The Biggest Story of 2010: Foreclosures, Foreclosures, Foreclosures
We’ve chattered about many distressed properties here on Crib Chatter, including short sales and foreclosures, in the last 2 years.
But recently, the number appears to be picking up, even in “prime” parts of town. You can definitely see the increase in the multi-unit buildings and smaller “starter” condos in North Side neighborhoods.
Also worth watching is the length of time it is taking the banks to re-list the property once they come into possession of it.
Take this 4-flat which was just listed last week at 1739 N. North Park in Old Town.
It became bank owned 15 months ago and only recently came back on the market. 15 months!
Here are the units:
- Unit #1: 2 bedrooms, 1 bath
- Unit #2: 1 bedroom, 1 bath
- Unit #3: 1 bedroom, 1 bath
- Unit #4: 1 bedroom, 1 bath
Built in 1888, it doesn’t look like there is any parking with the building.
Timothy Blomquist at The Lake Shore Drive Group has the listing. See the picture here (sorry, no interior pics).
1739 N. North Park: 4-flat
- Sold in July 1989 for $275,000
- Sold in January 2003 for $570,000
- Sold in May 2005 for $610,000
- Bank owned as of September 2008
- Recently listed for $489,000
- Taxes of $13,954
Other issues to look for in 2010 with foreclosures:
- Distress sales continue to dominate in certain high rises such as 10 E. Ontario and 800 S. Wells.
- Distress sales are picking up in newer, luxury high rises, such as those we’ve seen in Avenue East, at 160 E. Illinois, in Streeterville as some investors throw in the towel.
- Distress sales appeared in the best buildings in the city, i.e. The Palmolive and others, in 2009. Will this trend continue in 2010?
- Will “walk-aways” become an issue in the condo market? I’m already hearing about owners simply walking away from condos because they are underwater, especially in the Wrigleyville neighborhood.
2010 looks to be one of the most interesting years in recent memory in the Chicago real estate market- for both buyers and sellers.
So this is a nasty looking place. But it is in Old Town Triangle. Does that mean you can’t blow it down and put something new up?
Not surprised about the first foreclosure…its a total dive and not indicative of the whole city. Its a class unto its own. As for problem buildings (Wells and Ontario) those will continue. We will also see a small amount of distressed sales in good buildings but probably not walk aways in good buildings b/c people are underwater so much that its worth the damage to their credit. Walk aways tend to happen in AZ, CA and Florida in places where whole neighborhoods have lost 35-40% of value. That hasn’t happened in Chicago. Values are down but not to that extent.
“Walk aways tend to happen in AZ, CA and Florida in places where whole neighborhoods have lost 35-40% of value. That hasn’t happened in Chicago. Values are down but not to that extent.”
A local- really? Check out what is happening in Lakeview. People bought for $325,000 in 2005 and the condo is now “worth” $250,000. Many had 100% financing or they put down $20k. In either case, they are severely underwater. If they want to move- what do they do? They short sale or walk away and it goes into foreclosure. They can’t rent it out because they don’t even come close to covering their costs.
This is happening all over Lakeview (not to mention further north in Ravenswood, Andersonville, Edgewater and Uptown. We won’t even discuss Rogers Park.)
It’s just taking awhile to work through the north side neighborhoods and for these foreclosures and shorts sales to be the new reality for all the other sellers in those neighborhoods.
The biggest issue I’ve seen thus far isn’t so much the holding on to vacant properties but rather the delay in foreclosure. lately it’s been taking 12 months for the banks to file a foreclosure and another 12 months to 18 months to complete it and another 12 months to put it on the market.
People are defaulting right and left in prime neighborhoods yet continue to live there without making payments. You can say “Oh that’s not happening” but unless you are seeing their mortgage statements you don’t know what you’re talking about. I see their mortgage statements because I represent both banks and debtors in foreclosure.
The banks aren’t necessarily trickling the properties on to the market as much as they are slowing down the entire mortgage foreclosure process from start to finish. That way it appears like it’s trickling out when in fact the entire process is taking longer. Banks used to issue a NOD to the borrower on a 90 days late and the foreclosure was filed by 150; now it’s taking a lot longer to issue the NOD or Default, and in some cases, like a few of the files on my shelf, up to a year and a half JUST TO FILE THE FORECLOSURE.
requesting a loan mod, regardless of whether the borrow makes any payments, delays foreclosure an additional 8 months to a year.
Well hopefully in 2010 Banks will look at their marinating REO inventory and start to slash prices. I also think Banks should make it harder for people to just walk away. I don’t care if I have to live off Ramen and canned Beans for 3 years and pay it off 10 years longer than expected, my debt is my debt.
“Walk aways tend to happen in AZ, CA and Florida in places where whole neighborhoods have lost 35-40% of value. That hasn’t happened in Chicago. Values are down but not to that extent.”
the south and west sides of chicago are full of walk aways. well due to other reasons than a 35-40% drop in value, but still walk aways are happening.
HD- Are the Banks stalling with the foreclosure process because they are overwhelmed with the increase in filings or is it because holding on to inventory makes banks look healthier than they are? I have friends that closed in 2-3 weeks. If the Bank can get you in the property within 3 weeks, I don’t get how it takes so long to get people out of the property. In the meantime Main St continues to pick up the tab for this circus.
There’s no way to make it harder to walk away. In most cases, like they say, you can’t squeeze blood from a stone. 90% of the population has no assets of any significant value other than a paycheck and a $20,000 automobile insurance policy, and that includes nearly everybody who bought with little or no money down between 2001 and 2007. Believe me when I tell you this is true.
1739 N. North Park is a colorful story. Until two months ago, it was being occupied by squatters (yes, in Old Town). They had occupied the building when the owner became sick or died and the place went into arrears. Finally the bank took possession of the property and the cops had to forcibly evict the squatters. They had apparently been living there for at least several months.
Both.
“HD- Are the Banks stalling with the foreclosure process because they are overwhelmed with the increase in filings or is it because holding on to inventory makes banks look healthier than they are?”
It varies from bank to bank to property. I have close personal friends who’ve been trying to close on an REO since April and still no luck.
“I have friends that closed in 2-3 weeks. If the Bank can get you in the property within 3 weeks, I don’t get how it takes so long to get people out of the property. In the meantime Main St continues to pick up the tab for this circus.”
South, West and far North are not the prime areas I was speaking of. Whoever thought Rogers Park was prime…ever, in any economy is nuts. LP, Near North, etc…has not lost 35%-40% of value. As for the far north, I never understood why those neighborhoods took off in the first place. Bad schools and the commute is often longer than the commute from the North Shore.
I have a feeling walk-aways will continue to grow in popularity, if that article Bob posted (and Groove kindly re-posted a while back) are indicative of the trend. I do believe the article was focusing on CA/AZ, but it is happening here, e.g., I definitely know of at least one walk-away in our old building. Obviously one example isn’t necessarily a plague of walk-aways, but it is interesting (and not in a good way) to me that the “stigma” of walking-away isn’t as negative as it once was making it an option to some people. Sad, really. I mentioned that article to my husband and he literally choked – he just couldn’t fathom that option.
homedelete is right, you can’t squeeze blood from a stone and most people who are walking away have no assets. The problem really snowballs when an individual who has a high salary and great credit decides to walk away. I personally know of people that have done this. They obtain a mortgage on their dream home that has fallen 50% while keeping up with their payments, then walk from their current home. Personal accountablity really needs to be encouraged.
” LP, Near North, etc…has not lost 35%-40% of value.”
Generally speaking, those who believe they have the strongest hand are the last to fold.
Sales volume has yet to recover to historical levels and foreclosures are rising fastest in those hoods.
Also, financing is back to normal for jumbos and the lower rungs in the property ladder have been removed.
It ain’t over.
To me, walking away is the absolute last thing I would ever do. This is all becoming more prevalent because people are starting to think of their lives as businesses. And a business will always walk away from an “investment” like this. Unless you reign in businesses from doing the same kind of walk-away, you can’t expect people to stop doing it too.
When representing debtors or mortgagors, I encourage the walk-away option as often as I can. Some of these people are so far underwater that they will never be able to catch back up. The house is nothing more than an albatross around their neck. A Local tends to forget that even in prime areas (or especially in prime areas) debtors are underwater due to HELOC’s and 2nd mortgages moreso than comparable selling prices. For example, if someone bought in Wrigleyville in ’05 for $325k and now they $250k, they’re between 20-25% underwater. However, you forget about the guy who bought in 2002 for $275 and HELOC’d in his way up to $350k or more in 2005/06 and now he’s even more underwater than the guy who purchased in 2005.
HD —
How can you tell the status of a Cook County Chancery case other than look it up online? Lots of motions, etc. but no clear picture of where it stands. Any help would be appreciated.
A lot of this is anecdotal. The people I know that are underwater don’t want to hurt their credit rating. A lot of them have decided to rent their place out at a monthly loss that they can afford, rather than hurt their credit score – or in some cases forking out the cash. I’m seeing A LOT of this. This activity is providing support to home prices.
Look at it this way tell everyone upsidedown to walk away, rent a bigger place for less than the mortgage, now use the savings to furnish the extra space, purchase new things and get some stuff you have been wanting.
Economy solved!!!
JMM:
The debtor has seven months from the date of service or three months from the date judgment is entered, which ever is longer, to redeem (or for all practical purposes, reinstate) the mortgage. The property cannot be sold at judicial sale during this time. The property can be sold and usually is sold at judicial auction after that. You want to look for the words “judgment entered” in the docketing because that’s the order that gets the clock ticking.
After the property is sold at auction, the plaintiff returns to court to get the sale approved. that’s usually the next motion in the docket after judgment. when the OAS (order approving sale) is entered there is language giving possession to the Plaintiff with a 30 day stay on enforcement.
IN cook county the plaintiff has to file a separate eviction action in municipal court to get the sheriff to evict the resident (tenant or debtor) but in the collar counties you can file the OAS directly with the sheriff for an eviction.
Do people actually buy foreclosures? I looked at a bunch and a few short sales at the start of 2009 and they were just horrible places. I ended up buying from a distressed developer, and got a livable unit right away.
I wonder how many people who say “I want to get a deal on a foreclosure” actually end up closing. Thoughts?
The whole ‘protect the credit score’ thing is totally overrated. Pay your bills on time for three years after a foreclosure and your score will improve to the 600’s or the 700’s which is probably damn near close to where they were when the first bought the home. IF they spend a couple of grand on a lawyer they can probably even do a deed in lieu and return the property without even a judgment of foreclosure on the credit report.
So, going back to Case-Shiller: peak to trough, we lost about 27.5% of value. That was followed by 5 months of appreciation at rates above 1% per month, then -1% in October. Since Feb 1987, the average monthly appreciation has been 0.3%. Through January 2009, on average, prices in November, December and January declined 0.2% (-0.2%).
I’d suspect that Nov 09 – Jan 10 will show some steep declines bringing us pretty close to the trough. After that, assuming that the job market improves, which most economists expect, we shouldn’t see more dramatic declines.
Recall the WSJ article from two weeks ago – statistically, defaults and foreclosure risk is most highly correlated with employment (monthly income), not perceived value.
HD:
2008-CH-00732 (suburban foreclosure) has been sitting for like 2 years. It’s unclear from a lay perspective what gives, but no judgment entered. I guess this is why the banks have been taking forever? Looks like a credit from a seized community bank (surprise surprise).
defaults and foreclosures are correlated to being 20% underwater or more plus one default trigger i.e. job loss, medical issue, reduction in income, death in family, etc.
“After that, assuming that the job market improves, which most economists expect, we shouldn’t see more dramatic declines.”
That’s the rub — Regardless of what “most economists” think I don’t know ANY Illionois employers (other tnan the Gubmint) that intend to add positions in the next year.
2008-CH-00732;
It was filed in early 2008, the Plaintiff did nothing for almost a year for any number of reasons.
2009 had the bank failure, the addition of a couple of foreclosure defendants, the substitution of some attorneys, and even a DWP (dismissal for want of prosecution) which basically means that plaintiff failed to show up in court for a status so that added a few months to undo that.
It keeps getting continued for status of something or other. You may want to go to court on Jan 5 in front of Judge Simko (who’s a good judge by the way) and to listen to what the attorneys tell the judge the status is and what the hold up has been. They’re obviously waiting on something, that’s why it keeps getting continued 30 days at a time.
As old Steve said 18 months ago… Don’t buy new consturction or new conversions and ya’ll be fine!
Anyone who purchased in the easy lending era of 2004 – 2007 will take a hit. The rest of us will be fine. LP has appreciated at a steady 4-5% since 1998 with some higher years offset by the last few as declines. No new construction in LP equals no real sell off.
Stick to the areas in demand and your investment will be protected…
Sabrina would like all of you to be renters for life and to put all of your money in gold. Because real estate goes down and gold appreciates at 15% per year and should continue in the years to come.
I love this blog!
HD –
Thanks. Remind me to hire you when I go after my next property.
Home Delete,
I would like to buy you coffee and pick your brain. You may be a little more pessimistic than I but you may know more than I. I work in commercial lending (not real estate) and see CRE guys let go all the time with a lot of CRE guys now working as analysts for guys like me.
Here is my situation. I own 2 places, each of which I put 20% down on. I can buy another place but am waiting for the right foreclosure/shortsale to happen. I am split between buying a condo downtown (west loop, loop) or a single family in Oak Park/River Forest, but have started leaning more towards buying $400-600K house in Oak Park/River Forest. I see this middle range of the market bottoming in 1-3 years. I have even gone and rented a place in Oak Park so I can be close to the train and GF can drive to Lisle/Naperville. I am not thrilled about the prospects of being a renter again (mostly from pride), especially as I have 4 families that rent from me, but economically it appears to make the most sense.
If you were me, when would you look to get serious about buying SFH in an area like Oak Park? (I am also considering Hinsdale, LaGrange and Park Ridge due to good schools and easy train access)
You may be right on housing hitting bottom in 2013. Even if we hit bottom in 2011, which may be optimistic now, prices are expected to stagnant for 2-3 years after that, which means even if I wait until 2013-2014, I may still be able to pick up a foreclosure for a song, particularly in the middle range (lower priced homes below $400K, should bottom sooner)
Your thoughts and those of others on here are appreciated. Thanks.
JPS – Companies expanded in December at the fastest pace in four years, much higher than expected. Caterpillar is considering recalling workers. The biggest question going into next year will be if the stimulus packages successfully primed the economy enough for indepdent (not gov’t subsidized) growth. The prior decrease in inventories that are now rebuilding point to ‘yes’, but no one really knows.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aq.eiBGooTdc&pos=1
Also, 51% of home purchases in November were from first time buyers. I’m not sure what realtors in Chicago are seeing or how that compares to historical trends, but that looks like an indication of pent-up demand to me.
http://blogs.wsj.com/developments/2009/12/23/why-us-home-sales-are-both-up-and-down/
A cup of coffee? HD charges $75/hr for RE consulting. 🙂
humboldt,
i would say you are asking the million dollar question(s). if somebody knew the answers to all you are asking, they’d be making a killing speculating in the real estate markets.
my gut is directionally in agreement with your assessment. even if markets are bottoming in the next 12-18 months, the pricing recovery will be muted. i do not expect returns greater than that of long-term bonds (2-3% in real terms). the era of double-digit compound returns are over. i think the one issue that folks haven’t been talking about is the demographic shift of the boomers. will there be more down-sizing among the grey-haired set? will our generation go back to renting (another shift in preferences of households)? i would only buy if you meet most if not all the following conditions: 1) you can afford to take the loss, 2) you plan to stay in the house for a long time (7-10+ year horizon), 3) house is trading near replacement value.
How can we require accountability from individual borrowers, no matter how well-healed they may be, when Morgan Stanley can decide to walk away from 5 commercial properties in San Francisco? It amuses me that they state that “this is not a foreclosure situation or a default; we are just giving the properties back to the bank.”
HUH? If Morgan Stanley had equity in those properties their managers would not “give them back” to the lender, would they? The buildings are worth less than when they bought them, that simple. How is Morgan Stanley’s situation different from that of a solvent and able homeowner who walks away from his mortgage?
This will be the year of Alt-A and Prime defaults. The banks admit it. Over a third of all homeowners in this country, including people who bought their places decades ago and who should be hundreds of thousands of dollars ahead on them, extracted equity via HELOCs and 2nd & 3rd mortgages. This is why most loan mods will never fly. Most of these people will be forced out of their places as their loans recast and the payments double or triple, and there will be a humongous wave of recasts this year. Worse, NODs hit record levels in Q2 of 2009- and most of those loans will not be cured. Worse, the FHA has written another couple of layers of loans tricked to default, because they are 3.5% down loans for up to 4X income to shaky borrowers; the new subprime.
And the commercial defaults are only beginning. This will mean more bank failures, reduced capital available for investment in productive industries, and much tighter lending, as well as more unemployment. None of this will be helpful for prospective homebuyers, except those who pay cash and hope to drive a very hard bargain. (I’m trying to be one of these cash buyers).
So I figure prices will bottom in 2017 earliest, and we will revert to normalcy as it was before asset-based lending was invented, circa 1978. Lending will be risk-based, your ability to pay and reputation for doing that will once more be very important, you will have to have a reasonable down payment(at least 10% if not more, you will be limited to borrowing no more than 3x your income, and housing will track rents and incomes and cash flow (in the case of rental property). There will be no more house-flipping and making a year’s income on house appreciation every year.
“house is trading near replacement value”
How do you price the land? Because that’s the wild card for SFHs, no? The structure is pretty easy to price out, but in a mature ‘hood (like OP, or close to Metra in Hinsdale/LaG/PR), the current price of a buildable lot is still the price of the cheapest teardown, isn’t it?
“before asset-based lending was invented, circa 1978”
Not invented. “democratized”. Asset-based lending has been around as long as mortgages, it just wasn’t available to the “common man”.
“How is Morgan Stanley’s situation different from that of a solvent and able homeowner who walks away from his mortgage?”
You know how it’s different, so I won’t bother. But that’s not illuminating.
I would gladly pay $75/hr for the right advice. Buying in 2003 and 2006 has probably cost me a good $200K ($120K in cash alone, representing my down payment money) or more.
I would be looking to occupy this next house for 10+ years, looking to raise a family there even. For the condo, the timeframe would be shorter due to the crappy Chicago schools, probably 5 years. Also, assessments just keep going up. With a SFM I don’t have to worry about such things.
I am leaning more and more in the direction of renting 2-3 years to accumulate larger down payment and then buying Oak Park/River Forest shortsale/foreclosure within walking distance of the train. Of course, I can always rent longer if I need to. (Plus, I am from a farm in southern Indiana where I wouldn’t mind buying a few more acres to add to the family farm in the next 10-20 years)
Yes,hon, I know how Morgan Stanley differs. It’s just that they’re setting a great example- many more buried borrowers will decide to just walk. It’s called “strategic default” and Morgan Stanley didn’t invent it. But they’re making it that much more acceptable.
“Democritized” is the correct word, thank you. Solomon Brothers facilitated asset-based lending by that wonderful invention, the CMO. Banks couldn’t sell their mortgages so easily before that.
There are short sales and then there are REOs – different nuances but both distressed. What I’ve found is that there are few really attractive deals out there and when there are they go under contract in a few days. Mostly there is something wrong:
Bad neighborhood
Troubled building
Structural or design flaws
Damaged
Multiple lenders involved (short sales)
Unable to get the process completed in a timely fashion
Laura –
Commercial defaults are only beginning; however, I don’t think it will be as bad as many people predicted six months ago.
First, the CMBS market is slowly coming back. Bank of America, JP Morgan and Goldman Sachs have successfully brought deals to market, only one of which was TALF. I’ve talked to at least five other lenders that have relaunched their platforms and expect to market aggregated loan pools in 2Q10 (the first three deals were single borrower deals with loan pools between $400 MM and $500 MM).
Second, Life Company lender portfolio’s have remained solid (very low default rates). Most will be back in the market in 1Q2010 — even AIG and Genworth are quoting deals again . . .
Third, corporate bond yields are significantly down from earlier in the year. Lenders are chasing yield again, and mortgage rates are higher than corporate debt. Institutions with long term liabilities (Life Co’s, Pension Trusts, etc) need to match assets and liabilities. Current lending parameters are MUCH more conservative now. Many require 40%-50% equity on their underwriting, on rates much higher than average in their portfolio.
Fourth, there is a lot of equity on the sidelines looking to issue Mezz debt with equity like returns. Even more are waiting to buy defaulted properties (all at well below replacement cost).
Lenders are very conservative right now, but they are very active.
Humboldt1,
Nothing wrong with renting but trying to time the market is impossible – too many unknowns. Yeah, I’ve got my opinion that we’ve bottomed but I’m not trying to bet the ranch on it. It’s better to ask yourself if buying makes sense given the current environment and your current situation. If you don’t see a lot of downside to pulling the trigger now and you think your life would be better owning then go for it. Like with the stock market, some people keep waiting for a bottom that they never find.
“It’s just that they’re setting a great example- many more buried borrowers will decide to just walk. It’s called “strategic default” and Morgan Stanley didn’t invent it. But they’re making it that much more acceptable. ”
Nah, people are just using MS’s actions as a rationalization. Corporate entities have received different treatment from their lenders for as long as corporate entities have existed.
Of course, lenders (speaking as broadly as conceivable) started treating individual borrowers like corporations (and corporations like risk-free entities) in about 1999, so the lenders (and the rest of us) shouldn’t be surprised when individuals act like corporations now.
Humboldt1:
Thanks for the offer of coffee but I’m not going to out myself on this board. However I will give you my opinion.
GLS has it right, you have to do whatever is best for you and the GF. Oak Park is nice but there aren’t that many deals and there are a lot of people looking for deals. This downturn is like a slow moving train wreck and it will take years to return to normalcy, whatever that once was. I don’t necessarily agree with Laura’s prediction of 2017 because most of the loans will have recast, reset or just planed defaulted by 2012 or 2013 which at which point I will call the ‘bottom’ even though prices may still decline but at least there is a light at the end of the tunnel.
I’m in a similar situation to you. I would like to buy a home. I have cash for a down payment. I want to live in a decent northside neighborhood. I want to pay in the high 200’s or $300’s for a bungalow. Yet there are slim pickings and the ‘deals’ that are out there are ‘snapped’ up quickly.
So, I rent. Living in a rented 2 bedroom for less than a grand a month isn’t ideal for me, I’d rather be in a larger home with a yard, basement, office, etc, but the fact of that matter is that the real estate bubble is a part of our life and we have to live accordingly. If I were born 10 years earlier I could have bought a decent house in the late 90’s for a decent price with my HH income whereas my income money today buys nothing in the areas I could have lived 10 years ago.
Yeah but that’s what it should be priced at because they’re not tearing down homes anymore. That phenomenon died a few years ago and it ain’t coming back.
“the current price of a buildable lot is still the price of the cheapest teardown, isn’t it?”
“Yeah but that’s what it should be priced at because they’re not tearing down homes anymore. That phenomenon died a few years ago and it ain’t coming back. ”
Right, but if you’re doing a replacement cost analysis, you need to be able to value the land, too. And the teardown price is (and always was, barring unique attributes) overvaluing the land.
Short term CMO’s are great, where else are you going to get 5% for a 1 year note?
I can get 600% interest in 3 months on the loans I make at my payday loan store.
No, the max is only 391% APR according to the law.
Thanks Scumbag Illinois politician Luiz Guiterrez!
“Congressman who’s giving payday loan companies legal 391% APR loans says he’s powerless to resist their lobbying”
http://boingboing.net/2009/04/05/congressman-whos-giv.html
“Thanks Scumbag Illinois politician Luiz Guiterrez!”
In 2001 i was at golfsmith on diversy and clyborn getting a new 3 iron (threw the original in the woods, Bad Day).
luiz Guiterrez, was with two of his henchmen. I talked to him for like 10 minutes testing out putters (he should have bought the two ball, his putting was rough). He traded in a Brand new set of clubs, had to be only used thee times to buy another new set. (tax payers dollars hard at work).
Nice guy, but the whole time i had to bite my tongue i really wanted to give him a piece of my mind but out of some weird respect for his personal time to his “work” time i just gave small talk about golf and such.
Every time i here his name i regret not just letting it all out.
” talked to him for like 10 minutes”
You should call him up and let him know he owes you one for not embarassing him in public.
“You should call him up and let him know he owes you one for not embarassing him in public.”
next time i at the title loan store, i will call him from my boost mobile phone.
” i will call him from my boost mobile phone.”
Why’d Bob borrow your computer, Groove?
“Why’d Bob borrow your computer, Groove?”
nope just making the correlation of payday loan users are boost moblie users also. i could expand upon that premise but would come off a tad ummmmm how do i phrase it…
” i could expand upon that premise but would come off a tad ummmmm how do i phrase it…”
Deletable by Sabrina?
“could expand upon that premise but would come off a tad ummmmm how do i phrase it…”
bob approved?
Bryan on December 30th, 2009 at 9:29 am
“…The problem really snowballs when an individual who has a high salary and great credit decides to walk away. I personally know of people that have done this. They obtain a mortgage on their dream home that has fallen 50% while keeping up with their payments, then walk from their current home…”
I thought Illinois has deficiency judgment, so the lender can sue for other assets, possibly wage garnishments. To my understanding, Illinois doesn’t provide free walks unless its really not worth it to the lender (people w/ no assets).
“Deletable by Sabrina?”
“bob approved?”
thank you i will be leaving work laughing 🙂
“Why’d Bob borrow your computer, Groove?”
Biggest Story of 2010: Will anon(tfo) be forced out of his 15th floor penthouse at 1230 N Larrabee?
Also this boost mobile user has nothing in common with the previous targeted demographic of the baggy pants unemployable. They can’t even afford my phone as its $300. They get the $30 phone then call up and ask why they can’t surf the web when the LCD screen is 1″x1″ haha.
payday loan users use cricket, duh.
“I’d suspect that Nov 09 – Jan 10 will show some steep declines bringing us pretty close to the trough. After that, assuming that the job market improves, which most economists expect, we shouldn’t see more dramatic declines.”
I disagree. The government introduced extraordinary intervention in an attempt to support the housing market. Even now that intervention is losing its effect and its not even removed yet. Once it is removed (four months from now) housing will resume its decline. It was all fake gains brought to us by our own taxpayer dollars, politicians giving away money to special interest groups.
Unlike most summers in Chicagoland where things are stable I suspect this will be the odd year of continual declines.
Also which economists expect the employment situation to improve? If you’re talking about Wall St forecasters thats an eternally optimistic bunch: often times all 40+ of them are found to be optimistic when it comes to economic data.
As far as a bottom in Chicagoland–I am guessing 2014. And no the declines won’t be as dramatic in 2011, 2012 and 2013 as they were or will be in 2008, 2009, 2010.
Case Shiller for Chicagoland at 87-93 by 12/31/14 is my prediction.
I live in Humboldt Park. You would be amazed of the people walking around with $300 cell phones. Can’t pay the rent or support their kids (even with govt help via food stamps, welfare, Sect 8) but have smart phones. They don’t have contracts due to bad credit and pay by minutes. These are also the same people who use payday loans because they can’t wait 2 days for their paycheck (if they work) and also the same people who get rapid refund from Jackson Hewitt and HR Block. Perhaps, we should start requiring kids to take financial education classes in high school (college too) to prevent some of these bad behaviors and exploitation of the dumb poor.
I continue to be amazed that these payday loan places are still legal, but money talk. Congressman need to buy nice putters.
Bob,
I think it might be possible for Case-Shiller to be at 93 values on a nominal basis by 2014 (hope not), but there has been inflation since then.
“Also this boost mobile user has nothing in common with the previous targeted demographic of the baggy pants unemployable. They can’t even afford my phone as its $300.”
Dude, they just g them from people like Russ’ wife. Duh.
“I think it might be possible for Case-Shiller to be at 93 values on a nominal basis by 2014 ”
Bet he meant index values (ie 7-13% below 2000 prices), rather than 1993 values. And I suspect you meant 1993 *real* values rather than nominal. 1993=$1.00 –>2009=$1.4971; 1999=$1.00 –> 2009=$1.2985. Which is something I always disagree with HD about–I can readily see 1999 *real* prices, but doubt 1999 nominal prices, as I doubt a real $$ (as opposed to forex, gold or PPP) decline of 22+% from 1999 prices is coming.
“Perhaps, we should start requiring kids to take financial education classes in high school (college too) to prevent some of these bad behaviors and exploitation of the dumb poor.”
You’d have to educate the parents on making their kids go to school first…
Quite a few places in the county are already at 1999 nominal prices, such as on the south and the west sides. Do you think we’ll have a bifurcated market where units on the northside and north suburbs will be expensive but if you want to travel a few miles south, you can buy a house for a song?
Poor people routinely forego regular dental and health care, nutritional food and car insurance so that they can buy cable television, a flat screen TV and a smart phone. It doesn’t even phase me or bother me the least bit when I see ‘poor’ people with nicer shoes or a nicer car than I do, because I know the shoes were probably bought hot (if they’re not knock offs), the car likely has no insurance, the interest rate on the note is 3x what someone like I would pay, and they’re with cricket because they already owe sprint, vzw and at&T $500 bucks a piece, and they’re eating a bag of chips and a 2 liter of coke for dinner.
“Do you think we’ll have a bifurcated market where units on the northside and north suburbs will be expensive but if you want to travel a few miles south, you can buy a house for a song?”
Um, you mean like it has been for the past 50 years? When was the last time (before 1999) that a house in Lawndale *wasn’t* available for a small fraction of basically the same house in a “prime” neighborhood?
Lawndale used to be a prime neighborhood at one point.
“Lawndale used to be a prime neighborhood at one point.”
When IH and Sears were out there, sure. I believe that era ended about 50 years ago.
Do you see it returning to those days? Why? How?
Long term, the whole suburban/ex-urbs idea concept is going to fade away when peak oil arrives (if it’s not already here). We’re going to turn into more of european looking cities with a vibrant urban core and then suburban riot filled ghettos. The south side and west sides of chicago have great access to highways and public trans, there’s no reason they should continue to be so ghetto 50 years from now, except that the former residents of those neighborhoods moved to Arl. Hts and Mt. Prospect int he 60’s. As is maybe their great grandchildren will return. Along those same lines, a few weeks ago I found a picture at my parent’s home of my mother from 1st grade at st. viators in OIP from 1961; she moved with my grandmother to the NW suburbs in 1962. My great-grandmother was a city holdout who stayed in logan until she died in the 80’s. As it stands today I live 3 blocks north of st. viators and I didn’t even know that when I first moved to the neighborhood. It will come full circle.
The wildcard however is cold fusion. If science can discover a cheap and potentially unlimited energy source everyone might decide to move to Kendall County and commute because energy is so cheap and abundant.
“anon (tfo) on December 31st, 2009 at 11:17 am
“Lawndale used to be a prime neighborhood at one point.”
When IH and Sears were out there, sure. I believe that era ended about 50 years ago.
Do you see it returning to those days? Why? How?”
home delete,you are correct about Peak Oil and I believe it has arrived. Global production has plateau’d since 2005, and the support prices for oil keep rising in spite of recession and reduced demand.
The Age of Super Cheap Oil has not been kind to our cities, especially since WW2. However, the government was the major instigator of suburban sprawl development, increasing auto dependence, and the destruction of our cities.
I believe, as you do, that the outer suburbs will disinvest rapidly once we are clearly down the slope of depletion. Additionally, water-parched western states dependent upon the Bureau of Reclamation’s megadams for water will collapse and rapidly depopulate, while smaller Midwestern and inland Eastern burgs that were destroyed utterly since WW2 will blossom again: St. Louis, Cleveland, Detroit, Camden, Rochester, Cincinnati, Memphis, and other central and eastern cities.
HD: “Long term”
Sure. And I’ll be certain to move in next door to you in K-Town within a year or two.
That *still* doesn’t say anything about why/how K-Town will catch up to LP/LV/etc., which is what I questioned.
“burgs that were destroyed utterly since WW2 will blossom again: St. Louis, Cleveland, Detroit, Camden, Rochester, Cincinnati, Memphis”
Camden? Really? The rest, maybe, but Camden? Is Gary coming back, too?
HD you should really write a cryptic future predicitng text on old parchment paper or something. That way when everything you write comes true you can pretend to be Jesus or some other magician soothsayer type person and make a lot of money.
I’m a believer in Peak Oil, but I think its going to play out over the next few decades. The disinvestment and decline of the inner suburbs took 50 years, and I’d imagine the reversal will take about as long.
“We’re going to turn into more of european looking cities with a vibrant urban core and then suburban riot filled ghettos.”
I personally cannot wait for riot filled suburban ghettos. I picture rioting WASPs in Winnetka, angry that Obama has raised their taxes and that their 401k’s are down. Molotov cocktails being thrown on the Village Green and burning Mercedes SUVs parked in the lot at Indian Hill. That is good stuff.
Oh wait, we already have one — Maywood. Hmmm, that is less amusing to me.
I see Laura and HD have been hitting the NY hookah early this year.
You know how topsy turvy the world must be when I get my entertainment jollies not from the RE cheerleaders but from the CC regulars.
Yes people are just waiting to flock back to Detroit and Camden. Maybe even Garfield Park and Englewood will experience a renaissance of their own in Chicagoland?
Actually Laura some are flocking back to D-town indeed..wildlife.
“Perhaps, we should start requiring kids to take financial education classes in high school (college too) to prevent some of these bad behaviors and exploitation of the dumb poor.”
Illinois HS graduates must have passed a Consumer Education course or an equivalent (such as economics), as the class is a requirement.
You all know I’m joking when I talk about rioting suburban ghettos, right? Cold fusion? come on, this is comedy gold.
but for real, some cities have already been experiencing a sort of urban revival although it’s not like they’re for everyone. SF, Chicago, Manhattan, and a few others have lots of higher incomed professional people living in the city and the middle class lives in the suburbs.
Speaking of Detroit, don’t forget that during the dark ages and especially during the great schism, Rome had a population of less than 20,000 people, compared to a million in antiquity and nearly three million today.
and by city in the above examples I mean the city core, the so called ‘green zones’, etc.
“and by city in the above examples I mean the city core, the so called ‘green zones’, etc”
Yep. True that.
But Camden? Laura? Anyone?
Laura is going to start “snapping up” Detroit and Camden properties. And more power to her: there is amply supply of affordable properties today ripe for incredible appreciation if her hypothesis indeed turns out to be correct.
But methinks its more of she has some romanticized notion that these cities are still needed and/or wanted–they aren’t. They served a purpose before we had an ample physical and telecommunications infrastructure and needed to keep things closer together. Today they’re just bastions of poverty and relics of a bygone time and thats not going to change.
Don’t Be Fooled by the Housing Market’s False Bottom
http://moneymorning.com/2009/12/31/housing-market-false-bottom/
Also I am NOT predicting a return to 1993 values, I am predicting a CS index of 87-93 for Chicagoland sometime in 2014. Which corresponds to a 7-13% dip from nominal 2000 levels.
The above article is predicting a bottom in late 2011 with a CS index of 132. I think that is overly optimistic as it relies on one example–the early 1990s recession, that was much milder than this one.
I don’t think Laura has been to Gary lately… Like old Gary, go south on Broadway about 10 miles from 94 and it looks as it appears a neutron bomb went off in the 1960’s there, Detroit? Camden? Bahahaha ok, yeah people are just going to be dying to go back there with the 50% unemployment rate in Detriot…
Let’s get back to basics here. A lot of us invested in real estate back in the late 90’s and made a lot of money along the way. You nay sayers can cry until you are blue in the teeth but where did you successfully park your money over the last 15 years and what was your return? I personally turned a $20k when I was 18 into the $300k I put down on the home I live in today and I would not change a thing. Some investments work out and others do not. The key is your life style and whether or not you are happy with it.
Have your financial decisions created an opportunity for you to live a better life? I can’t in any in an scenario imagine living in a home as a rental for more than a couple of years. How can you call someone else’s home you home? A rental is temporary. A home is permanent!
Sabrina – Are you a renter? A great question!
Even I am missing the old heitboy now. The new one is a complete moron.
Sonies, what are you babbling about? Laura didn’t mention Gary. You obviously have no knowledge of the place. 10 miles south of 94 on Broadway puts you in the sterile suburbia of Crown Point.
I have no idea of what “old Gary” is, but the oldest hoods are definitely north, not south, of 94.
The hood south of 94 on B’way is Glen Park. It’s a real mess, but it is still in better shape than other Gary hoods except for Miller.
When you run the numbers on buying most places, you will come out ahead by renting over the next 2-3 years. I’m comparing renting a 2 bedroom to buying a 2 bedroom condo.
The key is consistently putting the savings aside into some investments with differing elements of risk in a combination of short-term investments, bonds, and stocks. The downside of buying are the maintenance costs/fees, the high transaction costs related to selling, the lack of liquidity, and the uncertain and egregiously increasing property taxes in the city. I didn’t even mention the expected decreases in value in 2010 and possibly 2011. In addition, rents are decreasing city-wide due to lower overall demand.
Keeping the savings in a savings account or in short term cd’s is probably a safer option than investing it in stocks and bonds, especially considering that you’ll need that money for a down payment in a couple years time. The risk from investing in the stock market far outweighs any gain if you’re saving for a down payment. Hell you could put the money in your mattress and end up ahead in light of the deflationary forces out there.
The easiest way to earn money is to keep the money you already have. Consume less, save more. You can easily save 10% more every month by cutting out discretionary expenses of marginal justification (starbucks, expensive car ins., eating out, etc).
I made over 40% on my equity investments in the past year, much of it was invested late in 2008. I am pulling some of it out in the next week to diversify more into cash and shorter term CD’s, with less in equities and bonds overall.
I just can’t justify total monthly housing costs of over $3,000 per month when you add in all the taxes, assessments, and mortgage payment for a nice 2 bedroom condo, with the real possibility of zero to negative 10-15% appreciation for the next 2-3 years. Especially when renting a comparable unit will run me around $2,000 -2,100 total.
“I just can’t justify total monthly housing costs of over $3,000 per month when you add in all the taxes, assessments, and mortgage payment for a nice 2 bedroom condo”
What price range are we talking about here? Most nice 2br/2ba condos in LP trade between 400 and 450k with 200-300 / mo assessments and 400-500 mo taxes. Even at the high end of that, I don’t get to 3k…
I’m sure you made 40% on your equity investments, I have no doubt of that, but I along with many other first time homebuyers would be foolish to risk down payment money gambling in the stock market especially after the crash we witnessed in 2008. I have nothing against gambling in the stock market but you should only do so with money you can afford to lose and IMHO most first time home buyers cannot afford to lose their 20% down payment. There are very few homebuyers who sold at the peak and then rented for a few years. Most people with a lot of cash already have a home. Don’t forget that as ridiculous as it sounds, I read in the WSJ a short time back that CD laddering has returned a better investment over the last 2 decades than investing in the equity market, and even with the stock market up 40% or whatever, CD laddering has been a pretty comparable investment.
$450,000 2/2
$90,000 down payment
5.3% fixed interest rate = $1,999 per month
$5000 taxes / 12 = $416 per month
HOA: $276
________________________________
$2,691
http://www.redfin.com/IL/CHICAGO/510-W-ARMITAGE-Ave-60614/unit-4/home/13348570
I’m talking monthly payment not including tax deductions, insurance, etc.
4th floor walkup, no parking. Ouch. Maybe 450k estimate is low.
Parking is included in my rent. 2 bedroom 2 bath with a fireplace and a roofdeck. 3rd floor walkup. So if you factor in parking costs and those other items I already have, it would be at least a $3,000 monthly cost.
Why would I buy in this market? I don’t see a good reason to do so.
By the end of the week, about 70% of my down payment money will be in CD’s and money markets. 70% of my new savings in 2010 will go to those, so I don’t think I’m taking that much risk, especially considering that I have many years to recover from any loss. I timed the 2009 stock market well, got lucky, and now have more in the bank as a result. I saw lots of panicked selling when I bought, which is how people make oversized returns if they are willing to take the risk.
“Sabrina – Are you a renter? A great question!”
I’ve said many times I’m a renter (I rent a condo.) I owned in the early 2000s however.
It’s much cheaper for me to rent than to own (the exact same property.) Until that changes, or I know I will be in the property for at least 10 years, then I will continue to rent.
“It’s much cheaper for me to rent than to own”
Sabrina — is this really still the case? Is your landlord losing money?
Bob: “a bottom in late 2011 with a CS index of 132”
Funny, cuz Chicago is currently under 131. I guess Gary was right!
The author in your link is actually predicting 1993 CS value + 74%. S&P appears to have firewalled the historical data, so I don’t know what that means for Chicago, but I think (1) it’s a bad prediction, based on faulty logic and, (2) even if tied as neatly as they suggest, it would need to be based on each metro’s dp increase, not a national number.
I think a case shiller value of 120 in late 2010 to early 2011 is very likely but we could go to 110 if we bottom as late as 2012 or 2013
I think the CS will be in the 115 to 118 range by 2011. The pain is nowhere near where it will be next summer once the banks start dropping the bombs/foreclosures on the market when they can no longer hang on to them.