Market Conditions: Chicago is #5 in the U.S. for Homeowners Underwater
First American CoreLogic just released its first quarter report on negative equity in the United States.
The Chicago market has more homeowners underwater than you would think (and I don’t know if this means Chicago, the city, or the entire Chicagoland area.)
The metropolitan markets with the most underwater home owners in first quarter were:
- Phoenix: 550,000
- Riverside: 463,000
- Los Angeles: 406,000
- Atlanta: 399,000
- Chicago: 365,000
Report: 11.2 million U.S. Properties with Negative Equity in Q1 [Calculated Risk Blog, May 10, 2010]
Additionally, according to the Chicago Tribune, Zillow is also releasing a report on negative equity with these findings on Chicago:
Within Chicago, 62 percent of homes sold for a gain in March, or 57 percent of single-family homes and almost 70 percent of condos.
Translation: 43% of single family home owners sold for a loss and 30% of condo owners sold for a loss in Chicago in March.
In the entire Chicago area, 40% of all homes in March also sold for less than the owner had paid.
Zillow: 40% of home sellers took a loss in March [Chicago Tribune, Mary Ellen Podmolik, May 10, 2010]
Also, John Paulson, the hedge fund manager who made a now famous, and lucrative, bet against the housing market a few years ago when he believed a housing crash was coming, is now saying every American should buy real estate.
Paulson is now bullish on the U.S. economy, expecting a V-shaped recovery as the housing market rallies.
On Monday, Paulson said U.S. house prices could climb 3% to 5% in 2010. Next year, prices could rally 8% to 12%, he added.
Home ownership in the U.S. is the most affordable it’s been in 50 years, Paulson also said. Based on median home prices and the cost of mortgages versus median household income, houses are roughly 60% more affordable than they were at the peak of the housing bubble in 2005, Paulson said.
“My advice to all Americans — if you don’t own a home today now’s the time to buy one,” Paulson said. “If you already own one, now’s the time to buy another one. If you already own two, it’s time to help your children buy a home.”
A solid housing market should “cement” stronger-than-expected economic growth, Paulson said, forecasting GDP to expand 4% to 5% in 2011.
European debt market ‘managable’, Paulson says [Marketwatch.com, May 10, 2010]
No time to check the report this morning but perhaps someone can explain how CoreLogic would determine something like this. I can understand making such a determination based upon what has sold but determining it based upon what people own seems like a much more problematic analysis.
I think a lot of smart sellers got down to business at the end of April, realizing that was their best chance to get out of their house so they cut their prices and took their lumps.
I have no idea why Paulson is convinced we’re in (or soon will be in) a V-shaped recovery. Things have been pretty stagnant for a while. Perhaps his ‘V’s look like ‘L’s.
Fannie Mae Needs 8.4B More
http://online.wsj.com/article/SB10001424052748703880304575236030191182938.html?mod=WSJ_hps_LEFTWhatsNews#articleTabs%3Darticle
“The company has now racked up losses of nearly $145 billion, or nearly double its profits for the previous 35 years.”
We’re almost certainly in for a double-dip. The question is the magnitude of the second part of the W.
Paulson sees a recovery because he has just had Goldman cook up a bullish CDO position and now he needs to bring some new sheep into the slaughter.
Permabear- you took the words out of my mouth.
Are those legitimate quotes? How could he be advocating buying a second home? He’s another reason our economy is where it is today.
Properties on the south side are cheap cheap cheap. $10k or less for a SFH on a 25×125 lot. Spend $20k at home depot and the place becomes livable. Rent it out for $700 a month.
I could buy two or four of them for less than $40k.
The only problem is trying to collect rent.
Or, if I’m like that property ‘redeveloper’, I have to wait 10 or 20 years for the property to appreciate in value to make my money.
““My advice to all Americans — if you don’t own a home today now’s the time to buy one,” Paulson said. “If you already own one, now’s the time to buy another one. If you already own two, it’s time to help your children buy a home.””
lol what a clown, PermaBear @7:34AM nailed it
He’s only in it for himself. Disgusting what happens when greed consumes a person. I would advocate people not buy homes this year, especially not a 2nd home, unless they can afford it. With the way FHA is lending, there is really a very limited restraint. The only limiting factor is appraisals, which are a joke in their own right.
Paulson should be strung up by his toes
Dave M – Do you think the housing market will ever return to “normal” where buyers actually have to come up with material downpayments or have we entered a permanent new arrangement where Uncle Moneybags will underwrite any loan with only 3.5% down forever without regard to credit losses? As a guy who sends enough cash to buy a nice luxury car to Washington every year, I must say I am pretty troubled by the massive losses Uncle Moneybags is taking on Fannie and Freddie and setting itself up to take on the FHA paper so deadbeat proles can live rent free in nicer places than my apartment. Are the handful of posters on this board the only ones troubled by this arrangement or will we see sufficient political movement to cause this ridiculousness to stop?
Slightly off topic, but a worthy read about the age old cribchatter.com debate of purchasing verse renting.
http://changethis.com/manifesto/issue/70.02.GreatReset#view
“I don’t know if this means Chicago, the city, or the entire Chicagoland area. … Chicago: 365,000”
If it somehow controlled for occupancy ( I don’t think it does or even can), then there is NO WAY it’s the city only–the city has around 1mm housing units and something around 45% of them are o/o–it’s unpossible that 81% of city units have mortgages in excess of their value, given how many own free and clear.
Also, those numbers are better than I would have expected–metro Chicago (9.6mm) is much, much larger than Phoenix (4.4), Riverside (4.1) or Atlanta (5.5) with significant fewer underwater owners. And, if “LA” does not include Orange County (I would suspect it does not), LA isn’t much larger and would have a quite similar percentage.
I think Chicago will continue to move up that list little by little into 2011. It’s gonna be great to be a buyer 12 months from now when everyone is forced to sell, and the banks are forced to dump more properties on the market. All the phony paper gains have evaporated, and the true real estate investors can take over.
The answer to your question is multi-faceted:
1) higher taxes;
2) printing money;
3) austerity measures such as means testing SS & Medicare
4) and in some cases, possibly default
Our problem is the same problem that western countries the world over have. Too much debt, too generous benefits, not enough money to pay for it all. Debt loads get to a point where servicing the interest becomes too expensive.
We’ll just have to wait and see what other countries do. The four solutions of late have been: a. Default (aka Argentina); b. Run the printing presses (aka Zimbabwe) and 3. borrow even more (aka US and much of Europe) and 4. Austerity measures (aka Greece). All the options totally suck.
i suppose the 5th option would be to start a world war and win the war. We don’t owe nobody nothing.
“#PermaBear on May 11th, 2010 at 8:42 am
Dave M – Do you think the housing market will ever return to “normal” where buyers actually have to come up with material downpayments or have we entered a permanent new arrangement where Uncle Moneybags will underwrite any loan with only 3.5% down forever without regard to credit losses? As a guy who sends enough cash to buy a nice luxury car to Washington every year, I must say I am pretty troubled by the massive losses Uncle Moneybags is taking on Fannie and Freddie and setting itself up to take on the FHA paper so deadbeat proles can live rent free in nicer places than my apartment. Are the handful of posters on this board the only ones troubled by this arrangement or will we see sufficient political movement to cause this ridiculousness to stop?”
“Austerity measures (aka Greece). All the options totally suck”
please to explain. austerity measures (at least of the scale that could work in the USA) needn’t *necessarily* suk. Isn’t that Grover Norquist’s goal, anyway?
John Paulson: “My advice to all Americans — if you don’t own a home today now’s the time to buy one,” Paulson said. “If you already own one, now’s the time to buy another one. If you already own two, it’s time to help your children buy a home.”
Shorter John Paulson: “Come here little lamb and stick your neck through this comfortable, yet light weight harness.”
This SOB is the subject of a massive fraud investigation (criminal and civil), and the wise advise would be to keep his mouth shut.
But, much like Blagojevich, he thinks that keeping his name and face in the limelight helps his cause.
hey HD did you know that 40% of government debt is owned by…. our own government?
anon(tfo) the greek austerity measures suck for the greeks because they significantly raise the retirement age from 55 to 67 I think and they also are lowering pensioners benefits for everyone across the board. It’s on par with teh rest of the world but it still sucks for the greeks who are used to living well.
Sonies,
Yeah, I know we own a lot of our own debt. that’s the default on the debt option.
“the greek austerity measures suck for the greeks because they significantly raise the retirement age from 55 to 67 I think and they also are lowering pensioners benefits for everyone across the board.”
Boo Yah. Bring on the austerity measures. Can we use Illinois as the first experiment in the USA?
They should raise the retirement age for all government workers to 65. That would help with the pension issue immediately, and help with state, local, and federal budget crises. Why don’t they do this? Why are government workers allowed to retire at 52 with a full pension? The system is rigged.
Oh I totally agree with you anon(tfo), I’m just saying that there’s rioting in the streets and they’re burning banks over this and other austerity measures.
IL is defacto insolvent if you define insolvent as the inability to meet your financial obligations as they come due.
It’s just a matter of time before these issues come up in federal court who appoints a receiver to run the state and terminate union contracts. By 2013 if I had to guess.
“Boo Yah. Bring on the austerity measures. Can we use Illinois as the first experiment in the USA?”
“I’m just saying that there’s rioting in the streets and they’re burning banks over this and other austerity measures.”
You’re young. The Greeks sort of have a track record of rioting for good and bad reasons. Wake me when there are austerity-measure-related riots in scandavia/germany/benelux, etc. (I’d say western europe, but I’d expect the French to riot, too).
“It’s just a matter of time before these issues come up in federal court who appoints a receiver to run the state”
Good thing you don’t litigate constitutional issues.
Paulson’s just talking his book, I’d imagine.
What happens when a state is BK? they can’t just file Bk. Do creditors start attaching assets? There is no real answer. But whatever it is, we’ll find out.
It’s just thoroughly depressing to read about the Illinois budget situation. I really don’t see any solution. We’re running headlong into a default.
This is the number one reason why I haven’t bought property. I just don’t trust Illinois politicians. But never in my most cynical did I ever expect to see this place go insolvent.
permabear, the reason proles are occupying min-mansions they can’t pay for on your dime and mine is that Wall Street owns this country, and you and I and other net taxpayers, large and small, have to offset the Street’s losses.
A retired hedge fund manager was in my office yesterday, with his pal, one of our brokers, and he put it just that way. “Wall St. owns this country.”
I mean, we already knew that, but hearing it out of someone who went to school and later worked with many famous names connected with this debacle pretty well ices it.
I will never get to collect a dime of social security and I’ll be working until I drop, to offset the losses, and so will anyone who hasn’t been able to pack away a large sum of cash. And even those will be hosed by the low interest rates and inflation, which WILL come, and rather soon.
“It’s just thoroughly depressing to read about the Illinois budget situation.”
[I deleted a political thing before posting] Don’t rely on any reports or summaries, unless they’re from a source you (a) trust in general and (b) believe has some facility with numbers. The “deficit” for FY 10-11 is all about political fear mongering in an election year.
Can someone answer why we are doing pension-funding catchup in the midst of a bad recession?
“I will never get to collect a dime of social security”
More political fear-mongering. Even when SS “runs out of money”, the current year taxes support about 70% of projected benefits. So $14k/year instead of $20k (or whatever)–still a lot of dimes.
Dan, thank you for the link.
yeah except you’ll have to live to 80 to claim on it
danny,
The budget situation in Illinois is definitely something to think about before buying property. It’s certainly under-appreciated.
It’s a lot easier to vote with your feet if you aren’t tied down.
“The “deficit” for FY 10-11 is all about political fear mongering in an election year.”
anon,
I’m not sure how you figure this. Is it not a fact that the Illinois unemployment fund is broke and borrowing from the Federal government? Is it not a fact that businesses in the state have seen their unemployment tax rate increase for 2010 to make up for it? I had zero employee turnover and my rate increased 16%. Is it not a fact that sales tax revenue is failing to meet even the most pessimistic projections of last year? Is it not a fact that income tax revenue continues to drop?
“I’m not sure how you figure this.”
How much of the $12b consists of making up for past under-contribution to pension funds? Does doing that make *any* sense in the current economy? And we should cut education funding to make that happen? Fear. Mongering.
And with that, I promise not to talk about it more, in this thread, unless it actually ties back to housing fairly directly.
anon(tfo), Illinois has stopped paying most of it’s 3rd party bills and instead uses most of the revenue for salaries. I personally know the gen counsel for one the various IL depts and this person say that their dept is broke, completely broke, they aren’t paying vendors and in some cases they’re months behind on rent, and they are projected to run out of money to even pay salaries in their dept sometime in June. It really truly is as dire as everyone claims it is.
http://qctimes.com/article_9953d78c-557d-11df-8a50-001cc4c002e0.html
very very interesting article showing the outstanding bills for various illinois vendor.
These are just the biggest ones:
NAME AMT
UNIVERSITY OF ILLINOIS 405,791,531.58
CHICAGO BOARD OF EDUCATION 302,837,411.39
SIU PAYROLL CLEARING ACCT 61,526,477.50
WALGREENS COMPANY 60,433,837.96
WEXFORD HEALTH SOURCES INC 52,936,737.06
HARMONY HEALTH PLAN OF IL INC 48,046,150.29
HELP AT HOME INC 41,902,047.44
FACILITIES MANAGEMENT REV FUND 40,491,654.94
NORTHERN ILLINOIS UNIVERSITY 38,416,082.72
ILLINOIS STATE UNIVERSITY 37,288,675.01
ADDUS HEALTHCARE INC 34,598,469.06
ILLINOIS DEPT OF HUMAN SVCS 31,185,801.91
CENTRAL MANAGEMENT SERVICES 30,250,668.00
SOUTHERN ILLINOIS UNIVERSITY 23,778,940.76
EASTERN ILLINOIS UNIVERSITY 23,542,569.05
SCHOOL DISTRICT UNIT 46 20,508,550.49
WESTERN ILLINOIS UNIVERSITY 19,060,427.60
ROCKFORD PUBLIC SCHL DIST 205 16,606,427.12
THORNTON TWP SCHOOL TRUSTEES 16,216,971.70
FAMILY HEALTH NETWORK INC 16,033,915.39
BLOOM TWP SCHOOL TREASURER 15,133,654.33
NORTHEASTERN ILLINOIS UNIV 14,768,816.48
WORTH TWP TRUSTEES OF SCHOOLS 14,532,366.68
CHICAGO CITY OF 13,969,487.34
HOOKS SUPER X INC 13,891,223.41
HEALTH INSURANCE RESERVE FUND 13,868,225.00
COOK COUNTY 13,641,105.27
PLAINFIELD SCHOOL DIST 202 13,569,605.45
PROVISO TOWNSHIP 13,557,566.58
SOUTHERN ILLINOIS UNIVERSITY 13,468,723.30
ILLINOIS COMPREHENSIVE 13,130,500.00
MAINE TWP SCHOOL TREASURER 12,733,232.13
WHEELING TOWNSHIP SCHOOLS 12,381,255.36
CHICAGO STATE UNIVERSITY 11,753,645.99
COMMUNITY UNIT SCHOOL DIST 300 11,336,721.85
INDIAN PRAIRIE COMMUNITY UNIT 11,071,314.50
NCS PEARSON INC 11,051,137.15
COMMUNITY CARE SYSTEMS 10,985,717.25
COMMUNITY UNIT SCHOOL DIST 60 10,981,024.29
THE CATHOLIC CHARITIES OF THE 10,826,530.28
LYONS TWP SCHOOL TREASURER 10,293,454.85
SPRINGFIELD SCHOOL DIST 186 10,130,518.30
AUTOMATED HEALTH SYSTEMS INC 10,063,068.17
TOWNSHIP 36 NORTH RANGE 13 E 10,055,089.51
BOARD OF TTEES COMM COLL DIST 10,012,791.62
VALLEY VIEW SCHOOL DISTRICT 36 9,771,932.94
GATEWAY FOUNDATION INC 9,419,166.81
NORTHERN ILLINOIS UNIVERSITY 9,328,129.70
MCKESSON HEALTH SOLUTIONS 9,225,223.30
UNITED HEALTHCARE INSURANCE CO 9,207,701.37
MYERS RICHARD HON 9,109,435.78
PEARSON EDUCATION INC 8,885,393.95
“Illinois has stopped paying most of it’s 3rd party bills and instead uses most of the revenue for salaries”
Dude, you’re trusting that the Guv, etc are actually doing what they should do. I’d trust the Outfit to do right by the state before I’d trust the knuckleheads who are actually running things.
[broke my promise. sorry. i’ll hang up the phone and just listen]
IT all relates to housing because we’re going to get a massive tax increase somewhere the road. It’s inevitable. Property taxes will go up, way up, to pay for the hundreds of millions owed to the various school districts on that list. That money has to come from somewhere.
The fear mongering from the teachers is because they want to get theirs and they have the clout to protest. cuts are inevitable and they want to avoid them as much as possible.
The guv doesn’t pay bills, the comptroller does. and does pays what he can with whatever money is available. And there is currently only enough money available to pay salaries and some rent. revenues are way down and spending is way up. hence we have the problem above.
/[hangs up phone in anger!]
I think we can all agree that this is the SEIU’s fault
[throws phone into lake michigan]
Oh I could tell you stories about how SEIU actually controls the state’s finances but …
[then you would find me floating in Lake Michigan]
I’m surprised no one already mentioned this:
How are the housing default numbers from the article not adjusted for population and shown per capita?
Chicago has the fifth most defaults but is the third biggest city in the country. What would you expect?
“I’m surprised no one already mentioned this”
Well, not in so many words, but check the last para in post at 9:14.
Also, if you click thru, you find out that Nevada (yes, the whole f’ing state) has over 70% of it’s homeowners underwater.
Because I didn’t go all the way to the actual report (registration req’d), I’m unclear if the percentage are of just owner-occ’p’d and just with a mortgage or of some larger cohort.
I think the Chicago figure will get bigger, but eventually will be reduced if you factor in the foreclosures and bank owned properties as part of the denominator. If they are excluded from the denominator, it will get quite a bit worse going into 2011.
“if you factor in the foreclosures and bank owned properties as part of the denominator”
Once there’s a foreclosure, there’s no mortgage* to be greater than the value of the house, so one cannot be underwater.
*yeah, yeah, smart guy, deed in lieu. I don’t care.
So foreclosures will actually help the ratio. I’m sure the NAR will tout the decrease in their infamous press releases…
“So foreclosures will actually help the ratio.”
For sure. As noted before, without looking at the actual report, I’m unclear how the cohort is generated–it seems to be only owners of o/o units with outstanding mortgages–and who counts has a large impact on the ratio and a lesser impact on the absolute count (b/c if it’s unclear whether the unit is o/o, do they count it in the 365,000 or not).
I am relatively optomistic that we are exiting the current recession (even if the recovery is comparatively weak by historical standards) based on a.) improvement in manufacturing indicies; b.) employment increases along with avg hours worked; c.) increased liquidity in financial markets; and, d.) increasing trend in optomism among company owners.
The unemployment rate will likely continue to rise for a few months, after correcting for Census hiring, as discouraged workers re-enter the job market, but should rebound by the autumn.
There are major risks that could quickly derail the recovery, however. The most obvious is financial contagion from soverign defauls, which would kill liquidity, increase borrowing costs and could lead to a far worse second collapse.
The Unions are collecting way above market benefits/salaries at the expense of everyone else. Politicians need to have the guts to fight them, and voters need to turnout at elections to give them political cover. AFSCME and the teachers union are far worse than SEIU.
Maybe we need to start some sort of huge other-union. The American Association of Hardworking Taxpaying something something somethings.
Strength in numbers.
The American Association of Hardworking Taxpaying that aren’t phat union workers
/leaders
Ok, the world really is ending. Good thing many of the CC posters have in-depth knowledge of the metropolitan water district. There may still be hope for the renters of the world.
JMM manages other people’s money. Therefore he has an insider’s view of life on “the streets”. He even thinks he adds value even though the S&P today is below where it was 12 years ago. Hey JMM has you insightful strategy added value to your client’s over the tenure you’ve been there? Assuming you’ve even been there three years.
Lets clarify something JMM: your family money makes you lucky in life. Not particularly smart, nor particularly adding value to society.
Don’t try to come on internet message boards and try to claim to have some grandiose economic insight merely because your family money happens to make you wealthy. In fact I am quite confident I could be a better asset manager than you and the majority of other money managers and thats why I manage my own money. Shit CDs could’ve done that.
What do you tell your long-term clients quarter after quarter? To ignore twelve years ago and its a different paradigm and market? And especially to ignore the assets under management fee where you basically take 1% off the base just to look after their money? Must be a sweet gig.
Because as a betting man with hindsight I’d have my money on the economy of 1998 any day. Even knowing that was half-baked by a different asset bubble. And your clients are getting slaughtered over the long-term with those assets under management fees. Too bad for them they’re bad at math.
JMM has family money he helps manage so that gives particular insight to poke fun at CC “renters” and those with knowledge of facts of Chicago.
JMM, I really hate the bailouts because I know they disproportionately benefit people like you, to the detriment of larger society. The exact kind of people who should’ve taken it on the chin in this downturn but didn’t due to government intervention.
And to the CC audience: the MSM is reporting the “Audit the Fed” bill passed. This bill was watered down and a one-off audit. It does not apply nor add any oversight to the Fed’s actions going forward. So look forward to continued support of the ensconced money class of America.
Look for more bailouts of large, politically connected firms such as Chrysler, GM, Bank of America, Citigroup, GMAC, and anyone else who can lobby votes in Washington.
To anyone who thinks bailouts are over let me ask what has substantively changed with regard to legislation or the executive branch which would warrant this opinion? Nothing.
Public sector unions …. more outdated than the silent movie at a talkie theatre for a nickel.
I argue all the time with my conservative friends about where there is more corruption, in the unions or in the corporate sector. I think its just depends on which angle you look at things. From a more local angle, it looks like the unions. On a national scale, it looks to be the corporations. What a disappointment in Obama. Not that McCain would have made any more changes. The health care bill was a gift to the health care and pharmaceutical lobbies. I expect financial “reform” to be a gift to the banksters.
OT:
Gotta love these pics. 13 of them. Not a single pic of the inside. It has pics of the metra train and a stop light though!
http://www.redfin.com/IL/Chicago/4035-N-Keystone-Ave-60641/home/13480847
Bob:
Just my own personal view but your rants seem to smack of bitterness. Your insights seem to smack of google searches. You appear to know little or nothing of what you speak, and what little you do seem to know rings hollow as uniiformed “outsider looking in” perspective on just about anything that you feel is unfair to you.
JMM:
You manage other people’s money and likely have done very little with it unless you happen to be one of the few star fund managers. I doubt you are and if not, I don’t think you have any grandiose insight into the economy.
I think many of the CC posters, including those who know a thing or two about the MWRD, likely are more informed than you with regards to the direction or housing valuations. I also don’t believe you’re some sort of enlightened wizard beyond the curtain with regard to what I read in the financial press. Overall I think the WSJ does a pretty good job of documenting the play-by-play of the financial meltdown and the government rushing to the aid of the financial system to support the continued trading of otherwise illiquid, likely worthless derivative securities created during the past 15 years.
You do, however, seem to be very interested in many facets of CC posters in an attempt to explain away their bearish opinions. My opinions are mostly derived from data points and facts. You might have a different set of facts but I see few things other than low interest rates to make a positive case for future RE valuations.
If you sense bitterness in my posts, you’re correct. I am quite bitter than financial professionals walked away with a near record year in 2009 in cash compensation basically being an intermediary between two government agencies, borrowing from the Fed and lending it to the Treasury. Its arbitrage with taxpayer money and a sweet gig.
Or am I missing something here and Wall Streeters earn their keep? If so please do explain as I’m all ears.
Wow, serious chip on the shoulder of the IT manager. Next time I get the blue screen on my computer, I will seriously have to think about dumping it off on you.
Keep going and I might think you for an unemployed MBA who didn’t get a job at Bear Stearns in 2007.
No one here works on “Wall Street” or anything similar. Hell, this is Chicago in case you forgot (with RE prices that match). You show ignorance when you confuse a family office for something it isn’t and think all people invest in is equities. Go ahead and google it now. You will figure it out. Eventually.
I’m an IT manager now? Wow if you’re asset allocation ability is anything like your guesstimation of professions I think I’ll gladly stick to retiring debt and sticking to CDs. But really if you’re still getting blue screens, you should be far away from other people’s money.
A friend of mine called last night. He was a 3rd year VP at an investment bank. Very bright and knowledgeable. Great at financial modelling. He was laid off a year and a half ago and is still unemployed. I’m a little concerned because he is freaking out and not thinking straight. He told me he is going to sell his 1 BR condo on the Upper West Side of Manhattan because his expenses are around 3K a month, and move into his parents house in suburban Boston.
He said he bought at the height of the market in June 2007 for 719K. So he listed it for 719K and got an offer for 682K.
He said since he would only be taking a 37K hit he was considering just doing it and taking the loss on his taxes.
I was like wait a minute…I asked him if he had considered transfer taxes, closing costs and the real estate commission plus the money he had put in to renovate the place. He said no, but he had figured he would get 180K in his hand once everything was said and done, so it was all ok.
I was like, but lets add this all up. You’ve got the 37K hit on the price (which is actually not that bad), but then you have to add about 35K on the real estate commission, another 20K in renovations plus transfer taxes and closing costs…that adds up to a more than 100K hit, not a 37K hit.
He was like “oh, I didn’t think about it that way.”
Granted, I am worried about him because he is making these decisions under a great deal of stress and he is not thinking straight. But everyone should take it as a lesson to live within your means and plan for any future eventuality which is completely out of your control. For example, don’t buy a super-pricey 1 BR in a fancy nabe because when the chips are down you don’t even have an extra bedroom to rent out to a room-mate to help make ends meet and it’s not a place you’re going to live in for the rest of your life either…
Believe me, I know it’s an uphill battle to convince someone to live within their means but rest assured that life will eventually teach the imprudent that very lesson.
“Granted, I am worried about him because he is making these decisions under a great deal of stress and he is not thinking straight. But everyone should take it as a lesson to live within your means and plan for any future eventuality which is completely out of your control. For example, don’t buy a super-pricey 1 BR in a fancy nabe because when the chips are down you don’t even have an extra bedroom to rent out to a room-mate to help make ends meet and it’s not a place you’re going to live in for the rest of your life either…”
Hi homedelete!
Yeah, I’ve received plenty of bad advice over the years from people who really should have known better. MOST of them in banking.
I’ve had plenty of people disparage me for being a secretary instead of taking on a “real” career. Or for buying in Brooklyn 15 years ago when there was a stigma attached to living there. Or for making a substantial downpayment instead of putting that money in Equities and using the interest to pay my mortgage.
Sorry, but I like a sure thing and I like getting a paycheck and I like having a roof over my head! And at least my stuff is paid for and not bought on credit. And at least I come by it honestly instead of sleeping with some sleazy pig to get it like a lot of girls with Fendi bags 😉
Milkster I’m glad you get it. It’s the difference between being broke and washed out when it comes time to retire, and, not being retired at all. My profession (law) is filled with lawyers in their 60’s and 70’s who work not because they want to, but because they have to. It’s difficult to pay off the principal on a $800,000 mortgage especially when it’s interest only. Meanwhile his partner lives in a paid off home he bought in the $80’s today worth in the $500’s in Glenview.
Milkster,
Obviously your friend should be stressed and freaked out. But the story seems strange:
i’m surprised that an expert at financial modeling not understand the costs of selling a home/condo?
i’m also surprised that he thinks he can take a capital loss on the sale of real estate on his tax return. real estate losses for your own personal home cannot be written off.