Market Conditions: High End Home Sales Perk Up in First 8 Months of the Year
Crain’s is reporting what readers of Crib Chatter already knew: the high end housing market has returned (kind of).
This year we’ve already seen the sale of an $8 million home in Lincoln Park and two $7 million+ penthouses in the Elysian.
Recently, a $5.79 million condo in The Palmolive, at 159 E. Walton, went under contract.
Buoyed by the increase in sales (from practically nothing in the last 2 years)- there has also been a rush to list high end properties, including the $4.95 million modern single family home in Lincoln Park we recently chattered about as well as an $11.3 million Gold Coast penthouse.
Maybe the sellers are sensing a rare “window” in which to sell?
There were 452 single-family homes and 672 condos priced at $1 million or more on the market in Chicago as of Aug. 31, according to Baird & Warner Inc., which analyzed information from Midwest Real Estate Data LLC. Based on sales activity over the past year, that’s an 18-month backlog of houses and a 21-month inventory of condos.
A balanced market would have a six- to eight-month supply, says James Kinney, vice-president of luxury sales at Chicago-based Baird.
“I think we’re in for many months of wading through inventory,” Mr. Kinney says. “The supply is going to continue to build until we see a turn in the job market.”
The good news was that sales of high-end single-family homes in Chicago rose about 24% to 199 in the first eight months of the year, compared with 161 in the same period last year.
High-end condo sales, meanwhile, jumped about 85% to 253, compared with 137 in the first eight months of 2009. The surge can be explained in part by the first closings at upscale projects like the Elysian Hotel & Private Residences and Ten East Delaware, Mr. Kinney says.
Sales in the high-end market also have climbed because sellers have cut prices — something many were reluctant to do last year.
High end home sales up in the first 8 months [Crain’s Chicago Business, Andrew Schroedter, September 13, 2010]
Well, like they say, inventory levels are through the roof. I just did an analysis of how long it takes to sell homes in Chicago and did one cut by price point. Obviously it still takes a lot longer to sell something above $1 MM.
http://www.chicagonow.com/blogs/chicago-real-estate-getting-real/2010/09/how-long-does-it-take-to-sell-a-home-in-chicago.html
I don’t see the high end turning around any time soon. The financing is too finnicky, people are wary of carrying too much debt, and I think there is a new attitude towards overly conspicious consumption. The true high end will probably survive as most of those owners can take the hits to move the properties (a la Jamie Dimon), but I think a lot of the nouveau riche/aspirational rich stuff that came about during the bubble are going to see some more cuts.
I don’t think readers on here had any clue the high end was as durable as this article suggests.
I will say, and I have said it before, that the near high-end mythical $800k mortgage has gotten A LOT cheaper. Let me illustrate:
PMT @ 7% (circa dark days 2009) = $5,300 PI
PMT @ 6% (early 2010) = $4,800
PMT @ 5% (TODAY!) = $4,300
That is a big difference.
Just like a lot of people are gearing for higher taxes in other areas, the after tax component of this is expected to get even cheaper for the 35% bracket set. As little as people like it, the 5% more in taxes (39.6 from 35) means your mortgage shield is another 2k cheaper.
I know HD doesn’t like to do math, but these numbers are (generally) indisputable.
I agree w/ JMM – if people have stable jobs (doctor, law partner, etc.) and KNOW that they need a bigger place/different neighborhood and are looking for 1million plus housing for the long term, this absolutely is the time to buy. There is no debate or question about it. Someone really would have to be an idiot/moron to be in this situation and NOT buy now (and these people, generally, are not idiots)…..
Except people are more transient now. And people are less certain about their futures. They may end up with a job, but where. Who the hell wants to eat a 100k loss to move to the East Coast for a new job.
“if people have stable jobs (doctor, law partner, etc.) and KNOW that they need a bigger place/different neighborhood and are looking for 1million plus housing for the long term, this absolutely is the time to buy. There is no debate or question about it. Someone really would have to be an idiot/moron to be in this situation and NOT buy now (and these people, generally, are not idiots)…..”
Are we talking about law partners looking to buy their first homes, trading up, buying equivalent homes in different locations? Will affect decision.
“As little as people like it, the 5% more in taxes (39.6 from 35) means your mortgage shield is another 2k cheaper.”
Also means the benefit of a lower rate is a little less.
“Except people are more transient now”
…not everyone. Most professionals in the business for over 10 years and w/ strong family ties to chicago and some disposable income are extremely stable. There is no mass exodus or invasion to/from major cities. Think about it, how many people do you guys personally know that had to move from Chicago – very few, if any. The “nervous-nelly”, “shrinking violet” attitude displayed by the majority of the population is pathetic and irritating.
“There were 452 single-family homes and 672 condos priced at $1 million or more on the market in Chicago as of Aug. 31”
I know why, but I dislike the lumping of all 7-figure listings together. The market for $2mm+ homes is much, much smaller than for the under $1.5mm homes.
“Are we talking about law partners looking to buy their first homes, trading up, buying equivalent homes in different locations?”
Mostly late 30s/early 40s new partners (in law, business, medicine) w/ young children likely moving up to their 2nd (and supposedly permanent) dream house. This is the demographic that will likely buy these million + houses.
“The “nervous-nelly”, “shrinking violet” attitude displayed by the majority of the population is pathetic and irritating.”
Nice. Restarting the clock…
“Mostly late 30s/early 40s new partners (in law, business, medicine) w/ young children likely moving up to their 2nd (and supposedly permanent) dream house. This is the demographic that will likely buy these million + houses.”
Agree with this. And part of my “notsomuch in the $2mm+ bracket”–some, sure, but a *lot* fewer.
Say what you will, but a young affluent family buying a $1M-1.5M house these days doesn’t exactly connote dream home to me.
Instead it means 4-5 bedrooms on a 25×125 lot in LP or LV and a respectable school district. A family home, not a dream home.
Said another way, no rap videos will be shot there.
As for the stable Chicago families with stable incomes, as part of that co-hort I can say that even though I bought my home 14 years ago I am not a likely buyer of a new home. People get pretty set in their ways once children achieve the social years. Maybe an in town move, but this is not the market for that stuff.
Buyers at this price point are the family I mentioned earlier. Late 30’s. 2 kids, 3rd on the way. Wealthy in terms of income and need more space soon. Don’t give a crap about their LP/LV condo or townhouse that might sell at a small loss when they are plunking down 300k on the next place. Rare, but they are out there.
Most of my clients who are making partner at consulting firms, law firms, established Docs are spending right at a $1 million. They are buying houses in the burb’s typically. Not condos. Typically late 30s early 40s types who definitely aren’t going anywhere anytime soon.
The only folks I see buying the condos are empty nesters who can nearly pay cash.
The problem is a lot these around $600-$1 million properties, particularly the condos weren’t really built for the person settling down. No longer are Associates and 1st year VPs buying these places due to the financing constraints. Instead they are continuing to rent or dropping down to the lower end until they are ready to buy the more permanent single family.
Chicago has too many high priced places geared towards transient types.
“Mostly late 30s/early 40s new partners (in law, business, medicine) w/ young children likely moving up to their 2nd (and supposedly permanent) dream house. This is the demographic that will likely buy these million + houses.”
So whether prices are high or low right now should matter a little less to these people, as that primarily affects the delta between houses. It is a pain in the ass to have to both sell and buy, as the market is a little illiquid. Lots of people still listing at close to bubble price, some willing to deal, some not. Pain to shop around.
Not saying some people aren’t buying, but still a pain.
prices have dropped significantly and interest rates are very low, if you are in the market for a high end home you bet now is the time to buy. Only problem now, is that poser wealth can’t buy these homes anymore. So that is why you see the large decrease in volume, as only real wealthy people can buy these homes.
“So that is why you see the large decrease in volume, as only real wealthy people can buy these homes.”
Um, volume is up. It’s in the title of the post.
compared to 2002-2008
sorry I didn’t parenthesis or footnote that, i thought it was implied
JMM, can you spell out what this means to a simpleton like me:
“As little as people like it, the 5% more in taxes (39.6 from 35) means your mortgage shield is another 2k cheaper. “
“JMM, can you spell out what this means to a simpleton like me:”
The ~$40k in interest you are paying leads to a ~$2k larger net tax benefit with 5% higher tax rate. Oversimplification, but JMM knew that and (quite reasonably) didn’t want to go thru the offsetting deduction phaseouts and AMT implication, esp. b/c they will *definitely* change b/t now and when 2011 taxes are filed.
It means if you are in the top marginal tax bracket and that bracket goes to 39.6% (pre-Bush rates) you are paying 4.6% more in taxes on the margin. Since mortgage interest is generally deductible, the value of the deduction increases everything else being equal by 4.6% x interest expense in 2011. Assuming an 800k mortage and around 32k in interest expense, you get about $1,500 (sorry I rounded) more of a federal deduction.
You will pay more in taxes, but your mortgage is a more valuable deduction. That is the point.
Yeah my IPMT function in Excel failed me. Either way, it becomes more valuable in a *higher tax rate environment*.
Obviously the right way to look at it is to PV the tax shield over the expected tenor of the loan. In that case it is probably worth 10-15k on an economic basis.
“Yeah my IPMT function in Excel failed me.”
Hopefully this doesn’t lead to another jmm v. bob day.
“You will pay more in taxes, but your mortgage is a more valuable deduction. That is the point.”
Maybe for 2011 & 2012. But remember the current administration has already floated the idea of capping out the mortgage interest deduction to something like 28%. Don’t think it won’t be revived if his party retakes congress in 2012.
There is a term for this, most often used in reference to business planning but equally applicable to this set: regulatory uncertainty.
I also can’t believe the stupidity of the R party to publicly state that its all or nothing with regards to the current proposal to keep the tax cuts for only the non-upper income. This is one issue they certainly have to compromise on but they’re not bending.
“This is one issue they certainly have to compromise on but they’re not bending.”
Not what I’ve been hearing… I think everyone realizes that a compromise is the only solution at this point (of course, things can change..)
Also in today’s low-rate environment it essentially means the mortgage interest deduction is worthless on financing less than 143k of a property purchase (286k for couples), at a 4% interest rate.
So while StevO Heitman used to calculate using the full benefit, in actuality in Chicago only those carrying large mortgage balances stand to benefit.
The over-leveraged McCrapbox condo couple with a 400k mortgage actually isn’t seeing nearly the marginal tax benefit as presented by the industry shills. Maybe $100/mo marginal tax benefit in this case.
” But remember the current administration has already floated the idea of capping out the mortgage interest deduction to something like 28%”
Politicians are smart – but rich people are smarter… Realize that the majority of people making over 250k are NOT salaried (partners/shareholders, CEOs, execs, etc.). There are ways to still shelter a lot of your income and keep your personal income level (for tax purposes) at 249k. It will be more complicated and challenging, but, believe me, people are already figuring out ways to beat the system. The suckers that will get stuck are the poor middle level schmucks making a salary of 250-350k.
“Not what I’ve been hearing… I think everyone realizes that a compromise is the only solution at this point (of course, things can change..)”
Today the R leadership is coming out opposed to any sort of compromise. Even though they have no leeway and essentially _have to_ or else they lose a huge voting bloc in the election. They truly have no hand to play with this strategy and I am left wondering WTH are they thinking.
I agree and think that capping @ 28% might be traded for something else (such as a few more years of Bush tax rates). But sure, that would crap all over my argument. Of course, so would removing mortgage interest deductibility altogether, which is the norm for most of the rest of the world.
“The suckers that will get stuck are the poor middle level schmucks making a salary of 250-350k.”
Exactly. Which is why I laugh whenever I hear some D/progressive people talk about making the rich pay more. They are so disconnected from reality they truly believe the government is capable of capturing this and taxing them and there are no unintended consequences of altering behavior or moving investments so as to shield them.
Only fools believe the government is truly effective in this regard (and politicians grandstand based on the idiotic viewpoints of these fools).
“Of course, so would removing mortgage interest deductibility altogether, which is the norm for most of the rest of the world.”
I am all for this as I think it is an unfair deduction in the first place (even if I were to personally benefit). The current property-owner class with a mortgage would be enraged, however and all current homeowners would be a little peeved as this would undoubtedly negatively impact valuations.
And only those who don’t yet own property (and the government) would stand to benefit. Even though its the right thing to do I don’t see it happening any time soon.
So much of our government policy over the past 50 years was geared towards maximizing house valuations. Now we’re bearing the fruits of that policy and we see how well that all worked out.
“I am all for this as I think it is an unfair deduction in the first place”
Why do feel this is unfair? i don’t understand..
“Also in today’s low-rate environment it essentially means the mortgage interest deduction is worthless on financing less than 143k of a property purchase (286k for couples), at a 4% interest rate.
So while StevO Heitman used to calculate using the full benefit, in actuality in Chicago only those carrying large mortgage balances stand to benefit. ”
Yeah, because when you start itemizing, nothing else counts either. What about the property taxes on that condo? And state income tax? It’s nowhere near *all* countable–like Stevo would do–but you swing too far the other way.
You’re oversimplifying to make your argument, which leaves a *giant* hole.
“Why do feel this is unfair? i don’t understand..”
Renters don’t get it, too. On this point, Bob is a whiny liberal*–if he can’t have it, no one should.
*its a joke, bob.
“Why do feel this is unfair? i don’t understand..”
People should not be able to deduct interest for certain financed items and not interest for all financed items. Its the government making a value judgment that certain goods are more preferable than others and it discriminates against those who have a preference for other goods (ie: cars, etc) as well as those who pay cash for their purchases. It affects the market by driving up RE valuations as a result.
Such patronizing attitudes from our government embedded in policy are one of the main reasons we’re in this quagmire and I don’t believe our government should be making such value judgments.
I guess the bottom line is that there are a lot of unknown, many variables, etc. – there will ALWAYS be these unknowns. What separates the men from the boys are the guts/strength/determination to make a g-damn decision and stick to it. All those on the fence about buying now should just get off – you obviously don’t have what it takes to make it in this market. Keep renting.. and worrying and crying and whining…
“What separates the men from the boys are the guts/strength/determination to make a g-damn decision and stick to it. All those on the fence about buying now should just get off – you obviously don’t have what it takes to make it in this market. Keep renting..”
Hahaha more of the cajones argument from clio.
I actually have made a decision: I am going to rent for the next four years at a minimum and let all this sh_t shake out. But renting has the open option of purchasing _at any point_ in the future, whereas owning does not. TYVM 😀
Only a fool would purchase real estate today, given the banks manipulation of their foreclosure pipeline.
Your cajones argument I also find insulting as you would probably find the majority of RE owners are female.
Clio is beginning to sound like StevO Heitman with each passing day.
I don’t think real estate pricing will change much between now and 4 years from now. Personally, I think that is a good thing.
People will equitize their homes and balance sheets will be much improved in a few years.
“and balance sheets will be much improved in a few years.”
For those with steady jobs yes. For everyone else no.
For houses in Evanston… Perhaps not.
http://www.chicagobreakingnews.com/2010/09/witness-decapitated-body-found-near-evanston-school.html
I think the recent rally in the stock market may improve confidence in the real estate market in prime areas. It may not cause increases in prices, but at least should help stabilize the market.
“I don’t think readers on here had any clue the high end was as durable as this article suggests.”
I have always maintained the upper level housing market would not face the same fate as lower or starter level housing did. As Russ stated above, the REAL and truly wealthy people will not be terribly impacted. Those who were merely posuers have already lost their homes (and wealth) or are now scrambling to keep their supposed images intact.
JMM:
Great calculations! Do you know what makes an $800,000 super jumbo mortgage even cheaper?
A super-jumbo 5/1 ARM at 3.1%!
Howmuchamonth? $3,500 a month!
ye-haw! let’s reinflate this bubble!
Money is cheap – take on as much debt as possible! Right JMM?
“I have always maintained the upper level housing market would not face the same fate as lower or starter level housing did.”
WLeo, this might come as a surprise to you but the vast majority who read this blog likely couldn’t give two sh_ts about the HNW segment.
They are playing in a different financial sphere from the rest of us and their behavior or outcome likely has no impact on the lower segments. They also represent an infinitesimal amount of the market as measured by volume.
Go back to watching Mr. Belvedere or something dude, we could care less.
What’s your point? the REAL and truly wealthy people will not be terribly impacted? That’s like saying the sky is blue. The .05% of the population with $100,000,000 in assets or more will be OK still.
Even Ted Turner, after losing $7,000,000,000 said:
“You know, if you economize and don’t buy new airplanes or long-range jets, or that sort of thing, you can get by on a billion or two.”
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a2S9IquEJbYA
“#westloopelo on September 14th, 2010 at 10:45 am
“I don’t think readers on here had any clue the high end was as durable as this article suggests.”
I have always maintained the upper level housing market would not face the same fate as lower or starter level housing did. As Russ stated above, the REAL and truly wealthy people will not be terribly impacted. Those who were merely posuers have already lost their homes (and wealth) or are now scrambling to keep their supposed images intact.”
“The suckers that will get stuck are the poor middle level schmucks making a salary of 250-350k.”
Clio, I agree incomes in this range are taxed the worst
However, I have never met anyone who made $250-350k a year who was a “middle level schmuck”. Sorry to comment just on your comment, but, that’s a ludicrous remark that makes you sound completely detached.
Granted, it’s not as ridiculous “only a fool would purchase real estate today,” but you don’t really want to compete that way, do you?
Except that the 30 year has ZERO risk. Remember all your chirping about ARM resets? What do you have now buddy? I hear crickets…
“Money is cheap – take on as much debt as possible!”
Although this was meant as a sarcastic comment, I totally agree w/ it!! If you do it the right way, you can really take advantage of the economy – you just have to be smart about it.
DO you know what else is zero risk JMM? A Caddy with spinning rims at $450 a month for 90 months. Yes, they make car loans for 90 months. There’s no risk in that.
With low interest rates, who cares? Money is so cheap it’s practically free.
And you’re not hearing crickets – you’re hearing voices in your head.
I never chirped about ARM resets – I complained about both 1) option ARM RECASTS and/or teaser ARM rates and 2) ARMs borrowers with lower incomes qualifying for higher mortgages because of lower monthly payments. The 30 year fixed borrower pays more for his housing because his neighbor, who makes less money, paid more for his home because he offset the increase with a lower interest rate.
“#JMM on September 14th, 2010 at 11:17 am
Except that the 30 year has ZERO risk. Remember all your chirping about ARM resets? What do you have now buddy? I hear crickets…”
JMM: Remember in 2004 when Greenspan said that using ARMs were a better deal than fixed rates?
And instead of saving the difference between the ARM and the fixed rate, borrowers chose to borrow incrementally more money instead?
http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm
Your ‘cheaper’ argument is a red herring, a false argument. They don’t save – they just borrow more. And by borrowing more, the cost of housing remains high.
But who cares if housing is expensive if they can afford the monthly payment, right?
“Sorry to comment just on your comment, but, that’s a ludicrous remark that makes you sound completely detached. ”
That was the one that inspired you to make this comment? Or was it just the one that filled up your bucket?
“Remember all your chirping about ARM resets? What do you have now buddy? ”
Option-ARMs are likely exploding right on schedule. The lower interest rates will only reduce the payment shock on these marginally (say from 110% payment increase to 90%).
I haven’t been able to quantify the extent of the problem here in IL as local data is hard to come by, but if IL option-ARMs are anything like the national totals we have two more years of exploding option-ARMs then another two years to let them work through the pipeline. Lines up quite nicely with my buying timeline, too.
I am very amazed from this crisis the chief regulator of these (Federal Reserve) allowed them to exist and never took action, and even moreso surprised Congress’ response to this crisis has been to hand more power over to the Fed as well.
“I am very amazed from this crisis the chief regulator of these (Federal Reserve)”
OCC, not the Fed. Fed sets reserve requirements and the like, but doesn’t regulate mortgage practices like the OCC.
from a WSJ article( I can’t find a link to the original)
“It now appears that many borrowers who moved into option ARMs were attracted by the low payments and may have been staving off other financial problems. More than 80% of borrowers who are current on these loans make only the minimum payment, according to UBS.
Mr. Mozilo told investors in September 2006 that he was “shocked” so many people were making the minimum payment. He called a sampling of borrowers to find out why. The “general answer…was that the value of my home is going up at a faster rate than the negative amortization,” he said. “I realized I was talking to a group…that had never seen in their adult life real-estate values go down.”….”
“Or was it just the one that filled up your bucket?”
Bucket filled. And emptied.
IIRC more than half of option arms were issued in CA but it made up a very large percentage of the total loans in CA.
I have a buddy from high school in the suburbs with an option arm loan. He’s just waiting for it to recast and then he’s walking away. That should happen in a year or two.
All it takes is one or two foreclosures in a neighborhood to drag prices down even further.
I can see these future price declines from miles away. It’s not rocket science. he will default in 2011 or 2012, he will enter forclosure in 2012 or 2013, and it will be sold as an REO in 2013 or 2014. How will that affect prices going forward? How many guys are out, middle class, a wife, three kids, two cars and one dog, how many of them are out there that are just waiting to walk away in the near to mid future?
It will take a miracle, a freakin’ miracle, for prices to stay flat for 5 to 10 years. Without a festivus miracle, except continue prices declines for years to come.
“It will take a miracle, a freakin’ miracle, for prices to stay flat for 5 to 10 years.”
For 5 years it is definitely improbable. For 10 years its much murkier–it is possible the inflation machine kicks in between years 5-10 and values are back to where they are today in nominal terms in 2020.
In any case I don’t see any near-term support for house prices in Chicagoland going forward. We never had nearly the correction that Las Vegas or Florida did and instead of undershooting thus far, due to government intervention we still have nominal pricing 25% higher than 2000 yet with a much worse employment situation and outlook.
Bob – I slightly disagree to a point but cant back it up with much factual support. I feel that prices will rise on “good” Chicago propertities – the non-cookie cutter low month assesments – and fall on the opposite. Of course, this is dependent on purchase price too.
Banks will throw out “feelers” to try to re-establish market values for both types, good and bad, thus TRYING to set the price, buyers will establish it.
“We never had nearly the correction that Las Vegas or Florida did ”
If we did, we’d be Detroit. apples/oranges.
Bob,
nor could I care less about you living in your $700 a month studio with only dreams of owning a property (or becoming accepted by your hipster friends) yourself.
I was commenting on the statement about CCers not having an idea of how durable the upper end of the market would remain. This thread addresses how the upper end market has seen a jump in sales over the last 8 months…only giving my opinion.
BTW, what is Mr Belvedere? A show about how the hipster crowd you want so much to be a part of live?
“Bucket filled. And emptied”
Let me fill it back up for you: Honestly, all of this talk and speculation about house prices is just that – talk. You have to personalize it to your own situation and figure out what makes sense for you. However, many people out there are too afraid/dumb or lazy to figure this out and therefore listen to all of the so-called experts spout their nonsense. People should really just go w/ their gut – if you see a house you like and can afford it , then go ahead and buy it!! You will be much happier. I know that people make fun of me, but the truth is that now IS the time to buy and, if you don’t, you DO run the risk of being priced out of the market (either by rising interest rates or slowly rising home prices).
“BTW, what is Mr Belvedere? A show about how the hipster crowd you want so much to be a part of live?”
As the saying goes you can’t outwit a fox, westloopelo. Bravo to you, sir.
“Let me fill it back up for you”
Are you *actually* this clueless? Nothing in this post strikes me as especially detached from reality. Evidence of a low opinion of most people? Sure, but a low opinion many (if not most) of the regulars here share to a lesser or greater degree and not especially notable.
It’s a pet peeve of mine when people say this. If prices corrected in Chicago as much as Florida or LV, we would NOT be detriot. Following that logic, Florida and Las Vegas should now also be Detroit?
Have you ever been to Florida or Las Vegas?
It’s not an apples to oranges comparison. Detriot has had a 50 year decline, white flight, riots in the 60’s, years of failed leadership i.e. KWAME etc., declining manufacturing and production, high unemployment, etc. Chicago has more in common with LV and FL than Detriot – they’re in a league only with Buffalo and Camden.
“#anon (tfo) on September 14th, 2010 at 12:24 pm
“We never had nearly the correction that Las Vegas or Florida did ”
If we did, we’d be Detroit. apples/oranges.”
“It’s a pet peeve of mine when people say this.”
If we were down over 50% from peak, like LV and Florida, our CS-index number would be around 80, like Detroit. (yeah, detroit worse than 80, chi a bit better). Chicago is below the comp-10 and the comp-20. Our CS number has tracked MSP quite closely, with a little slower run-up, a slightly lower peak and a slower descent.
*And* that’s just SFH. On condos, of the tracked markets, Chicago is by far the lowest index, with a correction 2x bigger than NY or Boston, and about the same size as SF (much smaller than LA, but LA went ubernuts).
Yes but remember Chicago valuations were higher than these other cities to begin with, and likely higher in terms of RE valuations to area wages.
Sure more people earn higher wages in Chicago, but at 4x the wages of say, Cleveland? Makes a case for stronger overcorrection in Chicago vs. Cleveland.
Detroit is a whole ‘nother beast, one which I can’t get into without Sabrina quickly censoring my posts and temp banning me. But suffice to say its not a comp to Chicago unless you’re comparing it to just the south side.
“JMM: Remember in 2004 when Greenspan said that using ARMs were a better deal than fixed rates”
Alan also gained fame by speaking of Irrational Exuberance! Shame that the comment was made way too early and not about the RE market run-up. If that were the case he would be known as Creskin the fortune teller now.
http://en.wikipedia.org/wiki/Irrational_exuberance
anon(tfo) – not everything in FL is down 50% from peak – just the homes that are selling. the higher end just like most other places has kept its value – or at least kept it’s listing prices steady …. hahaha! Like Gary pointed out above (and Redfin) has shown, few listings actually result in a sale. Chicago’s Cook County had just one-third of all homes listed during 2009 sell by mid-August – the lowest among the 7 major metro areas surveyed.
If nothing is selling, the stalemate can’t last forever. Prices will continue to fall, maybe even up to 50% off the 2006/2007 bubble prices.
And I promise you that the CS index will not be the reason Chicago turns into Detroit. It will be the myriad of other reasons causing our fall.
http://blogs.wsj.com/developments/2010/08/16/redfin-less-than-half-of-all-home-sale-attempts-successful-in-09/
“Evidence of a low opinion of most people? Sure, but a low opinion many (if not most) of the regulars here share to a lesser or greater degree and not especially notable.”
R U drunk already? I don’t even understand what this means!!
Anyone watch the series “Hung”? That waterfront area where he lives (in or near Detroit) actually looks pretty nice.
“I don’t even understand what this means!!”
Call the presidents of UC, H and S and demand your money back. They clearly failed in their educational mission.
Or maybe stop carping about other people’s primary and secondary education choices for their kids, because yours obviously wasn’t that much better than average.
“Anyone watch the series “Hung”? That waterfront area where he lives (in or near Detroit) actually looks pretty nice.”
In case you haven’t noticed that entire show is not so subtly. Seriously have you seen the opening credits? Are you going to infer that NYC is awesome too due to “Making it in NY”? Or LA similarly for “Entourage”?
Hmm. Not sure what you’re asking, Bob. Yes, the opening credits paint Detroit for the blighted place that it is, but the fact that the main characters appear to live a fairly pleasant suburban existence is not wholly beyond the realm of reality.
And I’ve lived in NYC…it is awesome. I’ve spent plenty of time in LA…and yes, it too is awesome. Are there rough spots in both, and does it cost alot to live in a very nice place in both? Of course. But only a complete hick (or someone with a diagnosed phobia of big cities) would deny the awesomeness of NYC or LA (or just about anywhere along the coast of California).
Bob people pay 4x more to live anywhere BUT cleveland… I mean damn Lebron James gave up 30 million dollars to leave Cleveland!
(I would too)
“We never had nearly the correction that Las Vegas or Florida did and instead of undershooting thus far, due to government intervention we still have nominal pricing 25% higher than 2000 yet with a much worse employment situation and outlook.”
Nominal pricing needs to be deflated by 1.20 – ish which is the 2000 to 2009 CPI deflator. So its basically 2000 prices right now.
Oh by the way, the CS SFH numbers have been flat, that is right, flat at 125 for almost 18 months.
“Oh by the way, the CS SFH numbers have been flat, that is right, flat at 125 for almost 18 months.”
On NSA I see a range from 130.85 (Jan-09) to 119.71 (Mar-10) to 124.90 for latest data (Jun-10). On SA I see a range from 131.66 (Jan-09) to 121.76 (Mar-10) to 125.15 today.
Perhaps flat enough for you, but I know our government’s interventionist policies have skewed these numbers and I’m not wading in until the monopoly money stops flowing (after our confused policy makers stop mistaking lower house prices as a cause of a America’s economic ills and instead recognize them as an effect of America’s economic ills).
And don’t worry: we have a fresh batch of policy makers coming in come November who likely will understand that better.
No point in buying until the market shows y/y stabilization absent interventionist measures. And as there is speculation the Federal Reserve will start on quantitative easing 2.0 next year to the tune of another trillion, there truly is no rush to buy.
(I don’t think QE2 will have much of an impact, however, as I truly do think mortgage rates have bottomed, so if we’re on QE4 or QE5 come 2014 I might still buy).
I dont think the feds are propping the market up at this point through easing — interest rates are ridiculously low but truth is they have been low for some time. The rates I reference are jumbos which were priced at an insane spread to conforming for time when the credit markets were locked up. Now no one wants jumbos so they are in tight against conforming rates.
Anyway, I think it is the other way around, people like you are waiting for a bottom.
It is why deflation is so problematic. Everyone waits for a better deal and nothing ever transpires.
Part of the issue with Chicago, is Chicago. Weis is incompetent, crime is running rampant and the city and state are broke. It sounds like a joke, but literally, the state of IL is not paying tax refunds to corporations. If that were individuals they would have a riot on their hands.
“I think it is the other way around, people like you are waiting for a bottom.”
A lot of sellers are trying to hang on to bubble prices. When I see listings for which there’s a sale price during the 2000s and w/o major reno or neighborhood changes, I’d say more often than not (probably much more often than not) the list price is more like the 2006 than the 2003 price (I know you don’t generally see both prices for a given place but you know what I mean). People are not generally pricing within a smallish discount of case shiller indicated price.
The problem is that they can’t sell because they’re underwater and they can’t afford to take the loss.
“A lot of sellers are trying to hang on to bubble prices. When I see listings for which there’s a sale price during the 2000s and w/o major reno or neighborhood changes, I’d say more often than not (probably much more often than not) the list price is more like the 2006 than the 2003 price (I know you don’t generally see both prices for a given place but you know what I mean). People are not generally pricing within a smallish discount of case shiller indicated price.”
“Anyway, I think it is the other way around, people like you are waiting for a bottom.”
I am not typical for my peer group so I don’t think I lend easily to extrapolation.
But what I think you’re talking about is the change in paradigm among those my age from RE being a responsible, acceptable, encouraged thing to do in one’s youth then trade up later in life?
Sorry but its no longer a societal status symbol it once was (“ohh I’m so responsible I’m single, 25 and just bought a 300k place with 5% down!” is dead). Its more like a financial scarlet letter for those my age. Also the whole buy a condo and step up in five years is completely off the table: better to rent and not buy a home until you’re married and ready to settle in a place for a long time that can accommodate as many kids as you plan to have.
And you’re looking at the tree not the forest: this recovery is not going to be driven by real estate. Look in the mirror and say that ten times.
Lower housing prices are an effect of America’s economic ills, not a cause. For them to be a cause would imply consumption being driven by asset valuations which implies a ponzi economy, which is unsustainable.
http://www.calculatedriskblog.com/2010/09/investment-contributions-to-gdp-leading.html
Deflation is problematic only if you look at it through the lens of an inflationist. Deflation is the necessary purge for the years of reckless lending we’ve engaged in. The sooner the no money down countrywide option arm loans disappear from existence, the sooner our economy will start to heal.
“Anyway, I think it is the other way around, people like you are waiting for a bottom.
It is why deflation is so problematic. Everyone waits for a better deal and nothing ever transpires.”
Courtesy of Bob reminding me to read CR:
“The “early read” on existing home sales based on regional data suggests that existing home sales ran at a seasonally adjusted annual rate of around 4.1 million in August, up around 7% from July’s pace.”
Wha? I thought we were *certain* to continue testing all-time lows? HD???
Perish that thought anon.
I guess people want their status symbols back.
Never doubt the individual greed and egoism of the American consumer. When they earn it, they will spend it. People want as much and more than they can afford. I will take that to the bank every day and sleep well at night.
There are no paradigm shifts and memories are short.
“There are no paradigm shifts”
A little too much like “this is a permanent paradigm shift” for my taste, but more likely than a permanent end to cycles.
First of all, you’re putting words in my mouth.
Second of all, it’s up a month, then down a month testing new lows. Remember new home sales a few months back? It went up a little, and then plunged!
And finally, resorting back to G’s retorts: Sales volume will return with lower pricing. So if sales volume is up 7%…..guess what happened to pricing during that same time period?
“Wha? I thought we were *certain* to continue testing all-time lows? HD???”
So now we’re cherry picking positive data that shows volumes back to levels 14 years prior? That’s some thick shade of lipstick you guys have put on that pig!
It still cracks me up that all the naysayers here basically have little or no net worth yet are frenetically hoping, willing really, for the worst case scenario for the U.S. economy.
If things do slide off a cliff as many love to predict, your fate is worse than the rich guy you despise. And it may very well be worse than the guy in the expensive house that is under water that can simply walk away with out consequence anyway.
Anon is right — pricing is going to be very sticky, even through July.
And I am not talking about the db that tries to sell at 2006 prices. I am talking about competitively priced 2003 era pricing for a well maintained, even rehabbed home. The 400k upgraded 2/2 condo in LP. The 750k rehabbed SFH in Lake View. That pricing will be sticky.
Consumerism is a relatively new phenomenon in the America history. Too bad they didn’t teach you in your remedial American history class about the after-effects of the great depression and what it did to the spending habits and savings rates of those involved. Today’s jobless and underemployed youths aren’t going to go out and buy escalades or $300k condos as soon as the economy picks up. They’re going to make less for the rest of their lives and they’re trained not to have job security.
and furthermore, there’s now more student loan debt than credit card debt, JMM. Just think about that. Today’s younger generation (which you are completely out of tune from) spent more in their 20’s on college education than jimmy choo shoes. Where’s the money going to come from to pay for these status symbols, JMM?
“#JMM on September 14th, 2010 at 4:51 pm
Perish that thought anon.
I guess people want their status symbols back.
Never doubt the individual greed and egoism of the American consumer. When they earn it, they will spend it. People want as much and more than they can afford. I will take that to the bank every day and sleep well at night.
There are no paradigm shifts and memories are short.”
Cheap money and a tight labor force with rising wages — lots of skilled employees leaving the labor market.
Employers are having a hell of a time finding people.
Don’t be mad just because your law degree is relatively worthless.
” Today’s jobless and underemployed youths aren’t going to go out and buy escalades or $300k condos as soon as the economy picks up. ”
Yet Ipod sales are at record levels? Talk about out of touch…
This my second pet peeve: when people say that if home prices double dip then my fate will be worse off. As if mine or everyone else’s lifestyle and net worth is based upon the real estate market. It’s not and the world will continue to spin.
“If things do slide off a cliff as many love to predict, your fate is worse than the rich guy you despise. And it may very well be worse than the guy in the expensive house that is under water that can simply walk away with out consequence anyway.”
Agreed. They won’t buy Escalades because they i) don’t want to get shot or carjacked and ii) wasting gas isn’t cool anymore.
Your fate will undoubtedly be worse off. It’s perhaps your biggest blind spot.
Where is your retirement coming from? Lol.
You know, I broke my cardinal rule: never argue with an idiot, because to bystanders, you look like two idiots arguing. There’s 10% unemployment in the state and an even high U-6 rate and you’re talking about employers having a hell of a time finding people. What planet do you live on?
“#JMM on September 14th, 2010 at 5:08 pm
Cheap money and a tight labor force with rising wages — lots of skilled employees leaving the labor market.
Employers are having a hell of a time finding people.
Don’t be mad just because your law degree is relatively worthless.”
Where’s my retirement coming from? You!
“#JMM on September 14th, 2010 at 5:11 pm
Your fate will undoubtedly be worse off. It’s perhaps your biggest blind spot.
Where is your retirement coming from? Lol.”
au contraire, my fate will be just fine. affordable, cheap and abundant housing is a blessing for just about everyone…except those who bought in 2006 expecting to pay for their own retirement.
“#JMM on September 14th, 2010 at 5:11 pm
Your fate will undoubtedly be worse off. It’s perhaps your biggest blind spot.
Where is your retirement coming from? Lol.”
“What planet do you live on? ”
One that employs over 1,000 people.
Try 25% unemployment and bankrupt entitlements due to a busted equities market. You are a fool and don’t know any better, I get that, but don’t post like you know anything about economics because you don’t.
By the way existing home sales reports are coming out soon. I guess that is not a meaningful statistic because people move into empty houses and don’t buy or improve anything.
Your ignorance is already well documented. Keep the stupid inane posts of “buy now or be priced out forever” coming. They certainly add a lot of value to the collective knowledge base.
HD: Some employers, in certain types of fields, are absolutely finding a hard time filling positions with qualified people. Expanding past the very specialized and highly competitive field that I deal with daily, I’ve seen a friend who is unemployed get rebuked by multiple employment agencies and firms. The issue? The firms are looking for very specific requirements (say X years of a certain billing software vs. X years of a competitive software and re-training).
On the other hand, I have highly trained attorney friends (multiple degrees, big firm experience, but no book) unable to land anything. My friends in the construction trades are similarly hit or miss – firms are exceedingly selective (some might say too much) and not hiring while also complaining of not finding anyone.
Oh, and a big chunk of the 10% are people who do what you do — prey off the misfortunes of others. Mortgage bankers prime among them (sorry Russ). They are not engineers, nurses, welders or mechanics. They are office mopes who never made or fixed anything. They just took a fee for something that added little or no value to society.
You work with the least responsible 1% of the Chicago metro market. You ignore third party data and only rely on your own observations.
I have a variation on a theme for you:
POST NOW OR BE FORGOTTEN FOREVER!
Keep up the good work. I am working on your retirement as we speak.
“not hiring while also complaining of not finding anyone”
Did you see the WSJ article mentioning that American companies are sitting on a boatload of cash and if they would just deploy it the recession would end instantly? Jobs galore etc. Lovely thought.
CK: I did read that, which was slightly odd. For the recession to truly end, folks that want them need jobs. But the jobs won’t come until the recession ends… just glad I don’t have to try to come up with ways to ‘fix’ society.
“My friends in the construction trades are similarly hit or miss – firms are exceedingly selective (some might say too much) and not hiring while also complaining of not finding anyone.”
I see this too and my response is: sounds like these firms are full of it. I work in a field where they list these laundry list of requirements for X years with Y specific experience (ie: software), which is some list designed up by HR or some senior manager who is pretty far removed from the actual gruntwork.
There are ample employees out there able and willing to do the work, its just overly picky employers who think they’re going to get a 160k employee for a song and wouldn’t consider the 75k employee who is very capable and willing to work at that price.
Also if things are so rosy from the consumer standpoint, why is massive student loan debt wrecking life plans?
http://www.nytimes.com/2010/09/04/your-money/04money.html
A Recovery’s Long Odds
http://www.nytimes.com/2010/09/14/opinion/14herbert.html?_r=1&scp=7&sq=student%20loans&st=cse
JMM, anon(tfo): don’t let actual reality interfere with your perception of what you think reality SHOULD be like.
Afterall you wouldn’t want to be different than just about any “social sciences” professor I’ve ever had.
Seriously HD is right on this one: what fvcking planet do you two live on? Oh yeah the ponzi planet where you think some up and coming young buck is going to buy out your assets you’ve marked to fantasy (peak) in your head?
Wicker: don’t confuse choosy unrealistic employers with A tight labor market. We have a hard time finding mensa candidates for below market wages therefore its a tight labor market. If it were so tight they would hire slightly underqualified.
JMM you the money manager telling me the lawyer that I add no value to society and take only a fee? Wow,you are something….
Can any mortgage person help me understand this:
I was refinancing one of my Hinsdale properties (wells fargo) and the only costs I had to pay was the appraisal/credit check (645). The house wasn’t on the market when I applied (8/4). However, I put it on the MLS for rent on 9/7 – it rented on 9/10 and was taken off the MLS. I was just notified that they cancelled my application b/c it was on the market during the application period (even though I proved that it wasn’t on the market when I applied and is currently not on the market). They refuse to refund me my 645 and told me to reapply in 60 days (w/ another 645 for a new appraisal). HOW the F@CK is this NOT fraud?!! This is worse than the bait-and-switch tactics used in the mid 2000s!!!! Can anyone give me any insight?!!!
“JMM you the money manager telling me the lawyer that I add no value to society and take only a fee? Wow,you are something….”
Well he’s up in the hierarchy of being a FuF money manager. Slightly better than taking your clients money directly and earning a rate of return equal to or less than their benchmark and taking a 1-2% mgt fee with a straight face.
At least he can look his clients in the face and tell them the volatility for their risk adjusted return is likely lower.
Most vanilla money managers are indeed frauds: FoF managers not so sure of.
“HOW the F@CK is this NOT fraud?!! ”
It might be fraud but it sure is funny. Guess there goes your oil change budget on the lambo eh?
Madoff got a lot of his money through funds of funfs.
Clio:
Two things come to mind. No bank will refinance a property that is listed for sale. Banks don’t want to be a short term loan as they are unprofitable. Underwriters will check the MLS to see the listing history as well as the appraiser. My guess is the MLS listing had for rent AND for sale so the underwriter killed the deal.
If the property were just for rent, it shouldn’t have killed the deal if it was an investment property.
When obtaining a mortgage, you essentially have to put your life on hold. Seriously. Don’t DO ANYTHING without talking to the loan officer first. Don’t move money around, don’t change jobs/employment, don’t get preggo, don’t go on leave of absence, don’t have work done on the house, don’t make assumptions about anything because even the most innocuous thing that you may consider innocent can sink your deal.
It isn’t fraud because YOU killed the deal. Appraisers get paid regardless if your mortgage is approved or not. They are third parties.
“Madoff got a lot of his money through funds of funfs.”
Yeah but an unfair association. Also I suspect JMM is managing family money in these (I think he let that slip before), so it makes it even less offensive. If he was taking OPM and just stock or bond speculating and acted as he does it would be outlandish and offensive.
Thanks Russ – but don’t you think that proving that it is not for sale and having a signed 1 year lease should “revive” the deal? Can’t it be sent back to underwriting? If not, then this is really no better than the unethical practices going on in the mid 2000s. (Oh, and if someone’s pregnancy affected the refinance, THAT is DEFINITE grounds for a lawsuit!!!)
“It might be fraud but it sure is funny”
It’s not funny – I almost killed someone today!!
HD – serious question…
do you really believe that deflation will occur in our easy credit, instant gratification U.S. society?
think about that for a minute
Clio:
The property being listed for sale is what is triggering the denial. Sometimes a letter of explanation may help, but the reality is that banks really don’t want to make loans on properties that will be sold soon. A 1 year lease doesn’t mean the property won’t be sold.
It used to be you had to wait like six months to a year to refinance once a property was listed for sale. However, since so many people are finding themselves unable to sell, the banks have loosened up this guideline and now will allow a refi after being off the market for just one day in most cases.
Your best bet is to call another lender.
It is occuring sonies. ask russ about how easy it is to get a mortgage. Ask me how many people are going bankrupt or walking away from their mortgagees. Ask jnm how difficult it is to find a decent return on money. Access to credit has been curtailed, yields are down, mortgage rates are at record lows. As signs point towards deflation.
Thanks Russ – great advice. I should just cut my loss and move one (although it isn’t the money – I just HATE TO LOSE!!!!!)
This is a new word I learned. I’m not sure about it yet though.
http://en.wikipedia.org/wiki/Biflation
“JMM you the money manager telling me the lawyer that I add no value to society and take only a fee? Wow,you are something…”
Notice Shakespeare wrote nothing of money managers.
Anyway, the only “fund management” I do deals with liability driven investing which is not about asset picking or outperformance at all. The rest is indexing and cost minimization. I have a special secret — use lawyers as sparingly as possible. They are a waste.
I like “youflation” everything YOU own is worth less and everything YOU want costs more
“I have a special secret — use lawyers as sparingly as possible. They are a waste.”
People tend to hate them until they need one.
“People tend to hate them until they need one.”
Bob, out of curiosity, R U an attorney?
“Notice Shakespeare wrote nothing of money managers.”
“He that wants money, means, and content is without three
good friends.”
As You Like It, act 3, sc. 2
“Put Money in Thy Purse”
Othello. ACT I Scene 3.
There are ample employees out there able and willing to do the work, its just overly picky employers who think they’re going to get a 160k employee for a song and wouldn’t consider the 75k employee who is very capable and willing to work at that price.
I’ve been trying to hire an individual since spring with no luck. Am I picky yes but not looking for a 160k for a song just a 22-26 year old with limited work history but a strong work ethic, ability to follow directions, and willingness to grow into a position. Should be quite easy but for some reason I cannot find this individual in the current market!
There a many really lazy people out interviewing. We give a homework assigment prior to the interview. Nothihg hard just some memorization of a product we sell. Over half of the people come totally unprepared.
“….just a 22-26 year old with limited work history but a strong work ethic, ability to follow directions, and willingness to grow into a position…..There a many really lazy people out interviewing”
Hell, I’m just trying to find an unskilled laborer to help w/cleaning, etc. and can’t even find that!!!
SquareD – impresssive.
“do you really believe that deflation will occur in our easy credit, instant gratification U.S. society?”
Credit card use has fallen 23 consecutive months now. Consumer borrowing, overall, has fallen 17 of the last 18 months.
“Oh, and if someone’s pregnancy affected the refinance, THAT is DEFINITE grounds for a lawsuit!!!)”
There have been recent news articles describing how couples are being denied the chance to refi after they find out there is a pregnancy. Basically, the lender is determining that the wife’s income will no longer be available (which is what causes the refi rejection.) I think one article said that the wife is considered “disabled”- and hence her salary is reduced or excluded altogether in the refi application.
“The “early read” on existing home sales based on regional data suggests that existing home sales ran at a seasonally adjusted annual rate of around 4.1 million in August, up around 7% from July’s pace.”
This doesn’t say very much. July’s data was the lowest in 15 years. So if we are up 7% off the 15 year low- that’s great- but historically- doesn’t tell us that there is much improvement there.
The thing to watch is inventories. They have been rising again. And with rising inventories come falling home prices.
“I think one article said that the wife is considered “disabled”- and hence her salary is reduced or excluded altogether in the refi application.”
WOW – why hasn’t a lawyer picked up on this. This would absolutely be a lawsuit and, if tried in front of a jury, would be a slam-dunk.
“Bob, out of curiosity, R U an attorney?”
No. But I am drinking buddies with a couple and I have utilized attorneys in the past (not my drinking buddies tho).
Attorneys are very big drinkers from my observation.
“There a many really lazy people out interviewing. We give a homework assigment prior to the interview. Nothihg hard just some memorization of a product we sell. Over half of the people come totally unprepared.”
This is also a problem with our higher education institutions. I recall from my undergrad days (about a decade ago) there really wasn’t a lot of career services staff to support things like interview practice, feedback, etc. Apparently learning useless things like sociology or art history are encouraged at the expense of actually learning valuable career skills.
Clio- the issue was brought up in the NYT a couple of months ago.
http://www.nytimes.com/2010/07/20/your-money/mortgages/20mortgage.html?_r=2&scp=1&sq=pregnant&st=cse
It’s in their guidelines. If it affects your income, it’s fair game.
Thanks Sabrina – that is very surprising!! However, even if that IS the practice and guidelines, it still could be illegal/unconstitutional. If I deny to rent to someone because of similar reasons, I could be sued. This is a double standard and I bet could be challenged.
Clio:
Lawsuit on what grounds? If there is no income, there is no mortgage. Would you lender your own personal funds to someone if you weren’t sure they were returning to work and their income was going to continue at the same level?
The issue is that many women do not return to the workforce or take a pay cut. Pregnancy isn’t so much an issue during the process unless when the lender goes to do the verification of employment, the employer can’t guarantee the woman’s job is secure and when exactly they will be returning to work and that their income will continue. Many HR departments won’t put anything in writing with specific assurances (thanks to the lawyers). The other issue is that many women may take longer leave of absences where their income is curtailed during that period.
On one hand, Fannie/Freddie don’t want lenders discriminating on this issue, but at the same time if that mortgage were to go into default, Fannie/Freddie would be demanding a buy back from the lenders claiming the lender didn’t do enough income due diligence, especially if the default is even remotely related to the wife’s income loss.
Might be worth noting that pregnancy has been deemed a disability by federal law for decades now. . .
It’s one of those issues that really causes problems for “capitalism”– no one wants to pay benefits to new mothers so they have guaranteed income, and no one wants to force banks to lend to new mothers with no income.
Russ,
I completely understand the reasons why mortgage companies have this policy regarding pregnancy – but they SHOULD be held to the same standards as other companies. Pregnancy/maternity leave policies are EXTREMELY STRICT and WELL-DEFINED. My own company has suffered TREMENDOUS financial set backs because of women shareholders/partners taking maternity leave. We can’t just fire them because it is not financially beneficial to the group/companry or because we are worried that they won’t come back. In fact, we have to give them PAID leave. I don’t want to seem as though I am against maternity leave/children, etc., I just think it is unconstitutional that mortgage companies aren’t held to similar standards as other companies/institutions.
“Would you lend your own personal funds to someone if you weren’t sure they were returning to work and their income was going to continue at the same level?”
YES – I HAVE BEEN FORCED BY LAW TO DO SO (BUT NOT LEND THE MONEY- ACTUALLY GIVE THE MONEY) FOR EXTENDED MATERNITY LEAVE – see my previous post for explanation of this.
Isn’t it against the law to ask race, marital status, children status on job interviews? Why do mortgage companies get to ask these questions? Of course I understand it is relevant to the candidate’s ability to repay a loan – but couldn’t the same be said for a candidate’s job performance? and before anyone (if anyone is still out there) says that a candidate’s marital or child status doesn’t have any impact on their performance, I could argue that the same could be said for loan repayment (ie, you could have a spendthrift or frugal spouse, spend a lot or little on your children – each situation is different). OK – obviously I am still a little bent out of shape over my own refinancing debacle!!!
Pregnancy is only an issue if the employer can’t provide any kind of verification that income will continue. Again, the problem is that many Mega Corp HR Departments are robots and the in house attorneys won’t let them put anything in writing that remotely guarantees a job/income.
It is not as big of a deal as it sounds. I’ve just learned to ask discretely about it because I have had at least 10 deals over the past year where it has come up. Move up buyers love to do everything around a new kid not realizing it can really throw a wrench in the mortgage process.
My point really was that there are a lot of things people do in their daily lives that seem reasonable, but can really cause a problem when getting a mortgage – i.e., listing your home for sale in the middle of a refinance.
Thanks again Russ – I actually DO understand your points. That is great advice and SHOULD be taken seriously by anyone applying for a mortgage/refinance. It is not fair, but very little in life is fair…. I guess I should just learn to conform and not question/challenge these things – it would make things a lot easier for me……
Clio, mortgage lenders can’t discriminate on the basis of race, sex, marital status, or age. None of those factors are considered during underwriting even though the government forces lenders to obtain that information on every mortgage application under the Home Mortage Disclosure Act.
The pregnancy issue has nothing to do with pregnancy, but ensuring the income is continuing. If you took a leave of absence for any reason and the bank couldn’t document that your income was going to continue, your loan would be denied.
1) The Shakespeare quote about lawyers alluded to above is one of the most misunderstood/misused Shakespeare quotes of all time (i.e., his remark about killing lawyers was actually a pro-lawyer sentiment).
2) Clio: based the facts you’ve outlined above, I don’t see what the grounds would be for a lawsuit, let alone a slam dunk.
3) Clio: Your comment about the “shareholder/partners” taking maternity leave, and how doing so costs your company lots of money, is silly. Without getting into the fact that your assertion doesn’t hold water (as many studies, particularly of law firms, show), the reason your comment merits a “silly” is because you said we “can’t fire them” because of the law. You can’t “fire them” because they own the joint, according to you.
Clio: Scratch that – you actually said you can’t fire them because doing so would hurt the company’s business. That makes your comment even more silly (“(i) the owners’ maternity leave costs the company money and (ii) we can’t fire the owners because doing so would cost the company money”).
i don’t want my comments to be taken out of context. I think that having children and maintaining good family values is paramount and the absolute most important thing in the world. My comments on preganancy and the workplace were meant to show that there are double standards. Also, a stronger point is that if I were to deny renting to someone based on the same criteria that mortgage companies use to determine ability to pay, I would be sued, jailed, berated, etc.
“SquareD – impresssive.”
Lol. Not really. There was no such thing as a investment manager in his day. He was talking about rich people.
POST NOW OF BE FORGOTTEN FOREVER!
“This doesn’t say very much. July’s data was the lowest in 15 years. So if we are up 7% off the 15 year low- that’s great- but historically- doesn’t tell us that there is much improvement there.”
Doesn’t it tell you that you are 7% higher? Have you looked to see what a 7% pro-forma would line up to?
JMM you got schooled. Face it. Deal with it. Go back to your box under the bridge. Hahahahahaha.
Of course, in recessions the “high end” and “low end” properties still get purchased, for different reasons of course. Then there’s that great big fat middle “bulge” of intermediately-priced properties that nobody wants/can afford.
As the old song “Ain’t We Got Fun” put it:
“There’s nothing surer…
The rich get rich and the
Poor get…laid off.
In the meantime, in between time,
Ain’t We Got Fun!”
“The Shakespeare quote about lawyers alluded to above is one of the most misunderstood/misused Shakespeare quotes of all time (i.e., his remark about killing lawyers was actually a pro-lawyer sentiment).”
Don’t let facts get in the way of insulting lawyers, lest you be accused of being in league with scoundrels.
“JMM you got schooled.”
POST NOW OR BE FORGOTTEN FOREVER!