Market Conditions: 32.9% of All Single Family Homes in Chicagoland Now Underwater
Zillow reports that in September 32.9% of Chicagoland single family homes with mortgages were underwater, up from 27.2% a year ago, and higher than just 3 months before, in June, where it was 30.9%.
There was no separate data provided only for Chicago or for condos.
Zillow did provide data on September home sales in the city, however.
17.6% of the single family homes and 21% of condos that sold in September sold for a loss.
“Negative equity is going to continue to cast a pall over the housing market for the next several years,” said Stan Humphries, Zillow’s chief economist. “All these people are trapped in their homes and can’t move onto another one and it’s throwing off more foreclosures. For people who are not going to move anytime soon, it is much more of an academic issue. For people who need to move or who encounter an economic issue, it’s a material issue.”
The Illinois Association of Realtors also released its quarterly sales data yesterday.
Given that we follow the monthly sales pretty closely here on Crib Chatter, it’s not surprising that the third quarter sales were down 23.1% in Chicago to 4,477 sales from 5,820 sales in 2009.
The third quarter median price also declined 16.1% to $192,900 from $230,000 in the third quarter last year.
“The third quarter of 2010 reflects a different marketplace than the same period in 2009, when buyers were incentivized with $8,000 and $6,500, respectively, for first-time and move-up home purchases,” said Mabel Guzman, president of the Chicago Association of REALTORS® and a REALTOR® with Su Familia Real Estate, Chicago. “Today, tightened credit practices paired with a lack of consumer confidence continue to make homebuying a challenge for those potentially on the fence. Positive signs, however, can be seen in the stabilization of the average price in the city of Chicago and the ongoing investment in distressed properties throughout the city.”
Tax Credit Effect Evident in Illinois Third Quarter Home Sales; Sales Down 24.0 Percent, Median Price at $154,000 [Illinois Association of Realtors, Press Release, November 10, 2010]
A third of Chicago-area homes underwater [Chicago Tribune, Mary Ellen Podmolik, November 10, 2010]
Catch the falling knife, no thanks. This country had, and still has a spending problem. Both individuals and government are guilty. Until spending goes back below revenue for families and government, the housing industry will be further decimated.
I think one of the main issues is income, as they did not keep pace with the growth in home prices and property taxes. A single income family is priced out of most suburbs, unless they happen to make making well over 6 figures, or are interested in living 40 miles out, in a dangerous area, or want to deal with a significant renovation.
Prices are still too high for what people think they should be able to afford and willing to spend on a monthly basis. Housing was an investment for much of 1970-2006, but now it is seen as an expense to households. Households will recover, and as incomes rise into 2011 and 2012, spending power will as well. I see further declines on the way, even in such a low rate environment.
Expect to read a similar storiy in the press in November 2011. Someday housing will return to affordability for everyone and the foreclosure rate will return below 2%. We’re not even close. Shocking I know but few thought in 2006 or 2007 prices would fall at all, even this year, few thought prices would double dip.
Carry on.
I was talking about these numbers with Keith Jurow at the Real Estate Channel yesterday and we’re not convinced that Zillow is even able to factor in the HELOCs. If not then these numbers are actually much worse.
Well, I just ran the October sales (closings) numbers for Chicago. It just gets worse and worse. Can you believe that they were down 41% from last year! I don’t even need to check the history to confirm that that continues to be a 10 year low.
There’s something else going on though that I need to figure out. Contract activity is not down that much. I’m thinking with all the distressed sales there must be a backlog of short sales under contract that is building.
Last october’s sales were goosed by what buyers thoght was the expiration of the tax credit.
What’s going own now is what I believe is a listing issue. There are so few ‘deals’ listed in the MLS and so few sellers who can sell their current home that the market is paralyzed.
Bring back foreclosure sales, release the shadow inventory and streamline short sales and volume will return albeit at significantly lower prices.
True, but it is still abysmal. Look at it this way. Sales were down nearly 25% from 2008 levels, which were down from 2007, which was down from 2006.
A lot of the listings I’m seeing are the people who are still dreaming they are going to get that price (mainly over whatever they paid in 2002-2009 period.) So it sits and sits and sits.
Who are the agents who take on these properties?
Why is a property sitting on the market for a year with only a $10k price reduction?
We have seen, if it’s priced “right” it will sell quickly. The problem is the “right” price is well under what most people paid.
The market is paralyzed because too many people are still in denial. And on the buyers side, mortgages are harder to get and some buyers are in denial about that.
It will be interesting to see what happens this spring. I am already hearing rumblings of a huge amount of listings prepared to come on the market then because sellers believe conditions will be “better.”
“Last october’s sales were goosed by what buyers thoght was the expiration of the tax credit.”
So were November’s. Last December, sales fell off a cliff after the tax credit expires. It will be interesting to see if this year the sales are even below those numbers.
“Why is a property sitting on the market for a year with only a $10k price reduction?”
Sabrina, I have two friends that have their homes on the market, they would like to move but don’t have to. If the get the price they want fine, if not they will stay put. That being said I’m sure this isn’t the norm……
Interesting read on how foreclosure process may affect the market. . .
http://articles.latimes.com/2010/nov/05/business/la-fi-foreclosure-states-20101105/3
“Who are the agents who take on these properties?”
Any rational agent with free time would do this as its essentially a free lottery ticket. Even if it has a 5% chance of selling (and most listings likely have a higher chance even if overpriced) thats .05 * .03 * 200k (median) = $300 NPV.
That’s for doing a little bit of work and snapping some pictures. Not too shabby so long as they’re not spending more than eight hours or so in total time commitment to the property.
“Who are the agents who take on these properties?”
Like Bob said, if an agent is merely going to take a few of their own pictures and throw it on the MLS then there is no cost to taking on another listing. The question then becomes “Who hires such agents?” Apparently, a lot of sellers.
However, if an agent is actually going to do some work it’s a different story. There can be several scenarios: 1) You take on a listing thinking the seller will be more flexible on price but they aren’t 2) You and the seller pretty much know it’s going to end up a short sale so you take it on now to be there when they are ready 3) The market falls out below you 4) A lot of times you really can’t tell what the market is for a property until you get it out there. Not every property is a commodity with 14 other comps out there.
According to the economic theorists of the Debt Deflation or Post-Keynesian approach (from Wikipedia):
“some argue that the debts assumed at the height of the bubble simply cannot be repaid – that they are based on the assumption of rising asset prices, rather than stable asset prices: the so-called “Ponzi units”. Such debts cannot be repaid in a stable price environment, much less a deflationary environment, and instead must either be defaulted on, forgiven, or restructured.”
“Wide-spread debt relief either requires government action or individual negotiations between every debtor and creditor, and is thus politically contentious or requires much labor. A categorical method of debt relief is inflation, which reduces the real debt burden, as debts are generally nominally denominated.”
It seems obvious that some sort of sweeping debt relief/restructuring would be needed because “negotiation between every debtor and creditor requires much labor”. How can we possibly sift through the legal issues on 1/3 of all properties in America? It’d take too much time. If they inflate to make the nominal debts smaller in comparison, then how does the money get to MainStreet without full-blown gift/subsidy payments???
Default and walk-away. All the cool kids are doing it. Upwards of 1 in 8 mortgages are doing this.
“How can we possibly sift through the legal issues on 1/3 of all properties in America?
“Why is a property sitting on the market for a year with only a $10k price reduction? ”
Because $10K is the lowest they can go without bringing significant money to the table and decreasing their downpayment for the next place, or tapping into their emergency fund.
My theory: the fed is inflating in order to bail out these homeowners.
Yet for homes people actually want in neighborhoods that aren’t de facto war zones (unlike 75% of the city)…
http://www.redfin.com/IL/Chicago/2009-W-Bradley-Pl-60618/home/13388904
Under contract in less than a week at a $1.250M list.
The insight here is that most of Chicago is a dump. People forgot about that during the bubble and bought houses all over the city. We’re not back to a new normal — it is just normal — what Chicago has always been. Hell, even Sabrina was pumping West Town and there is a shooting there at least once a week. Hipsters are running / scootering scared right now.
“My theory: the fed is inflating in order to bail out these homeowners.”
Bingo. And it will work too.
Just don’t let the banks commit fraud in the name of expediency. There is so much scurrying around by the banks trying to cover up the mess they’ve made. Matt Taibbi writes about a case where a mortgage was placed into an investment trust after it went into foreclosure. So its as much the interest of the mortgage backed securities investors (pension funds, insurance cos) as the bankrupt borrowers that rule of law is followed and the banks don’t get away with securities and tax fraud as the legislature finds a way to pardon them and the courts look the other way.
http://www.rollingstone.com/politics/news/17390/232611?RS_show_page=4
“Bring back foreclosure sales, release the shadow inventory and streamline short sales and volume will return albeit at significantly lower prices.”
In your opinion. Any historical evidence of bubbles being reinflated?
Maybe gold will go up, but not real estate. IMO.
“Bingo. And it will work too.”
“Maybe gold will go up, but not real estate. IMO.”
Well, that is the funny thing about inflation. It tends not to be selective — more pervasive.
Well, actually, thats not true.
“Well, that is the funny thing about inflation. It tends not to be selective — more pervasive.”
Yes, yes it is.
This is misleading… Over 50% own their houses outright with no mortgage so there is no way that like 75% of people with mortgages are underwater. Maybe those people who bought in the last 5 years but even still a lot more people put money down than that
because you say so and everybody knows how you are always right about everything. IMO no way to reflate the old bubble, only the likelihood of creating new ones.
“Yes, yes it is.”
Real estate reinflation? Aren’t we in our double dip right now? Absurdity.
So i didnt get the memo, when did Zillow become the highly regarded factual data go to place?
I wouldn’t be suprised if 30% out of the 32.9% are crappy homes that were bought between 2002-2008 which the owner(s) completey overpaid thinking it was a lottery ticket.
The other 2.9% being beautiful, well built homes in which the owner(s) just stuck some bad luck or lost their job, etc..
Basing this off when I was in the market, I looked at ~25 foreclosed properities (shf, condos) and of them, only 2 were really “a livable, decent investment” imo.
“because you say so and everybody knows how you are always right about everything. IMO no way to reflate the old bubble, only the likelihood of creating new ones.”
It isn’t a bubble if there is no nominal growth in prices right? Stop and think about how inflation works for a moment.
Given the size of rents and imputed HO rents in the CPI basket, definitionally it isn’t sensible to have inflation without an increase in that portion.
“Aren’t we in our double dip right now?”
CS index seems to disagree with you. Unless 125.00 to 124.75 was a double dip. It will bounce around, but define dip? Below 100? Make a call.
“Basing this off when I was in the market, I looked at ~25 foreclosed properities (shf, condos) and of them, only 2 were really “a livable, decent investment” imo.”
It is how HD puts food on the table. Dealing with POS properties that were bought in Bronzeville assuming it was the next Lincoln Park.
Agree that most, if not all, distressed properties are junk and/or in junk neighborhoods. There is a reason they don’t sell.
Again:
http://www.redfin.com/IL/Chicago/2009-W-Bradley-Pl-60618/home/13388904
Less than a week.
CPI????? What a joke that statistic is! Yeah, go on quoting statistics and ignore the elephant in the room. I think over the long term rents will trend DOWN as overhang gets DUMPED.
JMM, you have already defined stable as 120-125, so I assume you’ll agree that the under will be a double dip? I’ll take the under.
“Just don’t let the banks commit fraud in the name of expediency.”
I’m with dingleberry here. Its obvious the banks are holding back for a number of reasons and one of them is likely the hope that they can lobby their way to legal and economic forgiveness.
“as the bankrupt borrowers that rule of law is followed and the banks don’t get away with securities and tax fraud as the legislature finds a way to pardon them and the courts look the other way. ”
Eventually if no pardon is given its going to be obvious the bankers are intentionally holding back (it already is, really, but its going to be glaringly obvious).
During the boom many banks skirted the law in the name of expediency and short-term profits. Unfortunately these laws they skirted could have drastic economic consequences for them. And the banks need to held to account for these drastic economic consequences per the letter of the law, with no bailouts from our government.
I always knew even a dingleberry could call JMM out on his bs.
“CPI????? What a joke that statistic is! Yeah, go on quoting statistics and ignore the elephant in the room. I think over the long term rents will trend DOWN as overhang gets DUMPED.”
Yes, CPI is BS. No one relies on that for anything. Good point.
“JMM, you have already defined stable as 120-125, so I assume you’ll agree that the under will be a double dip? I’ll take the under.”
By definition 125 would be stable because that is what the last value was. Saying the index would be flat in one period reading says nothing about the future.
So, what determines a dip here? 100? 110? 90?
Given our last “dip” (170-125) perhaps something of that percentage magnitude? That would imply 91. Are we going to 91 G?
Just asking the fear mongers for some intelligent analysis here.
Oh, G, also, perhaps we should stratify the CS index for properties not in warzones.
What is the CS index for this place?
http://www.redfin.com/IL/Chicago/2009-W-Bradley-Pl-60618/home/13388904
at first I thought you posted 3 different sales to support your argument. now I see you are just repeating the same one. very robust.
“Are we going to 91 G?”
I’ve long predicted we’re going to 94-95 and called guano crazy by the pro valuation cheerleaders. 91 is pretty close to that.
“at first I thought you posted 3 different sales to support your argument. now I see you are just repeating the same one. very robust.”
True.
Similarly, at first I thought you were going to offer an explanation, but then I realized you are dismissing data you don’t like or can’t explain just because.
Thats a nice house JMM in a good school district no wonder it sold so fast (even at 1.25mil)
“I’ve long predicted we’re going to 94-95 and called guano crazy by the pro valuation cheerleaders. 91 is pretty close to that.”
Bob — I appreciate you made a call, unlike most here. I’d agree 94-95 is a double dip.
HD — are you saying we go to 95?
What is this CS index your all are discussing? Refer me to where I can read up on this…
JMM you are so right about properties in the Bell School district. I currently rent over here so I’ve been hawking sales in this area for the last 3-4 years and prices are not budging.
I’m now contracting on a place east of here in Wrigleyville which appears to becoming a mini warzone.
“Someday housing will return to affordability for everyone ”
When, exactly, was housing affordable for *everyone*, HD? How is it possible for it to “return” to a state that never was?
not dismissing the data point, just amused by the repetition. like you’re hd’s alter ego
yeah funny when people laughed at me when I said over 2 years ago crime was getting a lot worse in lakeview and people were like “wheres the statistics blah blah blah”
We’re going below 100 for sure. From where we stand right now I can’t gauge how far below 100 we’ll go, but, my suspicious is that you will all be shocked.
anon(tfo) – rather than affordable, how about sustainable? Every house needs to sell at or less than current prices to maintain a market with less than 2% foreclosures. Even in recessions of the past foreclosures were not as high as they are today.
“Thats a nice house JMM in a good school district no wonder it sold so fast (even at 1.25mil)”
Good properities without sacrifices will move swiftly without re-pricing.
Sacrifices being something that is wrong with the property (lack of parking, high assesments, bad neighboorhood, etc..)
“Someday housing will return to affordability for everyone ”
When, exactly, was housing affordable for *everyone*, HD? How is it possible for it to “return” to a state that never was?
What HD meant to say is “Someday the house I want to purchase will be at the price I can afford.”
JMM – so what. One house does not mean anything. There hasn’t been a SFH closing in 3 months in the area bounded by western, IP, damen and addison. There are only a handful of SFH in that area under contract.
Complaints about no “deals” and sellers being delusional miss the point. I think its the buyers that are delusional. Delusional if they think any seller not in financial distress will accept an offer for substantially less than what they paid.
I think the problem it that people are confusing the concept of being “underwater on your mortgage” with the concept of being in financial distress. You are underwater on pretty much everything you’ve ever bought on credit — your car, your tv, etc. Doesn’t mean you should sell it all for less than you paid. You may also be underwater on a lot of the stocks you bought. Doesn’t mean you should sell them. And you never would unless you were in financial distress.
As with any other price drop, most home owners will wait this out. If they don’t *have* to sell, they won’t. And the percentage of homeowners that *have* to sell in a given year is very small.
I’m a case in point. I bought up in this market. I’m glad I did. I got a great house in a neighborhood I could not afford in the bubble. But I now have a condo that I can’t sell for a price that makes sense to me. I got one offer that would have required me to bring $30k to the table. Buyer’s negotiating strategy sounded a lot like the nonsense I read from some commenters on this site. I could afford to bring $30k to the table but I said no thanks. I’m now renting the place out, losing $300 a month on a cash flow basis. Big deal. It’s going to take 8 years for that to add up to the $30k I would have had to pay at closing . . . not even counting time value of money. All the while the mortgage is being paid down month by month.
Maybe that buyer will find another seller that is actually in financial distress. Maybe they won’t. But one thing is for sure: that’s the only kind of seller that will accept their crappy offer.
Seems like a strange way to shop for house to me. It’s like saying you only buy clothes at going out of business sales. Yeah you may save some money, but you’ll also end up the moron wearing the ugly purple sweater.
That’s because no one wants to live in that boundry HD or everything is still overpriced.
No, that’s not what I said, but yes, that’s true. one sellers loss is another buyers gain.
“What HD meant to say is “Someday the house I want to purchase will be at the price I can afford.””
“What is the CS index for this place? (2009 Bradley Pl under contract)”
JMM, Since you brought it up, are we talking inflation adjusted? According to the CPI, total inflation over the period from September 1999 to September 2010 was 30.10%
They paid $385,000 before reno on 9/17/99. The CS-SA was at 97.75 at that time. The latest Aug 2010 number was 124.45, only a 27.31% increase. The CS has not matched inflation over this time.
What did the gut rehab cost for this large 5BR/3.5BA? It appears to be high end from basement on up, including digging out the basement, lowering the floor and installing radiant heat.
We’ll see where it closes. There’s a chance this one didn’t exceed inflation. That would mean there is also a good chance it will not contribute to a rise in the CS index, seeing how the current Chicago SA index has not kept pace with inflation since 1999.
“That’s because no one wants to live in that boundry HD or everything is still overpriced.”
I dont mean to be a jerk…but its true I feel.
alanon, you are correct sir. And might I add, that was quite a lowball offer. Tell me, do you think the buyer wanted to negiotate or was that his/her final offer?
I absolutely love the standoff between buyers who want a ‘deal’ and sellers who don’t have to sell. We all know who wins that standoff.
But whatever, the numbers speak for themselves. Gary said slowest numbers in Oct in over 10 years.
And this of course has nothing do with pricing.
“The insight here is that most of Chicago is a dump. People forgot about that during the bubble and bought houses all over the city.”
This is so true. Surprised no one else jumped on this. I am amazed by this fact every day. Remove all the bad neighborhoods, the homes in bad school areas, homes on busy streets or too close to the el, or homes that are poorly constructed or falling apart or have bad designs. That leaves about 7 homes in the entire city (I exaggerate of course).
alanon, you are absolutely correct and I love the analogy w/cars/appliances bought on credit. I think that if buyers understood that not all sellers are distressed, they would have a more realistic view of the market.
alanon, You forgot about continuing price declines. They are sure to occur in any condo which is currently at negative cash flow. Oh yeah, you forgot repairs, vacancies and turnover expenses, too. Are you sure 8 years is the break even? Good luck with your plan.
October SFH/Condo/TH closings for City of Chicago:
1992 1,094
1993 1,238
1994 1,187
1995 1,580
1996 1,475
1997 1,731
1998 1,855
1999 1,978
2000 2,106
2001 2,177
2002 2,503
2003 2,996
2004 2,651
2005 2,846
2006 2,630
2007 2,007
2008 1,564
2009 2,068 (31% short sales/foreclosures)
2010 1,225 (39% short sales/foreclosures)
“My theory: the fed is inflating in order to bail out these homeowners.”
*your* theory? Okay, “my” theory is that species evolve by natural selection.
What? Someone else published that 150 years ago? F’ that, it’s mine.
“HD — are you saying we go to 95?”
He’s been saying that *forever*, JMM. No way he’s changed his mind now.
“IMO no way to reflate the old bubble”
What does general inflation via currency devaluation have to do with reinflating the RE bubble? The Fed is trying to re-set the value of *everything* to effect a backdoor bailout of nominal-priced debt-assets; if the USD is worth 50% less, and wages increase 40% in nominal $$ to not quite keep pace, then the mortgage obligation becomes much more re-payable in nominal $$.
I have thick skin. But SH particularly got under my skin.
Regardless, either I am unclear in my opinions or you misunderstand them.
People will buy homes. Its slow right now because prices are too high. Prices will fall, volume will pick up and lending standards should keep a lid on prices in the future. The foreclosure rate on post-2009 purchases should return to historically low 2% or less. There’s an argument to be made that FHA 3.5% down mortgages are the next wave but we’ll see.
1999 prices or better is the ‘sweet spot’ where most buyers can sustainably pay for housing and keep a low foreclosure rate. Sorry, but that screws a lot of people like those above who bought 1999-2008 are going to have to short sale, walk-away, or bring money to the table, or live in their house forever. That’s just the way it is.
“#a-fed on November 11th, 2010 at 11:20 am
“That’s because no one wants to live in that boundry HD or everything is still overpriced.”
I dont mean to be a jerk…but its true I feel.
“I could afford to bring $30k to the table but I said no thanks. I’m now renting the place out, losing $300 a month on a cash flow basis. Big deal. It’s going to take 8 years for that to add up to the $30k I would have had to pay at closing . . . not even counting time value of money.”
We’ll see if you change your tune in a couple of years. You might be losing $300/mo now but what about in between tenants? What about the hassle of landlording? You strategy makes sense to me for the time being but as the years go by you better hope for either rent inflation or the market to recover.
“anon(tfo) – rather than affordable, how about sustainable? ”
That’s fine. I might or might not agree, but it’s not obviously false, like the “affordable for everyone” canard.
“There hasn’t been a SFH closing in 3 months in the area bounded by western, IP, damen and addison. ”
Uh, check your facts, man. Not true at all.
anon(tfo) – you’re right, garbage in, garbage out. I clicked the wrong box on redfin and it gave me bad info.
however, there’s been (2) closings on SFH in tha last 3 months
3654 n oakley
3913 n hoyne
the rest are multi-units or condos.
““That’s because no one wants to live in that boundry HD or everything is still overpriced.”
I dont mean to be a jerk…but its true I feel.”
You are incorrect. HD was wrong, too, but your conclusion is fallacious even without relying on bad facts, as there are other reasonable explanations, especially for a period as sort as 90 days and using closings as the measurement.
doubtful that cost of labor units will increase, imo, so whole theory is bunk. can’t push on a string…
“wages increase 40% in nominal $$ to not quite keep pace”
“Uh, check your facts, man. Not true at all.”
The MLS only has 3620 N Bell & 3654 N Oakley closed since 8/11/10.
Same time period:
2009 1
2008 8
2007 8
2006 3
2005 1
^^^I’m gonna party like its 2005. I’m gonna go out and buy a moto RAZR, a Black Eyed Peas CD and talk about how RE is going to make me RICH!
“however, there’s been (2) closings on SFH in tha last 3 months
3654 n oakley
3913 n hoyne
the rest are multi-units or condos.”
Not all the “multi-units” are actually multi-units. At least two of the others are actually SFHs.
“The MLS only has 3620 N Bell & 3654 N Oakley closed since 8/11/10.”
What percentage of none is 2? And the 5 year average was 4, so zero was misleading.
Also, as noted, MLS has the number wrong for this year.
“alanon, you are correct sir. And might I add, that was quite a lowball offer. Tell me, do you think the buyer wanted to negiotate or was that his/her final offer?”
Final offer, after negotiating. I think buyer may have been Bob or homedelete.
“alanon, You forgot about continuing price declines. They are sure to occur in any condo which is currently at negative cash flow. Oh yeah, you forgot repairs, vacancies and turnover expenses, too. Are you sure 8 years is the break even? Good luck with your plan.”
Why are prices “sure” to decline. Maybe they will, maybe they won’t. But I’ll happily put my money on “won’t” over an 8 year time period. Vacancies, sure, maybe. But I set the rent low and got it filled quickly. Repairs . . . will the cash flow analysis includes assesments, so only repairs from the walls in. Even if it’s less than 8 years I think I’ll be fine. As I said, the mortgage is also getting paid down every month.
“I absolutely love the standoff between buyers who want a ‘deal’ and sellers who don’t have to sell. We all know who wins that standoff.”
Who wins that standoff? And what’s your basis for saying so? Low sales numbers doesn’t mean that sellers are “losing.” It means they aren’t selling. The vast majority aren’t selling *by choice*.
“As I said, the mortgage is also getting paid down every month.”
Then its not an apples comparison. You need to deduct the equity you’re contributing each month from your cash-flow to see how much you’re really losing each month. If you didn’t do that with your $300/mo figure it doesn’t sound like you’re losing much.
dingleberry, oh they will increase alright, just not in the good ole USA. This will further inflate the cost of things we need due to increased demand where wealth is accumulating. They won’t need our houses if the jobs are back home, unless they are offered at scrap prices for raw materials.
“I could afford to bring $30k to the table but I said no thanks. I’m now renting the place out, losing $300 a month on a cash flow basis.”
That’s $3600/year to avoid paying $30,000. You’re effectively borrowing at 12% interest. I hope your investments pay more than that.
“What percentage of none is 2? And the 5 year average was 4, so zero was misleading.”
Thanks, MOTO. I thought I was helping you.
“That’s $3600/year to avoid paying $30,000. You’re effectively borrowing at 12% interest. I hope your investments pay more than that.”
That makes no sense. Assumes I have to pay the $30k at the end of 8 years! If that were a given, then of course I would have paid $30k today.
“Thanks, MOTO. I thought I was helping you.”
Never in the Corps, no. Not that I’m sure what that has to do with anything.
PS: misread the implication of “only”.
“That’s $3600/year to avoid paying $30,000. You’re effectively borrowing at 12% interest.”
This is always the wonder. Unless one has passive income that can be offset by the loss.
moto = master of the obvious, but i’m sure you got that and were being sheepish
anon, With your past references to the local music scene in the 90’s, I thought you’d get that one.
http://en.wikipedia.org/wiki/Masters_of_the_Obvious
“anon, With your past references to the local music scene in the 90’s, I thought you’d get that one. ”
Deflecting. Perhaps sheepishly, perhaps merely too opaquely.
“Assumes I have to pay the $30k at the end of 8 years! If that were a given, then of course I would have paid $30k today.”
Yeah, I’ve given this a lot of thought. I understand where you are coming from but the $30K you hope to recover over the course of 8 years is basically a bet on the appreciation of the real estate market over that time period. You might be better off playing with futures contracts on the S&P 500.
“That’s $3600/year to avoid paying $30,000. You’re effectively borrowing at 12% interest. I hope your investments pay more than that.”
He gets to have a house in a great neighborhood that he couldn’t afford during the bubble. As long as New_House_Mortgage + 300 is less than New_house_Mortage during bubble, he’s doing okay.
No one says he cannot accept another low ball offer before those 8 years are up.
Sabrina has it with “The market is paralyzed because too many people are still in denial.”
I enjoyed this Motley Fool article, “Why You Can’t Sell Your Home.”
http://www.fool.com/investing/general/2010/08/27/why-you-cant-sell-your-home.aspx
The short answer and the opening line is, “You’re asking too much.”
but he gets the new house whether he sells for the 30k loss or not, no?
“but he gets the new house whether he sells for the 30k loss or not, no?”
Not if he (or she..have we estabalished gender for Alanon?) needed that $30K for the new house, or to have an emergency fund. And this way he gets to see if things improve ever so slightly over the next couple of years.
He mentioned he could afford it. And he also get’s to see if things get ever so slightly worse. two sides to that coin flip.
Prisoner, i’m glad the article went on to say:
“A big factor is that so many homes (about 25%) are underwater. In these cases, the existing owner would have to cough up money to close a sale. Since few are willing or able to do that, most underwater homeowners ostensibly refuse to accept bids for less than they owe, which effectively excludes one-quarter of all homeowners from selling.”
Since so many people seem to base their opinions on personal situations, I will do the same: I think the real estate market is booming right now because I just got a signed contract on my farm today for 30k over asking (100k over what I paid for it in 2008). Of course I am financing it (contract sale), but it still is a CLEAR indicator that everything is going to be OK!!
Lets not forget the other carrot in the wings: the Fed’s QE2 some are predicting will drop rates on the 10-year to 1.5% by the conclusion of it. Not sure if this magnitude is true (certainly didn’t happen in QE1), but if so and mortgage rates follow their historical behavior in relationship to the 10yr (another big if) we could see rates on the 30-year at around 3% and 15 yr yields at 2.25%.
Zillow is terrible for data. I counts the 300 parking spaces (which are deeded separately) as units. If zillow can’t tell the difference between a 375K condo and a 25K parking space, then I pretty much doubt all of their data.
Yes, Icarus, good point. The article does say that 25% of sellers are excluded from the market because they are underwater. So 25% of sellers are forced to either overprice if or when then enter the market because (assuming they all are in the position for sake of argument) they either have no funds or refuse to use funds to make up the equity gap. Ok, we know about their position.
But I guess that creates the question about what’s up with the remaining 75% sellers or would be sellers (owners)? Perhaps many sellers or potential sellers are waiting for a rebound. We can all debate forever where this is going, but it seems if we get down to simple supply and demand, lower prices will move homes.
And if we can agree that many folks are waiting for a rebound…. how long will they be waiting? What’s a meaningful rebound?
I think some folks think housing will “rebound” but they haven’t thought about what a 5 or even 10% increase would do for them or how long it will take.
Finally, and I’ll shut up, what happens if we see a 5% increase in sales prices in a short period? Won’t that lure more of these sidelined sellers to the field? Won’t their additional supply push down prices unless we see a shift in buyers demanding to pay 5% more? If I were a betting man I’d say prices further down or stagnation for some time to come.
“Not if he (or she..have we estabalished gender for Alanon?) needed that $30K for the new house”
Correct. I was assuming he had the spare $30K. 12% interest on a small sliver of your mortgage is not such a bad interest rate it it allows you to basically own two pieces of real estate simultaneously at a LTV of like 95%+.
“But I guess that creates the question about what’s up with the remaining 75% sellers or would be sellers (owners)? ”
If 33% of homeowners are under water then there is an even bigger percentage of homeowners that would walk away with insufficient equity to buy a new place if they sold their old place – and you have to look at this after factoring in the impact of the transaction costs. Hell, it could be 50%, 60%+
“Not if he (or she..have we estabalished gender for Alanon?) needed that $30K for the new house, or to have an emergency fund. And this way he gets to see if things improve ever so slightly over the next couple of years.”
Didn’t “need” the $30k to buy the house, but would still rather keep the $30k cash in hand. I’ve been fortunate in this downtown, but everyone has their boogeyman. For me, it’s cash. In uncertain times I don’t see any reason to let cash go out the door if I can hold onto it until things improve (market, job security, etc.) If something terrible happens and I suddenly lose my job, that $30k could float me for 3 months. I figure why hand it to the bank (or, actually, the realtor) when I can hold onto it for some security? May not make sense to everyone, but I’m happy.
alanon, I totally agree with you – and also remember that you can always put the place back on the market. If you had sold, that would have been a final decision with no turning back.
Actually, this brings up an interesting question: If you bought that condo (which you are now renting out) as a primary home but now converted it to a rental, can you deduct any loses that you may experience on its sale in the future? I know with my investment properties, if I sold at a loss, I could deduct this loss from my income (which will be a recapture of 39% of the loss).
Zillow? You’re kidding, right? LOL
http://www.prnewswire.com/news-releases/nia-projects-future-us-food-price-increases-106758523.html
so how much will a condo cost when a ear of corn costs $11.43 and a loaf of bread costs $23?
National Inflation Association – About
“The National Inflation Association is an organization that is dedicated to preparing Americans for hyperinflation and helping Americans not only survive, but prosper in the upcoming hyperinflationary crisis. ”
Bwhahaha! Although I agree with their premise their conclusion is off mark–the US is a net agriculture exporter. Food isn’t going to go up nearly as much as people think from debasing our dollar. That would be imports.
“so how much will a condo cost when a ear of corn costs $11.43 and a loaf of bread costs $23?”
Somewhere b/t 500 and 1000 ounces of silver? Did you not read the pdf linked in your link?
lol well that would be great bob if we didn’t have commodity futures based in US DOLLARS determining the prices of food commodities
Unique look at inflation from mit:
http://bpp.mit.edu/daily-price-indexes/?country=USA
Bwhahaha! Although I agree with their premise their conclusion is off mark–the US is a net agriculture exporter. Food isn’t going to go up nearly as much as people think from debasing our dollar. That would be imports.
Bob, I didn’t read the article but I beleive their assumption is that if the dollar has a significant devaluation, Food valuations on the open global market will be cheeper creating an increase in demand overseas which will push prices up for the US consumer.
“if the USD is worth 50% less, and wages increase 40% in nominal $$ to not quite keep pace, then the mortgage obligation becomes much more re-payable in nominal $$.”
Well put Anon. This is a tough concept for people to grasp, but it is gernmane to the housing discussion. Hypothetically, if all prices and wages increased 25% overnight, a mortgage, which is fixed and does not change, would be eminently more affordable. Long duration obligations like fixed mortgages rapidly devalue in inflationary environments. With interest rates where they are today, a few years of 1981-83 inflation would basically obviate the whole issue. Really and truly. Not that this will happen, but a 5% inflation spell for the better part of this decade would completely undo the bulk of the housing mess. People have a hard time appreciating the economics involved, but it does not make it any less valid.
With regard to the North Center / Bell discussion, HD probably doesn’t know (or just ignores) that not many homes actually come up for sale in that area in the first place. This is because the neighborhood is eminently livable, and has an excellent K-8 school. Simply put, people don’t want nor do they have to move. And he also misses that many SFH conversions are still listed as two flats per the assessor as Anon points out. What’s more, many multi-families are actually inhabited by one family even though they haven’t been converted.
My point with the Bradley example is that nice houses in good neighborhoods trade. Quickly. Even in today’s climate. Reason: the vast majority of housing on the market is junk.
“The National Inflation Association is an organization that is dedicated to preparing Americans for hyperinflation. ”
I love it.
Though food prices are way up, that is one area that gets discounted due to volatility. Supply side inflation is definitely another animal.
Yeah, I don’t “appreciate” the economics involved because its wishful thinking, the hail mary of fed policy. Bubble blowing, yes. General inflation, no. imo, of course.
“Not that this will happen, but a 5% inflation spell for the better part of this decade would completely undo the bulk of the housing mess. People have a hard time appreciating the economics involved, but it does not make it any less valid.”
“Yeah, I don’t “appreciate” the economics involved because its wishful thinking, the hail mary of fed policy.”
Actually, fed policy is designed to keep inflation within a target range, not to create excess amounts of it. If simply creating inflation was the goal, our central bankers wouldn’t require much pedigree. Just hire a bunch of hacks from south america.
And, once created, inflation it is troublesome to reign in. You probably were in diapers in the early 80s but it was a fugly experience.
But I digress. Bernanke likes his porridge just right.
But now there is persistent and increasing speculation that inflation will run away from the fed this time. Already is on the long bond. 10 year is getting there.
http://seekingalpha.com/article/171386-ten-year-nominal-real-treasury-spread-now-at-2
Inflation brings many issues, but it sure does solve the housing mess. And how.
Still don’t see housing inflating, no matter how much Ben tries to blow that bubble back up. Commodities, PMs, yes, but not real estate. That ship has sailed. Business margins will get squeezed but they won’t be able to pass on costs to tapped out consumers. But keep putting your bets on housing. Track record isn’t too good at this point.
“Inflation brings many issues, but it sure does solve the housing mess. And how.”
JMM, Your point seems to have changed after my reply as to why the Bradley house might not contribute to a CS SA index increase.
When you originally raised it: “Oh, G, also, perhaps we should stratify the CS index for properties not in warzones.”
What’s your point now? “My point with the Bradley example is that nice houses in good neighborhoods trade. Quickly. Even in today’s climate.”
Nothing about its effect on CS? Aren’t you “dismissing data you don’t like or can’t explain just because”?
“Still don’t see housing inflating”
Missing the point. Neither does JMM, nor is actual inflation of house prices the hope of the Fed in “Gary’s Theory of QE2”.
Housing only needs nominal prices to hold to aid the sorting of the mortgage mess. Real dollar deflation of housing prices is okay, so long as it arrests the fall of nominal prices, as the debt side is in nominal dollars (well, not entirely, b/c of ARMs, but they are capped, too, so there’s a collar).
are nice houses in good hoods trading quickly, or is bradley house an aberration? seems like there have good places on here that have languished, but maybe my recollection is incorrect.
And what will change if wages are stagnant? What will support nominal prices that are unaffordable? Deleveraging still needs to happen before a floor can be found. imo
“Housing only needs nominal prices to hold to aid the sorting of the mortgage mess. Real dollar deflation of housing prices is okay, so long as it arrests the fall of nominal prices, as the debt side is in nominal dollars (well, not entirely, b/c of ARMs, but they are capped, too, so there’s a collar).”
ding, ding, ding, dingleberry!
“JMM, Your point seems to have changed after my reply as to why the Bradley house might not contribute to a CS SA index increase.”
Actually, smartass, I had two points. You apparently didn’t read them correctly as they were made in two separate posts.
But, I did look at your analysis and actually concluded it was wrong without even having to run any numbers.
Reason: CS does not consider entry as compared to exit. Only exits. Only sale prices and each sale price is independent of the last. Nice try though.
“Deleveraging still needs to happen before a floor can be found. imo”
Actually, consumer debt is down dramatically. Savings rates are at recent historic highs and debts are down, consistently and significantly. So, I think that has already happened.
Inflation has a hard time occuring while wages are stagnant but for supply shocks such as the oil embargo (which you weren’t around for either I am sure). The reason for this is self evident — if there arent wages to support higher prices, the higher prices simply cannot occur in the first place. The early 70s saw an outside force (an embargo) contravene this mechanism, but that was for exogenous factors.
Btw, sale exits are generally independent. Sales that occur very close together are handled differently, as are non-arms length appearing sales and so on and so forth.
oh, did i miss another econ lecture? crap will we be tested on this?
doode can i copy your notes?
By the way, I think U.S. consumers have pared close to $1 trillion in debt since Q3 2008. That is with a T.
alanon, could you have done a contract sale with you potential buyer? It really could have been a win-win situation. You wouldn’t have to come to the table with any money and you don’t have to deal with the headaches w/renting it/fixing it up and selling later.
“Reason: CS does not consider entry as compared to exit. Only exits. Only sale prices and each sale price is independent of the last. Nice try though.”
JMM, you can always be counted on to state some nonsense as fact when proven wrong.
“are nice houses in good hoods trading quickly, or is bradley house an aberration? seems like there have good places on here that have languished, but maybe my recollection is incorrect.”
CH — since Anon is probably buying the Bradley house (joking, but possible), I would ask him, but it is a nice family street, with wider than average lots and speed bumps in one of the best school districts in the state of IL. If you want to live in the city and can afford a $1M+ home, this has to be on your list.
There is a bit of a story here. People who love their neighborhoods and houses are slower to sell them, and hence there is less turnover. True of where I live, except people die and get divorced and the price tag is inconsistent with the 2009 bonuses on Wall Street. That will change however.
Consumer debt is down because is being written off. And you are wrong about the savings rate, it is at a 13 month low. There is a LOT more that will need to be written off eventually. Like I said, I don’t see how it can be reinflated.
And this seekingalpha link is from last week, not a year ago, like yours:
http://www.marketwatch.com/story/savings-rate-falls-sharply-in-september-2010-11-01
“Actually, consumer debt is down dramatically. Savings rates are at recent historic highs and debts are down, consistently and significantly. So, I think that has already happened.”
“JMM, you can always be counted on to state some nonsense as fact when proven wrong.”
Your concept is wrong, sorry to say.
According to you: “There’s a chance this one didn’t exceed inflation.”
Really? How so?
And now that statement, which you label as chance, is somehow proving me wrong when the facts are clearly to the contrary?
Does CS back out rehab costs? You are plain stupid to argue that point.
Keep working on those Excel dumps.
JMM, how much of that T deleveraging has in reality been consumers defaulting? Most? I don’t have time to find the link but im sure you can easily find it.
Thanks dingleberry.
“With spending rising faster than incomes, the personal savings rate fell to 5.3% of disposable income, down from 5.6% in August. It was the lowest savings rate since August 2009.”
As far as I know, that is about 6% higher than the last several years when it was in fact negative. Look at the 10 year trend and see how that compares…
The other point you missed is that spending is rising. That is what one would expect after 13 months of significant deleveraging. It is a good thing.
The TIPS spread is 2.2% now actually so that is current info. I didn’t want to post the WSJ article bc some stories are password protected so I picked that one up. I don’t actually read that blog.
The one thing that is certain is that we don’t know exactly what is going to happen. I know that the rich people I know are all buzzing about buying things now (real estate) because they all feel that inflation is coming and is going to be really bad. The value of the dollar is going to be low and so they are all VERY VERY keen on buying investment properties, etc. I don’t know if they are right, but it IS what they are doing.
“JMM, how much of that T deleveraging has in reality been consumers defaulting? Most? I don’t have time to find the link but im sure you can easily find it.”
I am not sure it matters? Leverage off consumers balance sheets is leverage off consumers balance sheets…
Glen beck preaches to expect inflation.
So does JMM.
Go ahead, turn on fox news and watch for yourself.
Not sure that comment makes a lot of sense HD.
Clio — the sentiment I hear is similar. Sophisticated investors are putting in place inflation bets / protection positions across the board.
Your best inflation bet as a consumer is a 30 year fixed mortgage on the largest house you can afford. Read: can afford.
Clio,
Being one of those people I am not buzzing about real estate.
A low dollar does not necessarly equal an increase in property values. I don’t like real estate as a play on inflation/dollar devaluation. It not a pure play such as hard assets like gold and silver (something that has treated me well in the last 2 years, what has real estate done). You can’t scale in and out of a realestate position like hard assets. The transaction costs of real estate make it a poor trading vechicle. Real estate is tied to the U.S economny while Gold/Silver is tied to the GLOBAL ECONOMNY. Real Estate is a non-liquid asset, I can get out of my gold position in seconds at a fair value.
http://www.redfin.com/IL/Chicago/3810-N-Bell-Ave-60618/home/13390069
G — too bad your arbitrary “since 8/11” didn’t pick this one up.
How would this impact the CS index?
Or did they line their bathroom with gold tile and in fact are barely keeping up with inflation?
valasko, I totally agree with you – but real estate also serves a VERY important secondary purpose that gold/silver don’t – it provides a place to live. If you are talking about investment properties, though, you are correct – but if you buy wisely, you can potentially make much more money in real estate than investing in gold.
Consumer spending was less than forecast, disappointing to most economists.
http://www.bloomberg.com/news/2010-11-01/u-s-consumer-spending-rises-less-than-forecast-incomes-unexpectedly-drop.html
Leverage off the consumer balance sheet will not be replaced with further leverage since most of it is bad debts. How does that figure into your rosy forecast?
Real estate and precious metals are both regarded as inflation hedges. They both have their advantages and disadvantages. For the ordinary consumer, owning a home is more realistic than a commodity fund or physical ownership than gold. As Clio points out, people have to live somewhere and home ownership provides ancillary flexibility in terms of renovation, etc.
You can also make potentially much more money in tulips, internet startups and beanie babies than in gold, but you need to get in and out at the right time…
but if you buy wisely, you can potentially make much more money in real estate than investing in gold.
“people have to live somewhere and home ownership provides ancillary flexibility in terms of renovation”
What about the flexibility of mobility in a tight job market? Does home ownership affect this at all?
By the way, commodity funds have serious issues in terms of how they roll futures contracts that put them at a disadvantage. I won’t get into it but Valasko if you have serious $ indexed there you should look into this point because the passive money gets traded against (some say used and abused) as it rolls predictably from one futures contract to another. Traders tend to play the contango pretty well and the passive funds pay them off accordingly.
“G — too bad your arbitrary “since 8/11? didn’t pick this one up.”
Not G’s; HD’s, and he admitted it was wrong.
Clio,
“valasko, I totally agree with you – but real estate also serves a VERY important secondary purpose that gold/silver don’t – it provides a place to live. If you are talking about investment properties, though, you are correct – but if you buy wisely, you can potentially make much more money in real estate than investing in gold.”
Clio
I made my money in realestate, its over….. I follow a cyclical investment strategy. Its over for at least 10 years. Below trend returns for years to come imho….. Overseas is where money will be made in the next decade, just like the last. One of my china funds has a 18% annual return for the last ten years.
I wish you luck my friend……
“What about the flexibility of mobility in a tight job market? Does home ownership affect this at all?”
Whilst people are underwater, maybe not as much. Just walk away.
But sure, your duration has to be longer for home ownership. The condo product is the one at odds with this one, but SFHs tend to be lived in longer. Kids have friends, schools, continuity is important, etc.
“Not G’s; HD’s, and he admitted it was wrong.”
I can’t keep up with the lying with numbers, sorry.
“but it is a nice family street, with wider than average lots and speed bumps in one of the best school districts in the state of IL. If you want to live in the city and can afford a $1M+ home, this has to be on your list. ”
Funny thing is, the standard lot on Bradley is the standard 25′, while most of the rest of the IPR/Addison/Western/Damen square is 30′. The U/C house is on 33′, which makes it nicer than most on those 2 blocks. And the ask seems intended to get a quick sale.
3710 Leavitt is another v. nice option in the hood, which should sell quickly, but might take a while to close, as I think the owners are moving w/in the hood, into a house which may or may not be finished.
JMM,
I understand the the futures contacts issue and the disadvantages in the etf’s. I do play the levered etf’s for short term trades. I hold the miners and some mutual funds for the longer term. I do have some of the hard assets but not much….
“3710 Leavitt is another v. nice option in the hood, which should sell quickly, but might take a while to close, as I think the owners are moving w/in the hood, into a house which may or may not be finished.”
Given the Leavitt occupant’s profession, this seems logical.
The lots on the 2000 block of Bradley are almost all 30′ and up. The 2100 block has some 25’s though. One of those 25’s sold for over $1.2 million, granted it was newish construction. I don’t think the lot size matters *as much* given its all RS3.
I think anything close to $1,250,000 is a big price for a house that old, regardless of the cosmetic finishes which admitedly are nice. I’d be willing to bet the wiring, plumbing, sewer system are still big compromises from a new build.
“I’d be willing to bet the wiring, plumbing, sewer system are still big compromises from a new build.”
If they dug out the basement (no opinion) and didn’t re-do the sewer/lower plumbing, I’d consider everything they did suspect.
Ahh, contango JMM, thanks for reminding me I need another few hours of CFA studying tonight after dinner…
Why not short long dated bonds and Treasuries, specifically, as an inflation hedge? Doesn’t that make the most sense and have the most room to run? Will gold go to $2,600 before the 10 Year goes to 5.3%? Can the Fed keep rates low and still inflate anything away? I have never heard of a scenario where inflation can be large enough to do what you are saying with nominal housing prices but not be coupled with rising rates and a popping bond bubble…
got your contango, your backwardation. my last investment was euo. trader’s market in any case.
“Glen beck preaches to expect inflation.”
Glenn Beck also made 23 million bucks last year… how much did you make again?
“So i didnt get the memo, when did Zillow become the highly regarded factual data go to place?”
Back to the question about the source of this thread Zillow.
Do any of you realtors think “Zestimates” are actually accurate?
…just wondering
“Do any of you realtors think “Zestimates” are actually accurate?
No – they are completely off (off by 30-60% on all my properties) – some estimated too high, most too low (and no, I am not in “fools paradise” – I am talking about market value).
This zillow site is really really dangerous because appraisers have told me that they use it when they are not familiar with an area – horrible for mortgage seekers. Also, buyers of some of my properties have used it as a negotiating tool – laughable at best. I am surprised that the site hasn’t been sued yet (? lost business – inaccurate information).
“http://www.redfin.com/IL/Chicago/3810-N-Bell-Ave-60618/home/13390069
…
How would this impact the CS index?
Or did they line their bathroom with gold tile and in fact are barely keeping up with inflation?”
They did quite a bit of work (and did it well). I’m not sure the CS index would pick up that fact, so it might positively affect CS, more than it should.
“What is the CS index for this place?
http://www.redfin.com/IL/Chicago/2009-W-Bradley-Pl-60618/home/13388904”
The correct answer is that if the CS methodology is doing its job, this should be excluded from the CS index calculation, as there was a major reno in between sales (unless there is a sale price reflecting reno that was missed by Redfin). It should be classified as an outlier (or at least downweighted but I think should really be excluded).
“Reason: CS does not consider entry as compared to exit. Only exits. Only sale prices and each sale price is independent of the last. Nice try though.”
I don’t really understand what this is saying.
“3710 Leavitt is another v. nice option in the hood, which should sell quickly, but might take a while to close, as I think the owners are moving w/in the hood, into a house which may or may not be finished.”
The Mangan style doesn’t quite do it for me. It’s more than nice but doesn’t make me ooh and aah. I’m sure this one is well done though.
““are nice houses in good hoods trading quickly, or is bradley house an aberration? seems like there have good places on here that have languished, but maybe my recollection is incorrect.”
CH — since Anon is probably buying the Bradley house (joking, but possible), I would ask him, but it is a nice family street, with wider than average lots and speed bumps in one of the best school districts in the state of IL. If you want to live in the city and can afford a $1M+ home, this has to be on your list.””
Please don’t make me show you a list of $1 million+ properties that have been sitting on the market for, in some cases years, in “one of the best school districts in the state of IL.”
Please don’t make me.
Hate to burst any bubbles on here- but there are plenty of great homes, some brand new construction, sitting empty for literally years in the Blaine, Edgebrook, Norwood Park and other “best” school districts. And no, they’re not next to the El tracks.
Yes- some homes will sell quickly if in certain locations and with certain amenities. If priced correctly. But there are simply too many $1 million homes and not enough buyers in ALL parts of the city. It will take years to work through the inventory even as prices decline.
“But there are simply too many $1 million homes and not enough buyers in ALL parts of the city. It will take years to work through the inventory even as prices decline.”
the buyers for that type of home are still out there, those were the move up buyers in that price range, but if the move ups cant sell they cant move up.
“It should be classified as an outlier”
That’s correct, DZ. It would be an outlier in the CS index. Actually, they both would be, since they are compared to the entire metro area.
As for the CS for the Bradley prop? Consideration of renovation costs would be necessary to calc the price change of a single prop.
“I don’t really understand what this is saying.”
JMM made it up.
” have never heard of a scenario where inflation can be large enough to do what you are saying with nominal housing prices but not be coupled with rising rates and a popping bond bubble…”
Who said anything about rates not rising?! Or a popping bond bubble for that matter.
“Yes- some homes will sell quickly if in certain locations and with certain amenities. If priced correctly. But there are simply too many $1 million homes and not enough buyers in ALL parts of the city. It will take years to work through the inventory even as prices decline.”
So this seller just got lucky? And the seller before in the same neighborhood who got a higher price than he paid in 2006?
Or are a lot of these $1M+ houses just overbuilt in non-attractive neighborhoods, at least for the real buyers — single families?
Basically, you are admitting most houses are inadequate for the preferences of the typical buyer, are in unacceptable locations / neighborhoods or are grossly overpriced?
I would agree with that. I also think $1.250 million for a house in this neighborhood demonstrates most housing is crap or the neighborhood is crap, or both.
Chicago is largely a dump people. This is a local issue, less of a national issue.
It signifies neither. Everyone knows that inventory is crap and many sellers are holding off on listing. The available inventory is crap. Sometimes even overpirced homes are the best deal on the market. Consuquently home sales in chicago the worst since 1994 or whatever.
“Chicago is largely a dump people. This is a local issue, less of a national issue”
RUFKM? Boy are you off. Compare the $/SQFT to any other major metropolitan area and you will be shocked. Go to NYC or LA and see how far 300k or 500k gets ya, check that 1.5M. You can barely buy a 1,500sq ft 2/2 in NYC for less than 1M that was actually constructed for residental purposes (not a divided up warehouse or similar). Try to go buy a 2,500 SQFT SHF in LA in a safe, decent neighboorhood that HAS central air conditioning for less than 1M…
Chicago is hardly a dump nor is it grossly overpriced by any means. You gotta get out more buddy!
“Try to go buy a 2,500 SQFT SHF in LA in a safe, decent neighboorhood that HAS central air conditioning for less than 1M”
Try to buy a house *IN* LA with a neighborhood public school you’d send your kids to if you could afford to buy. Makes Chicago look livable for families.
“Chicago is hardly a dump nor is it grossly overpriced by any means. You gotta get out more buddy!”
Chicago is a dump the comment was not based on relative cost. There is a lot of land here, relatively speaking, and a big chunk of the city is violent and/or plagued by crime.
The proof is in the pudding. Chicago real estate is not holding up as well as other metro markets (outside of the extreme bubble zones of course). LA / SF / NYC / BOS / WAS / etc.
Chicago has declining city services and increasing crime, or perception of crime. The housing mess is less and less of a contributing factor to Chicago RE prices, because quite frankly, Chicago has its own asystematic issues.
“As for the CS for the Bradley prop? Consideration of renovation costs would be necessary to calc the price change of a single prop.”
Sorry but renovation costs aren’t backed out of CS index values. That doesn’t make sense.
“Makes Chicago look livable for families.”
Provided your definition of living is largely staying inside 4 straight months of the year.
A lot of people don’t care to live like that, and apparently that seems to cause land there to trade at a premium.
There are plenty of good public school options but they aren’t in Los Angeles proper — but what is Los Angeles proper? Ever looked at a map? San Marino, La Canada, Beverly Hills, all of Orange County…
“Sorry but renovation costs aren’t backed out of CS index values. That doesn’t make sense.”
They don’t, that’s true, but they significantly discount or exclude homes with major renovation. They also apply a substantial discount to homes held for longer periods, and 11 years is long for CS purposes. That one will have, at best, 1/3 the effect of a house trading twice in 2010 w/o a large change in price.
“Chicago real estate is not holding up as well as other metro markets (outside of the extreme bubble zones of course). LA / SF / NYC / BOS / WAS / etc.”
?? NYC/BOS/WDC, sure, but how are you judging “holding up better” for LA and EsEff? Certainly not by CS-Index standards, where both are much more sharply off than Chicago.
“what is Los Angeles proper?”
The city of Los Angeles, of course.
“Ever looked at a map?”
Right back atcha, bub.
“San Marino, La Canada, Beverly Hills, all of Orange County”
Beverly Hills I grant you, but it is no more “LA” than Evanston is Chicago, and San Marino is maybe a reasonable analog for your neck of the woods, but:
Orange County? Seriously? What is Chicago proper? DuPage County?
La Canada? Is Lake Forest mistaken for “Chicago”?
Also, anyone who hides out inside in Chicago for 4 straight months should just move.
Obviously you ain’t from LA. Tell me where downtown LA is, literally and in practice? As a practical matter there are at least 2 downtowns, potentially 3.
City limits don’t mean anything. LA is not an urban city in any way shape or form as you know Chicago.
San Fernando valley to San Pedro = 50 miles. 2 hours in traffic. All within city limits.
Ok, you have no idea what you are talking about.
Meanwhile Tujunga, LA CITY basically borders VC and LC.
Your knowledge of how LA is laid out is pathetic.
“Chicago is a dump the comment was not based on relative cost. There is a lot of land here, relatively speaking, and a big chunk of the city is violent and/or plagued by crime.”
Dude, its the city of big shoulders! Imo, the available land is one reason that makes Chicago great! There will be new construction for many years to come (though slowly) but try to find new construction in the LA area and NY for a decent price!? Cant do it. This city is not plaged by crime any worse than LA or NY and a big part of the city is not violent by any means. Parts, yes, of course, but ahem….Compton in LA, Queens/Coney Island/Brooklyn???
Sounds like you just are hatin on Chi-town JMM. You should leave then because most Chicagoians are friendly, even with our big shoulders.
Also, the available land here is some of the most prime land that one can build on…take Cabrini for example, or the Spire hole.
“Obviously you ain’t from LA.”
Obviously you ain’t either, or else you’re completely full of shi … nonsense about who you claim to be and where you’ve lived. Someone who went to Sears and graduated from Paly/Gunn is not “from LA”. If by “what is Los Angeles proper?” you meant “City limits don’t mean anything in LA”, you should have just said that.
50 miles across the city isn’t that absurd–the corners of Chicago are 30 miles apart and it’s over 40 miles from one end of Queens to the far end of Staten Island. LA “proper” for practical purposes, is entirely north of the 105. So, yeah, Chatsworth to Watts is 45 miles. So? Still doesn’t make OC any more part of the city of LA than DuPage County is part of the city of Chicago.
“Provided your definition of living is largely staying inside 4 straight months of the year.”
Why do you have to stay inside?
I have snow shoes and ice skates. My friends and I go skiing on the weekends and make snow angels in Lincoln Park after a big snow. It is beautiful. There are plenty of activities to do in the winter time in the Midwest.
Here’s the link to the bus that will take you to ski resorts in Wisconsin and back right from Wrigleyville. It’s a fun time.
http://www.windycityski.com/
“Chicago real estate is not holding up as well as other metro markets (outside of the extreme bubble zones of course). LA / SF / NYC / BOS / WAS / etc.”
Ever been to Oakland and check out what is going on crime-wise and budget-wise there? Enough said.
“It signifies neither. Everyone knows that inventory is crap and many sellers are holding off on listing. The available inventory is crap. Sometimes even overpirced homes are the best deal on the market. Consuquently home sales in chicago the worst since 1994 or whatever.”
There is going to be a massive surge in inventory this spring. The agents I talk to have already told me they have dozens of listings ready to go.
But will there be any buyers?
“There is going to be a massive surge in inventory this spring. The agents I talk to have already told me they have dozens of listings ready to go. ”
You know, I heard the “holding off til the spring” thing in early spring 09. So this will be year 3 of hoping for the thaw.
Blame climate change.
“You know, I heard the “holding off til the spring” thing in early spring 09. So this will be year 3 of hoping for the thaw.”
I’m starting to get the itch to move but I’m definitely holding out (even from sending offers) until say Feb/Mar – interested in seeing this inventory refresh. I wasn’t paying that much attention in spring 2010 to see how much of a bump the # of listings got.
inventory is old would be nice to see something new.