2nd Biggest Story of 2011: Short Sales Will Be Everywhere…Even in Lincoln Park
In 2010, foreclosures were expected to be one of the biggest stories of the housing market.
Instead, in many neighborhoods, it was short sales which really dominated the Chicago housing market landscape.
For example, this 1-bedroom unit at 2700 N. Halsted in Lincoln Park has been on the market 16 months and is now a short sale.
Built in 2002, this 850 square foot unit has everything buyers look for.
The kitchen has 42 inch maple cabinets, granite counter tops and stainless steel appliances.
There is an in-unit washer/dryer, central air, deeded parking and a small balcony overlooking Halsted.
Assessments are relatively low at just $200 a month.
Yet this short sale still isn’t selling even though the property has been reduced $76,000 since it was originally listed in August 2009.
Will short sales become the sales method of choice for many in 2011?
How many short sales will actually sell?
And how many will come back on the market as bank owned properties?
With many buyers having difficulty buying short sales (due to long wait times from banks etc.)- will the increase in short sales only add further chaos to the housing market?
Eric Newman at @Properties has the listing. See the pictures here.
Unit #208: 1 bedroom, 1 bath, 850 square feet
- I couldn’t find an original sales price but it sold in March 2003 for somewhere just over $300,000
- Originally listed in August 2009 for $325,000
- Lis pendens foreclosure filed in December 2009
- Listed in July 2010 for $285,000
- Reduced
- Currently listed as a “short sale” for $249,000 (parking included)
- Assessments of $200 a month
- Taxes of $4304
- Central Air
- In-unit washer/dryer
- Bedroom: 15×12
- Living room: 25×12
- Kitchen: 10×9
This place will sell a lot closer to 200k than it does 250k. There is nothing special about. It’s small, cookie-cutter, and the same thing as hundreds of other one bedrooms out there. The only thing it has going for it is the heated parking, washer/dryer, and fitness center.
I think when the history books are written 10 years from now – Chicago’s condo (not SFH, just condo) market will be listed as just about as bad as Phoenix and Las Vegas were.
totally off-topic, but im trying to find an average GRM (gross rent multiplier) for the Gold Coast (60610 & 60611). anyone have any ideas?
I think this unit is pleasant…for the right price. For 200K including parking, OK unit. Yes, you can find some 2/2s in this price range.
joe, condo equity played a big role in SFH price and supply increases during the mania. Absent that and EZ credit, SFH prices can go nowhere but down. Sure, there are some who can buy now, just not enough to prevent them from becoming knife catchers.
A generic one bed at Halsted and Diversey, located just one floor above a stretch of Halsted that feels like a bus depot, is now listed at $250k. Wow, stop the presses!
This place was overpriced from the get go. Yet the fact that a one bedroom place such as this one (i.e., text book cookie cutter, 1/1, in a fairly undesirable location) is currently listed at $250k in a distressed sale is hardly a good example of “the sky is falling and zombies will be eating your real estate brains, EVEN IN LINCOLN PARK!”
Yeah, I get it. The worst economic downturn in nearly a century and the worst US real estate downturn ever has impacted almost every inch of property in Chicago, including Lincoln Park. But how are comparable 1/1’s fairing in pretty much any other hood?
As I’ve said many times, it is imprudent (not to mention a bit unbecoming) to cheer on the pain in the nicer locations. If things become undesirable in the most desirable areas, what will become of every place that is NOT Lincoln Park, and the like?
“If things become undesirable in the most desirable areas, what will become of every place that is NOT Lincoln Park, and the like?”
It’s going to get really affordable. Instead of spending 40% to 50% of income on housing it will be 20%. That will free up money for other more productive things- saving, vacations, home remodeling etc. The middle class family won’t be stressed about their housing costs anymore.
I’ve always maintained that there is no natural buyer for this type of property. Cheap credit, pervasive fraud by banks (liar’s loans, MBS fraud, etc.), and bubble/herd mentality was responsible for the craze that turned young renters into “homeowners”. These folks usually stay at one address for maybe 3 years. Think of how silly it is to take out a 30 year mortgage on a on a 1/1 or even 2/1.
There will soon come a time when rental parity dictates the value of these places. There is no next generation of Junior Real Estate Speculators (condo buyers). A younger friend (26 years old) recently told me “my generation has no desire to buy ANYTHING”. I think his views are pretty typical of 20 somethings today. There has definitely been a shift in paradigm. Ask some young people their thoughts. They might surprise you.
I’m not mocking anyone stuck in a place like this. I feel for them. It’s gonna suck for them.
249k is a pipe dream for this place, even if the bank would take it.
Someone should’ve told this owner back in 2003 you don’t need to drop 300k to live near & get wasted at Durkins.
On the upside, we could have a nice supply of inexpensive condo quality rentals in the future.
The thought makes me a bit jealous with some of the %&*^holes I’ve lived in.
TB, there is a market for this. Its a buyer who can realistically never afford a SFH and wants to remain in the city. Lots of people make less than 100K and want to remain in the city long term. Now that credit is not so easy…they actually have to purchase in their realistic price range (30% income to housing, not 50%). Its just going to take these people a while to figure out that the ELP SFH or the 3 bedroom downtown condo/luxury loft is never going to be in the cards for them. So the choice is Schaumburg SFH or an LP condo.
Case Shiller October data is out.
Chicago composite at 122.28
Third biggest month over month drop in the 20 city index:
Atlanta down 2.9%
Detroit down 2.5%
Chicago down 2%
Largest year over year decline in the 20 city index:
Chicago down 6.5%
Atlanta down 6.2%
Detroit down 5.5%
Phoenix down 4.3%
“Month-over-month prices dropped in all 20 metro areas covered by the index. Six markets — Atlanta; Charlotte, N.C.; Miami; Portland, Ore.; Seattle and Tampa, Fla. — reached their lowest levels since the housing bust first began in 2006 and 2007.
“The double-dip is almost here,” said David Blitzer, chairman of the Index Committee at Standard & Poor’s. “There is no good news in October’s report. Home prices across the country continue to fall.””
http://money.cnn.com/2010/12/28/real_estate/home_prices_fall/
“So the choice is Schaumburg SFH or an LP condo.”
What are you talking about? They could easily buy a house in Portage Park for the same price as this condo and dozens of other neighborhoods. The choice isn’t between Schaumburg and Lincoln Park. Pulease.
a local –
I beg to differ. I understand that there are lots of people who would consider a decent city condo for long term. Most of these people wouldn’t touch a Halsted St cookie-cutter, 2 doors down from a large Chicago Fire Department station, across the street from The Hidden Shamrock bar (or, as we used to call it, the “Shit and Hamrock”)and Alive One (a decent rock bar).
I’d guess that most long term LP dwellers would be looking for a quieter, more grown up address, and a condo with some pizzaz. Maybe a Lakeview St. or Lincoln Park West addresses?
“TB, there is a market for this. Its a buyer who can realistically never afford a SFH and wants to remain in the city.”
I disagree completely. Whoever buys this place never even had a SFH on the radar. Not — well, I can’t afford that SFH so a 2nd floor 1-bedroom, 1-bathroom condo on a busy street will have to do… This is more like a SPC — Single Person Condo.
What happens to one bedrooms in neighborhoods that aren’t LP but in the city and safe and near public transportation?
See below:
http://www.redfin.com/IL/Chicago/4211-N-Kedvale-Ave-60641/unit-314/home/21998119
Annony said “As I’ve said many times, it is imprudent (not to mention a bit unbecoming) to cheer on the pain in the nicer locations. If things become undesirable in the most desirable areas, what will become of every place that is NOT Lincoln Park, and the like?”
undated cookie cutter in a less desirable [than 160 E Illinois] location, but they got a better photographer.
There will be even better deals than last time. Knives aren’t universal.
um hd seems like a non-arms length transaction; I am sure others would have bid it up a bit more than 67% off list in 2 months.
The Chicago CS SA index for October is 119.95. Sub 120, who would have thought? The first sub 120 for the correction. Nothing special really, just the first. The only question now is if it won’t be sub 110 by March.
“Largest year over year decline in the 20 city index: Chicago down 6.5%”
In all fairness, last fall was the peak of the dead cat bounce off the first dough4dumps trampoline. It sure looks like that did delay the correction. It also appears that the last round of d4d also delayed another step down with the magical bouncing cat. Thank you knife catchers for relieving some burden on future taxpayers.
Now, let’s see where this kicking the can down the road takes us…
Look for the proles who are long on RE to push for another dough4dumps program. Hopefully these newly elected tea party representatives will make it clear to them that it’s not the government’s responsibility to bail people out from their reckless financial decisions in life.
There are winners & losers in a capitalistic meritocracy, as there should be. Its becoming obvious who the losers are in this bust.
They are gonna be everwhere!!!
…and impossible to close on until 2012 unless you bid 2x ask!
What were they thinking when they listed in 8/09 at $325K? I agree this feels more like $200…
A sample of 1/1s and 2/1s
Sold on 09/28/2010
$40,000
4136 N Keystone Ave Unit 1NE
CHICAGO, IL 60641
1/1
Sold on 10/18/2010
$40,000
4128 N KEDVALE Ave #004
CHICAGO, IL 60641
1/1
For Sale (MLS-listed)
$48,000
4249 N KEDVALE Ave #11
CHICAGO, IL 60641
1/1
Sold on 08/12/2010
$40,000
4209 N KEYSTONE Ave Unit GW
CHICAGO, IL 6064
1/1
Sold on 09/17/2010
$27,500
4814 W Hutchinson St Unit 2B
CHICAGO, IL 60641
2/1
For Sale (MLS-listed)
$77,777
4855 N Harding Ave #2
CHICAGO, IL 60625
2/1
Sold on 10/28/2010
$98,500
4655 N Spaulding Ave #3
CHICAGO, IL 60659
2/1
Sold on 07/09/2010
$26,500
2700 W Summerdale Ave Unit GD
Chicago, IL 60625
1/1
Sold on 09/23/2010
$25,000
2400 W BALMORAL Ave Unit 3B
Chicago, IL 60625
1/1
Sold on 11/10/2010
$54,900
2700 W Gregory St Unit 2W
CHICAGO, IL 60625
2/1
Sold on 11/01/2010
$61,000
4881 N Hermitage Ave Unit G3
CHICAGO, IL 60640
1/1
Under Contract (MLS-listed)
$100,000
3600 N LAKE SHORE Dr #1304
CHICAGO, IL 60613
1/1
Sale Pending (MLS-listed)
$32,000
1034 N MOZART #2
CHICAGO, IL 60622
2/2
“What were they thinking when they listed in 8/09 at $325K? ”
They were thinking “I want to live in THIS neighborhood” and “everything else is selling for at or near this price” and my realtor won’t let me lowball because she has comps to back up that they won’t entertain such an offer
“They could easily buy a house in Portage Park for the same price as this condo and dozens of other neighborhoods. The choice isn’t between Schaumburg and Lincoln Park. Pulease.”
Alas, to many transplants who live in the green zone, in their mind Portage Park is as far away from “the city” as Schaumburg.
“What were they thinking when they listed in 8/09 at $325K?”
They were thinking that’s what they needed to roughly break even after their likely low downpayment and taking Realtor fees and transaction costs/taxes into account and that it was a free lottery ticket? But apparently Godot did not come to buy their place.
the average transaction I saw in the area [5 blocks] for a 1/1 was around 80-60K with 40K being the lowest except for the one you found.
looked up another interesting one that you found and saw 3C sold for 12K on 12/14
Sold on 09/23/2010
$25,000
2400 W BALMORAL Ave Unit 3B
Chicago, IL 60625
1/1
moreover that area bounded by montrose irving and elston has the majority of properties [there has to be a reason sec-8, gay bar, gangs etc.]; move out from that area hardly anything is for sale or sold [1/1’s]
“They are gonna be everwhere!!!
…and impossible to close on until 2012 unless you bid 2x ask!”
Yep, which is why the banks will accelerate foreclosures. Short sales will likely not increase as much as REO sales in 2011. The banks are learning that delaying the foreclosure because the loanowner is “trying to short sell” is costing them money, and the potential for short sale fraud is not worth the risk of waiting.
So, there are likely to be more short sales but a greater increase in REO sales in 2011.
I wonder if the coming inflation started by the printing presses might actually create a bottom in real estate… Look at Gold prices etc, the dollar is becoming more and more worthless every day.
It’s cheap because those apartments were converted to condos over the years when they should have remained apartments and now owners are walking away en mass.
No gangs, no section 8, no gay bars. a little rough around the edges but nothing like uptown or rogers park.
“#revassal on December 28th, 2010 at 10:25 am
moreover that area bounded by montrose irving and elston has the majority of properties [there has to be a reason sec-8, gay bar, gangs etc.]; move out from that area hardly anything is for sale or sold [1/1’s]”
“I wonder if the coming inflation started by the printing presses might actually create a bottom in real estate…”
That is certainly the intent of the Fed. However consider that people are still paid in nominal dollars, and aggregate wages are down in nominal dollars. RE prices are going to be tied to nominal wages (in USD), which aren’t holding up so good.
Some interesting data points:
January 2000 Chicago CS SA index = 100.57
October 2010 Chicago CS SA index = 119.95
January 2000 to October 2010 CS SA change = +19.27%
January 2000 to October 2010 BLS CPI change = +29.57%
January 2000 average 30 year mortgage rate = 8.21%
October 2010 average 30 year mortgage rate = 4.24%
Bob and G, those points sound impressive but I don’t have a clue what it means. Can you translate to English for us simple folk 😉
“Look at Gold prices etc, the dollar is becoming more and more worthless every day.”
not in terms of EUR or GBP; the dollar is actually appreciating. the problem with thinking inflation in gold, wheat, oil, etc. will also carry over to RE is that nobody can get a loan to buy RE. if banks dont lend out money for homes or only lend out to people with 20%, i could see RE flatlining while food, energy, metals rise in price. we either need wage growth or a further fall in real estate prices before inflation brings RE prices back up with it.
short sales are stupid
not only do you trash your credit score
you lose your house
you have to pay taxes on the difference in mortgage amounts
you have to still pay your mortgage
you have to deal with the insane buerocracy at the bank to get an approval, not to mention finding a qualified buyer
you have to deal with funky financing
why not just stop paying and live in your place for free for a few years and when the bank finally gets around to forclosing on your dumbass hand them the keys and say F-u
oh and I also forgot
you don’t have to keep your place staged
you don’t have to deal with a realtard either
“you have to still pay your mortgage”
No, you don’t. Some banks will even act faster if you don’t. However, this opens the door to just another stalling tactic by the FB. The banks, as dense as they are, are wising up to this fact.
Conversely, sellers who are paying their mort and attempting to short sell will be encouraged by banks to continue doing so. No sale approval will be made by the bank (unless high price like a-fed suggested) as long as they believe they can delay you into continuing to make payments.
The banks’ encouragement up to now of short sales fit their incompetent plan of delaying everything until “the market improves.” Even the dumbest among them are now beginning to see it is a race to the exit.
If it’s a race to the exit then when are we going to see the fire sales?
But I thought that the delinquent balance needed to be paid before any closing takes place
“you have to pay taxes on the difference in mortgage amounts”
No I thought the tax law was changed recently so this is not due to the IRS. This is forgiven iirc.
“Bob and G, those points sound impressive but I don’t have a clue what it means.”
It means while the Fed may incite inflation in other asset classes, especially those sourced from imports, they are unlikely to do so to US RE valuations as US RE valuations are largely set by people that live in the US’s wages in US dollars.
“But I thought that the delinquent balance needed to be paid before any closing takes place”
Ummm, then it wouldn’t be a short sale. The bank is just looking at the bottom line.
“you have to pay taxes on the difference in mortgage amounts”
Not for now and I think it’s safe to believe that will be extended.
“If it’s a race to the exit then when are we going to see the fire sales?”
Don’t forget how fat those bankers have become.
“It means while the Fed may incite inflation in other asset classes, especially those sourced from imports, they are unlikely to do so to US RE valuations as US RE valuations are largely set by people that live in the US’s wages in US dollars.”
exactly. w/o wage growth or lending standards ala the early 2000s, RE prices will at best remain flat.
I just went on Streetview to check out some of those listings homedelete put up and found a 2/1 at Balmoral and Western on the market for $14,900. We’re now entering the realm of condos that are cheaper than trailer homes.
“If it’s a race to the exit then when are we going to see the fire sales?”
When the top 20 banks were bailed out along with the GSEs who probably control 90+% of the mortgage market perhaps no time soon. This is because they aren’t incentivized to do so: they know their firms do not have to adhere to the same constraints of capitalism that non-favored firms do.
The government can’t maintain the facade forever: look for BHO to pass on one giant lemon to his successor, whether that be in 2012 or 2016. Depending on the year will impact the amount of dirt under the carpet. Either a giant pile or an enormous pile.
“We’re now entering the realm of condos that are cheaper than trailer homes.”
Trailer homes have fewer contingent liabilities created by neighbors.
“We’re now entering the realm of condos that are cheaper than trailer homes.”
I was going to make a meth lab joke but, at these prices, it might become applicable to both typies of residences. One thing’s for sure, rents are going down. So long foolish investors with the higher cost bases.
“We’re now entering the realm of condos that are cheaper than trailer homes.”
Trailer homes have the added plus that if there are no jobs in your area you can relocate your domicile to an area with better prospects.
Of course during the boom nobody ever considered the hindered mobility of the owner caste because few considered, much to their detriment, that things could actually go bad.
“Of course during the boom nobody ever considered the hindered mobility of the owner caste because few considered, much to their detriment, that things could actually go bad.”
The Realtards told us that if we lost our job or things got so bad, we could always sell our places for at least as much as we bought them.
Always question the motivations of a salesperson. The vast majority of them aren’t in it for altruistic motives but rather financial.
It’s absurd what banks are paying during the foreclosure process. The banks are paying the servicers about .25% which is hardly enough which means the servicers make their money on fees instead;
I’ve seen advertisements on housingwire for asset managers that charge $500 per file to handle an asset; and I know for a fact that the foreclosure law firm mills charge roughly $500 per file as long as it’s a default. Process servers get roughly $3 per non-service attempt and $25 or $30 per actual effectuated service. Then when it’s time to close the REO the banks won’t pay more than $200 or $250 closing to the attorneys in attorney states; and they’re using in-house staff or title companies in every other case for pennies on the dollar.
What this means in the race to the bottom on pricing is that these 3rd parties outside banks are staffing their files with hoards of undertrained, undereducated, overworked, unpaid and often incompetent ‘paralegals’ and I use that word loosely, and of course, everything is a clusterF**K. REO realtors take reduced commissions and don’t like to share, they don’t even bother putting pictures because they don’t feel they’re making enough money.
So, cases take longer, complicated cases get put off to the side because there’s too few staff competent to handle the case; in some cases, routine issue that would normally take weeks to fix take months or longer.
“So, cases take longer, complicated cases get put off to the side because there’s too few staff competent to handle the case; in some cases, routine issue that would normally take weeks to fix take months or longer.”
In these cases who pays for the accumulating costs? (Property damage from sitting vacant, back taxes, back HOA fees, etc)? It sure ain’t gonna be the deadbeat. And please don’t raise my blood pressure by saying its the 53% of Americans who pay federal income tax.
Bob, the buyers pay the accumulating costs in the purchase price of the asset; everything else is just a loss, which is different than a cost.
“everything else is just a loss, which is different than a cost.”
Not to the banks that are marking their assets to fantasy. Losses that aren’t reserved for must be expensed upon sale.
Might show up on a different line of the IS but still flows through to the bottom line.
“Not to the banks that are marking their assets to fantasy. Losses that aren’t reserved for must be expensed upon sale.”
Still not an out-of-pocket cost. Accounting-wise, it’s pretty much the same, but in the real world a cost is worse than a loss.
I love units like these, I wonder how many little parties were thrown there with Tostitos and Pace picante sauce on that kitchen island? how many more will?
homedelete and revassal –
This entire complex on Balmoral is in distress. I haven’t researched what exactly the story is because I’m not interested in pursuing anything there, but cheap listings from these condos pop up in my MLS blast daily. It appears they are still collecting monthly assessments, however in some of the photos I’ve seen, windows are boarded up and the units are always in terrible condition and very, very old.
Also, it borders on Rosehill Cemetery.
I would lump these units in with the rest of the units I’ve seen lately which are dirt cheap, but not a “deal”.
* * * *
“looked up another interesting one that you found and saw 3C sold for 12K on 12/14
Sold on 09/23/2010
$25,000
2400 W BALMORAL Ave Unit 3B
Chicago, IL 60625
1/1”
For a little less than that you can get an adorable ELP 1/1 vintage with redone kitchen/bath:
http://www.chicagotopcondos.com/?q=07638512#
Granted, you have coin laundry (!), no central air (!!), no FP, no balcony, and nearby rental parking (!!!!!!11!!1!), but you get that adorable ELP vintage feel and location.
So $250K for all the amenities this has doesn’t seem too bad. Would never want to live on Halsted, though, much less that strip of it. Blah.
Take a look at the pics for Unit 3C which sold for 12K:
http://www.redfin.com/IL/Chicago/2400-W-Balmoral-Ave-60625/unit-3C/home/28939902
Then read the realtor comments:
“Lincoln Square Studio cleaned up and ready for you to move in. Conveniently located close to everything.”
BWAHAHAHAHAHAHAHAHAHAHAAAAAAAAAAAAAA!
“Take a look at the pics for Unit 3C which sold for 12K:”
And those places apparently sold for 129 to 199 in ’07 and ’08.
youre absolutley correct sabrina,nothing at all wrong with portage park,or any of the other so called middle class neighborhoods,that are actually very nice and have a nice housing stock.no need to flee to the ‘burbs.
****************************************
“So the choice is Schaumburg SFH or an LP condo.”
What are you talking about? They could easily buy a house in Portage Park for the same price as this condo and dozens of other neighborhoods. The choice isn’t between Schaumburg and Lincoln Park. Pulease.
The 2400 W Balmoral Building’s in a nondescript no-man’s land type of area. It’s not really Lincoln Square and not quite Budlong. As far as living in that particular building, one would have to accept the fact that they’re right on Western Ave with the attendant noise, forget the cemetery.
As far as being located close to everything? Well, sure. If you have a car. Oh. There’s that brand new Dominick’s on Lincoln if that’s considered “everything.”
Think of what we could all accomplish with the time we are spending debating facts on this blog.
The housing market sucks, just look at that data. Yes.
The housing market is okay, just look at this data. Yes.
This neighborhood is terrible because of blank. Yes.
That neighborhood is awesome because of blank. Yes.
“you have to pay taxes on the difference in mortgage amounts”
“Not for now and I think it’s safe to believe that will be extended.”
You all were discussing what happens in a short sale in this thread. This is NOT accurate. We’ve chattered about this before but it’s been awhile since we went over the “rules” of short sales.
The IRS only “forgives” the loss on the mortgage if it’s a first mortgage- NOT the second. This was passed by Congress during the financial crisis so that people were not taxed on the difference between what they owe and what was forgiven. But for moral hazard reasons, they only forgave it on the first mortgage (with the thinking that people took out second mortgages to buy boats, jet skiis, go on vacations etc. and therefore they shouldn’t be off the hook for this amount.)
For example: if you bought a $300k condo with a $250k first loan and a $50k second loan and now you are short selling it for $220k- the second bank will obviously not get anything in the sale.
If the bank “forgives” the second loan, under the current tax law that $50,000 is considered income and you will be taxed accordingly. The bank will issue a 1099. I know someone who had this exact problem and there was no way they could pay the tax on the $50k (which would have been somewhere around $10k.) So they worked it out with the bank so that it could be paid over a 5 year period. The bank is issuing $10,000 1099s 5-years in a row so they will slowly pay the tax on it.
But the homeowner is obviously not getting out of the second loan scott free.
I know of a second scenario where the bank is making the homeowner pay about $16,000 on a $40,000 second mortgage in order for it to be “forgiven.” I don’t know the tax implications of that deal.
In neither case did they just walk away. Why didn’t they just allow it to go into foreclosure? Their credit scores were not hurt as badly. In one case- their score hardly went down at all. For some people- the credit score still matters. Also- if they walk away they will still owe the tax on the second mortgage anyway (the bank will still issue the 1099 in the case of a foreclosure.)
Good times.
Yes I have read the credit score impact of a short sale is roughly 1/2 that of a foreclosure; and it stays on your report for a shorter amount of time. That’s what I’ve read – don’t know if it’s fact or not.
It all depends if you stop paying your mortgages during the short sale process. If any amount of the second. Gets charged off or id they report it as ‘late’ your score will be affected.