:42-8:19 or 8:03-8:41) to Ogilvie
    4 min walk to office (one building from Ogilvie)

    48 minute commute.

    The real estate market on the North Shore has separate submarkets. Move in ready, new, open concept houses are selling and at good prices, those that need work (particularly a kitchen renovation where it needs opened up) are sitting, houses close to trains (but not next to tracks) are selling better. This tells me that people are waiting to move up here until their children are kindergarten (don’t want to pay high real estate taxes until you really need school and no time for a renovation and don’t want to live through it with kids) and commute time really matters. Those who drive generally pick Wilmette, those who train will pick a house close to Metra over distance from city b/c you’d rather be on the train for the extra few minutes than walking in the cold for an extra few minutes. A 2-3 block walk from home to trains in Glencoe/Winnetka is less total time than a 7-8 block walk in Wilmette.

    Many families who live here have one person who works in Northbrook/Glenview/Evanston and one downtown. Fewer families with both people commuting downtown.

    Although I walk to Metra, there is no problem getting parking at the Metra stations on the North Shore, no looking for parking, etc…. This seems not to be case in many west suburbs.

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  59. Commuting is anything you are doing between the door to your house and the door to your office. Some people don’t care about commuting and everyone else pretends not to.

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  60. The house in Ravenswood Gardens on Wilson and its much shorter commute would be a no brainer for me, even if the house itself is weak in current form. Close to the Rockwell stop, close to LS and probably at least a 20 minutes shorter commute than the DG house., Not everyone who works downtown works in the Loop, for those of us who live North and work in River North, especially those who work unpredictable hours and can’t be tied to a restrictive train schedule, the CTA destroys Metra for convenience.

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  61. Agree, CTA beats Metra for those who work unpredictable hours but suburban publics beat CPS for those whose careers can’t handle unpredictable schools (strikes, funding problems, inconsistent before/aftercare programs, and the worry of high school).

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  62. I’m in Ravinia (Highland Park):

    7-minute walk to Ravinia station.
    42-minute ride on train
    7-minute walk to office.

    And that’s if I make the express train. A two-way commute is two hours of the day. Longer if I go in late (last express train leaves my station at 8:04).

    It’s definitely a trade-off. The schools out here are really excellent. I have a senior in high school and an 8th grader, and they’ve gone through their entire educations at Highland Park public schools. The attention on students is similar to what you’d pay $35,000 a year for at a private city school (I went to one of those, so I know).

    On the other hand, taxes are no fun out here. They’ve risen from $7,000 when we bought our house 16 years ago to $13,000 now.

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  63. “This home is in Waters. Which is a better school than Hentry Puffer in DG. Waters low income kids perform better than Puffer low income kids. Waters non low income kids perform a lot better than Puffer non low income kids.”

    I think the real winner for the western suburbs is its fantastic high schools. No one disputes that there are great elementary schools in Chicago in many neighborhoods. The real problem is at the high school level. If your kid doesn’t get into one of the magnets, they’re at a disadvantage. Then what?

    In the suburbs, there’s no testing to get in. You know where your child, and your child’s friends are going, from grand school to junior high or middle school to high school.

    Buyers pay a premium to know that.

    What would you do to get your kid into Walter Payton?

    Well, all you have to do is move into the Hinsdale Central school district instead. And, yes, there are apartments, townhouses etc. to make it happen.

    But the great thing about the Chicago suburbs is that there are MANY outstanding high schools from Highland Park to Libertyville, to Naperville, to Flossmoor.

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  64. “Income for pensions also can’t keep up with payments.”

    Ah- okay. I see what you meant about Social Security.

    But you have the problem all wrong. The issue isn’t the “income” not covering the pensions, it’s that the state and local governments haven’t been funding THEIR portion and then letting the money grow in order to pay the payouts. That’s what everyone is always talking about with them being “underfunded.”

    For the government, it was always, “we’ll deal with that later” since the big payouts didn’t have to happen for several decades. Those politicians, like Mayor Daley, weren’t going to be around then, right?

    It’s kind of like the future retiree who only puts in $1,000 a year into a 401k and then wakes up at age 50 and says, “you mean I’m not retiring to Scottsdale in 10 years after all?” So now they have to fully fund the 401k and the makeup provision, but there’s still no way they can catch up. There isn’t enough time. So they’re not retiring to Scottsdale after all (and that’s when they end up in Belize. ha!)

    Only the state of Illinois and the cities of Chicago, Evanston and others, can’t force people to take less money. And now they need to fund the full amount AND the makeup portion. And that’s why our taxes are going up now.

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  65. “Compare that downers grove house to this one in Ravenswood. Feel free to judge distance to transit to the loop, schools, yard and home size, neighborhood amentities, etc. I know which one I would choose.”

    Don’t forget- but we mostly do- that not everyone works in Chicago or Chicago’s loop. Maybe those living out in Downers Grove are doctors at Good Samaritan Hospital or school principals. Maybe they are executives at Univar or a Downers Grove police officer. Maybe they work in Naperville and reverse commute.

    There are a lot of jobs in the suburbs, still, even as McDonald’s prepares to move to Chicago.

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  66. “Surprised to look at Downers Grove Henry Puffer vs. CPS Waters school in Lincoln Square. Water is a better school academically.”

    Henry Puffer is in an area with a lot of apartments and some not so great houses.

    But either way, it feeds into Downers Grove North High School, a top 40 high school in the state. Does Water?

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  67. “not going to happen, we’ll have a recession triggered from anything above 2-3% and then they will lower rates again…”

    We will?

    Inflation is already here. The Fed may have no choice but to keep raising. They’re going to try and make it so it doesn’t shock the economy into a slowdown. But bonds may have other ideas anyway.

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  68. “Millenials are worse off financially than Boomers were at a comparable age. They are paid less, many are underemployed, and advancing less quickly”

    If they’re not advancing as quickly, it’s because the Boomers are so broke they won’t retire. If only the largest generation would make room for those who came after them, they’d have no problems.

    By the way, the Boomers have to sell their homes to someone in those expensive suburbs. If they want to move to a warmer climate or they want to downsize to a condo in the city (the two big scenarios I’m always seeing)- they have to sell to someone. It’s not going to be Gen X’ers who are mostly in their mid-to-late 40s now. They are already where they’re going to be.

    This could be why we’re seeing such high inventory on the North Shore. Lots of Baby Boomer buyers from the 1960s and 1970s now have no one to sell to.

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  69. “I know of about 500 new SFHs that sold through the MLS in the 12 months ending last July/ August. OK. Maybe that’s not much in a city the size of Chicago. Why not more? Maybe there’s a skilled labor shortage? Don’t know.”

    This is, as you said Gary, NOTHING! This is a city of over a million people.

    We have plenty of available land sitting around though, with a lot of it close to downtown. There’s 60 acres in that plot south of Roosevelt Road on the River that is being pitched as one of the Amazon sites.

    They WILL build housing and commercial buildings there. But will it all be rental or will it be condos?

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  70. The economics just must not be there. As tight as inventory is Chicago has not seen much in terms of price appreciation – and certainly not in comparison to other metro areas. If prices were higher that would certainly incentivize more SFH development.

    Flips are another component of supply that’s out there but it’s not easy to quantify how much that’s contributing.

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  71. “Inflation is already here. The Fed may have no choice but to keep raising. They’re going to try and make it so it doesn’t shock the economy into a slowdown. But bonds may have other ideas anyway.”

    core CPI is still hovering around 2% what are you talking about…

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  72. RE: 60 acre tract in S. Loop “The economics just must not be there”

    What I’ve heard is that the soil is not suitable for building. It is mostly rubble, old river bed and muck, so whatever is eventually built there has to be able to pay for significant geoengineering, hence why it’s been vacant for so long.

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  73. “core CPI is still hovering around 2% what are you talking about…”

    Ask any restaurant chain. Ask any chemical company. Ask any company that makes paper products. Ask the homebuilders how those record high lumber prices are treating them.

    Sonies, you must work in an industry where you would never see it.

    And Munchin is insisting that we can have wage inflation and NOT other inflation. Ba ha ha ha! That’s one of the funniest things I’ve heard in a long time. It’s already here.

    Yeah- ask companies who are already paying the higher wages if they’re not raising product prices. Ask them if they’ll allow their margins to contract. Ba ha ha ha!

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  74. “Jenny, kids change everything. Your priorities will be different. A 45 commute to have a yard, more space, and good public schools is a small sacrifice. As Sabrina mentioned, most of the desirable burbs have the same exact amenities… to be frank some suburbs are even more walkable than some of the city neighborhoods.

    Vast majority are going to head to the burbs once the bun is in the oven. Most of the city types tend to prefer suburbs with the metra / el and a walkable downtown village from what I see with my clients who are at that stage in life. The biggest reason is public schools, plus you just need the space.

    Millenials will be making the trek to the burbs just like everyone before them. No one wants to raise 2 kids in a 1200 sqft condo. Chicago ain’t Manhattan and the vast majority won’t make it high enough in their careers to afford a true single family in LP, Bucktown, etc.”

    This is very spot on. I was raised in the western burbs and went to a top notch school. We had a backyard & space, but of course were car dependent. Lots of my friends that started to have kids (low 30s) have made the trek back and I do not blame them.

    Personally, I just bought and can walk to work if I want (but opt for a sub 5 minute cycle). My 99 transit score location is perfect for me, but I am also paying $375ish /sqft in River North compared to what others can get outside the ‘green-zone.’ No kids in my near future, that’s for sure.

    There’s tradeoffs of course, which is why the prices are (mostly) set by the free market and there’s really aren’t many ‘deals’ in real estate (unless you are perhaps a professional flipper, have inside information, or simply get lucky).

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  75. The core CPI index excludes goods with high price volatility, such as food and energy. This measure of core inflation systematically excludes food and energy prices because, historically, they have been highly volatile and non-systemic.

    wages
    https://fred.stlouisfed.org/series/BA06RC1A027NBEA

    its called inflation sabrina… we haven’t had much of it for nearly a decade so whiney people with shitty jobs that don’t make more every year are always complaining about it

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  76. I agree with Rob about people moving to the burbs, and for the reasons he states. It’s actually kind of nuts, but as soon as we had our first kid, back in 2000, I started feeling the call of the North Shore. We were living in a 1,200 SF condo in LP at the time and loved it, but we started spending our weekends cruising through Evanston and Wilmette checking out open houses, with our baby in the back seat. We knew we planned on another one, and we wanted to be all set before we got started on that project. We bought our home in HP in Aug. 2002 and by October the next bun was in the oven. Crazy, I know. It was almost like an invisible force at work.

    Now I can’t wait to move back to the city, but the question is whether my wife and I will ever have the gumption to pick up and move again, especially with the mortgage paid off and all our accumulated stuff from 16 years. Maybe we’ll sublet a one-bedroom at some point so we can at least be in the city on weekends. Lame, I realize.

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  77. Dan#2 posted “…Maybe we’ll sublet a one-bedroom at some point so we can at least be in the city on weekends. Lame, I realize.”

    Imo it’s an exceptionally rational plan not lame in the least. You can rent a well located updated 850 sq ft 1 bedrm condo in GC for $1600-$2000 (+ $135-$250/mo. for parking) which is about double the monthly assessment the owner is paying, without considering PITI owners pay. Owners take all risk of special assessments & there doesn’t appear to have been any value appreciation for 1 bedrm condos in GC in past 15 yrs. Best of all you can determine whether you two still like living in green zone with very little risk.

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  78. “our accumulated stuff from 16 years”

    Time to start your death cleaning?

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  79. “You can rent a well located updated 850 sq ft 1 bedrm condo in GC for $1600-$2000 (+ $135-$250/mo. for parking) which is about double the monthly assessment the owner is paying, without considering PITI owners pay. Owners take all risk of special assessments & there doesn’t appear to have been any value appreciation for 1 bedrm condos in GC in past 15 yrs.”

    So why do they continue to own a cash flow negative investment/ Why don’t they simply sell?

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  80. Yes, Anon, time to start our death cleaning. So true!

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  81. Thanks, Southbound. I appreciate that. Maybe you’re right. Renting makes a lot more sense than buying for the reasons you mentioned. I just feel lame being one of those suburbanites who pretends to be a city dweller on weekends. It seems like a half-hearted thing to do.

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  82. So why do they continue to own a cash flow negative investment/ Why don’t they simply sell?

    Mortgage is paid off? Or they were cash buyers? So, not cash flow negative.

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  83. Madeline posted response to: So why do they continue to own a cash flow negative investment/ Why don’t they simply sell?

    “Mortgage is paid off? Or they were cash buyers? So, not cash flow negative.”
    Ime there are many different landlord situations but a common two are related: A). In hindsight they overpaid when they purchased 10+ yrs ago and are unable or unwilling to bring a check to cover the difference between net proceeds and mortgage payoff to close a sale at today’s value. Over time their mtge balance will decrease but if RE taxes get raised their situation may get worse. B.) Also in hindsight they overpaid but they’re unwilling to sell b/c they’d have to admit they made a mistake buying the unit even if they don’t have to write a check to close. just my opinion fwiw.

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  84. “its called inflation sabrina… we haven’t had much of it for nearly a decade so whiney people with shitty jobs that don’t make more every year are always complaining about it”

    Yep. And Powell today said he was worried about the economy overheating and that, yes, they will be raising probably 4 times this year. And it could be more.

    Inflation is here. It always takes a while to show up in the data. There’s absolutely no way that the $1.5 trillion dollar tax cuts don’t move through and economy with 4% unemployment. And Powell knows it.

    Why is this such a surprise to people?

    Lol.

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  85. “Yep. And Powell today said he was worried about the economy overheating and that, yes, they will be raising probably 4 times this year. And it could be more.
    Inflation is here. It always takes a while to show up in the data. There’s absolutely no way that the $1.5 trillion dollar tax cuts don’t move through and economy with 4% unemployment. And Powell knows it.
    Why is this such a surprise to people?”

    Your economic analysis needs A LOT of work. Can you please cite the data where the Fed IS going to hike 4 times. All current statements from the Fed have said three, three, three. In fact Kashkari, Evans, and Bostic have all sounded the alarm of not wanting to raise rates too quickly. Secondly, your inflation hysteria is laughable! The Fed’s preferred measure of inflation is the core pce.
    “The latest Headline PCE price index was up 0.11% month-over-month (MoM) and is up 1.70% year-over-year (YoY). The latest Core PCE index (less Food and Energy) came in at 0.18% MoM and 1.52% YoY. Core PCE remains below the Fed’s 2% target rate.”

    1.52% is nowhere near 2% and i wouldn’t consider anything less than 3.0% to be high inflation.

    Please do not let your personal or political agenda get in the way of the facts.

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  86. I don’t think her personal agenda is getting in the way, Mike. If you look at the market’s reaction to Powell yesterday, you can see that Sabrina is far from alone in worrying about possible inflation and economic overheating.

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  87. What is this telling us? 50 BPS increase by the end of the year? I’m not sure I’m interpreting it correctly and don’t have time right now to research it? http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html/

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  88. “The real estate market on the North Shore has separate submarkets. Move in ready, new, open concept houses are selling and at good prices, those that need work (particularly a kitchen renovation where it needs opened up) are sitting, houses close to trains (but not next to tracks) are selling better…”

    Great observations, Urban Mommy. I disagree about the need to open up a kitchen, as I live in a 1940s home in HP where we never did that. But most people want it, I understand. I agree about the walk to train. We’re about 5-7 minutes walk from Ravinia station, depending on one’s pace. I think that does help our home value quite a bit, but it’s still an hour door to door to my office.

    Other considerations besides the ones Urban Mommy outlined so nicely:

    – Distance to lake: It matters to some people. For us, it’s about a 15-minute walk to the beach, or a 3-minute drive. I like being near Lake Michigan, but so much of it is private property up here. I miss the open views of the lake you get in the city. We do have a beautiful park and beach nearby however.

    – Distance to schools: Most of the kids in our neighborhood walk to school. I think that helps foster independence in children and also gives the neighborhood a homey feel. In the summer, kids are everywhere here, and once they’re 9 or 10, they’re generally unaccompanied by parents. That’s why we love this area. Not sure if it’s true all over the North Shore, however.

    – Distance to stores and restaurants: We can walk to some, including a bakery, Walgreens, dry cleaners, and a few upscale restaurants, all of which cluster near the Ravinia train station. But there’s still way too much driving when you live up here. Some people pay extra to live walking distance to shops and restaurants. Others might not care.

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  89. “you can see that Sabrina is far from alone in worrying about possible inflation and economic overheating.”

    yeah so much for that… shes as dumb as these robo traders that gobble every piece of fake news up like its gospel

    “The U.S. Commerce Department said gross domestic product expanded at a 2.5 percent annual rate, instead of the previously reported 2.6 percent pace.”

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  90. Gary, if you click on the December 2018 thing it shows a ‘bell chart’ of 3 raises having the most probability @ 40%

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  91. Man, someone here is really into conspiracy theories. I don’t know how long Sonies has followed the markets and the economy, but I’m a financial/economy reporter who’s been writing about the markets since 1996, so I think my opinion has some merit.

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  92. well stick to filling up your word quotas because you don’t seem to know much about how the stock market works

    2 raises this year

    book it

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  93. Nice, Sonies. Thanks for the dialogue.

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  94. “What is this telling us? 50 BPS increase by the end of the year? I’m not sure I’m interpreting it correctly and don’t have time right now to research it?”

    Powell implied 4 raises but the Fed is “data dependent” as we know. The data continuously changes. And he may clarify his statements tomorrow when he’s before the Senate. The House testimony was his first go around so he’ll quickly learn that whatever he says can move the stock market, even parsing down to individual words in his statements.

    There’s a nearly 90% agreement that the Fed will raise again this March. But we’ll see what the employment reports look like.

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  95. “Can you please cite the data where the Fed IS going to hike 4 times.”

    He said it yesterday which is why the 10-year yields moved back over 2.9%. I should say, he said the Fed will react to keep the economy from overheating. 4 raises are clearly on the table. And they’ll do more, obviously, if they have to.

    There’s money sloshing everywhere. We didn’t need the corporate tax cuts. They are inflationary. But the Fed is ALWAYS behind. ALWAYS.

    Nothing ever changes.

    By the way- what would be my “political agenda” in saying the Fed is going to try to keep the inflation genie in the bottle? Inflation doesn’t know party.

    But if you put in trillions of economic stimulus with a 4% unemployment rate, and thousands of Baby Boomers retiring every day and no one to replace them, then yeah, you’re going to get inflation.

    If you don’t- you have even bigger problems.

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  96. “you’re going to get inflation”

    And who is helped most by inflation? Owners of assets subject to liens for fixed rate debt.

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  97. “He said it yesterday which is why the 10-year yields moved back over 2.9%. I should say, he said the Fed will react to keep the economy from overheating. 4 raises are clearly on the table. And they’ll do more, obviously, if they have to.”

    that isn’t what he said at all… thats what some idiotic pre printed internet websites tried to bend his words to say

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  98. “that isn’t what he said at all… thats what some idiotic pre printed internet websites tried to bend his words to say”

    He confirmed again today that the Fed is on track for 3-4 rate increases this year. Data dependent, of course. They aren’t seeing gains in wages yet even though there should be.

    I guess that huge corporate tax cut isn’t going to trickle down after all.

    Low end is getting big raises though. They can’t find enough people to work in the restaurants, hotels etc.

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  99. “And who is helped most by inflation? Owners of assets subject to liens for fixed rate debt.”

    I never said it wouldn’t help homeowners but only if they live in the property long enough. Otherwise, they’ll be buying at the higher price AND with the higher rates.

    I think higher rates are going to upend the housing market. We could go back to homeowners actually living in one home for 20-30 years instead of 3-5.

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  100. “We could go back to homeowners actually living in one home for 20-30 years instead of 3-5.”

    I believe I pointed out earlier (a different post even?) that we are actually already at record lows in mobility.

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  101. I watched his press conference live. He did not pre commit to 3-4 raises. That was a senator who made that comment. He said he would take into account incoming data when making rate decisions.

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  102. “I believe I pointed out earlier (a different post even?) that we are actually already at record lows in mobility.”

    Hence the low inventory.

    Too soon to know if people are going to stay in their 2-bedroom loft or 2-bedroom 2nd floor condo in a Lakeview 3-flat for 20 years. Or even their 3-bedroom townhouse in the South Loop.

    Maybe.

    The average length of time in a home just before the housing bust was 7 years.

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  103. https://www.bloomberg.com/graphics/2018-hundred-richest-places/

    Inverness?

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  104. chichow questions Inverness bona fides. Anecdotally iirc Inverness is where founder of one of Chicago’s largest & most successful PE firms lives & raised his family

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  105. Winnetka Glencoe Lake Forest Wilmette Highland Park high school Tom Cruise

    Hinsdale Oak Brook don’t we all want to live in the Midwest Club? Burr Ridge Backdraft can I get a Ferrari

    Long Grove Invernes because I can ride PONIES?

    https://en.wikipedia.org/wiki/Inverness,_Illinois

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  106. love this – 170k !

    Bloomberg also ranked cities by earnings from interest, dividends, rents, and royalties, as well as distributions from estates and trusts—a subset of household income called passive income. Destinations popular for affluent retirees were plentiful on this list, which was led by Atherton, California, with an average of $170,611 in passive income.

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  107. Just posted my February update. Dark storm clouds on the horizon with really low contract activity, though February sales were close to last year. And, yes, inventory ridiculously low http://www.chicagonow.com/getting-real/2018/03/chicago-real-estate-market-huge-decline-in-february-contract-activity/

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  108. “Just posted my February update. Dark storm clouds on the horizon with really low contract activity, though February sales were close to last year. And, yes, inventory ridiculously low”

    Thanks Gary.

    You seem to imply that the really low contract activity, the lowest in 82 months I think you said, is the result of low inventory. But would it really suddenly fall off a cliff by that much in February simply due to the inventory? We’ve had low inventory for months now.

    Could it be a combination of low inventory and rising mortgage rates? I thought we wouldn’t see any impact from the rising rates until April or May- when those buyers weren’t on a rate lock. But maybe I was wrong.

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  109. Or it could be that normally contract activity really starts to pick up in February but this February was stunted by the low inventory. It might not have been such a big factor the last 3 months.

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  110. But how much lower is the inventory versus last February, for instance?

    Is it really a 16% fall lower?

    I don’t know. That’s why I’m asking. I realize you don’t know either. We’ll have to wait to see moving forward.

    It could be that we’re already at super low inventory and the inventory that IS available is in the upper bracket. The “starter” home is getting rarer. So the increase in rates could have taken some people out of the market.

    We shall see.

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