2-Bedroom 41% Under the 2004 Purchase Price in the South Loop: 125 E. 13th
The last time we chattered about 125 E. 13th, a 2004-construction midrise building in the South Loop, was in February 2008 when the developer took out a full page ad in the Chicago Tribune about appreciation of the units in the Museum Park development.
Turns out some of the original buyers in this building mentioned in the ad were able to sell for quite a bit of appreciation by 2007. (Remember the flippers?)
The advertisement described the Museum Park development as having an “unmatched record of value and appreciation.”
See our February 2008 chatter here.
This 2-bedroom in the same building recently came on the market priced 41% below the 2004 purchase price.
It is bank owned.
There are no interior pictures (maybe they think it will sell fast and doesn’t need them) but the listing says it has hardwood floors, granite counter tops in the kitchen and a marble bath.
Parking is also included in this sale.
There are two other 2-bedrooms currently listed for sale in the building:
- Unit #1102: $345,000 plus $30,000 for parking
- Unit #904: $325,000 plus $30,000 for parking
See the pictures for Unit #1102 here.
How quickly will this bank owned unit sell given that it is listed for $95,000 under its closest competitor in the building?
Ayoub Rabah at Great Street Properties has the listing. See the exterior picture and listing here.
- Sold in August 2004 for $438,500 (included the parking)
- Lis pendens foreclosure filed in September 2009
- Bank owned in September 2010
- Originally listed in November 2010 for $259,900 (includes the parking)
- Assessments of $340 a month (includes gas)
- Taxes of $5742
- Central Air
- Washer/Dryer in the unit
- Bedroom #1: 17×11
- Bedroom #2: 12×10
- Den: 10×10
At this price, you are at rental parity (or just below it, actually). If you had a kid going to one of those schools in that area, it would be a great investment. It also could be a good in-town for someone. However, I suspect it will go over asking price…. but then again, who knows.
Ah, another place with a window-less bedroom (the one with the wall that ends two feet under the ceiling, to admit light), and concrete ceilings with open ducts. I wonder what it would cost to redesign the
HVAC system and close in those ducts.
The price seems right, for the time being, though I think that soon there will be a big change in fashion and places like this will be really, really not cool.
This place is going to go for over the asking price. The unfortunate thing is that this will set a floor that the other unit owners who are trying to sell are going to have to chase down. Also, I believe the redfin page shows that the taxes are $3060. That will help get this place sold.
For under $1500 the new owner can close in the second bedroom with glass panels above the drywall. While this may not be code it dramatically changes the noise travel while still allowing light to pass thru to the cave like bedroom. At this price it might be worth that investment if the new owner intends to have someone living in that room!
“The unfortunate thing is that this will set a floor that the other unit owners who are trying to sell are going to have to chase down.”
uhhhh – no it doesn’t. Seriously, why do you guys think that just because a certain unit is very cheap, that automatically all other units need to be that cheap? I understand about comps and appraisals – but you don’t set your price based on whether an appraiser is going to use a foreclosure as a comp. To think in such absolute terms is ridiculous – and most sellers absolutely do NOT need to lower their price just because of one or two foreclosures.
“uhhhh – no it doesn’t. Seriously, why do you guys think that just because a certain unit is very cheap, that automatically all other units need to be that cheap? I understand about comps and appraisals – but you don’t set your price based on whether an appraiser is going to use a foreclosure as a comp. To think in such absolute terms is ridiculous – and most sellers absolutely do NOT need to lower their price just because of one or two foreclosures.”
as a buyer, if i see the same unit in a building go for $250,000 and the one im looking at is offered at $350,000, im not paying over $250k, ceteris paribus. period.
I’m going to agree with jfmiii. Regardless of the situation, distressed sales need to become part of the set of comps, as they have become a larger and larger share of the market, especially in SL.
There are too many foreclosures/short sales now for anyone to ever pay more in the same building. So, it certainly IS going to make the market in that building.
Case Shiller is out. Chicago had the largest decline in the 20 city index compared to a year earlier- down 5.58%. We even beat out Tampa and Las Vegas (down 4.29% and 3.47%.) Wow.
On CNBC, the talking heads were all surprised that Chicago led the price declines.
Anyone else have the other Chicago data?
“as a buyer, if i see the same unit in a building go for $250,000 and the one im looking at is offered at $350,000, im not paying over $250k, ceteris paribus. period”
well then you will be waiting a long long time to buy anything. There simply aren’t enough foreclosures when compared to number of buyers. If you wanted this unit and couldn’t get it (because of multiple offers or you were too late), you would be an idiot to wait for the other units on sale to come down to this level. Again, it is like going to a Chanel outlet and seeing a drastically discounted dress and then going to the Chanel store and waiting for another dress to come down to the same price. Totally ridiculous and totally wrong.
Sabrina, that data is skewed and doesn’t tell the entire story. Real estate is very personal and local. Believe it or not, some areas are doing quite well. I have not had any problems renting or selling whatever I have/had for prices that seem to go against what everyone here is predicting. You guys are making a HUGE mistake by thinking that the foreclosures/short sales are going to define the market in the coming years – they simply are not. People are extremely picky about where they live and what they buy – they are NOT going to buy a foreclosure just because it is a good deal. They will buy something they can afford and like. It is as simple as that – the economic criteria are one thing – but, take it from me, serious buyers are looking for quality and something that fits their lifestyle whether it is a foreclosure or not.
“well then you will be waiting a long long time to buy anything.”
You mean like the next few months?
Clio- there are foreclosures all over the place. And nothing else is selling. Look around at the listings. Look at all the short sale listings in the south loop that aren’t selling (that will ultimately head to foreclosure.) I was following one in another south loop building that had been a short sale for 2 years! It finally was withdrawn from the market. It will be coming back on the market as a bank owned unit. Oh- and in that same building- there have been 4 or 5 foreclosures already. No one in their right mind would pay more than those comps.
“Sabrina, that data is skewed and doesn’t tell the entire story. Real estate is very personal and local.”
Case Shiller is only single family homes. It doesn’t even include condos. Imagine if it did. It would be much, much worse in Chicago.
Sabrina, you are right about certain buildings in certain locations. I guess I am thinking more about the good buildings in highly desireable areas. Basically, those people are very very safe. Buildings in the S. Loop or less desireable locations may be in some trouble.
I don’t know – I just don’t see the huge downturn in real estate. I hear about it all over the news and on this site – but it is not translating into my personal experience. There are a lot of people looking to buy/rent right now and those people, while they want a good deal, would rather spend more money and get something they like than buy a short sale/foreclosure. I don’t know if other people in real estate/mortgage industry agree with me or not. It would be interesting to see what they have to say about their personal experience this year (whether volume/sales were higher/lower).
I just moved out of this building in September. I loved living here…I didn’t like the fact that the floors weren’t real hardwood, or that there was no pool. The gym and garage are really nice, the maintenance staff is amazing, and the condo association was great as well. The building was a good mix of renters and owners, but everyone living there was pleasant. great building..
clio, on that note – your comparison doesnt make any sense. Real estate is not like a chanel store…and there is NO building that is safe from pricecuts/foreclosures/preforeclosures…Even the trump, palmolive, etc have seen some pretty serious pricecuts on a lot of units.
on that note, 250 is awfully low…i think it will go over ask as well.
Case Shiller data was released today and Chicago’s non-seasonally adjusted figures for SFHs & condos, respectively, were 124.76 & 124.77. Both encountered monthly declines of 1.22% & 2.41%, respectively. And year over year declines of 5.63% and 9.33%, respectively.
This means had you purchased a condo in September 2010 for 250k with 10% down and your property tracked the index, you would’ve seen $23,317 in equity evaporate and essentially turned your 25k into $1,682. Poof.
Case Shiller data was released today and Chicago’s seasonally adjusted figures for SFHs & condos, respectively, were 122.62 & 122.75. Both encountered monthly declines of 1.22% & 2.62%, respectively. And year over year declines of 5.64% & 9.38%, respectively.
This means had you purchased a condo in September 2009 for 250k with 10% down and your property tracked the seasonally adjusted index, you would’ve seen $23,437 in equity evaporate and essentially turned your 25k into $1,562. Poof.
Please also note above the purchase scenario for the NSA data meant to indicate a purchase in September 2009.
“This means had you purchased a condo in September 2010 for 250k with 10% down and your property tracked the index, you would’ve seen $23,317 in equity evaporate and essentially turned your 25k into $1,682. Poof.”
uhhhh – not really. You can’t generalize like that. It is like saying that because incomes have dropped 3% in the past year that someone previously making 100k now is making 97k. This simply is not true – this is an average and should not be applied to individual cases.
No clio it is true. It is your reading comprehension that requires some adjustment.
Who cares about NON seasonally adjusted numbers in Chicago…
what are the seasonally adjusted numbers?
of course sales will slow down in october/november compared to summertime… durrrr
Both are posted Sonies. Please go back and read again above.
“No clio it is true. It is your reading comprehension that requires some adjustment.”
Bob – seriously, really?!! Come on – even you don’t believe this nonsense. Basically, you CANNOT apply these numbers (which are meant to be a general snapshot of the overall housing industry) to specific properties. If you claim that you can, then you, my friend, lose sigificant credibility.
clio, the few good, stable upper-bracket buildings in super-desirable locations are always exceptional, and they tell you nothing about the market as a whole. I note that buildings like 1500 N Lake Shore are holding their value just fine, but they never got so overpriced relative to the means of their likely buyers. Buildings like this, or like 2430 Lakeview, or Drake Tower, never have foreclosures because you must pay cash, which weeds out the financially unqualified. These buildings are priced in keeping with the exceptional incomes and net worths of the people who buy them- a crowd pretty well insulated from financial disaster unfolding around us.
That said, most new “upper bracket” buildings and houses are suffering and their prices will have to decline to meet the likely demand as there is a limited market for really expensive dwellings and you can’t borrow 90% of the price for them anymore. Not enough wannabe poseurs with no-doc loans to buy these places. There were far too many built for the number of people who can afford them without really imaginative financing.
The really high end buildings will be OK but the market as a whole will deteriorate further. Chicago mortgage broker Michael David David White at Housing Story.Net published figures showing that only 1200 foreclosed houses and condos are on the market in Cook County, but there are over 28,000 foreclosed houses and condos languishing in the “shadow” inventory. Less than 5% of the foreclosures are visible on the market! It will be interesting to see what happens when this stuff finally is listed for sale.
“Bob – seriously, really?!! Come on – even you don’t believe this nonsense. Basically, you CANNOT apply these numbers (which are meant to be a general snapshot of the overall housing industry) to specific properties. ”
My statement was conditioned with “This means had you purchased a condo in September 2009 for 250k with 10% down and your property tracked the seasonally adjusted index”. Its not my fault you were incapable of reading that. Twice.
“It will be interesting to see what happens when this stuff finally is listed for sale.”
Maybe it will cause prices to rise. But I’d suspect the opposite.
Wile E. Coyote is already off the cliff but he’s still running in place….guess what is next?
I’ve personally seen dozens of HAMP modified mortgages with ridiculous terms all of which will eventually become foreclosures. But they aren’t yet counted as foreclosures and are difficult to track in the shadow inventory.
“Chicago mortgage broker Michael David David White at Housing Story.Net published figures showing that only 1200 foreclosed houses and condos are on the market in Cook County, but there are over 28,000 foreclosed houses and condos languishing in the “shadow” inventory. “
Bob I read what you wrote – I guess my point is that it is an example that really doesn’t pertain to anybody as no particular property follows the index exactly. It irks me even more because all you are doing is trying to scare people who are buying or who have just bought – more idiotic fear mongering.
Someone doesn’t like data…
“It irks me even more because all you are doing is trying to scare people who are buying or who have just bought – more idiotic fear mongering.”
Surely everybody’s property outperformed the index and it is not truly representative of Chicago RE as a whole?
Face it, clio: your “devils in the details” counter-argument is not valid when I am talking about aggregate data.
People need to be scared clio because aggregate data tells me people who purchased real estate, on the whole, in September 2009 in Chicagoland, lost the equivalent of around 20 grand. (Depends on what the median price is but that’s probably close).
I think people need to be scared with reality, clio, not have their hand held by industry cheerleaders who are compensated on transaction volume alone.
I think clio understands that in order for a ponzi scheme to continue to operate the first and foremost thing you need is people’s confidence in said ponzi scheme.
“Both are posted Sonies. Please go back and read again above.”
ah thanks bob i guess i was mid-post
the #’s looks the same… anyways
I wonder how the realtards at the Illinois Association of Realtors are going to try to spin this terrible data. That organization is on the level of used-car salesman, robo-mortgage signers, and the con artists that took out huge home equity loans to live like the Jones’s, then just walked away from their mortgage when they knew they couldn’t pay it off.
I keep the long term trend data for both SFH and condos in Chicago graphed here: http://ChicagoHousingStats.com Top of the page. We’re now 13.2% below the trendline and will definitely go lower once the index starts to include October in it’s 3 month average.
People are getting the idea. Volume is down what, 40% from last year? Imagine last year at this time you sold 100 properties. Today, you sold 40 less properties. What that means is that this October you sold only 60 properties, last October you sold 100.
You have bills, salaries, overhead, membership fees, taxes, light bills, insurance, gas, postage, computer systems, all these bills that need to be paid, and now, there is at least 40% less money to pay those bills. It’s a nightmare out there for anyone involved in the industry and I do feel bad for them.
However, they, as an industry, need to pull their collective heads out of their ***** and figure out a way to increase transaction volume. Get the banks to streamline the short sale process. Be more aggressive with price cuts. For example, I’ve got a crapshack on my block listed that should sell for $100k that listed for nearly $400k. No mortgage, long time owners. Sitting on the market for 6 months. WHY? The realtors aren’t doing their job and pricing appropriately to sell.
The NAR got its tax credit of $8,000; great, that goosed the volume for a few months. Now what? Its the same old BS – ‘now’s a great time to buy’ etc etc. I think the NAR and realtors as a whole must be panicking and frozen because this double dip because they’re collectively staring into the abyss.
Gary,
has your personal volume of sales decreased this year? I highly doubt it – every single realtor is doing fairly well. I don’t know why, but they are. It is weird and opposite of the data and sentiment here.
Any knifecatchers on here want to give some advice to future knifecatchers? Or are they still convinced the bottom is in?
Again, my personal experience is that things ARE selling and going under contract (and I am not talking about short sales/foreclosures. Seriously, look at the number of places that are “contingent” out there. You will be surprised.
“Seriously, look at the number of places that are “contingent” out there.”
Oftentimes the major RE houses will put unsold bulk properties as contingent in order to take them off the MLS. I think theres even still a couple properties on Vetro. These places never close they just stay contingent, sometimes for years.
Though CS continues to be more or less in line with its 19 month trend, Chicago’s performance underscores its deterioration relative to other comparable cities, especially those on the coasts. Let’s not forget that increasing violence and decreasing city services has an impact. Chicago is an underperforming real estate market and the reasons for this are obvious.
Also, if the tax credit was $8,000 and the average home price in Chicago CS is around $200,000, does it stand to reason we will see a 4% retrenchment from June numbers? If so, 120 seems about right as a trough for the next several months.
“does it stand to reason we will see a 4% retrenchment from June numbers? If so, 120 seems about right as a trough for the next several months.”
No because most people are not good at discounting their cash flows–especially entry level buyers.
Also as the tax credit was frequently used for downpayment assistance, it is likely the quality of the loans during the period the tax credit was in effect will be significantly worse than normal.
This is entirely the harvest the NAR has sewn and they need to sleep in the bed they made. No more bailouts for them.
Famous last words as the index crashes over the winter.
“#JMM on November 30th, 2010 at 9:44 am
Though CS continues to be more or less in line with its 19 month trend, Chicago’s performance underscores its deterioration relative to other comparable cities, especially those on the coasts. Let’s not forget that increasing violence and decreasing city services has an impact. Chicago is an underperforming real estate market and the reasons for this are obvious.
Also, if the tax credit was $8,000 and the average home price in Chicago CS is around $200,000, does it stand to reason we will see a 4% retrenchment from June numbers? If so, 120 seems about right as a trough for the next several months.”
“
“Gary,
has your personal volume of sales decreased this year? I highly doubt it – every single realtor is doing fairly well. I don’t know why, but they are. It is weird and opposite of the data and sentiment here.”
Well, ours is up but that is not typical. Sales volume is down huge and the number of realtors is not down that much so it has to be down on average. You just don’t know any weak realtors – the order takers.
“I didn’t like the fact that the floors weren’t real hardwood”
That’s a strange criticism. I’m not aware of any modern high rises actually using hardwood. It’s all engineered, which can be just as nice. Maybe they just used some really junky stuff in this building?
Gary, I know it is weird – but EVERY SINGLE realtor I have talked with has said the same thing. I don’t understand it – but it seems as though the market is not as bad as people think. I have rented and sold 3 of my properties this year without any problem or price reductions (my farm sold for over asking price – and 110k over what I paid for it in 2008). It is very strange and I don’t know how to reconcile/make sense of it.
it is the lambo effect clio. some people have rainclouds follow them around, your car is obviously the opposite. it is like a red italian Kit and you are david hasselhoph
There’s a lot of truth in that people see what they want to see from the data. That’s what makes CC so fun when people’s different perceptions/hopes of reality collide on here.
Clio,
I could send you a huge list of failing realtors. If you talk to any one of them they’ll tell you it sucks. You just don’t run into these folks because you move in different circles.
I used to at least respect Clio’s opinion and take it into consideration, but with today’s chatter he has proven how clueless he really is.
“has your personal volume of sales decreased this year? I highly doubt it – every single realtor is doing fairly well. I don’t know why, but they are.”
This is one of the dumbest things I have ever heard. It is a FACT that sales are down, so obviously realtors as a whole are doing fewer deals. Surely it is possible that you have talked to a few that bucked the trend and are doing better for whatever reason, but for you to say “every single realtor is doing fairly well” just proves your ignorance. For every single realtor to be doing better this year, there would have had to have been an exodus of realtors leaving the business-and they certainly would not have left the business if they were printing money like Clio thinks ALL realtors are.
“Bob – seriously, really?!! Come on – even you don’t believe this nonsense. Basically, you CANNOT apply these numbers (which are meant to be a general snapshot of the overall housing industry) to specific properties. ”
Come on Clio. You are like the seller on Real Estate Intervention who sees their neighbors identical house sell for 20% less than their ask and tries to justify why their house is worth so much more. Yes, it is an average, but that means that it if your properties really aren’t going down(It’s a miracle, somehow everything Clio owns refuses to go down in value.) then other people’s properties are going down MORE than the average. That is how an average works. Sure you can find a handful of properties that are an exception and have gone up or stayed flat, but that means all the “normal” properties are down even more than the average.
Gary:
Of the total number of Realtors in Chicago, what percentage do you believe are real full time players right now?
It has been a phenomenal year for top mortgage originators. Probably 75% of the competition has been eliminated leaving even more business for those that remain.
It is definitely SLOW as far as purchases go. I am normally 80% purchases and 20% refinances… right now it is like 95% refinances and 5% purchases. Total volume is up a bit though.
2011 will definitely be interesting to say the least…
“Yes, it is an average, but that means that it if your properties really aren’t going down(It’s a miracle, somehow everything Clio owns refuses to go down in value.) then other people’s properties are going down MORE than the average. That is how an average works.”
What you may fail to realize is that these averages reflect the prices of sold homes. There are a lot of short sales and foreclosures bringing down the average (as you state). The normal or nicer home prices have and will not drop that much more – that is not wishful thinking – it is what is happening. Seriously, if you want a nice house in Winnetka, Hinsdale, Oak Brook, Kenilworth, etc. – you will still have to pay a premium. Sorry – but that is the fact.
Gee, Russ, I don’t know. It’s a total guess. Given, how 80% of all realtors are total buffoons I’d say that at least 50% are part time by virtue of the fact that so many don’t return emails, don’t answer the phone, and when you do get them on the phone the TV is on some game show.
“if you want a nice house in Winnetka, Hinsdale, Oak Brook, Kenilworth, etc. – you will still have to pay a premium. Sorry – but that is the fact.”
Obviously you pay a premium, but you are paying less than you would have 2 or 3 years ago. Youre comments say nothing about the trend of price movements up or down “Oh well nice places still sell at a premium” No s&(% clio.
Just because they are at a premium, that does not tell us anything about the direction of the trend(the original topic of conversation). They can be selling for a premium on top of a lower base price, or the base price could stay the same and the premium could shrink. Either way the sales price would be lower even though they are at a “premium”.
3SKing, I understand what you are saying. I DO think that prices are generally off about 10-20% from their peak in these nicer areas – but they seem to be stabilizing and people are predicting a turnaround/increase next year. Again, I am only talking about the most coveted areas.
“and people are predicting a turnaround/increase next year. ”
LMAO! Yup 2011 is sure going to be the year of the great RE recovery. I have a press release from the NAR just waiting to come through my fax machine.
“LMAO! ”
Glad to bring some happiness into your life!
“What you may fail to realize is that these averages reflect the prices of sold homes. There are a lot of short sales and foreclosures bringing down the average (as you state).”
Didn’t this thread start out with Case Shiller? That’s not an average, that’s real life shit homie.
I’m surprised people still feed the troll. It’s been too long.
Bob2 – you really need to have a little more respect for people. Maybe people “feed the troll” because I probably own more real estate than anyone on this site – also I own a small real estate company. I have bought, renovated and sold scores of houses over the past 15 years. All of these experiences are incredibly important and pertinent when talking about real estate. Anyone can incorrectly analyze data – however, if you haven’t been in real estate long, your analysis could be way off. I shouldn’t have to explain these kinds of things to you… but I obviously have to do so.
Clio, Every single Person I have talked to has kept their job through the recession, increased their purchasing power through raised income and lower inflation, and spent more money in general. I guess we didn’t have a recession then based on your logic and my anecdotal experience.
rv- what is most important to people on this site? Their own personal real estate issues. My point is that real estate is extremely local and variable depending on several factors. You simply CANNOT extrapolate data to fit your own personal situation. You have to think for yourself and make decisions based on that. These blanket statements regarding the future decline of house prices, etc. are all AVERAGES. IT may not be true for individual areas= so future buyers really should take this data with a grain of salt and not base their decisions solely on this misleading data.
I think we all understand the hyper local nature of RE… Don’t deceive yourself though, ‘misleading’ is a pretty strong word, Clio.
Implying that actual, reliable data from a reputable source, based on REAL sales, can never be misleading. Only that it can have different interpretations (based on your personal experiences).
I’m sure many people feel the same way about evolution…
That old comment thread on this property was a laugh. Clio’s tired old “statistics lie, data deceives” was trotted out way back then. I really wish that the doom and gloomers who do not want sustainable RE prices would get some new material.
If you truly believe this canard, wouldn’t it stand to reason that your case for no further declines could be made equally supportable by data? Why don’t we see that?
Crwls – I disagree. The data IS misleading and should never be published in this way. To be more accurate, you need to separate areas/building/neighborhoods, etc. Anything less specific than this IS ABSOLUTELY misleading. I can tell you that I have published numersou papers in scientific journals and have seen both misinterpreted data and misleading data. They are two different entities (as you described) – but I DO believe that this real estate data is, in fact – misleading in the context that we are using. It is intended to give business people a general snapshot of what is out there – it is NOT meant to give lay people or people buying/selling real estate an prediction/idea of how to price homes.
“If you truly believe this canard, wouldn’t it stand to reason that your case for no further declines could be made equally supportable by data? Why don’t we see that?”
uhhh – because the foreclosres/short sales that ARE selling are bringing down the averages. There should be data on non-foreclosure sales. That would be most useful.
clio, you said the same in response before to the specific data I posted on Oak Brook to help you understand that market. Every property sold for less than the prior sale and few were short sales or foreclosures. You still didn’t believe it was useful.
“because the foreclosres/short sales that ARE selling are bringing down the averages. There should be data on non-foreclosure sales. That would be most useful.”
I thought what you found the most useful was what people who aren’t even listing their homes for sale b/c prices are too low would like to sell their homes for.
PS anon, if you’re not off sipping mai tais somewhere, or even if you are, had a question I emailed you.
“Every property sold for less than the prior sale and few were short sales or foreclosures. You still didn’t believe it was useful.”
G – you only published the data for houses that were bought after 2004 and then resold. You can’t select data points to make your argument. First of all, people who are selling 1 million plus houses after less than 6 years is a very skewed aspect of the population (? unstable finances, ? unstable job, ?unstable personal circumstances etc.). If you want to publish numbers, look at ALL of the sales (not just the ones that fit your argument).
Um, clio, I posted that data in response to your argument that Oak Brook homes had not declined in value, and it proved otherwise. You did try moving the goalposts, SHOUTING, and ad hominems in response, but who cares?
G- you really didn’t prove anything with your numbers because you self selected only those houses that sold after 2004 and were selling again. I understand why you did what you did, but it is NOT proof. It is like polling women that go to an OB/GYN office on whether they are pregnant or not and then stating that 80% of women out there are pregnant (yeah, I know – I’m not sure where I got that example – but you get my point).
Providing examples of homes that have declined in price didn’t disprove your argument about no price declines?
“my farm sold for over asking price – and 110k over what I paid for it in 2008”
I’m now left wondering what you meant by “sold?”
“I’m now left wondering what you meant by “sold?”
I meant that somebody bought it – isn’t that what “sold” means?
“I meant that somebody bought it – isn’t that what “sold” means?”
No its when you actually CLOSE the deal. I’m not trusting your deals close at all with you pontificating about providing owner financing. Sounds like some unqualified buyers in there and who knows how long things could be held up due to whatever.
Bob – you are right. However, if I am making 5.5% on my investment and all of my costs are covered, what do I care if they default in 5 years. By then, property values will have recoved nicely, I will have made a 5.5% return on my money in the mean time and can repossess the house/land and sell it for even more at that time. There is absolutely no doubt that prices will be higher in 5 years. None.
“There is absolutely no doubt that prices will be higher in 5 years. None.”
I have my doubts, and some others probably do, too. I guess that proves you wrong (again.)
I have my doubts as well.
So if I wanted to buy this place, what would be the likelihood that I would get it at asking price? (Or even get it at all). I’ve been reading CC for a long time, and I’m actually renting in this same building. I like it.
“I have my doubts, and some others probably do, too. I guess that proves you wrong (again.)”
How does that prove me wrong? I didn’t know that you were the “absolute” and final authority on the subject. I think the huge amount of money I have made in the real estate market over the past 15 years counts for something…..
If prices are not higher in 5 years then we will be 28% below the trend line. I find that extremely hard to believe. Is it possible? Sure….if Chicago becomes another Detroit…if China buries the US…if the US spends all it’s money taking care of old and sick people. Do I think it’s likely? Not at all.
Gary, wouldn’t the 5 years of realtively staedy prices (assuming flat from here to 5 yrs hold the trendline down? Or did you account for that?
Gary, that is your own trend line, correct? We all know your predictions based on your trend line have not been accurate. “if Chicago becomes Detroit”? Please help me understand how 28% below even your trend line will make this true.
clio, let me help…you stated that there were no doubts, I expressed that I had some and others might, too (which Bob confirmed.) Therefore, there clearly are doubts. You see, it was atually you who claimed “absolute” authority and you were proven wrong quite easily.
G- geez, stop it already. I think it is obvious that prices are going to be higher in 5 years. To think anything different is absolutely ridiculous and goes against everything everyone is saying. Also, do you really think we are continue to spiral downward or even stay in the same economic situation. Come on – don’t be naiive. Prices are absolutely going to go up –
clio, geez, stop it already. You are claiming absolute authority.
Clio is pulling an Eric Cartman tantrum I love it!!
And I think it is obvious that prices are going to be lower in 5 years. The “everybodies” you listen too must be other cheerleaders, probably realtors. Here is one of those “contrarian” points of view that you refuse to consider in your rose colored future. If you need more examples they are easy to find:
http://finance.fortune.cnn.com/2010/11/22/why-the-housing-bulls-are-wrong/
“I think it is obvious that prices are going to be higher in 5 years. To think anything different is absolutely ridiculous and goes against everything everyone is saying. Also, do you really think we are continue to spiral downward or even stay in the same economic situation. Come on – don’t be naiive. Prices are absolutely going to go up -“
The Detroit argument is just a different version of Godwin’s law. Mention Hitler and you lose the argument. In real estate discussions, mention Detroit, and you lose the argument.
and BTW: Chicago already has a couple of Detriots. I.e. Englewood, etc. Look at the prices below and tell me how this isn’t detriot.
http://www.redfin.com/search#!lat=42.00389&long=-87.841626&market=chicago&search_location=englewood&sold_within_days=180&status=130&v=6&zoomLevel=15
http://www.redfin.com/IL/Chicago/6428-S-Carpenter-St-60621/home/13932724
a $25,000 brick two-flat at 6200 S. Carpenter.
I had to look up “Eric Cartman” and it said that he is a cartoon character that is spoiled, ill-tempered and foul-mouthed. There is nothing about my comments that could be attributed to such a character. All I was doing was stating that housing prices WILL be higher in 5 years. This is almost common knowledge and believed by almost everyone out there. To dispute this is truly idiotic.
Why the hell would anyone compare Detroit to chicago. These are two completely different cities with a completely different economic base, racial mix, socioeconomic mix. It is so ridiculous and stupid – geez, what is wrong with you people?!!
One thing you all have not addressed is inflation. It stands to reason that in a “normal” environment and inflation running 2-3% per year that we might see appreciation in real estate. It would be interesting for Gary’s graph to look at trends in prices with inflation subtracted out. And yes, clio, i know you don’t deal in the goods and services the CPI represents – it just tries to give a sense for us “little people”
My trendline is based upon the pre-bubble CS data, which I think is a pretty normal period and it produces a 3.7% annual increase in prices, which seems reasonable. I haven’t adjusted it for new data points.
My past “predictions” were not based just on the trendline but also with what was happening in the market. And those were short term predictions. Much easier to get those wrong than long term predictions.
And I don’t understand this question: ““if Chicago becomes Detroit”? Please help me understand how 28% below even your trend line will make this true.” What I was saying was not that 28% below trend line would make us Detroit but that if Chicago’s economy went down the tubes then you could have a situation where it would be tough to maintain home price appreciation.
“If prices are not higher in 5 years then we will be 28% below the trend line. I find that extremely hard to believe. Is it possible? Sure….if Chicago becomes another Detroit…if China buries the US…if the US spends all it’s money taking care of old and sick people. Do I think it’s likely? Not at all.”
Gary, I truly respect that you take the time to put useful information out there. But you always speak of “the trend line” as if it were a monolithic entity rather than a projection, over many years, that depends on significant assumptions such as start date, end date, real versus nominal, etc. I suspect there’s a pretty big range of trend lines if you were to do some sensitivity analyses. You’re not obligated to do such analyses, but if you don’t, then I’d suggest some caution in discussing whether things are plausible or not given “the trend line”.
Also, weren’t we around 28 percent above the trend line at one point?
“I had to look up “Eric Cartman” and it said that he is a cartoon character that is spoiled, ill-tempered and foul-mouthed. ”
He is also belligerant and is by far the best character on the show.
“My past “predictions” were not based just on the trendline but also with what was happening in the market. And those were short term predictions. Much easier to get those wrong than long term predictions.”
As I understand what you are doing, you’re taking the 12 years of data from 87 to 99 and then projecting out the annual rate (I’m not sure the specification you use to get the annual rate) from there on out. It’s really difficult to project out 11 or 16 years. Also, the real versus nominal point Stuart makes and that I’ve made in the past is important. If you believe projections of housing prices are best expressed in real terms, then using a historic nominal rate and applying it to a period with potentially very different inflation rates may not make much sense.
“I had to look up “Eric Cartman” and it said that he is a cartoon character that is spoiled, ill-tempered and foul-mouthed. ”
“He is also belligerant and is by far the best character on the show.”
Could be either Bob or clio. Bob is more foul-mouthed and ill-tempered (M-Th). clio is more spoiled.
“clio is more spoiled.”
I’m not spoiled – just realistic about real estate. It still is a good investment for financial, personal, and social reasons. Seriously, other than plastic surgery/education, what other “investments” can you actually enjoy?
Clio, I understand that you’ve got some experience, but the way you just make assumptions and use blanket statements is fairly baffling. Anything is plausible, don’t be so naive.
Let’s say the general market is still correcting and in year one falls another 10% year over year. At this point a bottom is finally established and home prices stabilize. Years 2 through 5 would then require a minimum 2.5% CAGR simply to be level 5 years from today. Given that we will have just emerged from the asset class’s largest bubble ever, it’s reasonable to assume that home appreciation in years 2 through 5 would most likely track the rate of inlay ion, typically targeted at 1 – 2% a year. On top of ALL that, I personally believe the American consumer won’t be immensely better off than he/she is today – I just dont see where the rapid job creation and expansion of the economy will come from.
You really think its OBVIOUS prices will be higher in 5 years?! From this thread alone I would gladly bet blindly against you.
Inflation*
It is impossible to predict where prices will be in 5 years. The Japanese have not recovered for a bubble that occurred over 25 years ago. The stock market has not recovered for a bubble 10 years ago. In both those instances people predicted that things would be better in 5 years. The housing market will only improve if the overall economy improves and unemployment drop substantially. Even then most bubbles do not repeat themselves. I hope prices are higher, but not based on runaway inflation.
just my .02 cents
Crwls – I understand what you are saying – however, I strongly believe that in the better areas/nicer buildings, the recovery will be faster and bigger. Seriously, the only thing that people care about is where they live. If Las Vegas prices keep going down and don’t recover – it really doesn’t affect us. If prices in Englewood go down and aren’t higher in 5 years, it doesn’t affect me. I don’t mean to sound callous but the truth is the truth – we are all selfish and are concerned with our own personal situation. The bottom line is that, in better areas/buildings/neighborhoods, prices will ABSOLUTELY be higher in 5 years. I don’t think anyone would argue against this (although national/regional averages may not support this, local numbers WILL).
Never knew a rational, non-crooked investor who dealt in absolutes.
“Clio is pulling an Eric Cartman tantrum I love it!!”
“Screw you guys I’m going home” -Eric Cartman
“The bottom line is that, in better areas/buildings/neighborhoods, prices will ABSOLUTELY be higher in 5 years.”
The problem with this statement is that while that may be true, and it may go up the historical norm of 1% to 3% (once we actually hit a bottom)- can most people deal with that?
There is a whole generation of home buyers who believe that what happened in the last 10 years is “normal”. It’s not. Just like the stock market going up 18% on average from 1982 to 2000 (a bull market) is not what is happening right now.
What happens when people wake up and realize real estate will barely appreciate at the inflation rate?
“Chicago already has a couple of Detriots. I.e. Englewood, etc. Look at the prices below and tell me how this isn’t detriot.”
I’m sorry to say it- but I have to agree with HD here. Whole neighborhoods in the city are being completely destroyed. Condos for $5000. Houses for under $10k. Many of these are not in Englewood either (as he refers to.) Look at the South Shore. Just a few blocks from the Jackson Park Highlands are prewar vintage condos for the price of a car (or less.) And still they don’t sell.
Look at the unemployment levels. Nearly 50% in some neighborhoods. It’s extremely difficult out there. We have the more affluent areas that mask our problems (Detroit does not- not until you go to the suburbs.) And our overall economy is better than theirs. But close your eyes and drive through some of our neighborhoods and there wouldn’t be much difference.
“What happens when people wake up and realize real estate will barely appreciate at the inflation rate?”
They’ll realize that they made a wise choice buying. Seriously – everyone needs a place to live. The fact that the house you bought at price “x” is keeping up with inflation while your payment stays the same is great. The alternative is to keep renting while your rent goes up with inflation each year. Buying makes more sense and, in the long run, makes MUCH more financial sense (even if real estate only appreciates at the inflation rate). In 20 years (which go by fast) you will be so much further ahead, you will be very happy.
“But close your eyes and drive through some of our neighborhoods and there wouldn’t be much difference”
Detroit and chicago have two completely separate economic and social bases. Economy in Detroit centers around one industry. Economy in Chicago centers around MANY MANY MANY MANY MANY MANY MANY different industries. Chicago has thousands (if not tens of thousands) of multimillionaires. Chicago is a world class city and a destination for many. The comparison is ridiculous at best.
http://www.redfin.com/IL/Chicago/2212-E-70th-St-60649/unit-3C/home/13925400
$10,000 for a 719 sq ft 2/1.
$213,330 in 2003l.
“Buying makes more sense and, in the long run, makes MUCH more financial sense (even if real estate only appreciates at the inflation rate).”
The average American was staying in their home only 7 years. What happens when they have to stay there- as you said- for 20? How many people staying in that condo for 20 years? Not many.
The mentality has to completely change from the last 10 years. I’m not saying people won’t buy real estate. They will. But they will do what the boomers did. They will rent and save money until they can buy a single family home (or other property) big enough to live in for a LONG time. No more of the short-term buying. While this change is going on- the housing market is going to get severely hit in many areas.
Also, as we have discussed, the big transaction costs will really make buying unattractive for anyone expecting to stay there under 7 to 10 years. Losing money is never fun.
“Seriously – everyone needs a place to live.”
Exactly and renting is a near perfect substitute. But its one currently with different cash flows and offers far more convenience with regard to mobility.
“Chicago is a world class city and a destination for many. The comparison is ridiculous at best.”
Not really. You’re the one, Clio, who declared you’d be “scared” to drive south on Western Avenue. Try driving the boulevard system through the neighborhoods and tell me that it doesn’t look exactly like parts of Detroit.
If you throw in Detroit’s lovely and very affluent suburbs- it doesn’t look that different from most of Chicago. I’m not arguing with you that it’s two different economies. But there are huge swaths of the city where you can buy a house for under $10,000.
“Exactly and renting is a near perfect substitute. But its one currently with different cash flows and offers far more convenience with regard to mobility”
Bob – that’s all good for you (a single man) – but when you get married and have kids, you are going to have to look for bigger places in better school districts. The rent on these places is astronomical. You would be better off buying in that case. Also, when you look at that rent vs own calculator, after about 7-8 years, buying is almost always better. In addition, the peace of mind you have knowing that your house is yours to upgrade/downgrade and treat as you wish, your payment is fixed, you have the opportunity to pay it off, and don’t have to move is priceless.
“Not really. You’re the one, Clio, who declared you’d be “scared” to drive south on Western Avenue. ”
actually, it was driving NORTH on Western Ave which was terrifying!!!
Sabrina, I DO understand what you are saying. It is just hard for me to believe it because there are SO many areas in Chicago that are SO ridiculously expensive and nice that I just can’t see prices falling in the areas in which I live/play. I just don’t see it.
“that are SO ridiculously expensive and nice that I just can’t see prices falling in the areas in which I live/play. I just don’t see it.”
Are you now saying that prices have not fallen in your chosen neighborhoods and buildings? Even though the stats are showing that prices are down to 2002-2003 even in areas like Lincoln Park?
I can show you dozens of properties all listed for less than their prior purchase price in the last 5 years in the “best” neighborhoods in the city. All of those homeowners are losing money. Is it as bad as what is happening outside of the Greenzone? No. But the prices have seriously come down on both single famiily and condos. In some cases, the condos are down about 20%.
Sabrina,
I realize that prices are down – but you also have to realize that not everyone who bought 5 years ago is selling. Also, not everyone who is selling bought 5 years ago. Many of these people are going to do just fine. It is like buying a stock – so the market is down a little – you haven’t lost any money until you sell. I seriously can tell you that although the price of all my real estate (with the exception of my home in Oak Brook) have decreased but are still worth much more than what I paid for them. Again, real estate is not only about timing but also about having the stamina to stay in the game. If you stay long enough you WILL be fine.
I’ve always liked this building a lot. This unit should sell over list quickly. The building will only get more expensive to live in over time due to maintenence most likely, but that said, if you want a newer 2/2 with garage parking in a really nice building, this is one of the better deals I’ve seen in the South Loop.
I really enjoy the proximity to restaurants, grocery, the lakefront, parks and you get to walk to touristy stuff all the time (museums in your backyard, Soldier Field games and concerts etc…). And now Trader Joe’s is going in at 1100 block of South Wabash.
As for HD’s point about Realtors not doing there job, everyone takes listings or does not take them for many reasons. I had a great year personally, but was rejected more than any other year on listing appointments due to my suggested listing prices and strategies I laid out. Many just could not afford to list, others listed way too high and are all still on the market even after price drops… none of those properties that I lost the listing appointment have sold.
Wow, Clio, wow. You really want to make the argument that just because investors haven’t recognized losses means they have made a good investment? There will always be plenty of time to face the music.
Perhaps you could use some help:
http://weakonomics.com/2010/08/25/what-fat-ladies-in-bikinis-taught-me-about-investing/
“depends on significant assumptions such as start date, end date, real versus nominal, etc. I suspect there’s a pretty big range of trend lines if you were to do some sensitivity analyses. You’re not obligated to do such analyses, but if you don’t, then I’d suggest some caution in discussing whether things are plausible or not given “the trend line”.
Also, weren’t we around 28 percent above the trend line at one point?”
Both good points. When I look at the way the trendline fits the historic data I’m pretty comfortable extrapolating it out. You tell me if it looks reasonable. However, to your other point at the peak we were actually almost 36% above the trendline. So, yes we could easily end up 28% below but I’ll gladly take the other side of that bet. I routinely invest in the markets when I see disparities like that and have done well that way.
“I had a great year personally, but was rejected more than any other year on listing appointments due to my suggested listing prices and strategies I laid out. ”
OK – now 2 of the realtors who regularly post and the mortgage broker have ALL said that this as one of their best years. This echoes what I hear from all of the realtors I speak with. I am telling you – take it from people who are IN the actual business of real estate – it isn’t as bad as people are making it out to be. Things in the nicer areas are still moving – but they are being overshadowed in the news by several of the not-so-nice areas. Again, real estate is EXTREMELY local. Don’t get fooled by the news.
Oh- and this year-to-year decline, etc. doesn’t mean much when sales were propped up in the late 2000s by those funny mortgages in the not-so-nice areas. You REALLY have to look at data in the specific area you are looking to get a more accurate idea of what is going on – or ask a realtor.
“Wow, Clio, wow. You really want to make the argument that just because investors haven’t recognized losses means they have made a good investment?”
Yes… yes I do. If you bought in a good area and are at least near to breaking even with your payments (if it is an investment property) or if you can stick it out a few more years (if it is your own personal home), you will likely do OK – you really haven’t lost anything. It is when people panic that they lose. Again, it is like the gorgeous person in the bar, scared to go home alone, picking the first person he/she sees. If they just wait, and are patient, they will likely do much much better.
“OK – now 2 of the realtors who regularly post and the mortgage broker have ALL said that this as one of their best years.”
Clio this is just wrong. I get e-mails from many agents I have dealt with over the 3 years of doing this site telling me they are leaving the business and getting a “real” job because they just can’t make it. Sales are awful (and some of them have been doing it 7 or 8 years.) They can’t survive.
People like Eric, Mario Greco, Matt Garrison etc. are doing well because the others are dropping out and the listings are being consolidated in a few agents. (and good for them.) These are the ones that are the top of their professions. So they are doing okay- but everyone else is dropping out.
October sales were at nearly 20 year lows. Don’t sit here and say that the agents are all doing great.
Clio,
I saw some recent survey data on Chicago agents that shows that their incomes are down like 50% in the last couple of years. I’m planning on doing a post on this soon if I can get off Cribchatter. But anecdotal evidence just doesn’t cut it. I don’t know anyone who is unemployed but I don’t conclude that there is no unemployment.
Gary,
I am not stupid and of course I know that many realtors are “out of the game” and many others are not making money. The point I was trying to make was that real estate, like realtors, is very local/specific. The good properties/good realtors are doing fine – the bad properties/”bad” realtors are doing poorly (and I use quotes when I say bad because I don’t mean it as an insult – maybe they were not experienced, didn’t have the luck to land a job at a good firm, etc.). However, the news and everyone’s opinion is that ALL properties/ALL realtors are doing badly. This just isn’t the case. The parallels continue as realtors who are still in the game are having a great year (because of decreased competition). In the same way, properties in great areas have been and are going to be in greater demand because people are no longer speculating about other areas (ie, WP, S.Loop, BT, etc.).
Sabrina – I’m a “Baby Boomer” and I can assure you, based on the behavior of many of my peers, we practically “invented” the concept of buying and selling/trading up every few years.
Thirty-year mortgages? LOL – how many MARRIAGES last that long nowadays, especially among those born during the last 6 decades or so? “Staying put” with one spouse in one dwelling is (as the Boomers’ younger siblings might say) SOOOO Greatest Generation!
It made sense, then, during the last bubble to offer easy mortgages to Gen Xers who would get tired of the property by the time the APR “reset” would occur, so they’d sell, retire the old loan and get a new introductory rate on a new loan for a new home…
Well, it seemed like a good idea at the time…
“It is when people panic that they lose. Again, it is like the gorgeous person in the bar, scared to go home alone, picking the first person he/she sees. If they just wait, and are patient, they will likely do much much better.”
I don’t know Clio, if the girl waits too long the pickens get slim and you end up going home with the really drunk guy which could be bob….. sounds like a bad decision to me!
Clio you know nothing about the bar scene. Gorgeous people don’t need to pick up people in bars, nor do they often hang out in bars aside to hang out with friends. Bars are for more average and below people to make other average people gorgeous. And I’m not claiming to be gorgeous either.
“Gorgeous people don’t need to pick up people in bars, nor do they often hang out in bars aside to hang out with friends.”
Not necessarily true – I hang out with many ridiculously gorgeous friends and, believe it or not, the thrill is in the chase and in the unknown. Going to the bars can be a huge ego boost – ok we are really getting off topic and I don’t want to get scolded by teacher.
valasko, true – but you have to be smart about it as well. You can’t wait too long and you have to jump on every opportunity you can. It, like real estate is a game (a fun and exciting one).
and that is how you end up creepin’ at at 3 am at the hangge uppe.
“If they just wait, and are patient, they will likely do much much better.”
“and that is how you end up creepin’ at at 3 am at the hangge uppe”
I used to love the Hangge Uppe…. 22 years ago!!
“When I look at the way the trendline fits the historic data I’m pretty comfortable extrapolating it out. You tell me if it looks reasonable.”
One obvious issue is inflation. If the rate of inflation during 1987-99 was somewhat higher than from 1999-2010, then your projections will overstate where we *should* be at present, and if it was a lot higher than inflation is at present, then using a nominal rate to predict the next couple years seems very misguided. If you picked different starting points, you could easily be 5-10 percent below your trendline by now, significant but not dramatically different.
“However, to your other point at the peak we were actually almost 36% above the trendline. So, yes we could easily end up 28% below but I’ll gladly take the other side of that bet. I routinely invest in the markets when I see disparities like that and have done well that way.”
Ok, and I generally agree, but you said that it was “extremely hard to believe” we could end up 28 percent below, which is very different from “we could easily end up 28% below”.
DZ, glad to see you chime in on this. I would call Gary’s use of statistics more marketing gimmick than actual analysis.
DZ, glad to see you chime in on this. I would call Gary’s use of statistics more marketing gimmick than actual analysis. Same thing with his loose wordplay.
“but you said that it was “extremely hard to believe” we could end up 28 percent below, which is very different from “we could easily end up 28% below”.”
OK…I need to be more careful with my word choices. It is hard for me to believe we would end up 28 percent below. It could happen but I think it’s unlikely. I give it less than a 20% chance. How’s that?
“I would call Gary’s use of statistics more marketing gimmick than actual analysis. Same thing with his loose wordplay.”
In the interest of comity, I’m inclined to give people the benefit of the doubt. It could be that (a) Gary genuinely sees things the way he says, (b) is predisposed to seeing a somewhat rosier picture given his interests, or (c) knowingly says things he doesn’t believe to promote his interests. Absent clear evidence to the contrary, I’ll go with (a) and maybe bit of (b).
And as I said, I do appreciate the time that Gary takes to provide info on his blog and on here (obviously he probably sees a promotional interest in doing so, but I still appreciate it). And I appreciate the data/analysis you provide, which is of a nature not readily available to me or most others.
“It could happen but I think it’s unlikely. I give it less than a 20% chance. How’s that?”
I believe it definitely IS going to happen. But not in the neighborhoods most CCers talk about 90+% of the time.
FTR, I don’t believe it is (c) with Gary, either. As for (a) and (b), cognitive dissonance is a necessity for realtors these days.
This is why I love Cribchatter. Getting a big kick out of these discussions of my motivations. For what it’s worth…I really believe this. I am making personal decisions on this basis. I also don’t believe my success in real estate will depend upon whether prices go up or down but I would like to see more transaction volume and fewer realtors – which probably both won’t happen will they?
Both will happen sooner than you think. Sabrina says that realtors are dropping like flies; and we know that prices are dropping too. And when prices drop, transaction volume picks up. So in a few months, maybe within a year, volume will pick up, and there will be less realtors. It is possible to have your cake and eat it too.
“but I would like to see more transaction volume and fewer realtors – which probably both won’t happen will they?”
As Sabrina has mentioned, times are very tough for many Realtors who had great success since the late 90s. Many worked hard, but off of referrals and direct mail cards only. When the referrals dry up because no one can play Monopoly any more and trade properties, a lot of these agents have been hurting as they had no business plan and didn’t save money. Some I consider experts and respect… that really did a great job but had no real plan. Also, the agents who sold $2M-$6M just once because of the boom, they are all gone or doing nothing if still in the business.
The suburbs from what I understand are just awful for many many long time agents.
The Chicago market is basically down 40%-50% in unit transactions from 2005-2007 and/or year to year by quarter in many neighborhoods. I know agents who have sold over $10M a few times over the last decade and now under $2M this year and maybe last. My guess is agents with strong business plans and “systems” continue to do well. The “mega sphere of influence types” work it well too (if you have a couple upper bracket clients a year, you can put together a decent business). I’m a sort of systems guy. Those who wait for the phone to ring are dead and cry and complain at the office. The “systems agents” get new, cold business because people find them and reach out to them as they demonstrate they are active in the market and have great resources.
Secondly, good agents choose who they do business with by qualifying clients. I’ve written here before how unrepresneted buyers get upset and arrogant when they call me out of the blue for a showing and I ask respectfully if they are pre-approved and working with a good mortgage consultant. It’s not offensive, it’s good business and I offer to get them consultation. Most never call again. Good agents do not waste time with people who are not up front and don’t waste time at the water cooler in the office either.
All this talk about random Realtors’ business is pointless. People want and need to work with me or another agent for all sorts of reasons. Moving here, moving away, growing family, young professionals, need to short sale, need good contractors, lawyers, lenders etc… Most of the time people are very greatful to have someone a phone call away at all times that has been through real estate transactions, renovations, condos, single family homes etc…
Most clients are talking to us A LOT during the whole process and after closings. It’s difficult to explain how many small decisions are made that can save time, money, and their lifestyle from these constant conversations. On the other hand, even if we are careful and have agreements, some clients get a free education and top resources and we never see them again. That’s the breaks.
So, like any other consulting gig, it’s a partnership of someone’s needs and wants and my ability to deliver. Just like good mortgage brokers and bankers that really define themselves by saving people time and money are invaluable…you’d know that if you’ve ever done multiple transactions. Good contractors, good lawyers, good anything get things done and make things right. We adapt to client needs, advertise, work the streets, whatever!
Please know my business partner and I don’t take ourselves that seriously… we are not saving the world and actually have a lot of fun and energy in a pretty serious and upsetting market to many. We deliver the true bad news all the time but keep plowing ahead for clients. But, we are dead serious about consulting properly with the people we talk to all day and every day from current clients, Internet inquiries, family, open houses, referrals, relocations, mortgage people, attorneys, banks whatever.
In the world I live in, people need/want help and information when it comes to real estate. The serious field educated expert consultants with answers, resources and real definitive advice for their clients will continue to make a living. And we don’t obsess about other Realtors or the ups and downs in local or national markets.
I’ve no doubt the realtors that post here will be fine. They tend to be the stars and the ones people will flock to once they realize that a wet behind the ears hot blonde 24yr old with a lot of ambition but little else just isn’t going to cut it in today’s environment.
Like many professions, but to a greater degree, millenials are going to be screwed from becoming realtors, unless its just for kicks as a side job.
“we are not saving the world and actually have a lot of fun and energy in a pretty serious and upsetting market to many.”
I don’t envy the agents right now. Thanks for the insight Eric. I can’t imagine how hard it is on the sellers right now. It’s very emotional, I’m sure. After all- most sellers want one price and in this market it probably isn’t a realistic price (most times.) It’s hard to get sellers to face reality. That probably means you take on less listings as well.
Bob,
When starting my real estate career, I assumed there would be a lot of hot blonde agents. NOPE! Seriously, very few examples over the years of inexperienced “overly attractive” agents doing the day to day business. To your point though, many of the young attractive agents around the offices have dissapeeared… I’m still usually the youngest “producer” in the room!
Let’s just say the Top 5% are not the Top 5% best looking!
That said, a lot of us stay fit and dress well enough (ha).
Also, very few Realtors post here or do any video, blogging, writing or effective social media period. I’ve been conducting trainings for years and few stick to a media plan of any sort.
“Also, very few Realtors post here or do any video, blogging, writing or effective social media period.”
I would agree. Most are really behind the times in all things having to do with the internet. There are thousands of people reading this site every day and yet very few ever actually provide information here (even though it’s a great place to market themselves.) Heck- they can put their properties on my site for free but very few ever ask me to do so. (of course- being featured on CC isn’t always in the best interest of ALL properties.)
Additionally- many simply do not even answer their e-mails. I will e-mail them with questions about a listing and they will not respond for 5 or 6 days. It’s pretty amazing.
There are, what, about 5 or 6 agents who post here. That is it.
For the benefit of a fair shake and full disclosure, do any of those realtors in question mind identifying themselves as so?
I would find it beneficial from both a market insight perspective and a ‘motivation’ perspective. Thanks!
Eric (and any other agents), my experience has been that the vast majority of agents in the suburbs are completely clueless. Seriously, look at the 2million dollar plus listings in Oak Brook/Hinsdale and you will see that they are listed with a small number of realtors (most of whom are housewives who live in the neighborhood). When I have called these women in the past, they are almost always completely clueless about the property, size, logistics, etc. – and I am talking about multimillion dollar properties that are THEIR listings!! I can only assume that people list with them for lack of competition. Have you ever thought of coming out this way and give these ladies a run for their money? I would love to get into a venture like that (it would be like taking candy away from babies).
“For the benefit of a fair shake and full disclosure, do any of those realtors in question mind identifying themselves as so?”
You want to know the agents who have commented here?
Gary Lucido
Mario Greco (though he hasn’t commented for awhile probably due to the abuse that was thrown at him)
Matt Garrison
Eric Rojas
There are a few others who comment every once in awhile (especially if their property is featured.)
Crwls–I’m a self-sponsored real estate broker that posts on this site now and then. I enjoy reading the comments on this site regularly and chime in when I have something to add. However, as Bob suggested, I’m in the real estate business “for kicks as a side job”. I entered the business near the peak of the market but I’ve never relied on it as my primary source of income, so I’ve been able to stick around despite the downturn. Actually, I think there are only two types of agents that are relatively content in this market: 1) those like Eric and Gary that focus on the job full-time and take a pragmatic and no nonsense approach (and as a result are doing pretty well) and 2) those like me that have experience and know the market/process well but have well-paid day jobs and don’t rely on commission income to survive. In the past, part-timers were really frowned upon, but I actually think it’s a positive in my case because I have no motivation to push someone into buying or selling–and my clients have told me that they appreciated that. I do little in the way of advertising and my business comes primarily from friends and their referrals. And being a self-sponsored broker, I have the freedom to operate as I wish or offer commission rebates to clients. Everyone that posts here seems pretty sophisticated when it comes to real estate and, for that reason, I previously offered and will continue to offer a 50% commission rebate to anyone here that is actually thinking about buying in this market. I just hyperlinked my name if anyone is interested.
“As I understand what you are doing, you’re taking the 12 years of data from 87 to 99 and then projecting out the annual rate (I’m not sure the specification you use to get the annual rate) from there on out. It’s really difficult to project out 11 or 16 years. Also, the real versus nominal point Stuart makes and that I’ve made in the past is important. If you believe projections of housing prices are best expressed in real terms, then using a historic nominal rate and applying it to a period with potentially very different inflation rates may not make much sense.”
Agg CPI 87-99 = 46.65% CS from Jan-87 to Jan-99 = +72.59%
Agg CPI 99-10 = 31.28% CS from Jan-99 to Sep-10 = +34.99%
Jan-87 CS + CPI(87->00) = 81.17
CS Jan-87 to Jan-00 “real” aggregate growth = 23.2%
Jan-87 CS + CPI(87->10) = 103.09
CS Jan-87 to Sep-10 “real” aggregate growth = 21%
Back out the inflation, CS-Chi is still below “trendline”. But not by much.
And the 87-99 period isn’t really a good period, imo, as I don’t think that ~1.37% annual real price growth is sustainable (for truly comparable homes, which CS claims to compare; if Americans are buying houses twice the size with 5x the amenities/finishes, that’s different)–the price of the comparable house simply *will*not* double–in real $$ terms–every 50 years. Use .75%/yr growth over inflation and your trendline number for 2010 (starting from CS ’87) is 121.84–meaning we’re still slightly above a more sustainable trendline for price growth.
Tho, I do believe that aggregate inflation for the next 12 years will be higher than inflation in either of those periods, so projecting higher *nominal* RE prices in 2020 seems pretty safe, even if we aren’t yet at the bottom.
Thanks Sabrina!
I postulate that over the long term “real” housing prices should actually be zero unless there is an underlying change in the location making it more desirable.
For Chicagoland as a whole there is no reason why the CSI should be any higher than the CPI over the longer-term.
“house simply *will*not* double–in real $$ terms”
Case-Shiller taxes into account comparable sales, so things like larger houses should be distilled out. Real house prices appreciation should be -0- over long periods, barring some other change (tax policy treatment of MI deduction, for instance).
err takes into account
“Case-Shiller ta[k]es into account comparable sales, so things like larger houses should be distilled out. Real house prices appreciation should be -0- over long periods, barring some other change[.]”
Glad we agree, at least in part.
AS JMM would point out, over long periods, the structure will depreciate, while the land *might* appreciate. But, barring complete abdication of maintenance obligations, over the reasonably short periods (certainly less than 40 years, and mainly less than 20) of most concern to most of us here, there is little chance of complete depreciation, and some chance of “appreciation”, if one picks the right house in the right location, w/o overpaying for turnkey or location.
“for truly comparable homes, which CS claims to compare”
“Case-Shiller ta[k]es into account comparable sales”
Really not sure how well CS does this. Yes, I would think they could spot major reno and depreciation, but to the extent net overall house quality is increasing r decreasing slightly (but perhaps persistently) over time, I don’t see how tehy catch that. They flag outliers relative to other houses, but what if the average is increasing or decreasing?
“Really not sure how well CS does this. Yes, I would think they could spot major reno and depreciation, but to the extent net overall house quality is increasing r decreasing slightly (but perhaps persistently) over time, I don’t see how tehy catch that. They flag outliers relative to other houses, but what if the average is increasing or decreasing?”
Which is why I chose “claims”. I don’t know really how they manage it, either, but take them basically at tehir word for discussion purposes.
The Chicago Association of REALTORS has a pdf of there top producers.
For 2009:
http://www.chicagorealtor.com/associations/6001/files/2009SA_CR_Web2.pdf