Foreclosure Alert: Lincoln Park Townhouse 45% Off: 2220 N. Kenmore
This 4-bedroom townhouse at 2220 N. Kenmore in Lincoln Park just came on the market as a bank owned property.
It is listed at about 45% below the 2006 selling price.
Here’s the listing:
BANK OWNED- SOLD AS-IS!! LOCATION! LOCATION!! BEAUTIFUL LINCOLN PARK TOWNHOME! 4 BEDROOM, 2.5 BTHS.
ALL CONTRACTS/OFFERS ARE SUBJECT TO INDYMAC BANKS SENIOR MANAGEMENT APPROVAL AND ANY OFFERS OR COUNTEROFFERS BY INDYMAC BANK ARE NOT BINDING UNLESS THE ENTIRE AGREEMENT IS RATIFIED BY ALL PARTIES.
Koral Realty has the listing. See more pictures here.
Unit #A: 4 bedrooms, 2.5 baths, no square footage listed
- Sold in May 1994 for $229,000
- Sold in June 2003 for $455,000
- Sold in September 2005 for $559,000 (?- records are unclear)
- Sold in August 2006 for $825,000
- Bank owned
- Currently listed for $458,000 (parking included)
- No assessments
- Taxes of $1,706
- Central Air
This asking price appears to be based on recent comps. Unit #B also has an interesting history and recently sold.
Unit #B:
- Sold in December 2005 for $735,000
- Sold in October 2006 for $820,000
- Sold in September 2008 for $455,000
It’s refreshing to see the return of 2003 pricing but it still has a significant amount to go before we hit the bottom. This particular unit looks like a dungeon but maybe that’s just the pictures (yeah right!) Good luck trying to sell this place for slightly under a half a million dollars.
I also noticed this unit on the MLS – and wondered how it ever would have sold above 800k. HD rightly calls it a dungeon…
that 800k just seems criminal. that was close to 50% appreciation in just under a year. there had to be a set up, right?
This was mortgage fraud. The previous sales of both the A unit and B units for $800k were NOT FVM. These places are run down rentals worth around $450k – $500k in their current state. The previous owners worked together and one purchased at $800, the other refinanced at $800k, and then they both never made a payment. The place needs a new roof, new windows, new kitchen, new baths. There is 4 bedrooms but the living area is extremely small and does not support 4 bedrooms.
Fraud fraud everywhere!
HD says “It’s refreshing to see the return of 2003 pricing but it still has a significant amount to go before we hit the bottom. This particular unit looks like a dungeon but maybe that’s just the pictures (yeah right!) Good luck trying to sell this place for slightly under a half a million dollars.”
Well Hd, the back unit , unit B, sold for $455k back in Sept. It was the same unit also bank owned. The selling price was $20k over the ask price from the bank and they had 7 offers in 1 week. I know because I was one of those offers.
The bottom line is the unit will sell for $450K because it is right accross the DePaul and has 4 bedrooms.
I see the SHill agrees that we are at 2003 prices and still falling.
Good luck with those high-priced student rentals as the student loan bubble bursts.
G – Attendance at DePaul is the highest it has ever been as of Sept 2008. Pure negativity in all your posts really discredits you. The properties are worth at least $550 – $600k with a little work but they were trashed. We are not back to 2003 prices. The properties were destroyed and now need quite a bit of work to get them back to area FMV.
They rent for $3,000 – $3,500 each and your monthly housing expense would be around $2,300 (after $7,000 in taxes). Is that good in your book G or do you not like cash returns? Honestly G, have you ever seen a good investment or does everything just suck? Sounds like youa re in need of a more positive life. Life got you down?
But Steve- fraud even in Lincoln Park? How could that be? How could an appraiser say that these townhouses were “worth” over $800,000 when they clearly were “worth” much, much less?
If there was fraud going on even in LP during the height of the boom, as you say, what prices anywhere were rational?
The 2003-2004 price would seem more realistic- as Chicago prices have apparently fallen back to 2004 levels (according to Case Shiller and other market trackers.)
Sabrina – Just becasue the S&P fell 45% YTD does not mean every sector of the market has fallen the same amount. Don’t get me started again about the areas people paid way too much to vive in (Logan Sq, South Loop, west Loop, Andersenville, Rogers Park). These ares have fallen far more than the Gold coast and Lincoln Park.
Are you saying Lincoln Park is back at 2003 prices? Fraud happens everywhere and had nothing to do with area. It happened where it was possible to munipulate the market. Maybe the 4 bedroom listing (although the living space does not support 4 beds) helped the appraiser rationalize the the high price. See how this works…
2026 N Cleveland – Purchaed in 10/2006 for $445k and sold last week for $567K. Someone should have told this buyer that prices were below the 2006 purchase price back to 2003 prices.
You guys talk toalk talk but never really back it up with any concrete evidence. At least I list properties to support by opinion. You cherry pick all the sales data to pick out unusual transactions.
Steve: I’m finding plenty of properties that were not fraud that are falling well below 2006 prices in LP and we don’t know how low they’re going to go because they aren’t selling (so I’ll get back to you with a closing price.) It’s not unusual to see 2004-2005 prices now- even in LP.
And no- not conversions or new construction.
I grant you that the further out areas are falling quicker but prices are down even in LP and Gold Coast now. If you bought in the last few years- it’s not good for you.
Of course, some sellers who bought in the last few years will make a profit. Just like some stocks will go up when others go down.
Real estate is still falling and the declines are now accelerating. We have no idea where it’s going to pan out.
Here are the hard FACTS. While I don’t believe in average price comparison yoy, it is the only data we have and over several years is more reliable. So is Sabrina correct that LP is back at 2003 pricing? You can see for yourself. This is for all 2 bed, 2 (or more) bath units sold between June and Dec of each year.
2005
410 units sold for $439k
2006
259 units sold for $443k
2007
293 units sold for 459K
2008
200 units sold for $450k
Does this seem stable to you as I have claimed? Or is this one of those neighborhoods that appreciated like crazy (for no reason) and now is falling off a cliff?
Sales are down which is concerning but most of it is attributable to the financial problems out there. While parts of the country are down 40% from their highs LP sits with stable but soft pricing. You guys keep saying the pricing is crashing but it is not in the data. Not sure where you get your info but it is wrong. Is LP soft? Yes! Are some people losing money? Yes! Are prices in general down much? No!
Sorry to rain on your parade!
Sabrina says “If you bought in the last few years- it’s not good for you.”
It is only bad if you have to sell right now. Who in their right mind would sell with this financial mess if they did not have to.
Things are still doing relatively well in Lincoln Park when you compare prices to other neighborhoods in the city. With Depaul and the very good Lincoln Park High School being two reasons.
You won’t get deals like these at Macy’s! Textbook case of market correction.
Steve, Sabrina has never said that LP prices were at 2003 levels. She has said Chicago prices generally are at 2004 levels, and that LP price declines, though behind the rest of the city, are starting to show. The data you just cited is 100% consistent with every claim she has made.
So everyone agrees that Lincoln Park has performed much better than most neighborhoods? Is that you are saying Kentworthy? Have I not been saying that for the past 15 months? I have been bashed for the comments you just admitted were true.
Lincoln Park has held up better than just about any neighborhood. It is now a fact…
Sabrina says “This asking price appears to be based on recent comps. Unit #B also has an interesting history and recently sold.”
What recent comps are you talking about? Unit B which received 7 offers and sold for $25k more than asking price? This was a bank owned property too and was not sold for FMV.
What other 4 beds comps are you talking about in this area? I just want to make sure we are clear on this? Please show me one other 4 bedroom unit in this area that supports this price.
Thanks!
I will answer my own question – There is only one 4 bedroom property that sold for under $565k in the past 12 months. This was unit B at this same address that again was a bank owned property that fetched 7 offers in 1 week. Is this the comp(s) you were talking about?
The SHill sure is shrill, time to pay a bill?
G – Best of luck to you and your negativity. You are going to need it…
Steve H. – We are in a massive asset deflation as home prices return to the historical norm (and overshoot somewhat) as the irrational credit bubble that artificially created the demand has vanished. Supplies are increasing (including the shadow market and those that are in default…more are on the way). It may have started in real estate, specifically subprime, but it now affects all areas, near prime and prime. The wealthy and high earners have been getting slammed for months now as they helplessly watch their wealth disappear at a rate many times faster than its creation. The high net worth people….the HNWI, VHNWI, and UHNWI are being creamed with the new money rich in the HWNI and VHNWI class taking a beat down of depression era proportions. It has been amazing to watch the speed of the wealth destruction…it has surprised me as I am the optimistic sort. Chicago has been fortunate to have had dampeners in place to prevent a massive bubble but there was and is still a bubble none the less. Chicago home prices will dip below the historical norm before this all unwinds. Looking at recent past comps will provide no real price support going forward and is merely a reference point of a price ceiling for those few people in the market. Real priced deflating assets financed with nominal priced debt is cruel to even those who were well prepared.
Steve–no one I can think of has EVER disagreed that LP, GC, etc. would hold up better–and has been holding up better–than other neighborhoods in Chicago. (I defy you to find one case, for example, of me denying that.) The point of departure from you is that these areas would suffer NO loss in prices. You have recently reversed your position to admit that even LP is “soft,” but in the past, you have unambiguously and repeatedly asserted that prices there were only going, and would only go, up.
It’s pretty impossible to argue with you, for two reasons. One, you present a moving target–for example, when someone points out homes in LP that in fact had gone down in price, your answer is some version of, “Well, except for a place like THAT.” Two, you shadow box with strawmen (as in your last post, pretending as though people have said that LP was as bad as, say, Roger’s Park or South Loop–which no one in my memory has done.)
Kentworthy – I have never claimed prices in LP will continue to go up. I have never claimed to know what prices would due next week let alone next year. I have always based my statements on data. Sold listings, supply vas demand market data, ect. I have claimed LP has been soft for the past 3 months. Prior to me saying this, it was not soft. I base everything I say on real time data (ie listings vs pending contract ect). Prior to August, the listing time in LP was 3 months and was doing just fine. When listing times increased I pointed this out and said the market had softened considerably. I also said if the financial crisis did not clear up soon, LP would face price declines which I would not be suprised to see. The fact is the data does not currently support decreased prices and any statement predicting what will happen in the future is pure speculation.
Let’s keep this straight – I have never claimed real estate just goes up. I have simply pointed out that most the time buying is better financially than renting. I also said if you buy “smart” you will be just fine in 5 – 7 years.
John – Thanks for the update. I have been living under a rock for the past year and no idea. I too follow what is going on and it is scary. However, don’t pretend to knwo the outcome of what is going on. Assets are disappearing via writeoffs but just as quickly the government is printing money faster than they ever had. We obviously has deflationary pressures which the gov is trying to offset by pumping money into the markets. If the credit markets stabilze we will be faced with inflation over the next five years. If they don’t stabilize then the party is over. You can’t have capitalism without lending and leverage. It does not work…
Housing prices are dependant on interest rates and income levels (obviously this the problem with the run up in some areas) So far we have interest rates cooperating nicely. The variable is how high unemployment will spike and whether we see declines in income levels. This will determine if FAIRLY valued properties increase or decrease in price.
Anyone who has read this site with any regularity knows you have said just that. Also, that you USED to promise 5 LP “winners” purchased after 2005, for every post-2005 LP loser Sabrina featured (though naturally you never delivered on that promise, because you couldn’t). Hey, it’s good that you’ve realized your error and no longer make the claim that LP will continue to appreciate at above-inflation levels. It would be even more honorable if you’d admit that you used to say otherwise.
Steve H. – You need to take into account the real dollar priced interest rates. Per a previous post I outlined that 5.25% nominal rate is no bargain now and is more like the late 1970’s high rate…which is why buyers aren’t beating a door down to buy. Home prices are dependent first on the incomes of those that need or want to purchase in a particular area…downtown Chicago the prices are highly tied to those that work downtown, in Miami there are a lot of non-locals that buy so the local incomes aren’t as determinative. The fed govt can not fill the credit void caused by this structural change in credit supply….they simply can not, it is too large and printing money can’t even fill half the void and borrowing will drive up long term rates causing the fed deficit to be an ever larger burden on GDP going forward further limiting the fed govt’s ability to borrow. We are in a liquidity trap and the supply structure needs to adjust to the new demand level…and that can only be accomplished through a long nasty recession as the economy takes 8-10 years to adjust downward. The economy needs to downsize, take the hit, throw off the excesses, and move on….the sooner the better. In the meantime, home prices will make substantial declines with Chicago not quite halfway through its adjustment. Miami is more than halfway done. Also, I do not pretend to know the outcome, I know it through 2009….it is very clear as all macro factors point in one direction…it could not be any clearer and denial or babble about no one knows is nonsense. What happens in the second half of 2010 and beyond is less clear but will not be positive. Look for massive retail closings….numerous retail companies are choosing liquidation over reorganization…commercial retail properties are going to take a substantial hit as the tenants are not looking to stay, are liquidating, with no new retailers waiting to step into those retail store locations. It is coming, it is clear, it is ugly.
I should also point out that interest rates only serve to adjust demand around the demand supported by incomes since most buyer purchase homes using financing. Interest rates can not eliminate the primary support of home prices which is incomes as we have seen through the housing bubble burst.
John,
Agreed. A sobering article today was on the WSJ noting that the junk bond new issuance market is basically dead, has been for two months and junk bond yields are trading well above distressed levels (yielding 20+%). Some are predicting over 18% default rates on junk bonds in 2009. If they are correct there will be numerous bankruptcies in 2009 and beyond.
Other than the most credit-worthy companies the credit markets are still completely frozen. These bankruptcies will inevitably extract a heavy toll on the economy, making it far worse than if credit was still available but fundamentals were the only issue.
Bob – The question becomes, you only loan to people that can make the interest payments AND repay the principle as agreed. With sooo much structural supply level investments made in nominal dollars against real priced assets reliable earnings are the only thing that will allow one to borrow. Since many people and companies used excessive leverage and in an environment of lower earnings, the borrowing capacity of these individuals and companies are tapped out and they need to adjust their balance sheet by paying off debt instead of borrowing more. A big nasty recession is in play as deleveraging and change in structure supply take place simultaneously. Not good.
Agreed. But in the same article it noted that half of all US companies (assuming publicly traded) have below an investment grade credit rating. So if we have 18% of these going bankrupt that could be close to 10% of US publicly traded companies going bankrupt in 2009. Moody’s is only predicting 11% will go BK, I hope their research is more accurate than Garman’s.
I really think a 9% default rate on the Wilshire 5000 would be devastating. 5% probably would, too, but its the more preferable outcome.
Kent says “Hey, it’s good that you’ve realized your error and no longer make the claim that LP will continue to appreciate at above-inflation levels. It would be even more honorable if you’d admit that you used to say otherwise.”
See this is where you are 100% wrong. I have also made my claim that LP never appreciated that much and was not over priced. I said that why places like logan sqaure appreciated at 10% per year LP was only increasing by 3 -4%. You have your facts wrong again Kent!
Kent says “Steve–no one I can think of has EVER disagreed that LP, GC, etc. would hold up better–and has been holding up better–than other neighborhoods in Chicago.”
If this was the case Kent I would be in agreement with everyone on this board. My only claim here has been that LP’s pricing was stable. I have been attacked as being a realtor for making this claim but I really don’t mind being called names when I am right.
Isn’t it time we all consider that bank-owned properties that are now selling ARE the new comps? They ARE the fair market value, Steve.
Otherwise, the bank would have priced it very, very differently.
The banks aren’t emotional. They don’t have to deal with the mantra, “I’m not going to give it away” and other things that regular sellers put up as roadblocks to lowering the price.
The banks know what they’re doing perfectly well- selling the property. They’re selling it for what the market tells them it will sell for.
If Unit #B was such a great “deal” – Steve- it should have sold for far more than $25k over asking price (especially with 7 offers.)
But clearly the market said otherwise.
Last I checked 3-4% was above inflation. Moreover, you’ve described LP as appreciating at 5%, and predicted it would continue to do so. And again, I challenge you to find where anyone on this Board has denied that LP, GC, Old Town, and Streeterville would hold up better than neighborhoods such as South Loop and Roger’s Park.
When I argue with you, I have the nagging, nagging suspicion that Andy Kaufman faked his death.
Sabrina says “Isn’t it time we all consider that bank-owned properties that are now selling ARE the new comps? They ARE the fair market value, Steve.
Otherwise, the bank would have priced it very, very differently.
”
Does a property that fetches 7 offers in 1 week and sells above asking FMV? Come on Sabrina, you have to know better than that.
Honestly Sabrina – That was the worst comment I ever heard on this board. FMV is now determined by a single distressed property that was not advertised, marketed, or allowed easy access. It was boarded up with no electricity. I am certain that any sales / marketing class will teach you to turn the lights out and board the place up if you want the highest price.
Oh, the property had no homeowners association formed, no insurance, and had water damage. Again, this is the perfect comps for all properties now.
“Does a property that fetches 7 offers in 1 week and sells above asking FMV?”
Who wants to guess how the SHill called this during the run-up?
It is also as clear a sign as one could find that the mania continues and that the bottom is nowhere near.
LMAO, did the SHill just start a comment with “Honestly?”
G – Did your landlord raise your rent this year 🙂
Rents are going down because rents were also inflated by the credit bubble.
G – People were borrowing money to rent? LOL!
Do you have any evidence that rents have decreased?
G – I am going out on a limb and saying that you were inflated by the credit bubble. Hope you don’t take it personally 🙂
Steve – Kenworthy is 100% correct in saying “you shadow box with strawmen”. Your arguments and points are all over the place. Is almost as if you choose to ignore parts of posts on purpose?
It’s pretty clear that LP, GC, and other core neighborhoods are holding up better than fringe neighborhoods. No one is debating this – we’re all on the same page. I think what many (including Sabrina) are saying is that the market AS A WHOLE is decreasing and no neighborhood is immune. While this unit might not have been the best example (given it’s poor state), you can’t argue the trend.
Hence the statement that the Lincoln Park’s real estate market is “soft” and its future direction will mirror the credit markets ability to clear up.
The credit crisis is 3 months old while the real estate markets have been declining for the past 1 -2 years. LP & GC has remained stable through this period up until the credit crisis hit and all spending virtually stopped.
I have never changed by stance on the market. I have always stated that the data has not yet supported declines in prices. I said the area was stable while others were losing value. I never said prices would go up and basically said long term pricing should mirror inflation depending on the future attractivness of the neighborhood. I came out 2 months ago and said that contracts stopped and we basically had no activity. I went on to say that if the crisis was not resolved prices would come down dramatically. This has not shown up in the data yet but may be coming in the next few months. It all depends on finding some stability in a very non transparent economy.
That is my entire argument for the past 18 months.
“That is my entire argument for the past 18 months.”
I’m sure that is the SHill’s argument now, but we all know it wasn’t previously. I always said the SHill would have no choice but to eventually claim what it learned here as its own.
It was just as predictable as the inevitable correction.
Wait G you are saying there was a correction in LP at the same time you are saying you knew it would hold up? Which is it already G?
Is pricing in LP down or is it stable?
Can’t wait for your response?
G says “I always said the SHill would have no choice but to eventually claim what it learned here as its own.”
The only thing I learned here was how awfully uneducated people are on finances. No wonder why the country is in so much trouble…
Cognitive dissonance, folks.
Or just plain ignorance G!
Steve H. – We are going to see a rise in unemployment, 8% is baked in, 10% is probable. Combine that with tight lending standards, massive asset deflation and wealth destruction along with wage stagnation and housing prices will fall in those neighborhoods…it will happen substantially in 2009 since has lagged so far. The price drops are coming as I see further erosion in EVERY price support component…it really is that bad.
I wish it weren’t that bad, but it is. We must address the economic challenges, not deny them.
John – We all thank you and wish you would join the Obama economic team to help the US out of this crisis. What is funny is typically when you get a bunch of guys prediciting the end of the world on a message board, the exact opposite happens.
John – Where would you suggest everyone put their money in this time of crisis?
John – Give me your best short as of today. I want ot make some money. S&P’s? Gold? Oil? dollar? What is it? Please share…
John – It is easy to say things are bad. I know because my barber and my babysitter told me this yesterday. The questions is how do you profit from it. Make your call and we can revisit in the next few months.
Thanks,
Steve H. – Don’t quit your dog grooming day job, seriously you’ll need the income. Why would I share my pending investment strategy here? I have spent a fair amount of time researching the economic conditions and now know with high certainty how things will unfold and will invest accordingly after being held back by uncertainty over the last 16 months. It is clear now. But for you you may want to think about dumping those rental properties.
Oh, and I am not just saying “things are bad” … if you were honest you’d recognize that I outline the macro factors at work here. But then again you may be too dense to distinguish between what I say and what your barber and babysitter say….but then again maybe they are both wealthy safe made geniuses?
Great answer John! Talk the big game (like my barber) and then duck under the covers when the substance questions pops up. Credibility? I think the question is answered 🙂
Your research? don’t worry, not too many people invest off of guys predictions on message boards.
Spill the beans already?
What do you got John? Where do I put my money? I have my broker on the waiting for your answer.
Should I just short everything? If so, what the heck is everything? The dollar has been rallying, should I buy it or sell it? What about equities? They are down 45%, is now the time to buy or sell? What about citigroup? I thought they were going under and now they are back to $9 per share? Oil at $55? Is that good or bad? emerging markets? Will they callapse with the US or can they survive from within?
What do I short in this end all time?
Go hide under your rug john. Just out of curiousity, you are not my barber are you?
John’s mom must have put him to bed. Night John!
Steve H. – Wow, business must be really bod for you since you are clearly losing it. Take a deep breath, dial 911, and ask for an ambulance to take you to the psych ward. I don’t jump in and out of stocks and positions….I only make prudent decisions after careful analysis and planning. My investments going forward will not be concentrate in such nonsense that you posted. The world is not coming to an end, but it will be really painful as we go through the great recession or even a mild depression, the economy needs to contract on the supply end, plain and simple. Just remember to use the muzzle to prevent dog bites.
So you have been watching a little CNBC and have an opinion. My question to you is where do you profit from the upcoming crash? Where do you put your money to keep it protected from losses?
My best and prudent advice would be to pay off debt and as quickly as possible. The factors John has described point to a deflationary environment that will make debt more difficult to repay with future dollars. Unless you plan on going bk and forfeiting your collateral it might be a wise move to repay contractual obligations. The other suggestion would be to move into an all cash and liquid positions. There are times to make money and other times to preserve wealth. The past few months clearly show the name of the game is to preserve wealth.
The cracks are showing. Is someone losing their Beemer lease?
Steve H. – Where I invest is private, and no, haven’t been watching CNBC….probably last time I watched was over a month ago. I am currently 70%+ of all assets in cash and have been for the last 24 months. I stayed in cash as this stuff was shaking out. We now know, or at least I do, what happened, why, and what will happen next. I plan on implementing a sizable chunk of my cash accordingly….and investing in homes and condos to rent out to others is not in the cards, good luck with yours however as you hold an illiquid asset with high transaction and holding costs where the market determines the value and rental rates ….regardless of how it is renovated, staged, etc.
I have seen many many times were realtors who are too close to the market become blinded with greed as they see others make money in an up market….realtors are vulnerable to this since they tend to have little education overall and in an up market they see that people are making money with what appears to be little risk and often using borrowed money….it is just too tempting for the ignorant realtors not to jump in and take the bait saying hey I can do that too.
After an initial success these same realtors proclaim their success to others, pat themselves on the back and attribute their success to their own smarts and “inside” information as a realtor as if they are special and, laughingly, elite. Oh those silly realtors….we’re all real estate geniuses and mogals to be in an appreciating real estate market…you have to make a lot of blunders to lose during the bubble….as such, these “smart” realtors (and mortgage brokers too) jump ALL IN buying multiple properties as they build their real estate “empire” (we should have a thread on all the silly names of Inc.’s and LLC’s that realtors and investors set up ….some are hilarious and delusional names).
These same realtor real estate genius are the last to go as their delusions of attributing their gains to themselves is hard to let go and the denial runs very deep. Seems like only a knock on the door with the eviction notice wakes them up….just look at that lady in CA who even chained herself to the front porch of one of her homes…..the denial by these realtors and mortgage brokers is obvious to everyone but themselves….so sad. Again, good luck sticking to your real estate positions that you took during the bubble….you’ll need more than luck I’m afraid.
If you don’t like people pointing out why real estate is bad and there was a bubble, then just say it instead of trying to convince yourself all the time that you are right….it is a broken record at this point.
Oh and realtors actually believe that what they do makes a significant difference and that they are in “control”…..the level of difference it minimal, it is the market, not them…..silly realtors.
Hey John – Can’t even comment on that BS you posted from above. Congratulations by the way. I had no idea any day-traders survived the tech bubble back in 2000. Great job!
Steve H. – You are losing it….you need to take a break. I have never been a “day trader” or any such impulsive investor. I make prudent well researched investments and start businesses that create value and wealth….that fortunately rules out being a realtor.
John – Yes, we all look up to the business owning renter that posts on real estate message boards even though he has no interest in real estate 🙂
I should spend more time on message boards where I have no interest in the topics. Back to your desk job Johnny boy!
The SHill reveals his prior career choice? “I had no idea any day-traders survived the tech bubble back in 2000.”
John said, “These same realtor real estate genius are the last to go as their delusions of attributing their gains to themselves is hard to let go and the denial runs very deep.”
The SHill replies, ” Can’t even comment on that BS you posted from above.”
Case closed.
G – Care to take little finance quiz with me? I would turn you upside down…
Turn me “upside down?”
I see the SHill’s fantasies aren’t limited to RE riches.
What do you have for me G? Any finance questions? Happy to help you out.
Now, by the slim chance that wasn’t a come-on, I would suggest the inclusion of anon(tfo), kenworthey, ze carioca, valasko, John and kevin(tfo) to see where the SHill really ranks around here.
No offense to all those I didn’t mention.
I don’t have time right now to read everyone’s comments, but thought I’d throw in my 2 cents since My wife and I went and saw this unit. It is in very very poor condition, I think it probably needs a full gut rehab. It even has some bizarre qualities like sliding glass door on the second floor that literally opens up to 12 foot drop with no railing or anything to inhibit you from just walking of the building into thin air. It doesn’t seem to have hard wood under the carpets on the staircase or bedrooms, so there isn’t as much potential for a do-it-yourselfer to slowly refinish the place. Also that natural lighting is awful in the smaller living room and backroom kitchen. Generally just a “Yuck” place. Not impressive at all.
Honestly guys doesn’t it get old arguing with SteveO. If he is as heavily vested in RE as he claims, and if you believe the market is going to tank as much or more in the future, then you should have the smug satisfaction of knowing he’s financially in trouble. Personally I could care less. Arguing about it on here isn’t going to change any outcome in any case.
No worries, Steve H. is simply out to prove he is right regarding real estate as the ship sinks… Soon he will be underwater like the rest. I would normally just post what I thought was helpful info, but in Steve H.’s case he will get what he deserves, let’s just hope he doesn’t take other people down with him…I’m sure the pied piper Steve H. led his family and friends down the same destructive path of real estate riches too….these types of people always do. I hear the local community trade school will be offering dog grooming classes, perhaps Steve H. can sign up for a summer course seeing how other realtors have already filled all the spring spots…ruff.
Oh and this top headline on WSJ MarketWatch today…
ECONOMIC PREVIEW
Worst job losses in almost three decades expected
Manufacturing, services activity also headed lower, forecasts say
– Yep, with incomes stagnant and the pool of buyers faltering as unemployment spikes….those home prices will really hold up, not. While Chicago might not be the new Detroit….it is about to take big hit throughout 2009.
Should I state my position again “Hence the statement that the Lincoln Park’s real estate market is “soft” and its future direction will mirror the credit markets ability to clear up.
The credit crisis is 3 months old while the real estate markets have been declining for the past 1 -2 years. LP & GC has remained stable through this period up until the credit crisis hit and all spending virtually stopped.
I have never changed by stance on the market. I have always stated that the data has not yet supported declines in prices. I said the area was stable while others were losing value. I never said prices would go up and basically said long term pricing should mirror inflation depending on the future attractivness of the neighborhood. I came out 2 months ago and said that contracts stopped and we basically had no activity. I went on to say that if the crisis was not resolved prices would come down dramatically. This has not shown up in the data yet but may be coming in the next few months. It all depends on finding some stability in a very non transparent economy.”
Thanks for you time…
Come on, Bob, it’s fun to see the SHill spinning hopelessly out of control. He’s now down to repeating his historical revisions. LMAO.
Why keep that smug satsfaction inside? I prefer to laugh first, last and loudest.
I just like to get under the used home salesman’s skin. That’s why he despises me so much.
Steve:
Real estate is still about “location, location, location” and so I agree with you that LP, Gold Coast, and, according to stats provided by Gary on his website, Lakeview, have been holding up the best of the city neighborhoods.
But in a bursting bubble, it’s all relative. We’ll certainly see falling prices in every neighborhood.
While I agree with you, Steve, that we will likely not see price declines of 40% to 50% (overall) in the best neighborhoods, a bursting bubble always over corrects to the downside. 20% or more is not out of the question (especially- as you have pointed out- in a market with little to no credit available.)
Don’t forget, Manhattan saw price corrections of 30 to 35% in the early 1990s- even in the “best” neighborhoods.
What this means is a return to affordability in other neighborhoods like the Ukranian Village, Edgewater, Andersonville etc. $300,000 for a 2/2 condo in those neighborhoods is absurd.
Bob,
Are you really financially in trouble if you have 30 yr fixed mortgages and have achieved positive or break-even rent flows on your rental properties? The market can then capitulate for the next 3-5 years (or longer) while you collect rents and pay down the principal. Who knows where prices will be, but in a few choice locations in the city, the “young” rental pool will not decline, even in light of the stagnating economy. Rather, that pool will grow. I am not saying it is the best choice because it does have a high carry, but it doesn’t necessarily equate to financial destruction. People are going to keep buying and selling RE. We’ll see a gigantic uptick in refinances here next time that stat is released with rates back around 5.5%/5.375% currently w/ no points.
And John, thanks for summing up what is in the WSJ everyday. If people aren’t aware of all of the mrkt/economic stats that you have regurgitated, then I don’t know where he/she has been for the past six months.
Most well seasoned real estate professionals will make it through this real estate depression. The newbie and hack specuvestors will be the parties that will suffer the most. Established buildings with historically positive cash flows will survive; the land baron with several individual units with option arms (i.e. steven heitman) will suffer greatly.
Right now no one has a definitive answer how long it will take to shake out the weak specuvestors. My guess is that when foreclosure levels reduce by 30% or 40% off their highs the market will have dealt with a majority of the specuvestors. There are still hundreds of thousands if not millions out there. I had a guy with four ‘investment’ properties walk into my office on Tuesday begging me to help him stop the bleeding. The number of specuvestors out there from all walks of life is staggering.
My best educated guess is that rock bottom won’t be until 2010 or 2011, and we’ll stay at the bottom until the last of the option arms reset (and go into foreclosure) sometime in 2012 and 2013.
Due to the nature of my job I’ve seen a fair amount of what’s out there for sale and not much of it qualifies as investment grade at this point in time. Some properties purchased as investments might break even based solely on the asking price but that doesn’t include upgrades and repairs to make the properties habitable.
And quite frankly, even if you could obtain a positive cash flow I don’t know why someone would be a landlord for a few hundred bucks a month. If rent is $2,000 a month and PITI+HOA is $1,600, why even bother being a landlord? I can hourly bill more money that before lunch.
What if you have to god forbid evict your tenant? You lose at least two months rent and there goes your profit for the entire year. Plus attorneys fees, general hassles and repairs to the apartment. What if the interest rate on the IO note goes up? You can’t increase rent 6 months into a year long lease!
Moreover, purchasing now is like catching a falling knife. You might be able to make a small monthly profit – but the value of the property is decreasing, and if you plan on selling in the next 8 years it will be extraordinarily difficult to sell for a higher nominal value than the purchase price.
I know plenty of landlords and I represent quite a few. The ones who make money have been doing it for a long time. The ones I know who are losing money bought properties 2003-2007, are new to the game, and still cling to the belief that if they hold onto the property long enough they’ll flip it for a capital gain, even though they’re losing money every month.
Based on what I’ve seen throughout my experiences as an attorney, I would never be a landlord, and my belief is shared by many attorneys I know who also deal with residential landlords. Being a landlord is not for everybody and there is a significant amount of ‘pain in the ass’ factor to deal with, and I don’t have the tolerance for it. Years ago before boom it was worthwhile to own a few investment properties. Many of the successful landlords sold their properties to developers during the boom and made a lot of cash. Those days are over. If you want to be a real estate land baron you better be good at math and it’d help to have some luck. There are still quite a few specuvestors out there who don’t understand the business. They blissfully think we’ve hit the bottom or we’re close to it and now’s the time to buy. There people are the worst because they were too dumb not to buy as prices were increasing and now they want to become land barons during a crash! The market has to dispense with every last specuvestor land baron before we’ll be at a point where the fundamentals make sense to buy for investment purposes.
homedelete said: “The number of specuvestors out there from all walks of life is staggering.”
– No doubt about that, but that guy ONLY had four??? Is that all? It is crazy how many people bought….why stop at one or two? I also have to agree 100% that being a landlord for a unit or ten is not worth the risk whatsoever. Residential is the worst, commercial is not that much better. At least if you owned an apartment complex you would have a staff and everything would be right there….with a condo here, another there, etc. it is craziness and the people would be better off just being a greeter at Wal-Mart even with the trample risk.
——————-
– D – : Thanks for the condescending shout out. But apparently a lot of people still don’t get it and don’t comprehend where things are headed. This is NOT just a business or economic cycle on the downstroke. This will require a structural supply change not just in the U.S. but in many countries. You don’t hear about that in the WSJ in those terms, or CNBC, or whatever. That is what is going to make this a nasty recession with 10% unemployment. It is structural, not cyclical. If you had read my posts you’d realize that I am not regurgitating things. It was a credit bubble and the so called “credit crunch” while true to a certain extend while people searched through the uncertainties…it isn’t just a “credit crunch” that is the concern that can just be loosened and all will be fine. Few people “get it” and if you do, then you would be worried. Chicago hasn’t gotten its big hit yet, but it will in 2009 as higher unemployment hits its main business sectors.
P.S. Wake me up when the Trump building gets taken over by the bank.
Just a note about this unit to get us back on subject:
The front unit has sat unoccupied since before last winter and some pipes burst. It has a very serious mold (read: liability), water and structural problems as a result. Indymac (well, now the gov’t) just discovered last month that they even own this unit. All of the problems have been festering for 12+ months. It was also left unlocked and looks like someone got into it.
So these are NOT the same unit. The back unit didn’t have any of this and was in much better shape when it sold. The back unit sold at an attractive price but the front unit is not even close to worth it with the kind of money you’ll need to put into it and the unknown issues/liability caused by the burst pipes, mold, structural and total disrepair.
This will drop much closer to $400k before they get it done.
Four properties for $1.2 mil. I’ve seen a number of people who stop at 3 or 4 thinking it’s a nice foundation for an empire….and then how quickly it crumbles. Not everybody can be a casey serin (iamfacingforclosure.com) with 20 properties in their portfolio!
John explain what you mean by structural changes? I’m honestly interested to know what you mean.
Oh John… it is so easy to jump in here and claim the end is near. Why not as every other newspaper and tv program is saying the same thing. I too believe we are in for a sizable recession but the obvious to most never really pans out to be reality. You are on the side of the obvious John. First my barber, then my babysitter, and now my new friend John.
8 – 10% unemployment is baked into the cards John. I love the doom and gloom, it is so aginst the trend.
It doesn’t take much to get us to 8-10% unemployment (at least in Illinois and Chicago.) Illinois is already at 7.3% and Chicago is at 7.5%.
homedelete – In most recessions it is chalked up to part of the business cycle (which a good part of it is just a result of the lags between supply and demand and incorrect allocation of capital based on the lag, just in time inventories and information systems have helped to prevent more serious recessions) where the fed govt can spend money to shore up demand during the down stroke of the cycle (like in early 2000’s).
That is not the case here even if the fed govt spends $1T each year for the next couple of years since this isn’t a cyclical recession. Over the last 10+ years the U.S. economy has created a higher and higher level of demand through credit. It was a structural demand change to our economy that was built up through the creation of entirely new securities, financial instruments, through expansion of whole new areas for investment banks, etc….. an enormous amount of capital went into the creation of this demand structure. Well, guess what, those things are gone….they business hasn’t just slowed down or there is a new startup to fill the void….it is gone gone.
And for good reason it is forever gone since the concentration was on fees and not on repayment of principal which is really darn important when you make loans! During this build up of the demand structure elevating the demand level, enormous investments were made in meeting that demand level with supply. We see it now in housing, but look around….ever ask yourself how there seems to be a new strip mall on every corner, how colleges build what are essentially country clubs, all the new autos, etc.
The world has invested enormous amounts of capital to provide a supply level to meet the credit bubble demand level. The credit bubble (not just the housing bubble) has burst and is not coming back…it is not just a business cycle….banks can’t pass on bad loans anymore….and the supply level will need to come down to meet the new depressed (historical norm) demand. That means all those investments to build this supply structure are gonna get hurt. Massive retail closings, massive car dealership closings, massive real estate office closings, massive mortgage broker closings, etc. There isn’t anybody waiting in the wings to fill in the demand (created through credit via CDO’s etc.).
The fed govt is fighting a structural war with cyclical weapons….not gonna be effective to prevent a nasty recession to bring down the structural supply level. The economy needs to contract, adjustments need to be made…many realtors will go back to dog grooming, etc. Lending standards are returning to the historical and proven norm and will not return to the level of the credit bubble which created a credit bubble demand level that will not return.
You won’t read that on CNBC…most think a zero fed funds rate will solve things…silly economists, it isn’t interest rates that were the major problem during the credit bubble, it was the lending standards that went to the extreme that the principal wasn’t going to be repaid. Hence massive asset deflation and fed govt attempts to pay back the principal by buying up assets.
Repeat after me, this is NOT a business down cycle, it is contraction of business. Big difference and that should affect how you invest going forward…
And as I have said repeatedly to others, the economic crisis would be over if people just started to pay back their debts as promised. Now with all the programs people are trying to weasel their way out of their debts (some legit, other fraud) that will only make things much much worse than then need to be.
Wow John – You better call Warren Buffet… he has no idea this is all happending and jumped back into equities, financials, and mortgage backed securities.
Give him a call. 1-800-you-dumb
Well, WB made some mistakes recently didn’t he? So, no it was not obvious to WB nor your barber. Until we realize that interest rate cuts and deficit spending will not solve the problem the better. Maybe we should just reinstitute debtor’s prison…make room for them by freeing the drug prisoners and legalize, regulate, and tax pot (to make Ze C or whoever happy). Someone, when faced with prison people magically remember their other assets. We may also need to help all those depressed realtors like Steve H…perhaps a new TV show would boast their moral and spirits….like baywatch but with realtors to make it look cool and smart to be a realtor again….no, that won’t work most realtor are too old, pale, and overweight…. Will try to think of something else….I’ll go ask Suzanne since I always trust realtors with important decisions…..hahahahaha
T2, why don’t you call out Steven Heitman, talk about uninformed, useless rants:
“Steve Heitman on November 30th, 2008 at 8:34 pm
Wow John – You better call Warren Buffet… he has no idea this is all happending and jumped back into equities, financials, and mortgage backed securities.
Give him a call. 1-800-you-dumb”
And in case you still don’t get it Stevo….this is not a business cycle recession nor is it a credit crunch problem, it is a structural change in demand which will cause a structural change in supply…hence GDP must contract (hopefully less than 10%).
John says “many realtors will go back to dog grooming, etc.” Wow John, are they going to tare down a bunch of housing or are people just going to stay in their homes all of their lives? Pricing makes no difference on a realtors future. My guess is blogging economists will be out of business too.
By the way, I came to this conclusion through my own research and study….haven’t read it anywhere yet. But wait, you will……as everything normally done during cyclical recessions is impotent, people will begin to understand.
John – Buffet made mistakes? What because he jumped in a couple of points higher on the S&P? Most of us invest based a longer time horizon that 90 days. Your speculation that we are in for structural change in demand is in the cards but no where near the extent you are suggesting. Our economy is built on leverage and leverage it will be going forward. Don’t pretend to understand what is going on because you subscribe to a monthly bear news letter.
The end of the world scenerio is so boring. Go with something else John!
John says “By the way, I came to this conclusion through my own research and study….haven’t read it anywhere yet. But wait, you will……as everything normally done during cyclical recessions is impotent, people will begin to understand.”
This really makes me laugh as last week I received a monthly news letter that said the same thing. I will find it and post it for you Jonny boy!
Understanding that this is not a cyclical recession also explains why the stimulus check of 2008 were not very effective…..people didn’t spend them like before, instead they went to pay off debt or toward savings (same difference). Had the fed govt realized at the time that this was not a cyclical recession to be avoided, they could have put that money to better and more efficient uses…silly economists.
Please post it Stevo, would like to see their reasoning and understanding. By the way….I bet your little real estate empire is built on leverage and the assumption of leverage going forward too…how’s that working for ya? Silly realtors…when Suzanne starts taking her own research to heart, she becomes just another causality of the real estate bubble crash. Next.
Steve H. – Assuming this PetSmart stays in business, you may want to put in an application as a dog groomer to the store address below:
PetSmart Chicago Lake View East – 2832 N Broadway, Chicago IL, 60657
Who knows, some of your real estate clients may end up being your dog grooming clients too….well assuming they can afford a dog after getting advice from a realtor.
Hey John, no problem on the shout-out. You can read all that you have posted in the WSJ everyday. That has all been discussed. In fact, I think Bob or G posted about a WSJ article on high-yield/junk bonds that was written on either Friday or Saturday.
Additionally, there have been plenty of articles on Student Loan finance, CC financing, Auto lending, etc etc over the past 2-3 months especially. This is nothing new. You could have talked about this easily well over a month or two ago with, for example, Iceland collapsing and its impact on the global financing (credit) markets as BWICs flooded the mrkt.
I’ll say WB made a mistake when he stops collecting his 10% interest annually on his two big recent investments. The warrants are just white meat. I’ll bet he’ll be able to convert some of those at a profit as well.
The retail/commercial/industrial portion of the downturn or depression is going to start to hit in ’09, and is already beginning. It is going to get ugly.
John,
I am granting you the “HomeDelete Douche-Bag of the Weekend” award for the remarkable amount of crap that you have typed today. First, you claim that you were in cash when the market crashed (sure you were). Next, you claim that you know with high certainty what will happen in the future. Then, you claim that you have a secret “private” investment plan to get rich but you won’t tell any of us what it is. Finally, you regurgitate a bunch of BS from bear websites and claim it’s your own “research.”
For those you reading this post, please Google “Bill Fleckenstein”, “Nourial Roubini” and “the Prudent Bear” to see where he stole these ideas. What he fails to understand is that the people who have been “right” about this crash where wrong on everything else for the past 10 years. Now that they are having their 15 minutes, they will never turn tail and predict an economic recovery.
This whole pattern plays out every time we have a recession. I watch these things closely for a living and during every recession some doomsayer predicts that we will never recover and is slowly but surely discredited. During the last recession, Stephen Roach from Morgan Stanley was the doom and gloom guy. He was so completely wrong about the recovery that they had to change his job and move him to Hong Kong because he became a laughing stock (look it up). Morons like John are drinking the cool-aid of this round of doomsayers and will be left in the dust when the economy recovers.
Oh John – I will be just fine. You see I have a bunch of cash stting around if your big d-day comes. I also have a bunch of leveraged cash flowing investment properties in case all this stimulous leads to inflation down the road. I also have a bunch of preferred stocks for when the market recovers. Oh, I also own a bunch of gold ETF’s for that inflation stage as well.
You might want to resend your memo as the consumer just spent 3% more than they did last year on the day after Thanksgiving. Sure we will end up contracting our economy as we pay down debt. Don’t underestimate the power of the printing press, it iwll come back to get you…
T2:
Stephen Roach was correct on nearly all of his economic predictions. In fact, Morgan Stanley sent him to Asia because he was too bearish (which is never good for business.) It’s amazing what the investment banks will do to keep the good times rolling.
Perhaps you need to go back and re-read what he has written over the years (and continues to write.) He predicted most of what we are seeing as early as 2004.
Stephen Roach said that the low rates of 2002 would never stimulate the economy and that we would become Japan. Instead, we had a 5 year expansion and the stock market doubled. Just because he was eventually right is meaningless. Any moron who is permanently bearish is going to be right at some point! There are a few commentators who are able to shift between being bullish and bearish and they are ALL getting bullish now. Warren Buffet is the most famous one and I can give you some other, more obscure investors who are all buying right now and think the economy will be recovering next year. Most of the perma-bears don’t actually invest any money so their value comes from getting people to buy their books and hire them to speak (like Noriel Roubini). They have every incentive to be as alarmist as possible because to get the ignorant masses to tune in.
Sabrina – Timing is everything in investing. Stephen Roach told everyone to short the market back in 2003? How did that work out for his followers? People who invested in 2001 made a lot of money over the past 7 years. Now we are back to where we started. The damage is done and Monday morning quarter backing is for the birds. Where are we going to be in 2012 is what I would like to know. I am pretty sure I know where we are today.
Here are some questions for Jonny boy-
Will home prices be higher or lower in 2015?
Will incomes be higher or lower in 2015?
Will a loaf of bread be higher or lower in 2015?
Will the Dow be higher of lower in 2015?
T2,
Yes but I like John’s predictions because if they’re true and if I manage to keep my job for a few years I’ll be able to afford that McMansion that is currently priced at 600k. Half of real estate sounds great so don’t kill my buzz. I have a vested interest in seeing Chicago RE crash just as every homeowner has a vested one in seeing it stabilize.
Unfortunately the goofball government is squarely in the corner of those who own overpriced real estate and is trying all kinds of magic tricks to put the rabbit back in the hat. Whats another trillion to bald Hank? Maybe in retirement he can get a nice hairpiece.
Bob,
You are being just as greedy as the idiots who bought 4 units to flip back in 2006. Perhaps you should focus on improving your own earning power rather than hoping for everyone around you to get wiped out…
“Half of” should’ve read “Half off”
“I watch these things closely for a living ”
T2 you drink the kool-aid for a living? Is your job at risk too? Hahaahah douche bag. You can visit my office when you’re bankrupt and looking for work 2 years from now! For all we know you’re were a mortgage broker. Hahaha.
Roach didn’t tell everyone to short the stock market in 2003. If any market he was telling people to short- it was real estate (and that was in 2004-2005.) He was right- just like those who said in 1998 that the Nasdaq was a bubble (and they were right.) You can never time it perfectly as bubbles expand far greater than even the experts believe.
Same on the way down. The bust is always worse than the experts envision – and it overshoots.
That’s why this housing bust isn’t even close to the bottom yet. How do I know?
1. I still see people buying condos in Chicago for “investment” purposes (even when they’re not close to being cash flow positive.)
2. I still see investors closing on new construction units still thinking they can either flip them or rent them out and somehow cover their costs.
3. I still see buyers buying small condo units with the express idea of only living there for “2 or 3 years” and then intending to sell (at a profit of course.)
4. I’m still being told it is better to own than to rent (which means there isn’t enough fear in the market yet.)
5. I’m still being told that real estate is a better investment than stocks (which has been wrong for about 100 years).
6. Finally- see #4. Not enough fear yet for a bottom.
So- Steve- I’ll answer your question:
Home prices will be much lower in 2015.
All of you hoping real estate will crash so you can afford something should think again. The large houses and the good neighborhoods are for people who make more money than most. The average housing is for all of you sitting in a cubicle each day. average meet average. I am not trying to be an ass but make more mooney if you want a bigger house or better neighborhood. Chances are the prople living in the neighborhood you want to live in have a better job then you do and will always be able to afford more.
You can’t change class by deflating housing prices.
Hah! Case in point- Stephen Roach wrote an op-ed piece for the NY Times the other day, which I just noticed. Losers like him only come out of hibernation when they are right every decade or so. Once mainstream publications (like the rag that is the NY Times) starts highlighting bearish arguments, you know that things can’t get any worse.
Thanks for the response, Homedelete. As always, your post was childish and illogical. If you disagree with me, please feel free to provide and argument, if you are capable of it.
Sabrina – You can’t anser just one of the questions. The are all connected/ Please try again…
Incomes
Bread
Dow
“You can’t change class by deflating housing prices.”
Absolutely correct. The idea that home prices are going to collapse but the average schmuck on this message board won’t be affected is delusional.
HD – Are you really trying to gain creditbility as a bankruptcy attorney? The shit really has hit the fan…
T2, I’m sure Bob’s income is just fine, it’s the market that’s out of whack.
Pray tell T2, what do you do for a living?
“Bob on November 30th, 2008 at 9:40 pm
T2,
Yes but I like John’s predictions because if they’re true and if I manage to keep my job for a few years I’ll be able to afford that McMansion that is currently priced at 600k. Half of real estate sounds great so don’t kill my buzz. I have a vested interest in seeing Chicago RE crash just as every homeowner has a vested one in seeing it stabilize.
Unfortunately the goofball government is squarely in the corner of those who own overpriced real estate and is trying all kinds of magic tricks to put the rabbit back in the hat. Whats another trillion to bald Hank? Maybe in retirement he can get a nice hairpiece.
#
T2 on November 30th, 2008 at 9:43 pm
Bob,
You are being just as greedy as the idiots who bought 4 units to flip back in 2006. Perhaps you should focus on improving your own earning power rather than hoping for everyone around you to get wiped out…”
Steven, the only business I’m soliciting from this board is yours. Just let me know when you’re ready.
“Steve Heitman on November 30th, 2008 at 9:55 pm
HD – Are you really trying to gain creditbility as a bankruptcy attorney? The shit really has hit the fan…
I am okay in my big house in my nice neighborhood. Thanks though HD for your thoughts.
Pardon my assertions that might seem somewhat rude. I’m not wishing for the financial destruction of anyone on this board. I’m merely hoping that RE prices will crash in one particular neighborhood that noone here probably lives in (considered ‘non-prime’ by many on this board). If prices don’t hold up in this neighborhood and fall a lot over a few years I would be happy with that outcome.
HD,
I work for a major investment firm providing global macroeconomic strategy to money managers and have my MBA from one of the top 2 programs here in the area. I understand that you are a paralegal or something? I will give your economic advice the same respect that you should give my legal advice.
Call me when the arm resets and you can’t afford the new monthly payment. There are things I can do to help. You know how to get a hold of me.
“Steve Heitman on November 30th, 2008 at 10:02 pm
I am okay in my big house in my nice neighborhood. Thanks though HD for your thoughts.
Almost 7 years left on my arm HD. Send me your number and I will give you a ring…
aaaaah….so you’ll be looking for a new job soon just like the rest of them.. I wish you luck! It’s tough out there, I see it everyday. There are a lot of highly qualified people out there just like you looking for work. It’s hard, so many candidates and so few firms actually hiring. The last time I checked you major investment firms screwed things up so bad with the subprime and CDS that 2 of the 4 ceased to exist. yeah, so, who’s the douche bag now?
“T2 on November 30th, 2008 at 10:03 pm
HD,
I work for a major investment firm providing global macroeconomic strategy to money managers and have my MBA from one of the top 2 programs here in the area. I understand that you are a paralegal or something? I will give your economic advice the same respect that you should give my legal advice.”
The douchbag is you because you don’t seem to know the difference between an investment firm and an investment bank. My firm, a money manager, never owned CDS’s, subprime or anything like that. Those types of securities were owned by mostly banks, which has nothing to do with us. Thanks for proving my assumption that you don’t know what you are talking about.
HD,
Investment firm does not equal Investment Bank. Money managers don’t all work at Investment Banks as well. That was a pretty dumb statement.
So he admits he has an ARM. Like I ever doubted he was an overleveraged specuvestor.
I’ve had enough for tonight. Good nite everyone.
“#Steve Heitman on November 30th, 2008 at 10:06 pm
Almost 7 years left on my arm HD. Send me your number and I will give you a ring…”
I love how HD sign’s off rather than admit he was wrong. Classic!
Ah, I read too quickly and post too fast. Investment firm and investment bank. Yes, that’s right. That’s what I get for posting on a sunday night during a bears game. Damn vikings, I lost interest after the bears screwed up the 4th and goal. If it wasn’t for the damn weather I was supposed to be at a bar with good friends…..
Nevertheless, you and Steven can share the same opinion of me, I don’t really care, this is an anonymous internet chat for god’s sake, what’s the point of this place if it’s not to be outrageous.
T2 on November 30th, 2008 at 10:13 pm
The douchbag is you because you don’t seem to know the difference between an investment firm and an investment bank. My firm, a money manager, never owned CDS’s, subprime or anything like that. Those types of securities were owned by mostly banks, which has nothing to do with us. Thanks for proving my assumption that you don’t know what you are talking about.
T2 – I think we are Japan now…except we can’t export our way out of it.
And no, I haven’t been reading whatever it is you’ve posted except for some Nourial Roubini (spelling?) videos on youtube. Keep on believing this is a cyclical recession….it ain’t — proof is the anemic affects of the stimulus checks and the ineffective low fed funds rate. We have too much supply, plan and simple as that. The demand was X (thanks to the credit bubble building through the years) now it is X-Y and supply (and investments and infrastructure supply too) is still at X. We need to make the structural changes to supply to make it X-Y and that will result in a lot of movement of capital around the economy. This is a massive change in our economy….bigger then the shift out of manufacturing…it will be painful (just ask a realtor or mortgage broker). Look at the massive paper losses and wealth destruction. This ain’t your normal recession.
Stever H. – I don’t need to know what will be in 2015. But housing in real dollar terms will be lower barring something like global warming taking out half of U.S. housing (not likely). You really do need to take a reading compression class since you make some wide interpretations of things….probably from stress.
*** By the way, yes I came to my own conclusions based on how the economy has performed and why fed govt actions haven’t been able to stop the bleeding….because it isn’t a cyclical downturn that’s why. Also, yes, I am 70% cash (probably more like 75% thanks to the stock market declines) and have been for nearly 2 years. I decided to wait until the uncertainty passed, now it has, and now I will make investments accordingly….and will remain 50% in cash for bit longer too.
I was watching the bears game you douche but I returned when the score became 34 – 14
“T2 on November 30th, 2008 at 10:17 pm
I love how HD sign’s off rather than admit he was wrong. Classic!”
By the way T2 don’t get too smug, we have an over supply of MBA’s in our economy and investment firms AND banks will be downsizing. Just wait and see. By the way, I can trump you both…I have an MBA and a JD….who’d a thunk it eh? And retired at 35 with millions in the bank (FDIC insured of course, which was a real pain a few months ago to deal with that many banks, and all self made not a cent of inheritance of the like). It is hard to build wealth working for someone else….start your own business (not condo flipping!). Good luck
As a VHNWI person I haven’t found an investment advisor smarter than myself…..they seem to be like realtors…make a commission and call themselves genius when the markets go up overall when really only a drunken idiot wouldn’t have done worse. Oh well.
You see HD, this is where you fail to understand financing. A jumbo 30 year fixed at 7.5% vs a 7/1 arm at 5.5%. My worst case scenerio is 9.5% in the 8th year. How much money do you think I am paying down my loan in saved interest over the first 7 years? My loan will not be a jumbo in year 8 and I can refi if rates are attractive, or I can simply pay the 9.5% until I have the loan paid off.
Who would pay 7.5% when they can pay 5.5%? Only you hD!
Well hell John, I too hold an MBA and a JD. I also have a million (not millions) sitting around from starting various businesses. We should have lunch so I can teach you a couple of things.
Steve H. – In all seriousness, you assume you can refi, that the refi rates will be lower, that you aren’t underwater on your loan to refi, your loan may be a jumbo if prices fall (don’t know the amount since you didn’t post it). The least risky is to just lock in a very low 30 year mortgage instead. Weren’t you on of the hyper-inflation spooks? There is not doubt in my mind that if I were to buy something now I would take advantage of the “cheap” money at 5% or whatever (that is if I would be willing to take the price reduction risk which makes that rate actually higher, but not considering that then 5% is cheap money). Just did an analysis on buying a $1M condo on the beach…brand new gorgeous shortsale at 45% off the pre-con with finishes price…I passed. I put my money where my mouth is…there was condo assoc risk that could only be offset by another 10% price decline. So many investors out there that are in trouble…..
I can’t comprehend why an MBA/JD would be a realtor…you must have gone to second tier schools instead?
And to think I have one other degree too…..so much schooling. Now if we could only get 80% of Americans to graduate from high school, then we’d be much better off.
Look here, thr bears lost. That aside. People out there pay many of us on the board very well for our opinions….legal, economic or otherwise. We might now respect each others opinion but the scathing attacks are getting….boring and counterproductive. I’m not going to change anyone’s opinion and you’re not going to change mine. If there is anything I’ve learned from this its not to post during a crappy bears game after a couple of beers.
John – I have the cash in the bank to pay the loan off if I had to. Why in the world would I pay an extra $126,000 over 7 years for the security of the worst case scenerio? Would you pay $126,000 for a future interest rate of 7.5%?
I admit I am jealous of all the JD/MBAs. While I would abhor the thought and expense of sitting in class in law school and would never use the degree… I can’t help but think of how awesome four years of grad school would be. Then again I would be partying and not studying I guess because I don’t care about law.
John – I am not a realtor I am a business owner. My business is marketing, investing and developing real estate. I have people that specialize in each area and I oversee the group. My income is in the top 2% so please question what the other MBA’s are doing and not myself.
Bob – Don’t be jealous of either….a lot of MBA’s are self-important tools (my classmates were nice though) and JD’s tend to hate their jobs but the paycheck is nice. Best to do neither… LOL The education is interesting but to be pigeon holed into making it a career…not for me.
“I can trump you both…I have an MBA and a JD….who’d a thunk it eh? And retired at 35 with millions in the bank”
John, that’s great, I am also a PhD, MVP and King of England. See, isn’t it fun playing make believe on anonymous message boards? First, you claim to have a crystal ball. Next, you have a secret investment strategy that you can’t tell anyone about. Finally, you have many fancy degrees and are a self made millionaire. What a crock of sh!t. You’ve yet to produce a single argument that makes any sense. I can tell that you are lying because of the weakness of your claims. For example, EVERY recession is characterized by a mismatch between supply and demand, this one may be more severe than normal but to call it a “structural” recession makes no sense. That’s just a buzzword you heard somewhere that you think makes you sound smart, it has no real meaning in this context. Also, as you can imagine I’ve monitored the layoffs in my business quite closely. The amount of “MBAs” who’ve been laid off in the investment management industry can be counted on one hand. The layoffs have all been on the banking side of the business. The few on my side of the business have been primarily on the back office/administrative side. Thanks for your concern.
You all have too much time on your hands!
T2 – I am a multimillionaire, not a millionaire…..I thought you were a money manager or something so you should know what a VHNWI is? I do my own investments…..wealth management of my own money. Sorry, but I have only posted truthful info. MBA’s are in over supply right now as so many are in your field, they are going down and the prospect for nurses is more positive. I am surprised you don’t understand what I posted. A cyclical recession (one as part of business cycle) can be spent out of, that is not the case in a structural one where the economy need more substantial changes and adjustments. The difference is like this, in a cyclical recession you lay off a few people, maybe cut back hours, have lower profit but will rehire when things turn around, but in a structural recession, you close stores…you had 10, now you have 8 and that is permanent…you are not waiting around to reopen them. Same goes for condo flippers….many thought I’d just rent for a year or two (heck maybe 6 months even) and things will turn around and I will make $$$ just by holding onto the condos….no you won’t. Had the person known that it was a structural recession versus a cyclical one, he would have dropped his price and sold immediately. The economy is not coming back the way it was….there are massive permanent changes in how business is done (bye bye investment banks) and where capital is allocated. It is a large upheavel, not just a breather or a time out. And no, the world is not coming to an end, but you need to be prepared for the changes instead of being caught off guard that things will just be like they were before. A lot of once “wealthy” people won’t be when this is all over with….. a lot of HNWI and VHNWI will move down the instead of up…it will be a shocker for them. So no, this isn’t just a “recession”….
So you have money, Heitman. Good for you. Those who brag about large bank accounts are usually trying to make up for a small something else.
definitely some fraud involved in these townhouse sales. I wish i had been smart enuf to figure it out – from what i can tell there have been NO repercussions for most of these fraudsters.
one misconception from above i would like to clear up – the credit crisis is NOT only three months old. The credit crisis is widely described as having begun in fall of 2007. The google references in the media to “credit crisis” start in 2007, not 2008.
The TED spread used to be around 11bps before August 2007. After the ABCP market froze in August ’07 the TED spread jumped to over 100bps and stayed there until this September when it jumped wildly.
If you had to pick a day the credit crisis started it would be August 9, 2007.
The credit crisis started last year? You mean it took John until yesterday to figure this out through his own research? LOL!
Ah Steve H. – I didn’t post that, are you dense? Seriously, how does it feel that you advised and sold things to people that are now facing financial ruin…while you profited from it? It sounds like you are the one behind the curve and are a financial idiot. Seriously, you must have some sort of mental problem the way you post…it is delusional.
“Steve Heitman on November 29th, 2008 at 6:42 pm
G – People were borrowing money to rent? LOL!
Do you have any evidence that rents have decreased?”
Mine went down $75 a month.
Also, can we ban Douchebag Steve from this blog? Be a lot nicer without him around.
“VHNWI” (I’m assuming this means Very High Net Worth Individual) and “structural recession” are not terms used by anyone in the investment field anywhere. The first is an embarrassing attempt to sound like you are rich, the second is an equally embarrassing attempt to sound smart. “Structural recession” is simply a meaningless term. Anyone bragging on a message board that they are a multi-millionaire with secret investment plans is a complete wannabee. Add in the fact that you are making up terms in order to sound smart and I’m guessing you are 25 years old and make $40k a year!
T2 said “There are a few commentators who are able to shift between being bullish and bearish and they are ALL getting bullish now. Warren Buffet is the most famous one and I can give you some other, more obscure investors who are all buying right now and think the economy will be recovering next year.”
Do you also believe that the economy will be recovering next year?
As long as Steve H. goes on another one of his “vacations” and gets back on his meds…all will be fine.
T2 – I do my own wealth management and if you were in the field you would know the terms HNWI, VHNWI, UHNWI. As far as “structural recession” you’re right, I coined the term that’s why you won’t find it anywhere….including from Steve’s barber. Somewhere, we need a term different from recession but not a depression. I think the distinction of what is a structural recession where the supply structure is in for a permanent overhaul and downsizing (we have too much supply investment that was geared to a credit bubble demand level that won’t be returning…..a lot of empty retail store fronts are coming as they were part of the longer term investment that made up the supply structure) instead of a just a recession (which I am calling a cyclical recession since that is just a pull back of a business cycle). The distinction is important as I’ve mentioned…. those holding out for things to just turn around like in a normal recession are in for hurt…large changes almost like in a depression will be made this time, but a depression isn’t the right description either. A “structural recession” explains why people are having a hard time figuring out what is going on….they sometimes through out the D word of a depression but quickly back pedal. I think my understanding and description sums it up better than anything I have read or heard. Feel free to disagree all you want…but I am pretty darn sure I am correct here. No need to sound smart with it, just trying to describe it as I see it and the term works for me.
“Do you also believe that the economy will be recovering next year?”
Yes, but it depends on what you mean by “recovering.” The economy will likely contract through the first quarter and maybe the second. We will likely start to see positive growth in the second half of the year but it won’t be huge growth. If we have a large stimulus package we will see growth accelerate more quickly. Unfortunately for housing, though, home prices are a lagging indicator of the economy and won’t likely begin any recovery for at least 18 months or more. I think the best bet is that housing bottoms next year and then goes sideways for a while until income catch up with prices (which they are slowly but surely doing).
Your definition of a “structural recession” is simply the definition of a normal recession. IE, too much supply leads to a pullback while the supply is taken out of the system. I’m not familiar with anyone who is “confused” by what is going on right now. Even Nourial Roubini, the ultimate doom-sayer, doesn’t believe that we are in anything more than a nasty recession. You haven’t given us any compelling reason to take your analysis seriously other than inventing new terms and using buzzwords that don’t exist in the investment community.
T2 – You still think fed govt stimulus will pull us out of this? You still have it wrong. The fed govt won’t be out shopping at Linens-n-Things, Circuit City, Marvin’s, etc….. it will only keep unemployment lower than it otherwise would. Did you know when of the biggest helps to employing Americans has nothing to do with fed govt intervention…it is the economics of alien and foreign resident workers going back to their countries of origin. The good news is that there are a lot of job openings in those fields for Americans now…the bad news it those Americans prefer welfare instead. Maybe when WB or others start parsing the recession you’ll change your tune. It is clear that this ain’t your daddy’s recession nor your grandpa’s depression…. Disagree all you want, but I know I am correct.
Besides using the term “structural recession” is a heck of a lot better than Roubini’s term “nasty recession” since my term implies a longer term recession where capital investments make large and permanent reallocations in the supply structure. The demand structure has already been hit…..no more easy credit passing on the principal repayment risk to others under false pretenses….now it is the supply structure that needs to adjust….it will adjust downward, quite sharply as in auto sales, and will permanently reallocate capital in other areas. This feels like more than just a recession….as many people attest to….because it is a structural recession instead and not just a part of the business cycle. Class dismissed.
“I think the best bet is that housing bottoms next year and then goes sideways for a while until income catch up with prices (which they are slowly but surely doing).”
You’re flat out wrong about this. Parroting what you read on Bloomberg and hear on CNBC doesn’t make it true.
There are too many factors involved to think that housing will bottom anytime soon. Do you believe the record levels of vacant housing won’t effect prices? (take a drive though the south loop or north clark avenue or west on irving park road towards the highway). REO attorneys tell me they take in 200 foreclosures for every 100 they sell. The trend in the last few months has been accelerating. Do you think these foreclosures will have no effect on prices? How exactly do you expect wages to catch up with housing prices? Haven’t inflation adjusted wages been flat for a decade now? And with unemployment at a 16 year high you think employers are going to give significant raises? Every analyst and joe schmoe out there says, “We’ll recover NEXT year.” Then next year comes and they say “well, we didn’t see that coming but we’ll recover next year…..etc” And they keep saying that until they’re right. Nobody ever got fired for buying IBM, ain’t that right?
“I think the best bet is that housing bottoms next year and then goes sideways for a while until income catch up with prices (which they are slowly but surely doing).”
“You’re flat out wrong about this.”
Based on what? The opinion of a paralegal? I think certain areas of the country, like Nevada and Arizona, are years away from bottoming, but for the national averages I think it will occurr in the next 12 months or so.
“now it is the supply structure that needs to adjust”
What you are describing is simply the definition of a recession, you don’t need to make up new term. “Structural” means long-term and semi-permanent. For example, there is something called “structural unemployment” that creates permanent levels of unemployment. To call something a “structural recession” would imply that we are in a semi-permanent recession, which is clearly not the case. The idea that we will permanently dispose of some misinvested supply is cyclical, not structural. We permanently got rid of lots of bad investments in the dotcom bubble, but that’s what happens in a recession. You are simply using the term “structual” incorrectly and leads me to believe that you have no idea what you are talking about.
“This feels like more than just a recession”
That’s because we haven’t had a severe recession since 1982, so I’m not sure you would know what it should “feel” like. Try taking Econ 101 before you try to “school” me.
By the way HD, Gary Lucido had a good chart showing home prices vs. incomes that shows how we have come back quite a way towards affordability. If homes stay flat, we would be back at trend within 2 years or so. We may (likely) see some more weakness in home prices and then a stagnant period, leaving us below trend within 3 years or so. I’m sorry that you are praying for a 40% drop in home prices, but it’s simply not liekly to happen, particularly in Chicago.
Again, based on what? Other parrots on CNBC repeating the same mantra over and over again? DO you think Chicago is immune from the exploding option arm? That’s the next wave of foreclosures to hit. We’ve worked our way through subprime and the option arm foreclosure are just starting now. The problem is that we can’t even stablize sales with the number of forclosures. The option arms will add another 10,000 or more homes to chicago inventory while sales halt to a trickle. No that won’t effect prices….hahha! You’ll have egg on your face when you’re wrong. 40% is baked in the cake we’re only in the 3rd inning and it’s going to take all 9 to get there!
T2 on December 1st, 2008 at 1:10 pm
“You’re flat out wrong about this.”
Based on what? The opinion of a paralegal? I think certain areas of the country, like Nevada and Arizona, are years away from bottoming, but for the national averages I think it will occurr in the next 12 months or so.”
T2 – You are simply wrong. The tech bubble was limited in our economy and has never recovered….nor are we just in a real estate correction either. We’re not just taking capital from area A and putting it in area B. What we are going through is NOT a part of the business cycle where you can chart out the amplitude along a long term trend line going up. The trendline has taken a dramatic shift down instead. That is the difference….a cyclical recession is simply riding the cycle as it goes up and down and are predictable where fed govt spending can dampen on the down stroke….what we are going through is not that… the trend line is down instead of a ride along the business cycle. Too many people were just looking at it like we are riding down the business cycle and when are we going to hit bottom….well, we’re not riding down the businesss cycle, it was the trend line that dropped. See the difference? I’ve heard people say American’s standard of living is going down and won’t be the same…that in some part is true if you measure our standard of living by what is consumed.
small units are going to be another area that kills prices. Buildings are still considerably overpriced when compared to rents (which are soft) and the cost of money, even if you go owner occupied route, the value of the “owners unit” (which I believe is a bogus concept in multi-units) is still greater then its sale price as an indivual condo. On average most small unit buildings across the city are still overvalued by at least 30%
When was the last “recession” that this happened???:
THE FED
Bernanke: I’ve got more ammo
Fed chief outlines steps he can still take to stimulate the economy like buying Treasury notes and bonds to target the money supply.
– Again, I think I have a good understanding of what is happening and my term serves me well. If you disagree with it T2, then fine. But to me, the understanding and distinction explains it well.
What about the following factors;
1. Every place I look at the sellers are desperate. A lot of people are willing to take massive hits right now.
2. rates are LOW (and heading lower it looks like).
3. Everyone you talk to now sounds like Homedelete. When I was home for Thanksgiving my 20 year old pothead brother was talking about the housing crash.
Quit worrying about Macro statistics and consider what is happening out there right now and how you can take advantage of it. I would be willing to bet that you can find some sick deals right now if you try.
What trendline is now down? This will be the first quarter in which we have had a large contraction, so how could the trendline be going down? You aren’t basing this on any evidence, it’s simply something you’ve made up.
“I’ve heard people say American’s standard of living is going down and won’t be the same”
People were saying the same thing during the 1990’s recession, and again in 2002. Every recession has unique problems and this one is no different. I challenge you to show me a noted economist who would support your claims, considering even the most bearish ones don’t seem to agree with you.
“When was the last “recession” that this happened???:
THE FED
Bernanke: I’ve got more ammo
Fed chief outlines steps he can still take to stimulate the economy like buying Treasury notes and bonds to target the money supply.”
This once again shows your ignorance. During the last recession, Ben Bernanke presented a speech called “Deflation: Making Sure It Doesn’t Happen Here.” Look it up, that was where he first talked about maybe having to take these extreme measures. Bears like Stephen Roach said that they would never work. Of course, the economy recovered so we never had to try. You show a noticable lack of experience with economics and clearly have no knowledge of economic history.
TS, you have exactly the right attitude. You should buy when everyone is scared. That’s why Warren Buffet is one of the richest men in the world and HomeDelete lives in a rented studio in Uptown.
I posted a link to that speech for John last week. He’s seen it.
TS-
“Every place I look at the sellers are desperate. A lot of people are willing to take massive hits right now”.
Do these massive hits adjust the price of the seller’s homes to a non-bubble price point? Until they do that, I could care less about their homes or how low the current interest rates are.
1. Every place I look at the sellers are desperate. A lot of people are willing to take massive hits right now.
The problem isn’t the selling taking the hits it is the banks who sell the future REOs. IIRC 1 in 5 people nationally are underwater. If they want to sell they have two choices: Short sale or foreclose. Very few people show up to the closing table with cash; if they had any cash in the first place they woudn’t have used 100% financing.
2. rates are LOW (and heading lower it looks like).
Rates were low when the banks issued a ton of subprime toxic waste at 10%+, so what if rates are low.
3. Everyone you talk to now sounds like Homedelete. When I was home for Thanksgiving my 20 year old pothead brother was talking about the housing crash.
What does that have to do with anything? Totally irrelevant. Maybe you should take a toke or two and chill out a bit.
Quit worrying about Macro statistics and consider what is happening out there right now and how you can take advantage of it. I would be willing to bet that you can find some sick deals right now if you try.”
Looked at two SFRs in the same neighborhood last weekend listed at $429K and $440K. House listed at $429K sold for $505K in 2006. House listed for $440K sold for $279K in 1994. Based on inflation the second should be worth $405-410K today.
You could get either below $400K right now based on what sellers told me. With rates at 5.25% and heading lower this is a no brainer kids.
I saw a lot of others that didn’t have prior listing info.
TS said, “Every place I look at the sellers are desperate. A lot of people are willing to take massive hits right now.”
Yet the buyers do not buy, as is evidenced by the historical collapse in sales volume. That tells me that the “massive hits” sellers are willing to take today will only make a knife-catcher out of you tomorrow.
If people think that the 21.6% YOY decline in October Chicago home sales from 1,959 in 2007 to 1,535 in 2008 was something, you ain’t seen nothing yet. November sales appear to have declined 45.0% YOY from 1,858 in 2007 to 1,022 in 2008.
HD said – The problem isn’t the selling taking the hits it is the banks who sell the future REOs. IIRC 1 in 5 people nationally are underwater. If they want to sell they have two choices: Short sale or foreclose. Very few people show up to the closing table with cash; if they had any cash in the first place they wouldn’t have used 100% financing.
Exactly if someone has any equity and has to sell they will sell. See my examples above. Find the desperate sellers that did put $ down. I know it’s hard for you to believe but, they are out there.
Hd Said – Rates were low when the banks issued a ton of subprime toxic waste at 10%+, so what if rates are low.
They are at 5.25% right now and probably heading below 5%. That isn’t “so what” low that is holy sh*t low.
HD said – What does that have to do with anything? Totally irrelevant. Maybe you should take a toke or two and chill out a bit.
Don’t take offense but, weren’t you worried when everyone was talking housing boom and how they were going to get rich buying houses? Opposite applies now. all I am saying is take advantage of the situation.
The Fed is acting to push rates lower and it’s working. They are going to inflate us out of this and you will end up looking back wishing you would have bought and locked in before the sent the printing press into overdrive.
TS, are you suggesting they will be able to “inflate us out of this” while maintaining low interest rates?
G – Do you think that your statistics will come as a surprise to anyone at this point? The sh*t has hit the fan and everyone knows it. I am not saying go out and pay someones asking price.
Pay less than what the house is worth adjusted for inflation (Go back to pre 2000 prices of course). Lock in for 30 years at 5.25% or less. If you are planning to stay long term (5+ years) how can you go wrong if you did this?
Or we could get stagflation….stagnant wages and rampant inflation elsewhere. That could happen too. Or we could have deflation, b/c that’s the way things are looking right now…Gas went from $150—->$50…commodities have dropped significantly, the dollar is stronger, etc…
Your argument is a variation of the same argument used by Realtors during the boom: “buy now or be priced out forever!”
“The Fed is acting to push rates lower and it’s working. They are going to inflate us out of this and you will end up looking back wishing you would have bought and locked in before the sent the printing press into overdrive.”
TS T2 or whoever…..Yes, I am well aware of helicopter been. I asked when was the last time it happened, not when the last time a guy talking about the Great Depression mentioned it…. Big difference. Believe what you want, but my paradigm explains things. This isn’t like past recessions over the last few decades, period. Wake up.
G said – TS, are you suggesting they will be able to “inflate us out of this” while maintaining low interest rates?
No, that is why I am hoping to lock in soon.
HD said – Your argument is a variation of the same argument used by Realtors during the boom: “buy now or be priced out forever!”
No, when inflation occurs you should be making more money. If you lock in prior you could have a payment that would be considered to be pocket change at that point.
Your advice sounds like a leap of faith rather than sound financial planning. How could you go wrong? Prices might retreat even father and stay depressed longer than 5+ years.
“Pay less than what the house is worth adjusted for inflation (Go back to pre 2000 prices of course). Lock in for 30 years at 5.25% or less. If you are planning to stay long term (5+ years) how can you go wrong if you did this?”
Buy now or be priced out forever! It’s the same reasoning. Buy now while things are cheap or you’ll regret it!. It’s a fear tactic not rational or logical argument.
“They are going to inflate us out of this and you will end up looking back wishing you would have bought and locked in before the sent the printing press into overdrive.”
You will not be priced out forever. It will just cost you more at that point than it will now.
I guess I am just trying to tell you to look at the situation with an open mind. I have my opinion you guys have yours. We’ll see what happens.
G said – TS, are you suggesting they will be able to “inflate us out of this” while maintaining low interest rates?
TS replied – “No, that is why I am hoping to lock in soon.”
How do you think that will impact resale in a time of higher interest rates?
It is always better to buy at a lower price and higher rates than at a higher price and lower rates. You can always renegotiate the terms in a refi when rates drop, but you can’t renegotiate the purchase price ever.
I think what TS suggests is a clear indicator we are nowhere near bottom.
It is silly to talk about a bottom in housing, the fed govt could do little about the subprime (it is about repayment of principal, not interest rates) and the atl-a’s are coming…..prime has shown cracks… This is not the bottom.
G said – It is always better to buy at a lower price and higher rates than at a higher price and lower rates. You can always renegotiate the terms in a refi when rates drop, but you can’t renegotiate the purchase price ever.
What if your dollars are worth WAY less in the future? This is how deflation will be dealt with. Read the speech below;
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm
“U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”
Even if the dollars are worth less that doesn’t change the fact that housing prices are tied to local incomes. It means higher prices for everything else. Wages are pretty stagnant and with layoffs and dismal employment figures I don’t think wages will rise to meet housing prices; it’s going to be the other way around in the near term.
“are you suggesting they will be able to “inflate us out of this” while maintaining low interest rates?”
G, all the Fed needs to do is start buying 10 year treasuries to keep rates low while inflating. I’m not saying they should do this, but they certainly could. The link between inflation and rates is not as strong as you’d think in a fiat monetary system.
John said – It is silly to talk about a bottom in housing, the fed govt could do little about the subprime (it is about repayment of principal, not interest rates) and the atl-a’s are coming…..prime has shown cracks… This is not the bottom.
When did I or anyone else ever call a bottom? I have no idea when the Macro data will tell us that we have hit some sort of bottom and I don’t really care.
John, what new “paradigm” do you claim to be espousing? All you are doing is describing a recession, you haven’t discussed anything new.
The currency play is separate from the decision to buy a home or condo. Don’t get confused people.
HD,
No one is saying that his is the ultimate bottom in housing, but this is certainly an attractive entry point for a long-term homeowner who knows how to negotiate. Think about it: we are now a year into a recession during the worst financial crises in a generation during the seasonally weakest part of the year. You can’t ask for much more to go wrong! Maybe it gets worse next year, maybe not, but you will never pick the bottom and this isn’t a terrible time to go bargain hunting.
“Even if the dollars are worth less that doesn’t change the fact that housing prices are tied to local incomes.”
HD, you are so out of your league it’s not even funny…
HD said – Even if the dollars are worth less that doesn’t change the fact that housing prices are tied to local incomes. It means higher prices for everything else. Wages are pretty stagnant and with layoffs and dismal employment figures I don’t think wages will rise to meet housing prices; it’s going to be the other way around in the near term.
Let’s talk employment in the US.
1. There is a huge shortage of skilled workers right now. The employment figures are skewed by job losses in construction, financial services, etc.
2. Baby boomers are retiring, this will leave a huge gap going forward.
3. A lot of the jobs that were outsourced (manufacturing especially) will be coming back over the next decade. Weak dollar, quality issues, logistics and surging Chinese economy will all contribute to this.
The job market is changing but, it is much stronger than you think. If you have a marketable skill you will be in demand and paid accordingly for the foreseeable future.
T2 – It is a great time to become an informed buyer, but not yet time to buy. So, I can agree with you that people should go out and kick the tires. All indications are fed govt interventions will pick up to make “affordability” better…whatever the heck that means. The fact remains that repayment of principal will keep people on the sidelines regardless of interest rates. Prices will need to continue to come down. For a home to live in….go out and explore, but be patient, esp. with condos units that are all alike….for condo investments now is not the time since the number one rule in any investment is to buy low, period. The bottom will be around for many many months and the recovery will barely pace inflation (if even that) for years….. No reason to jump into an illiquid asset at this point.
TS said: “2. Baby boomers are retiring, this will leave a huge gap going forward.”
– Have you been talking to them recently? They are scared and many will be forced to delay retirement as their wealth it down 40%…er, make that 45% as of today.
Am I beginning to get whiff of panic in the air now…. let’s see.
John Said – – Have you been talking to them recently? They are scared and many will be forced to delay retirement as their wealth it down 40%…er, make that 45% as of today.
Actually, I talk to them every day. The first of the baby boomers are just hitting retirement age. The impact won’t start to be felt until around 2010 and by 2020 20% of the current workforce will be at retirement age.
Do you think retirement accounts will bounce back by 2010? 2015? Will they work forever?
Let’s talk employment in the US.
1. There is a huge shortage of skilled workers right now. The employment figures are skewed by job losses in construction, financial services, etc.
– Highest unemployment in 16 years. Go tell the construction worker that he’s skilled in the wrong areas.
2. Baby boomers are retiring, this will leave a huge gap going forward.
– the boomers aren’t retiring like everyone expected. And b/c they’ll be downsizing their home size in the near future it will put additional pressure on home prices.
3. A lot of the jobs that were outsourced (manufacturing especially) will be coming back over the next decade. Weak dollar, quality issues, logistics and surging Chinese economy will all contribute to this.
-i might agree with you on this but a lot can happen within the next decade.
The job market is changing but, it is much stronger than you think. If you have a marketable skill you will be in demand and paid accordingly for the foreseeable future.”
-Let’s hope for the best .
HD – Highest unemployment in 16 years. Go tell the construction worker that he’s skilled in the wrong areas.
He is… Where do you thing all of the manufacturing workers went the last ten years? They aren’t just floating around aimlessly right now. They got into Construction, became Real Estate Agents, Mortgage Brokers and house flippers (LOL but, it’s actually true to some extent). Today’s construction worker will become tomorrows Manufacturing laborer. Today’s hack Real Estate agent/ mortgage broker will become tomorrow’s hack quick buck worker in an industry yet to be determined.
TD, are you disagreeing with him? Do you really think incomes have no bearing on home prices? How can prices rise if people can’t afford to pay the higher price? It happened during the boom due to reckless financing, but those days are over. Now that nobody will buy those crap loans anymore, it’s back to downpayments and income verification.
“Even if the dollars are worth less that doesn’t change the fact that housing prices are tied to local incomes.”
HD, you are so out of your league it’s not even funny…
Talk about confusing posts, who said what and which part is a reply….
TS said: “Do you think retirement accounts will bounce back by 2010? 2015? Will they work forever?”
Retirement accounts will not bounce back by 2010…2015 possibly but in real dollar terms not probable. If assets go down 50% then they would have to double in 7 years to return just in nominal dollar terms which would mean a 10% appreciation rate (assuming no taxable events). No, they won’t work forever since they will die before that happens. Many will have to alter their plans significantly and the boomer kids waiting on an inheritance may be in for an unpleasant surprise. I would assume you’re getting some of these people coming in very concerned. My parents are retired…they got to do that at a very early age relatively speeking….and the stories I hear from my dad about what his peer group is talking about….they are more than concerned. All the restaurants will need to start putting the condiments behind the counter….
Geez, the tangents that some of you guys go off on are amazing. Insulting each other and turning the forum into a dick measuring contest isn’t necessary.
With regard to this listing, someone truly got bent over without the luxury of a lubricant on this deal. I did have to chuckle when I saw IndyMac’s name.
TS, you are a stronger man than I trying to paint a silver lining in a room full of bears.
Let’s talk employment in the US.
1. There is a huge shortage of skilled workers right now. The employment figures are skewed by job losses in construction, financial services, etc.
-Please tell me were all these skilled jobs are. The only shortages I know of are jobs which have high barriers to enty due to decades of higher education and long internships. Those type jobs will not help joe six pack.
2. Baby boomers are retiring, this will leave a huge gap going forward.
-Maybe they are or maybe they can’t afford to. Between the bail out package underway and the underfunded social security system the US might face bankruptcy(hyper-inflaction).
3. A lot of the jobs that were outsourced (manufacturing especially) will be coming back over the next decade. Weak dollar, quality issues, logistics and surging Chinese economy will all contribute to this.
-Basic manufacturer is gone from this country and will never return, unless people will take jobs paying substancally less than minium wage. Before this economic crisis hit China was opening factories in Cambodia to tap a workforce at even a lower pay scale.
4.The job market is changing but, it is much stronger than you think. If you have a marketable skill you will be in demand and paid accordingly for the foreseeable future.
-The job market is changing, if you are not highly educated the american dream is dead. Most americans will face a much lower standard of living. Welcome to the new world.
There is a silver lining in this all. Home prices will return to affordable levels. Less money towards debt maintenance = more money into the consumer market which should = stronger economy.
Furthermore, America was and will continue to be one of the economic engines of the world. We have a system of capitalism that generally works the best with a major hiccup once or twice a century. There’s no reason to think that some better economic system will come along and usurp our position.
It’s just that right now we have quite a few years of housing credit mess to recover from but we’ll emerge a stronger nation for it. You think the bottom is going to be next year, I think it’s going to be well into the next decade.
Where are the jobs for skilled workers? See links below. None of these jobs requires more than a 4 year degree. Many will accept less.
http://www.indeed.com/jobs?q=engineer&l=Il
http://www.indeed.com/jobs?q=Nurse&l=Il
http://www.indeed.com/jobs?q=sales&l=Il
Call some of the companies with these jobs posted and ask how the response is. It is only going to get worse.
Highly educated isn’t necessary. Skilled and willing to work hard is.
TS, Thanks for making my point. Many of the jobs listed in your links require a BS,MS and years of experience. See example 4year degree plus 9 to 19years experience. How does this help the out of work steel worker?
Thorough knowledge of: clean room practices, vacuum bake-out systems, various welding practices, electron device mfg. processes. Working knowledge of dispenser type cathodes, controlled atmosphere brazing. Familiar with automated video inspection practices, most matching practices and capabilities and room temperature vulcanizing, computer aided design software. Ability to write clear, comprehensible, technical work instructions. Experience requirements: T4 – BS plus 9-13 years relevant experience or MS plus 7-11 years relevant experience. T5 – BS plus 14-19 years relevant experience or MS plus 12-17 years relevant experience. Ability to obtain a government security clearance is required. U.S. citizenship is required. Relocation Assistance Available. Security Clearance Required
HD – We have a lot more than a housing mess to clean up. You think housing knocked oil down from $140 to $40? How about silver, natural gas, ect. The run in food prices, ect? Housing was part of the bubble but not the only player.
Steve H. – Food prices are falling too. And again, it is the credit bubble that is the problem….took many years for it to form and the oil shock pretty much cut the legs out from under a lot of people and businesses.
Steve Heitman on November 30th, 2008 at 8:44 pm
“John says “many realtors will go back to dog grooming, etc.” Wow John, are they going to tare down a bunch of housing or are people just going to stay in their homes all of their lives? Pricing makes no difference on a realtors future. My guess is blogging economists will be out of business too.”
“we the blogging economists” are just getting started.