A 2/2 Short Sale In East Lakeview Finally Goes Under Contract: 433 W. Aldine
I’ve been watching this vintage 2-bedroom at 433 W. Aldine in East Lakeview for months. It went on the market originally in June 2011.
It’s now a short sale.
At 1350 square feet, it has a dining room and french doors.
The kitchen has cherry cabinets, granite counter tops and stainless steel appliances.
The unit has in-unit washer/dryer but no central air. It DOES have an attached garage, which is somewhat rare for the neighborhood.
But it sat and sat.
Recently listed for $299,899, it was just reduced to $275,000 and went under contract almost immediately.
Why has this property been sitting on the market for months?
Was it because it was a short sale or did it need a drama price reduction to get noticed?
Joseph Marella at Keller Williams Realty Partners has the listing. See the pictures here.
Unit #14: 2 bedrooms, 2 baths, 1350 square feet
- Sold in December 1999 for $290,000 (per Zillow)
- Sold in November 2001 for $331,000 (per Zillow)
- Sold in March 2007 for $357,000 (per Zillow)
- Originally listed in June 2011 (couldn’t find a list price)
- Was listed in May 2012 for $329,000
- Reduced numerous times
- Was listed at $299,899
- Reduced
- Was listed as a short sale at $275,000
- Under contract
- Assessments of $442 a month
- Taxes of $4190
- No central air- window units only
- Washer/Dryer in the unit
- Attached garage (see the picture)
- Bedroom #1: 16×11
- Bedroom #2: 14×11
Big news: for the first time in 6 years the Case Shiller price index for Chicago came in above last year. 0.8% for SFHs and 2.7% for condos.
Thanks for the update Gary. We knew this was coming soon given what the index was doing every month. This has to be sustained for a year or two before there is any meaningful changes in prices. I’m still not seeing many people able to sell for more than they bought in the last 10 years (outside of renovators/flippers etc.)
Hm…the site is still slow but it doesn’t seem as bad as before. Let me know if you see anything really slow when making comments etc. I still have the thumbs up disabled.
It’s very apparent in my non GZ city neighborhood that prices have begun to increase.
This is a pretty unit. I think I could deal with the lack of air since it has a garage spot and in unit washer/dryer. The owner could just get one of those portable air conditioners, so as not to cover a window.
Really miss the thumbs up. I don’t notice any improvement since it was disabled.
I don’t think it matters any more that people who bought 10 years ago are screwed. That’s old news. What matters now is whether or not people who buy today are going to lose money in 5 – 7 years. I find that hard to believe, given where the market is.
And of course, what matters to me is how I will fare, having bought last year at this time.
“I don’t think it matters any more that people who bought 10 years ago are screwed.”
Note to self: do not hire Gary. (j/k)
O.K. Sorry. It still matters to people who bought 10 years ago.
“Big news: for the first time in 6 years the Case Shiller price index for Chicago came in above last year. 0.8% for SFHs and 2.7% for condos.”
So, Bob needs a new meme?
To state the obvious, site has been down (pages do not load) for much of the morning. Has been slow, sometimes extremely slow, for me in recent memory.
I’m happy to share that Gary and his team are working for me now and they are A+++
“To state the obvious, site has been down (pages do not load) for much of the morning. Has been slow, sometimes extremely slow, for me in recent memory.”
Same. Not noticeably different from yesterday when thumbs still here.
Error establishing a database connection!
Agree with Gary – I miss the thumbs up and there’s no improvement in the site as far as slowness in loading. I’ve been extremely patient waiting for this page to come up, and it finally did.
As far as this unit is concerned, I’m very familiar with the building, and it’s a lovely courtyard. Great location, though you do get a major wind tunnel effect walking to LSD from all the high rises on both sides of Aldine at this spot, which can make winter walks to the 151 bus stop unpleasant. The apartments in this building have all the vintage features people like, including (in some units), room-sized foyers. Some units have outdoor space, too. This is one of the few that has parking, which makes it a major improvement over some of the others. Appears they were asking way too much and now the price has come down, but I still think it needs to go lower.
The site loaded fast for me but I do miss the thumbs up/down. I think this unit was hurt by being a short sale. No one wants to deal with the hassel of a short sale uniess it really is a spectacular price. Otherwise, why wait possibly 6 months for an answer which very well may be no?
Gary, are you talking about real or nominal losses when you say you doubt that “people who buy today are going to lose money in 5 – 7 years”?
And btw ck out Shiller’s recent post:
http://www.nytimes.com/2013/01/27/business/housing-markets-future-still-has-many-clouds.html
Somebody got a good deal here. This is a beautiful unit, and garage space in buildings this age is vary rare, especially in near north neighborhoods.
“Somebody got a good deal here. This is a beautiful unit, and garage space in buildings this age is vary rare, especially in near north neighborhoods.”
But this unit has been sitting on the market for MONTHS. It is simply the result of being a stale listing? I don’t get it. The garage space is definitely rare.
“We knew this was coming soon given what the index was doing every month. This has to be sustained for a year or two before there is any meaningful changes in prices. ”
It definitely signals a change in the long-term trend. Whether it can be sustained or we have multi-year periods of localized bottoms who knows. I’m standing by my long-term prediction of Chicagoland SFHs bottoming out between 94-95 on the CSINSA. But extending the range out to spring 2018 from 2015. The Fed has just been pumping unlimited amounts of $ into the monetary base to the tune of 60B/month to keep interest rates low, and it seems to be working.
Someone getting a 30-year mortgage today at 3.5% can definitely afford a lot more house than someone even in 2009/2010 getting one at 4.75%. This open-ended asset buying can’t be sustained indefinitely, however.
The greenzone is benefiting from both the inventory deficit and the historically low interest rates. And the smaller population that can afford & is qualified to buy & wants city living is definitely looking in the GZ, and they can definitely buy more than they could even a couple years ago, and there’s _definitely less inventory_.
I see a greenzone mini-boom. I say mini-boom because the transaction levels will be a pittance compared to boom times. But if late 1990s transaction levels makes some people happy pop the cork on the champagne.
“This open-ended asset buying can’t be sustained indefinitely, however.”
I’m here to say that the Fed doesn’t have an exit strategy. There isn’t an exit. A return to a normalization of interest rates, a withdrawal by the Fed and other central banks in their efforts to monetize debt and artificially suppress interest rates, as soon as that ceases, the system itself will freeze up just as it did a few years ago.
The reason it will freeze up is the system can’t handle anything close to what would be considered historically normal interest rates. The stock of debt globally at that stage cannot be serviced. So the system, inevitably, will break down. The problem this time is likely to be much worse than it’s ever been in the past because the debt bubble has never been this big at any point in the past.
“The Fed has just been pumping unlimited amounts of $ into the monetary base to the tune of 60B/month to keep interest rates low, and it seems to be working.”
So, isn’t inflation inevitable then? And if so then real estate should inflate along with other assets.
“So, isn’t inflation inevitable then? And if so then real estate should inflate along with other assets.”
But when? The Fed has been pumping money into the system (along with the other central banks) for several years now. No inflation yet.
The only way housing prices rise is if incomes rise. And that’s still not happening.
US GDP contracted in Q4, so that isn’t going to help push incomes up at all. The Fed is holding the market up, and can only go a little bit further in doing so without causing major problems to the financial markets.
I know people who have lived here and the garage spaces are very valuable indeed. If you can’t get one, the options used to be renting in the 4+1 across the street or trying to get a reserve space in the alley next to the building (there are about 10 spaces in the alley and there was a building lottery for them). Of course, these are outdoor spaces, but it beats trying to park on the street.
“The Fed has been pumping money into the system (along with the other central banks) for several years now. No inflation yet.”
That’s because we have excess capacity of labor and manufacturing, so we need to mover further down the path of recovery but we will – and that doesn’t necessarily mean full employment since a growing percentage of the US population is not employable without a skills upgrade. However, the other factor is commodity inflation and with the growth of the emerging markets that seems like a certainty. The one counter-inflationary factor is the recent abundance of US energy resources.
“So, isn’t inflation inevitable then? And if so then real estate should inflate along with other assets.”
I had assumed that was your logic. But it sounds like even you have some doubts:
“So, isn’t inflation inevitable then?”
That’s the big question — to which I don’t know the answer. Man proposes, god disposes. The important thing is: you’re seeing near-southside real estate reflate. Can you identify the source of the reflation? Are the buyers PE-firms (that I understand), new household formations (that’d surprise me)? Is the lending entirely dependent upon the GSEs? (I’d guess so.) Would you say that near southside real estate is comparatively cheap — when looked at from the perspective of something like an owners-equivalent-rent or cashflow basis?
that’s a lot of questions. feel free to ignore them all.
“The reason it will freeze up is the system can’t handle anything close to what would be considered historically normal interest rates.”
In addition to the fact that it’s not like you can unwind a $2.2T position easily, if at all (baseline = 800B monetary base before the financial crisis, current balance sheet = $3T). A position that is now growing at 85B/month.
The Fed is now stuck, it’s back against the wall, as they have to keep printing & buying lest they take massive losses on their $2.2T bond portfolio. And just think, at the current rate of buying that Fed bond portfolio grows by $1T/year (remember to avoid the controversy stirred by QE2 QE3 was quiet and open ended, so call it QE(x).
There is no exit strategy in the conventional sense. I guess they’re planning on holding til maturity and praying for inflation. Either that or it’s only a matter of time before the Fed gets nationalized the same way Fannie & Freddie were and likely folded into the Treasury.
http://www.businessinsider.com/fed-losses-could-harm-public-perception-2013-1
“So, isn’t inflation inevitable then? And if so then real estate should inflate along with other assets.”
Insofar as I can tell only with paper assets (ie: equities). As real world demand is determined by what consumers can afford. There can’t be inflation of all asset classes if the median consumer can’t afford to buy as much as he did previously lacking an expansion of credit, which won’t happen.
What debasing the monetary base has done is give a shot in the arm to equities, as they’re a great hedge against a debased dollar (IE: .0001% of GM will still be .0001% of GM regardless of monetary base).
Problem with this is that the increased asset valuations will only goto the top 10%, and mostly the top 1-3%. And while the rich do buy a lot, and the luxury sector may do fine, more dinners at Ruth Chris for them won’t translate into as many dinners at Applebee’s for the middle class as in 2007. Large swaths of the economy are left behind from this approach.
The majority of Americans derive their purchasing power from earned income, not asset appreciation or dividends/interest and that’s where ~half of aggregate demand comes from. The powers that be don’t know what to do because in the past one bubble was solved with another. The decline in real purchasing power was covered up for two decades via two bubbles and credit expansion. There’s no more bubble and no more crazy credit.
“The important thing is: you’re seeing near-southside real estate reflate.”
We are? Where?
I don’t know where you all are seeing these massive price increases. At least with condos, I’m still seeing loss after loss after loss after loss. Maybe that crilly court seller might make something since it’s a hot area. I don’t know. But I haven’t heard of anyone making any money in the south loop.
And if prices are going “up”- it’s what- 1%? 2%? There are still tons of distressed condos all over the south loop. So I don’t understand where the impetus is going to come from for a “reflation”.
It’s all just wishful thinking.
And on another vein- who would WANT it to reflate? Why would we want to go back to that? It was unsustainable. I agree with Shiller’s NYT piece from this weekend that the odds of there being another era where home prices go up like 90% in 10 years are slim to none. It just doesn’t happen. Those years was only the second time in the last 100 years it has happened in America. A “normal” housing market is 1% to 3% increases in Chicago. People have to accept that that is what it’s going to be going forward.
If you’re buying for appreciation- you’re in for a world of hurt.
“And if prices are going “up”- it’s what- 1%? 2%? There are still tons of distressed condos all over the south loop. So I don’t understand where the impetus is going to come from for a “reflation”.”
Maybe no reflation but there are no longer “tons” of distressed condos all over the south loop with an inventory of 109. 4 foreclosures, 3 short sales. Seven units out of TENS OF THOUSANDS. The inventory has vanished, not sure where. Sitting on some banks balance sheet at mortgage origination cost & not being marked to market is likely where.
I would expect prices to rise about 3% per year from here on out over the long term. But that’s pretty good. With my mortgage at 2.875% my only cost is taxes and maintenance.
The fact that tons of people have losses out there is totally irrelevant to today’s buyer. In fact, if a buyer hit the exact bottom they would, by definition, be buying at the time when the number of people in a loss position was at it’s greatest level.
And not everyone is losing money. I can find more examples but we sold one of our client’s condos in Library Tower last year in 18 days for $24K or $29K more than what we paid for it in 2010.
BTW, a big chunk of the south loop inventory got bought up by Related Midwest. I’m dying to see what they do with it. The smart money has moved in. And it’s gotten really hard to buy a decent investment property these days.
Also, new listing of ours in Northbrook had at least 23 showings in the first two days on the market and multiple offers.
Eventually people figure out that low interest rates are a gift from heaven.
I notice that “helmethofer” got thumbs down for his excellent comment:
“I’m here to say that the Fed doesn’t have an exit strategy. There isn’t an exit. A return to a normalization of interest rates, a withdrawal by the Fed and other central banks in their efforts to monetize debt and artificially suppress interest rates, as soon as that ceases, the system itself will freeze up just as it did a few years ago.
The reason it will freeze up is the system can’t handle anything close to what would be considered historically normal interest rates. The stock of debt globally at that stage cannot be serviced. So the system, inevitably, will break down. The problem this time is likely to be much worse than it’s ever been in the past because the debt bubble has never been this big at any point in the past.”
Everything you state here is true, helmethofer. Our financial system is even more fragile and more overburdened with totally unrepayable debt than it was in 2008. All the palliatives applied- hyperlow interest rates, $2 Trillion in assorted bailouts, still-easy money for mortgages, Fed loans to buy bundles of mortgages- have only worsened the situation.
And, yes, inflation is inevitable, as evidenced by the rise in the prices of food and other essential commodities, as well as taxes and government salaries.
“Also, new listing of ours in Northbrook had at least 23 showings in the first two days on the market and multiple offers.
Eventually people figure out that low interest rates are a gift from heaven.”
But Gary- this is simply because of reduced inventory and NOT because the market is really any hotter than it was 6 months ago. What are sales doing? They’re going up but not dramatically. They’re barely even back to 2009 levels in the city- and the same is probably true of the suburbs. Heck, if there was more on the market then maybe there would be more sales.
So we’re not exactly seeing buyers coming out of the woodwork. This is true nationally as well. The monthly existing home sales are way, way below what would be considered “normal.”
Are we off the bottom? Sure. But is it a great market? No. And that is with record low interest rates. The Fed has barely breathed life into this market even with, basically, free money. It’s scary to think what will happen when it’s not so free anymore. Also- the sheer number of investors also tells you that this isn’t a “normal” market by any stretch of the imagination. Foreclosure/distress sales are also still too big a percentage of overall sales. 40% of sales being “distress” isn’t normal. It’s far from it.
If a house in Northbrook got multiple offers that’s because there are probably only 20 houses on the market in that price point right now (and 10 of those are probably old, stale listings and the others need work.) If you are a seller and you have a move-in ready house- you’re dumb not to list it. You’re not going to get the 2005 price. But you’ll be able to sell it fast.
Multiple offers only tells us one thing right now: there is NO inventory.
“And not everyone is losing money. I can find more examples but we sold one of our client’s condos in Library Tower last year in 18 days for $24K or $29K more than what we paid for it in 2010.”
I didn’t say everyone was losing money if they bought recently. Sure- there are always a few here and there you can point to. But if they sold in Library Tower for $24,000 more than what they paid in 2010 they likely still lost money after they paid realtor fees, transfer costs etc. Or maybe they managed to break even.
Why do you think prices will rise 3% a year from here on out? They never have in Chicago. They have averaged 1% to 3%. That is it. For 6 years in the 1980s they didn’t go up at all although we didn’t see the declines like we just experienced either. 3% would be more than the inflation rate. Why would it go up more than inflation?
I don’t see any reason why Chicago real estate would abruptly do a 180 from what it has done for the last 100 years. If anything- it should underperform for many more years given the size of the bubble.
And I totally disagree that it’s irrelevant that people have losses. Every single buyer I talk to won’t even consider a place if it’s priced more than the previous sale. They mock the listing. So yeah- they still want a deal and that means paying less than the poor fool who bought in the last 10 years. Or- as one buyer told me, “I got screwed on my sale, I’m gonna screw someone on theirs.”
“Maybe no reflation but there are no longer “tons” of distressed condos all over the south loop with an inventory of 109.”
I didn’t say they were on the market. Have you seen the number of lis pendens filed down there? It’s still years away from being cleared out.
Has a lot of progress been made in clearing it out? Sure. But we’re not even close to it being done. Many of the other unsold condos simply became apartments so that’s where a lot of the inventory went to.
Prices should be SOARING with that low inventory. Heck, there should be 50 offers on every condo in the south loop. But there’s not. Don’t you wonder why that is? Because the housing market simply isn’t that strong right now. The demand simply isn’t there.
I think that’s right. Supply is down, so is demand. In Econ 101 that means prices don’t move.
Follow the money. The Fed creates money, buys USTs….that money is spent by the Federal Gvt. Who benefits? Not so much Chicago. Places like WashDC do, of course, that’s why DC now has some of the highest priced RE counties in the nation. Perhaps also, some other cities like Houston (Energy) and other Military-Industrial complex locales. When the Fed creates money, it also goes to Wall Street and banks, so places like NYC will benefit from increased monetary base (inflation). Chicago doesn’t really get much of that inflation either, as we are no longer a major banking/finance center.
So, following the money….WashDC and NYC/Wall Street really get their hands on the inflation (new money). They coin-clip it, handle it first, get their profits….then it slowly filters out onto Main Street. Two ways: some Fed Gvt. spending makes it out on Main Street….welfare, health care. Then Wall Street via fractional reserve banking can create more money (inflation) and get it out onto Main Street via loans.
Banks aren’t lending much to Main Street, who isn’t borrowing anyway. So, none of the new money really makes it out to us here in Chicago at the street level, our middle class and upper-middle class isn’t getting any new money, and there’s no inflation of money circulating here to help bid up RE values.
PS Illinois and Daley helped “inflate” Chicago’s money supply by issuing debt/bonds, creating money out of thin air, and then spending it (deficit spending). All of that money is already circulating and already spent, so Chicago has a nice run, good veneer. Now that that process is exhausted, or being exhausted, we cannot look to state government to create new additional money at the margin. WIth no new additional money being created and spent by the IL and Chicago governments, that also means no inflation here. (this assumes the IL deficit is not growing like our Fed Gvt.’s, is this true?) Repayment of debt means money is taken out of circulation, but that’s not happening much either. Total debt is growing overall (Gvt. and consumer/personal)
“They never have in Chicago. They have averaged 1% to 3%. That is it. For 6 years in the 1980s they didn’t go up at all although we didn’t see the declines like we just experienced either.”
1. C-S has a nominal price increase of ~30% in 87-90, so you’re saying that from 80-86 or 81-87–a period with ~35% aggregate inflation–home prices were flat? Sounds like a big decline to me, albeit not as big as the past 5 year.
2. The average annual inflation rate over the past 100 years is *over* 3%–are you suggesting that Chicago home prices have lagged inflation for a century, or are you mixing nominal and real?
3. My recollection is that Chicago price gains have averaged a little under inflation+100 bps, over the long haul. Which just means that folks predicting a mid-term ‘recovery’ in nominal prices are effectively predicting moderately high inflation. Give us 5 years of 5% inflation and, even with below historic price gains, you’re looking at a ~30% increase in house prices (yyy, wages won’t keep pace, mortgage rate increases will kill asset value, etc etc, but that’s been baked in to the long term average, too)
Gary, when you say:
“I would expect prices to rise about 3% per year from here on out over the long term”
you’re talking about a nominal 3% price rise, right?
If so, your optimism about inflation doesn’t jive with prior statements you’ve made about being a declinist (like me). Or in your view does your inflation prediction not contradict your generally declinist outlook?
{My measly bond trade depends on whether you or Sabrina make the better case.}
Shiller & Case reported in 1987 that real (inflation-adjusted) home price appreciation in Chicago between 1970-1986 averaged only 0.3 percent/year:
“Over the 16 years of the sample period [1970–1986], we found annual real appreciation rates of 0.2 percent in Atlanta, 0.3 percent in Chicago, 2.2 percent in Dallas and 4.3 percent in San Francisco. (p. 54)
http://www.wellesley.edu/Economics/case/PDFs/prices.pdf#page=10
They write (pp. 49-50):
“all [four sample cities] saw home values at least keep pace with inflation as measured by the Consumer Price Index (CPI). In Atlanta and Chicago existing home prices remained remarkably constant in real terms over the 65 quarters of the sample period [1970-86]. While nominal prices nearly tripled, so did consumer prices in general. Real increases in both Atlanta and Chicago averaged less than one percent per year. [my emphasis]
Their early version of the Case-Shiller index was then called the “Weighted Repeat Sales” (WRS) index (p. 53):
“It is important to note that the Weighted Repeat Sales data do show a number of prolonged periods of real decline in home values: Atlanta from 1973 to 1978: Chicago from 1979 to 1985; Dallas from 1972 to 1976; and San Francisco from 1980 to 1983. Nominal declines are, however, rare.“
In his book “The Subprime Solution” (2008) Shiller writes (p 146):
“If we had been accustomed to quoting home prices in baskets since 1890, then people would generally have known that home prices haven’t basically changed in a hundred years (until the recent bubble)….”
http://visualeconsite.s3.amazonaws.com/wp-content/uploads/RealHousingPrices_1890_2010_log.png
And if rags like The Economist can be believed, price inflation is a relatively recent phenomenon:
“After falling by 40% between 1820 and 1900, American prices more than doubled during the first world war. But by the early 1930s the average price level had fallen back to its level in 1820.
“The British figures, covering the longest period, are the most revealing. During the three centuries to 1933, there were only six occasions when prices increased for more than three years in a row, mostly during wars, when government borrowing soared. Prices peaked in 1813, during the Napoleonic wars, but by the end of the 19th century had more than halved again. As in America, prices surged during 1914-20 but then fell back. By 1933 prices in Britain were hardly changed from their 1660s levels.”
http://fac.comtech.depaul.edu/jwoo1/courses/history_inflation.pdf
“What are sales doing? They’re going up but not dramatically. They’re barely even back to 2009 levels in the city- and the same is probably true of the suburbs.”
From my December update: “December marked the 18th month in a row that Chicago home sales rose over the previous year and it was the 10th month of double digit increases. The number came in 17.1% higher than last year.” Sounds pretty dramatic to me. And 2009 was distorted by the gubment. December sales were higher than 2007.And in the metro area they were higher than 2009 and almost as high as 2006.
“The monthly existing home sales are way, way below what would be considered “normal.””
I don’t know what you would consider normal. Certainly not 2000 – 2006.
“If a house in Northbrook got multiple offers that’s because there are probably only 20 houses on the market in that price point right now (and 10 of those are probably old, stale listings and the others need work.) If you are a seller and you have a move-in ready house- you’re dumb not to list it. You’re not going to get the 2005 price. But you’ll be able to sell it fast.”
2005 should not be the benchmark. That was not normal. BTW, there were around 550 buyers in the Northbrook market whose search criteria matched on that house. What does that tell you?
“Multiple offers only tells us one thing right now: there is NO inventory.”
Demand > supply. That’s how prices rise.
“Why do you think prices will rise 3% a year from here on out? They never have in Chicago.”
Look at the first graph on this page: http://ChicagoHousingStats.com I ran an exponential regression on the Chicago Case Shiller index from 1987 to somewhere around 1999/2000 – non-bubble period – and it came out to 3.7%. That’s the red line on the graph.
“Every single buyer I talk to won’t even consider a place if it’s priced more than the previous sale. They mock the listing. So yeah- they still want a deal and that means paying less than the poor fool who bought in the last 10 years.”
But that doesn’t have any bearing on where prices are going from here. That’s like saying Apple is a bad investment now because the price has fallen 35% from it’s peak. It’s irrelevant.
“you’re talking about a nominal 3% price rise, right? ”
Yes.
“But that doesn’t have any bearing on where prices are going from here.”
Sure it does. 25% of the market can’t list their homes (because they’re underwater.) They can’t sell and “move up.” Other move-up buyers who DO have some equity might not have much so they’re kind of screwed too. Without move-up buyers, what do we have?
If Apple shareholders had to bring cash to the table to sell their shares to new Apple stock buyers, do you think they would? Hell no. The housing bust price declines have distorted the entire market.
I’ve said for years that renters are in control. They are perfectly positioned. They can buy without having to sell something. And now prices have fallen AND interest rates are at record lows. For those people- underwater homeowners are relevant because there is simply NO inventory because people can’t sell.
The people who are buying are the former renters and the move up buyers who can bring cash to the table or don’t need to bring cash to the table. Sure demand is down but supply is down even more so that’s what’s driving prices up. And the Case Shiller index is now showing it for Chicago for the first time in 6 years. That’s what’s great about this index is that it’s an objective measure of aggregate prices and allows us to get off discussing anecdotes.
But prices are barely rising Gary. Your theory doesn’t hold up. Maybe if we saw a dramatic increase in sales over the next year or two without any more inventory- then, yes, prices would rise dramatically. But, again, 1% or 2% isn’t a big deal to me. That is normal price appreciation. Maybe you all don’t remember what it means when prices actually DO rise because they’ve been falling for so many years.
Here’s the December numbers for the last 9 years.
December 2004: 3,719 sales
December 2005: 2,847 sales
December 2006: 2,241 sales
December 2007: 1,629 sales
December 2008: 1,263 sales
December 2009: 1,820 sales
December 2010: 1,475 sales
December 2011: 1,536 sales
December 2012: 1806 sales
Sure- it’s gone up in December but it’s WAY below the early years of last decade. And yes, I realize we’re talking about the housing bubble here. But just because you come up 15% off the low- that doesn’t mean it’s great. Those are historic lows for goodness sakes. Has it improved? Sure. But it’s still not that great. It was below even 2009 sales (which I’m assuming were juiced from the tax credit.)
Where’s G when you need him? He could supply the data from early in the last decade. I’m assuming the sales are probably still higher than what we just saw last month.
“2005 should not be the benchmark. That was not normal. BTW, there were around 550 buyers in the Northbrook market whose search criteria matched on that house. What does that tell you?”
How many were looking last year so we can compare? The number of buyers doesn’t tell you anything if it’s the same as last year. Gary, you are getting all crazed simply because inventories have dropped so it SEEMS like the market is hotter than it really is. So everyone tells me, “Sabrina, everything I track on Redfin has gone under contract!”
So if last year there were 60 properties on the market in Northbrook and 20 went under contract and this year there were 30 houses on the market and 23 went under contract- does that mean the market is exploding higher? How much hotter is it? A little bit hotter but not significantly so. If we had 60 homes on the market again this year and 23 under contract, no one would be saying “this market is so great.”
“it’s gone up in December but it’s WAY below the early years of last decade”
Why would we compare current sales to peak bubble years?
I was wondering about G myself. Has he been around lately? If he’s disappeared then that is the most bullish indicator I can think of. Once this market turns around for sure we will never see him again. He feeds off of negativity. But I plotted all his data and filled in some of the gaps in the first graph on this post: http://www.chicagonow.com/getting-real/2013/01/december-chicago-home-sales-another-double-digit-increase/
I’m not looking for price increases of more than 3%/ year anyway. I’m not looking for a big deal. I’ll even take 2% because it really reduces my mortgage interest cost. The fact that prices once rose by 10% or more in a year is irrelevant. That was not normal and will not happen again. I don’t care that it happened or that it won’t happen again. And I don’t care that sales were at crazy high levels in the mid to late 2000s. That was not normal and will not happen again.
It’s not just an inventory story, Sabrina, it’s a contract and closing story and both are way up. Look at the trend in the first graph and look at the second graph at the link above. I need to redo my contract activity graph so that it’s easier to read but you get the idea. And December was the highest at the highest sales level in 6 years! (it’s actually going to exceed 2009 when the final numbers come in)
I couldn’t quickly find a G post with December numbers, but here’s a May/June chart:
“Closed Sales
Detached & Attached Single Family
City of Chicago
Year—1st Q—May —June —2nd Q —1st H
1997—3,126—1,688—1,817 — 5,163 — 8,289
1998 — 3,600 — 1,968 — 2,214 — 6,193 — 9,793
1999 — 4,179 — 2,108 — 2,435 — 6,620 — 10,799
2000 — 4,440 — 2,560 — 2,513 — 7,258 — 11,698
2001 — 4,324 — 2,348 — 2,451 — 6,967 — 11,291
2002 — 5,419 — 2,654 — 2,590 — 7,993 — 13,412
2003 — 5,666 — 2,762 — 2,891 — 8,340 — 14,006
2004 — 6,403 — 3,249 — 3,752 — 10,176 — 16,579
2005 — 7,307 — 3,589 — 3,850 — 10,809 — 18,116
2006 — 6,922 — 3,592 — 3,557 — 10,120 — 17,042
2007 — 5,994 — 3,132 — 3,153 — 9,032 — 15,026
2008 — 4,801 — 2,178 — 2,297 — 6,420 — 11,221”
Assuming that the ratio of May/June 2000/01 sales to 04/05/06 sales was similiar to Dec-00/01 to Dec 05/06 (04 looks like a big outlier–what condo buildings delieverd in Dec-04?), Dec-12 would be very, very simliar to Dec-00 and Dec-01. Now, there are a lot more o/o ‘available’ (listed+unlisted) units in the city on 12 v 00, but the nominal sales number is pretty similar.
“But prices are barely rising Gary. Your theory doesn’t hold up. Maybe if we saw a dramatic increase in sales over the next year or two without any more inventory- then, yes, prices would rise dramatically. ”
You’re seeing price discovery. Sure, prices are barely rising but it’s always going to be barely initially and the local real estate market moves slow and is reactionary. Interest rates remain virtually zero on a real basis, it’s much cheaper to borrow for real estate than it used to be if you can get qualified to do so. The economy continues to improve. Inventory is low because there are not enough owners interested in selling at what they expect they will be able to get, but the more buyers who want those properties and can and will pay more for them the more prices will rise. Buyers will either not buy or be willing to pay more to get the properties that they want. Lower sales volume primarily reflect that many people who want to sell can not or are unwilling to sell at the market price, and that many potential buyers are either locked into a current property or unwilling to pay the market price. They also reflect more people, especially young people, renting instead of buying.
Another interesting tidbit from something I read today
“The spread between rental cost [$718] and the average monthly mortgage payment [$481]has never been wider than it is today.”
” between rental cost [$718] and the average monthly mortgage payment [$481]”
I buy that, w/o considering T&I escrows, but that is not then reflective of the relative cost.
Median RE taxes in 2010 were $170/month. Average likely higher.
“If Apple shareholders had to bring cash to the table to sell their shares to new Apple stock buyers, do you think they would? Hell no.”
If that dynamic existed with Apple stock I’d be buying it hand over fist. I’d love to own a stock that can’t go down in price.
““If Apple shareholders had to bring cash to the table to sell their shares to new Apple stock buyers, do you think they would? Hell no.”
If that dynamic existed with Apple stock I’d be buying it hand over fist. I’d love to own a stock that can’t go down in price.”
That’s essentially how margin trading works, not as much leverage as real estate, but the same concept. However, under (if I recall correctly) Reg. D, it’s getting marked to market real time and you’ll have to make up shortfalls or let it get sold whenever the price goes down so that the leverage is above the permitted leverage. You don’t really have the risk of having to bring cash to the table to sell, like with real estate, but you risk part of your holdings being sold without your consent. The real estate analogy would be like forcing underwater homeowners to sell parts of their house at the current market price to keep their leverage down.
ok mr. nit picker, here’s what the source said
“Census Bureau – monthly mortgage payment assumes a 20% down payment at prevailing 30 year fixed mortgage rates, analysis based on median asking rent and median mortgage payment based on asking price .”
Obviously that includes principal payments, so if you add Taxes in there it may be a wash
The graph included that I can’t post is quite startling , as rents/mortgages mostly moved in unison with some phases higher than the other 1988-1993 mortgages were more costly with a brief period in 93 renting was costlier, then back 1994-2001 mortgages were more costly, then renting more costly from like 01-05, mortgages sharply higher from 05-09 and now renting is more costly since 2009-? The spike in 2005-2007 monthly mortgage payments is crazy
“The graph included that I can’t post is quite startling”
Is is proprietary? Does it look anything like this?
http://static.businessinsider.com/image/50e5f61869bedd9a28000003-915/slide-201.jpg
“here’s what the source said”
$481/month is, with a 3% rate (too low) a $114k mortgage, and a $142k purchase price.
I’m not doubting your reporting of the report, but it seems wonky, even on a national basis, in the details.
“2005 should not be the benchmark. That was not normal. BTW, there were around 550 buyers in the Northbrook market whose search criteria matched on that house. What does that tell you?
“Multiple offers only tells us one thing right now: there is NO inventory.”
Demand > supply. That’s how prices rise.”
There are a lot of casual buyers looking for homes who have been willing to wait and still want a “deal”. Many of them aren’t as willing to compromise compared to the 2005 buyer who was sold the bill of goods that they needed to get into the market or else they would miss out forever. There aren’t enough people who can afford all the $600-1MK homes if there was normal inventory levels on the north side of the city and in the near north suburbs.
Oh–from DZ’s link, it’s for ‘vacant properties’, which is going to skew hard to less desireable REO.
DZ’s graph is quite cool. I think that tells the story. In the long run rents are going to rise with inflation. In the long run renting costs should track with buying costs and that’s what makes buying make sense for someone who is going to stay put for 5 – 7+ years. And when renting costs get out of whack with buying costs something must happen to bring them back in line.
“I was wondering about G myself. Has he been around lately? If he’s disappeared then that is the most bullish indicator I can think of. Once this market turns around for sure we will never see him again. He feeds off of negativity.”
Yeah! Where’s G and all the foreclosures he predicted would hit the market in Avondale, Albany Park and Irving Park in the summer of 2012?
Yeah thats the chart 🙂
It was in some dude’s newsletter so I’m not sure if he made it or what and I want to respect the plagarism laws, the upper right chart is the one i’m referring to
JJJ: “The economy continues to improve.”
Didn’t GDP go negative today?
“Yeah! Where’s G and all the foreclosures he predicted would hit the market in Avondale, Albany Park and Irving Park in the summer of 2012?”
G comes and goes. He’s probably in Central America, enjoying the beach somewhere this time of the year. Sigh.
He usually shows up when we all have the data wrong (thank goodness someone has the right info.) At least on the monthly reports he’s supplied me with enough data over the years that I can just look at the post from the previous years to retrieve it.
http://www.nasdaq.com/article/2012-foreclosures-up-in-57-of-us-metro-areas-20130131-00214
Here’s the foreclosures. They’re there. Most people who bought or refi’d a home during 2003-2010 will go into foreclosure, short sale, or default. Not all, but most.
“Most people who … refi’d a home during 2003-2010 will go into foreclosure, short sale, or default. ”
That’s probably the dumbest thing you’ve ever posted. Not certainly, but probably.
“Most people who … refi’d a home during 2003-2010 will go into foreclosure, short sale, or default. ”
That’s probably the dumbest thing you’ve ever posted. Not certainly, but probably.
Mark my word, bitch. It’s already happening. Look at the default rates at some of the worst securitized subprime loan packages and it often reaches 100%. Even prime is quite high too during those years and it just keeps going and going….
Anon, are you on the edge of foreclosure or short sale? Is that why you are so upset over my comment, which I’ve made a couple of times before here? I’m sorry to hear ur losin’ ur house bro, but you can never really own anything in this world if ya know what I mean.
“homedelete (February 1, 2013, 6:36 am)
Anon, are you on the edge of foreclosure or short sale? Is that why you are so upset over my comment, which I’ve made a couple of times before here? I’m sorry to hear ur losin’ ur house bro, but you can never really own anything in this world if ya know what I mean.”
Wow, it’s like you’re psychic.
Whoops. Typo. Not psychic. Psycho.
“It was in some dude’s newsletter so I’m not sure if he made it or what and I want to respect the plagarism laws”
I hope the newsletter dude was respecting the laws.