An East Lakeview Pre-War Gem With Modern Amenities: 2912 N. Commonwealth
This 2-bedroom vintage unit at 2912 N. Commonwealth in East Lakeview has been on and off the market since August 2008.
The building was built in 1926, so the unit has many of the pre-war vintage features like large room sizes, a formal foyer, 9 foot ceilings and crown molding.
It also has the original living room fireplace.
But it has some features you don’t always find in the pre-war buildings such as central air and in-unit washer/dryer.
Garage parking is also available for $150 a month- and is valet.
The unit has been reduced $185,000 since 2008 and is listed for $27,000 under the 2004 purchase price.
Is this property now attractively priced for the location and square footage?
Carla Farris-Benedetti at Cathy Epstein & Associates has the listing. See the pictures here.
Unit #5B: 2 bedrooms, 2 bath, 1750 square feet
- Sold in March 2004 for $357,000
- Originally listed in August 2008 for $515,000
- Reduced numerous times
- Currently listed at $330,000
- Assessments of $864 a month (includes heat, gas, cable)
- Taxes of $4901
- Central Air
- In-unit washer/dryer
- Rental parking at $150 a month
- Bedroom #1: 17×13
- Bedroom #2: 17×12
- Dining room: 18×14
- Living room: 22×15
- Kitchen: 13×10
330k would’ve definitely cut it at initial list back in 2008. Heck maybe even 340-350k. But this owner hadn’t quite woken up to the reality of our economic situation despite the fact that Lehman Brothers went BK right after this was first listed.
This owner’s ignorance, or greed, is going to wind up costing them quite a bit. Keep chasing that market down, owner.
Nice! I like it. I would pay high 200’s
so a grand ontop of the mortgage & taxes to live here and park….eh, pass, but nice place though.
Unit #1B just sold at $310k. $20k to be on the fifth, rather than the the first, floor…assuming the place is nicer than the lazy, unprofessional pictures make it look (and I’d bet it is, or could easily be made so), I’d say this place is an o.k. deal. The high assessment (and low ammenity) vintage buildings aren’t for everybody, but these are fairly big, stately units and, yes, near the park.
agreed, assessments are in line with age of building and size of unit
Linked listing sez that the $864 includes 1 parking spot. And it includes cable and heat, which is ~$200 if you bought in a 3 unit building west of Sheridan. Question is if they have decent reserves, or if they are low w/ expectation of specials.
Keep cutting. $199,999.
Must. Resist. Herringbone. Floors. Some day people will come visit me in a place like this and I will be reclining on one of those armless fainting sofas with a long pipe and two yappy dogs at my side welcoming them into my parlor or library or something like that. And someone will come into the room and sever all of us cucumber sandwiches with the crusts removed. You don’t move into a place like this because it’s a great investment. You move into it because you love the character of the building and you love being surrounded by other people who also love it.
Lakeview condo/TH closed
Sep Oct Nov 3 mos.
2004 251 169 178 598
2005 304 207 178 689
2006 251 163 115 529
2007 174 147 118 439
2008 174 98 67 339
2009 104 124 115 343
2010 77 61 55 193
Lakeview foreclosure filings (all properties)
2007 110
2008 210
2009 309
2010 (Q3) 223 (+11% YOY)
There have been 100 foreclosure sales, and 139 short sales, in mls for all Lakeview props for 1/1/08 – 11/30/10.
Well, there’s “Lakeview,” then there’s the general area where this particular unit is located.
But Danny – do the mirrored archways (while easy to fix) cancel out the classiness of the herringbone floors. I had to inspect those pics carefully because I though I was seeing things. Seriously, who uses mirrors over millwork?
anonny, did you mean “it’s different here”?
But listing also says 1 garage space available for $150. Does the $864 include a non-garage space, or is an extra one being offered?
Expectation of specials? Looks like there’s one now.
#
anon (tfo) on December 3rd, 2010 at 11:29 am
Linked listing sez that the $864 includes 1 parking spot. And it includes cable and heat, which is ~$200 if you bought in a 3 unit building west of Sheridan. Question is if they have decent reserves, or if they are low w/ expectation of specials.
G: Yes.
While it’s not the best block in ELV (it’s rather dominated by the hospital and some senior buildings), it’s nonetheless in ELV. Heck, it’s just a couple of blocks north of…gasp…ELP!
Wow, G,
Those numbers show the Lakeview real estate market is terminally ill. Sales are off 72% from the peak of 2005. Just when you think things can’t possibly get any worse, they do.
“But listing also says 1 garage space available for $150. Does the $864 include a non-garage space, or is an extra one being offered?”
Realtors frequently use this trick. I am guessing you get 1 non-garaged space nearby for $1,014 in assessments.
BTW you can already get a 2/2 in a vintage ELV highrise without parking for $150k. It, of course, has killer assessments.
While we are on the high HOA argument, continuing on yesterdays discussion re: the cost of a SFH. Someone was talking about how they clean their own gutters, mow their own lawn, do their own gardening, paint the outside of their house themselves, snowblow their own driveway, etc. In addition to the time value, you need to buy a ladder, buy paint, a lawn mower, a snow blower, tools, etc. Those are all going to cost you at least a few hundred bucks minimum. I know someone will say “But those are one time costs”, but they still add up.
If you want an unsupervised outdoor area for children or if you need to cram 4 or more people into a household unit (family or otherwise) then a SFH is the way to go. I supposed many people have lived in three bedroom condos with families but it’s less than ideal and there’s nothing wrong with wanting a bit more space. We don’t live in hong kong where cramped is the norm. And we haven’t yet reached peak oil so commuting isn’t yet an issue.
““But those are one time costs”, but they still add up.”
It depends. My friends rent in a 2-flat and most of the supplies they need for yardwork and nice grill for grilling were left behind by the previous tenant. Of course this might not apply to home ownership as much.
“While we are on the high HOA argument, continuing on yesterdays discussion re: the cost of a SFH. Someone was talking about how they clean their own gutters, mow their own lawn, do their own gardening, paint the outside of their house themselves, snowblow their own driveway, etc. In addition to the time value, you need to buy a ladder, buy paint, a lawn mower, a snow blower, tools, etc. Those are all going to cost you at least a few hundred bucks minimum. I know someone will say “But those are one time costs”, but they still add up.”
wow we have a generation (future too) of mind-boggling inept & lazy people dont we? i bet they pay people to water their house plants too!
if this is the trend then i will will be changing my career path and going back into the trades! with all these unprepared folk it seems like a money maker to me!!!
someone is really question the purchase of a ladder? seriously tools?
please tell me you do know that a ladder can be used for more than cleaning the gutters?
and time value, i can understand, but really how much time will it really take you to mow a chicago lawn? or change your own faucet?
dear gosh take some pride in your home pick up a wrench, you will feel better about yourself and you will be able to hold your head up high and feel proud when you make your mortgage payment.
maybe then it wont feel like a RENT payment
Alright, well I’ve actually gained some insight from the whole ‘high assessment chat.’ At this point I can justify anything really $400-500/month for full utilities/gym
… no wonder i was having such a price discrepancy b/w what I could afford in a high rise vs brownstone. changed my model accordingly 🙂
Thanks all.
Groovie – you’re back!!! I was just thinking that we haven’t heard from you, anon, or westloop for ahile.
I love the size of this place as well as the location. The price is good for someone trying to get into a vintage condo. Buy now and take your time doing a vintage restoration/renovation. It would be a very fun project.
“Groovie – you’re back!!! I was just thinking that we haven’t heard from you, anon, or westloop for ahile”
on vaca and now catching up at work. so my crib chatting has been last on my list. look for full-on groove end of next week 🙂
I don’t know, if I didn’t have a child, then sure, I’d be up for doing as much as possible myself. But as it is, it seems there’s never enough time to fit in exercise, or any other things for one’s own physical, entertainment or (non-work related) intellectual pursuits (let along traveling), while holding down a demanding job and trying to spend as much quality time with a child as possible, without adding to the mix gutter cleaning and mowing the lawn. I spent enough years doing that sort of stuff for a living (as a teen and wayward 20-something), so with the 3 – 5 non-working, waking hours I have (on the typical weekday), I think I’ll avoid as many house chores as I can.
This could really be beautiful. Herringbone floors, bitches.
Danny, get off my fainting couch!
nice, and a lot of potential, but is it worth more than 1B? dont really think so. it does need a lot of work, imo.
I looked at this unit several times last year – I loved the building, and it’s a lot of space – plus it had garage parking, so rare in that neighborhood. I could not get past the fact that St. Joe’s Hospital dominates ALL the window views – you don’t have any view at all. Plus, the owner had made some poor design choices in the kitchen – there’s a washer & dryer, but they are on opposite walls. Why? Finally, a huge mural was in the kitchen (it’s been painted over, but not well) – and all the cabinet pulls are different – trying for whimsy, achieved annoying. Those are just cosmetic, but the lack of view, high assessments, and need for kitchen reno killed it.
of course it is worth more. First floor units suck
1B was updated, whether it was to my liking or not. the bathroom and kitchen in this one need to be totally redone.
Yes, the mirrors are awful…but pretty easy to remove and paint over I’d imagine. Still, I can’t be dissuaded from my dream of HOA-free living in Chicago. Lately I’ve been thinking the thing to do is just find a dumpy apartment with rent so cheap that I can justify doing some improvements and just stay there forever. I still can’t believe how little some of my bohemian friends pay in rent in neighborhoods that are pretty decent as long as they’re willing to put up with basement shared laundry and an outdated kitchen and bath.
Does anyone know why co-ops that include taxes in their assessments also list the taxes separately in the MLS? The listing Bob is talking about does this and I don’t understand if this just shows you what portion of your assessment is going to taxes or what. http://www.redfin.com/IL/Chicago/3750-N-Lake-Shore-Dr-60613/unit-11H/home/28639087
“Does anyone know why co-ops that include taxes in their assessments also list the taxes separately in the MLS?”
To let you know how much of the assessment is deductible.
Lakeview condo/TH closed
Sep Oct Nov 3 mos.
2004 251 169 178 598
2005 304 207 178 689
2006 251 163 115 529
2007 174 147 118 439
2008 174 98 67 339
2009 104 124 115 343
2010 77 61 55 193
Wow. Thanks G. I knew it was bad- but didn’t know it was THAT bad. At this sales rate- it could be years worth of inventory in Lakeview.
People on this site don’t seem to understand how people make money in real estate. Let me use this place as an example (although it is not a great example at all b/c of the relatively high assessments).
1. Buy for 300,000 (cash)
2. Rent for 2500/month (net gain:1236/month)
3. In 20 years, you will have made 296,640 – not taxed yet b/c of depreciation. You have almost made all of your money back already.
4. OK – in 20 years, you want to sell. Assuming a paltry 2% appreciation (which is low), the place will be worth 365,698.
5. Your total gain is 662338 (the 296,640 in rent-exp., plus the 365698 in sales price).
6. Your total expenses are 354351 (300,000 initial expense plus 54351 in recaptured depreciation and capital gains tax on the profit).
7 Your net gain is 307987 (total gain of 662338 – 354351 total expenses)
Your annual rate of return, therefore would be 5.13% (307987/20 divided by initial investment of 300k).
Although this doesn’t sound like much, it likely would be higher because:
1. appreciation will likely be more than 2% over the next 20 years
2. rents will definitely increase
Of course, these costs could/would be offset by higher taxes/assessments and realtor fees, etc.).
Again, this place isn’t the best example, but , even as a “bad” example, can show you how people can and DO make money in real estate.
clio – 1) it’s not just a return on the investment, its also a return on your labor. Being a landlord is work. It’s not like being a landlord is a passive investment. 2) you fail to include maintenance costs.
” you fail to include maintenance costs”
maintenance is part of the assessments (in a condo) – of course, over the period of 20 years you will likely have to replace some appliances but other than that, not much else will likely have to be replaced. also, even though there will be some months that the place may not be rented – the increases in rent over 20 years should cover that in my example.
“Being a landlord is work. It’s not like being a landlord is a passive investment.”
True – but being a landlord for a condo is a lot easier than being a landlord for a house. If you have a management company, it isn’t THAT bad.
That’s your analysis? I could do a better job reading chest films.
G- I don’t know who you think I am, but I don’t “read chest films” – wrong profession – sorry.
I looked at this unit last Spring. Mirrored archways were in style when this building was construed, and these are vintage, original mirrors.
Pros: lovely building, huge bedrooms, bathrooms, and closets
Cons: lousy views, across from the hospital, the butlers pantry is just a hallway to the awkwardly placed kitchen, the clothes washer is just to the right of the kitchen sink and the dryer is on the other side of the island, no dishwasher, whole kitchen needs to be redone, bathroom renos are very taste specific
Seriously overpriced.
“G- I don’t know who you think I am, but I don’t “read chest films” – wrong profession – sorry.”
clio, it ain’t my profession either – that’s the point.
The only thing to be sorry about was that “analysis.”
G-
wait – there was nothing wrong with my analysis. it was meant as a general education to people as to why investors get into real estate. everyday, people keep commenting on how real estate is a terrible investment and ask how people could make any money when appreciation is only 2-3% a year – well, there is the answer. There ARE a lot of people out there who invest in real estate and make money. The stock/bond market is not for everyone (especially if you don’t know what you are doing). Investing large amounts in savings accounts is also not the thing to do.
A much lower cost basis would make this ‘investment’ significantly more appealing.
But you’re right, investing large amounts in savings accounts is not the thing to do. ZIRP has created the disincentive to saving, and all the incentive to speculate and drive up asset prices. The war on savers is unfortunate. I’ve got family members in the rentier class who live on interest from savings and it’s paltry these days. My healthy & hearty beer drinking Wisconsinites in their 60’s and 70’s still have another decade or two to live and cutting into their principal is disconcerting to them.
“#clio on December 4th, 2010 at 9:42 am
G-
wait – there was nothing wrong with my analysis. it was meant as a general education to people as to why investors get into real estate. everyday, people keep commenting on how real estate is a terrible investment and ask how people could make any money when appreciation is only 2-3% a year – well, there is the answer. There ARE a lot of people out there who invest in real estate and make money. The stock/bond market is not for everyone (especially if you don’t know what you are doing). Investing large amounts in savings accounts is also not the thing to do.”
Love the apartment, and you can easily remove the mirrors. This is a really great building.
But, given what other vintage high rises in the area are selling for, I would say $280K would be tops. This apartment needs a lot of work, and, like other vintage buildings,has very high HOA fees.
I can install a good herringbone parquet floor in a comparable space for about $30K, so I won’t give $100K extra for it.
“1. appreciation will likely be more than 2% over the next 20 years”
We have covered this countless times. Why do you believe it will be over 2%? Chicago has averaged 1% to 3% through the last 70 years (before the anomaly of the last 10 years.) For 6 years in the 1980s, the Chicagoland area saw NO appreciation (that was the worst market before the current falling one.)
Doesn’t everyone understand that the last 10 years will not be repeated in our lifetimes? That it was the mother of all bubbles?
“True – but being a landlord for a condo is a lot easier than being a landlord for a house. If you have a management company, it isn’t THAT bad.”
You have to pay the management company.
And what happens when the tenants don’t pay rent and you have to evict them? What about the tenant who “cleans” those nice wood floors with regular floor cleaner so they have to be replaced? What about the tenant who puts a hot frying pan on those nice granite/marble/travertine counters and ruins them? What about the tenant who puts double the amount of laundry in the washing machine and floods the hallway?
These are true stories I have heard in just the last year. I could go on and on.
I predict at least 2% depreciation per year for the next 10 years.
Sabrina,
I understand what you are saying, but you have to realize (and admit) that many people in the history of Chicago/US/world have made a SIGNIFICANT amount of money in real estate (and not just in the past decade). Real estate is ABSOLUTELY a viable investment option (and not necessarily a Real estate is cyclical – unfortunately we are coming off “false highs” but real estate will keep appreciating – and, true we are not going to have the type of appreciation we had in the past 10 years, but that doesn’t matter – you STILL can make more money in real estate than many other investment options out there.
“I predict at least 2% depreciation per year for the next 10 years.”
This goes against what everyone else out there “in the know” are saying. Also, it goes against all logic – it is totally ridiculous. The economy IS improving, people DO want to move up, people will ALWAYS want to buy – that will NEVER EVER change.
Come on – don’t fool yourself. People on this site are also the same. No matter how “down” people are about real estate on this site, they ALL want to buy. If I recall, HD didn’t you just recently buy something? Even Bob who sings the praises of renting is actively scouring the MLS for a good buy. People’s desire to buy will NEVER change. This, in itself should convince you that real estate, especially in desireable areas as a whole, will NEVER EVER go down for the long run.
Sabrina,
Many of the folks on your site are experienced professionals in all different facets of the RE market who have made and lost plenty of money and even they have wildly differing views of how this market will play out in the next 20 years. I think far too many people who came nowhere near predicting the current crash (or at least were not smart enough to profit from it) are now exhibiting a fairly lame piece of schadenfreude and ‘come lately wisdom’. I happen, as an investor and economist, to think that we may not be at or even close to the bottom especially in certain structurally weak areas but having fallen as hard as we have, an average 2% appreciation rate over the next 20 years would be nothing unusual at all. It would not even get us back to peak pricing. If we said for example that the market has fallen on average 35% from the peak (call peak pricing base 100) then from our current 65 price, 2% compounded has us pricing below peak pricing 20 years later. You’re making some huge assumptions about the economy, interest rates and inflation and I don’t see how that qualifies as something ‘everyone should see’.
‘This was the mother of all bubbles’ – Well maybe in RE but in the grand scheme of economics, whilst it was vast in scale and effect, it is really only similar to the Dotcom bubble to name but one historic equivalent. Markets correct, they always have and always will. I am not arguing that pricing necessarily will increase more than 2% per annum over 20 years but I think it shows a lack of understanding of market clearing principles and a bit of intellectual arrogance to not only assume it won’t but to decry the stupidity of anyone who doesn’t ‘understand’.
Neo, read any book about 1929 and replace the phrase ‘stock market’ with the phrase ‘real estate’ and you will immediately appreciae the uncanny resemblence between then and now. The Fed in 2008 was abe to stop bank runs and the proverbial liquidity trap that 1929 -1933 suffered by offering trillions to anyone and everyone the world over as we just learned, but, the malinvestment which you term structural, lasted for many years beyond the initial stock market crash than as in now. I witnessed much of the bad investment and I saw plenty of borrowers in bad loans and I knew this would end poorly. I’ve been consistently preaching the same thing since I first posted here a few years ago.
This was the mother of all bubbles and not just real estate but subprime debt, credit card debt, stocks, student loan, pensions, government local and state debt……they all share in common debt and the housingblew first….meanwhile he rest of the world including canada, china and australia continued to party like its 2008. Just wait until those bubbles burst and there will be eve more pain to be felt.
“will NEVER EVER go down for the long run”
First stage of denial: Real estate will never go down. (whoops!)
Second stage of denial: “it will never go down for the long run.”
What’s the “long run”? Prices have been going down for 3 years in Chicago now. We are not yet at the bottom. Is the long run 20 years? I don’t think prices will go down for 20 years- but who knows? Japan has seen prices fall for 19 years. Don’t people need somewhere to live in Japan too?
“an average 2% appreciation rate over the next 20 years would be nothing unusual at all.”
I never said this was unusual. In fact, I said Chicago has averaged 1% to 3% a year for the last 70 years (before the boom years.) That is normal. Clio argued that appreciation would be much more than 2% in the coming years so that would make a real estate investment even better than it looks on paper. On what historical basis can you make that argument? That the Chicago economy is somehow different this time?
After we finally bottom out, real estate prices will average 1% to 3% in Chicago- what they have averaged for the last numerous decades. Unless, of course, we get some sort of hyperinflation – and that will open up more wounds than anyone would ever want to deal with.
The real estate collapse was a collapse of the credit bubble. The credit is not coming back. In fact, it could tighten further once Congress finally gets rid of Fannie/Freddie. Even the head of FHA has said that the amount of loans they’re backing is unsustainable. What happens when the 3.5% downpayment goes away or is significantly curtailed?
In order to stabilize the market, we need to bring back the 20% downpayment requirement. Homeowners will once again have skin in the game and therefore will be less likely to walk away when times are tough.
Even in 2007, mortgage debt increased by $1.1 trillion. And this was after the peak of the bubble. This credit expansion is not coming back.
“After we finally bottom out, real estate prices will average 1% to 3% in Chicago-”
Even at 1-3%, you are doing pretty well. Remember, real estate is not a “typical” investment – the 1-3% annual appreciation is really icing on the cake.
If it is a primary residence, you have to figure in the rent you are saving and add it to this amount (to calculate your return).
If it is an investment property, this 1-3% is added to the rent you already get (to calculate your return). Even with a mortgage, most investments properties “break even”, so this 1-3 % is actually MUCH higher – because you are getting this appreciation on money you have not invested (ie your mortgage amount).
You guys may not believe me, but I am telling you that there are a LOT of landlords/owners that ARE continuing to make money in real estate. Just do the numbers and you will see that it is possible (even with 1-3% appreciation – which, again, is icing on the cake).
“The credit is not coming back. In fact, it could tighten further once Congress finally gets rid of Fannie/Freddie.”
OK – I know that this must be a joke – are….you….kidding….me? This is how people/banks make money – believe me, the credit WILL and IS coming back. Right now people/banks are licking their wounds, but as soon as they find the right way to package/present a plan, credit will be flowing. Remember, these people/institutions are not acting for global/national or even personal responsibility. It is all about the money – and credit is where they make the most.
http://canadabubble.com/bubble-watch/1713-home-sales-still-falling-in-vancouver-and-calgary.html
Home sales still falling in Vancouver and Calgary
December 2, 2010 Garry Marr business.financialpost.com
The housing market continues to look bleak in two of Canada’s most expensive cities.
Statistics released from the Calgary Real Estate Board Wednesday show sales of single family homes were down 19% in November from a year ago. Condominium sales were off 38% from a year ago.
Prices are also falling. The average sale price of a single family home in Calgary in November was $455,460, a 2% jump from October but a 2% drop from a year ago. Condominium prices are down 3% from a year ago to an average of $287,793.
______________________________________________________
Sound familiar?
http://bubblemeter.blogspot.com/2010/03/australias-housing-bubble.html
Compare Australia to the US in the first chart
http://www.crackshackormansion.com/part2.html
and of course the infamous ‘Crack Shack or Mansion II’
“We aim to discover what a million dollars will buy you in Vancouver, Canada, and whether your mansion be distinguishable from a crack shack.”
Ever notice HD the vast majority of the most bubbilicous RE areas are typically blue-state/liberal type areas?
I suspect its because the foreign, clueless & wealthy buyers know they could never actually integrate into society into red-state metros like Cincinnati, Ohio.
Diversity is an asset? haha yeah
“Statistics released from the Calgary Real Estate Board Wednesday show sales of single family homes were down 19% in November from a year ago. Condominium sales were off 38% from a year ago.”
WRONG….WRONG…. WRONG – in so many ways:
1. Canada is NOT the U.S.
2. Just because number of sales are down, doesn’t mean that prices are plummeting. This could be secondary to many many reasons:
a. people are not putting their house on the market
b. people are not buying in this economy
these 2 factors do NOT mean that the intrinsic VALUE of the real estate is falling.
3. OK – your next quote was that the avg prices are lower. That still doesn’t give you a great picture on all properties. If people are buying all the cheaper properties/foreclosures, that will bring down the average. Just look at the “average” prices of sales that the tribune publishes. 1.3million average for Kenilworth — obviously you cannot and should not assume that most houses in kenilworth are around this price – they are not. Look it up. This data results in many minsconceptions as you can see on this thread and on this site.
“1. Canada is NOT the U.S.”
So one country can never be compared to another. LMAO.
If anything HD’s link shows that Chicago isn’t as bad off as diversity-laden metropolitan areas such as Vancouver, LA, SF, etc.
“So one country can never be compared to another. LMAO.”
not accurately
“not accurately”
The principles of economics actually transcend international boundaries, clio.
Bob – obviously but you are talking about two fundamentally different countries with different goals, priorities, expenses, infrastructure, and economic bases. You really cannot accurately compare the two.
We were in Vanxouver Canada in summer 2007 when times were still rolling along prior to the credit issues surfacing. It was a beautiful city and the condos on the water had amazing views. I highly recommend it as a summer vacation option. Stanley park, gaslight district, the island, many great restaurants. In addition the short drive up to the mountains make it a great destination. Book your trip!
Being curious about the real estate market I picked up some fliers. It was shocking what they were getting for tiny tiny condos. Even compared to Gold Coast pricing. If I recall correctly some of the new places were trying to sell at 700 per square foot and above.
Remember that the Olympics were coming and that the Vancouver economy was on fire. That is why I somewhat agree with Clio that all markets are different. Check out the Dallas economy. We we down there.over thanksgiving and i read many articles on how the economy and re market are both doing well and are still quite healthy there TODAY.
you’re hilarious neo!
I was completely taken-in by your post until I read the bit where you say “I happen, as an investor and economist, to think . . . (blah blah blah)”, and then I knew you were parodying Moses come down from Mt Sinai:
“. . . but in the grand scheme of economics, whilst [the RE bust] was vast in scale and effect, it is really only similar to the Dotcom bubble to name but one historic equivalent.”
Great stuff, really, but don’t tease us with your offer of “but one historic equivalent” when someone of your stature (as an “investor and economist“) could easily cite so many more.
[byam, do you think the present crisis looks more like the Rich Man’s Panic of 1903 than, say, the panics of 1873 — or 1891, when more banks failed than in any other year since the start of the national banking system in ’64?]
Its reassuring (and funny) to be told “Markets correct, they always have and always will,” and that any thought to the contrary “shows a lack of understanding of market clearing principles and a bit of intellectual arrogance.”
You’re absolutely right, and especially right to rebut know-nothings (like Sabrina, of all people!) for exhibiting “intellectual arrogance” when “making some huge assumptions about the economy, interest rates and inflation….”
Bully for you!
Certainly there’s no “lack of understanding” or “exhibiting a fairly lame piece of schadenfreude and ‘come lately wisdom’ ” in the lecture you’ve given us.
On behalf of all CCers I want to thank you for having illuminated these formerly intractable questions in such an inimitably satirical way.
I’d heap more praise upon your post but I want to leave space for others.
wojo, I agree- neo’s post was appropriate and accurate. Nobody knows exactly what is going to happen – but the chances are that real estate is going to continue to go up (as it has done for the past 200 years). Sure, it won’t be ridiculous like in the 2000s, but it will steadily go up. People should’t be scared about buying. Heck, even the biggest doubters on CC are looking to buy – what does that tell you? Actions speak louder than words!!!
You’ve got to be out of your mind if you buy property such as this one for investment purposes. You need to make at least 10% profit and make your time worth it by buying at a very reasonable price, which this isn’t due to the high assessments. Rentals also require money for painting, repairs, and general upgrading. As for mirrors, if they are glued on, then take out your plaster patching materials, as the glue and wall damage can be quite extensive.
Vancouver is a great city. You can ski/snowboard just outside of city limits at Cyprus Mountain. Freshest sushi on the continent. Clothing optional beaches. etc.
But the economic jolt of hosting an Olympics will always be followed by a withdrawal headache. Of course real-estate will spike and fall before an event like the Olympics. Athens’ economics is also in the crapper. I saw one Newspaper photo of a gypsy hanging her laundry in the desolate former Olympic outdoor-square. Beijing seems to be doing alright, but who knows.
I’m very relieved that Chicago did not get the Olympics. We really dodged a bullet.
“Certainly there’s no “lack of understanding” or “exhibiting a fairly lame piece of schadenfreude and ‘come lately wisdom’ ” in the lecture you’ve given us.”
Nope, nothing to see there, wojo.
I think we should at least get through the correction before anyone starts talking about real estate always going up.
I find it very interesting that we are now at 2002 values per CS but with 70% more mortgage debt outstanding, and yet even some investors and economists are calling for “normal” appreciation going forward.
City of Chicago November closed SFH/TH/Condos, median price & short sale/foreclosure sale % (avail since 2008):
1994 1,155 $109,500
1995 1,300 $117,500
1996 1,199 $125,000
1997 1,363 $125,500
1998 1,660 $142,995
1999 1,743 $155,000
2000 1,743 $175,000
2001 1,659 $185,000
2002 1,900 $209,900
2003 2,210 $230,950
2004 2,692 $255,650
2005 2,613 $274,900
2006 2,232 $282,542
2007 1,859 $289,900
2008 1,093 $222,500 16%
2009 1,905 $215,000 29%
2010 1,135 $180,000 38%
“I find it very interesting that we are now at 2002 values per CS but with 70% more mortgage debt outstanding, and yet even some investors and economists are calling for “normal” appreciation going forward”
G, I don’t know about you, but I speak what I know and see. I know that I sound like a broken record, but if you have a desireable piece of real estate in a desireable area, you are fine – prices ARE NOT at 2002 levels for these people. Why can’t you understand that?!! I understand all of your numbers – but those are averages across many areas/property types. My house has not gone down in value at all. This year alone I have had two people offering WELL over what I paid for it in 2004. My farm sold this month for 20% over what I paid for it in 2008. I briefly put my in-town on the market (20% under what I paid for it in 2008) and got a near asking price (5% under asking) within 1 week. Of course, I got scared and rejected the offer and took the place off of the market. These are just three examples. I really am trying hard to understand this – but my experience has been TOTALLY different. The only thing I agree with you about is that sales volume are much lower and the time to sell is much longer – but, to all the sellers with “good properties” out there – hold firm to your price (unless you NEED to sell).
Bob, I’d take a diverse city over a white-bread backwater any day. Last time I checked, Chicago was considered diverse.
“These are just three examples. I really am trying hard to understand this – but my experience has been TOTALLY different. The only thing I agree with you about is that sales volume are much lower and the time to sell is much longer – but, to all the sellers with “good properties” out there – hold firm to your price (unless you NEED to sell).”
This could explain why we have LP and Lakeview mansion houses sitting on the market for years and years without selling. They don’t NEED to sell so they just sit there. It’s like they think the market will suddenly come to them- when they are priced way over the market.
Clio, your properties are apparently the only ones in all of the city of Chicago that are holding their values (those and Crilly Court- which are also doing well in resale.) What about the seller in the Palmolive who lost over a million dollars? He bought in 2004-2005.
“OK – I know that this must be a joke – are….you….kidding….me? This is how people/banks make money – believe me, the credit WILL and IS coming back. Right now people/banks are licking their wounds, but as soon as they find the right way to package/present a plan, credit will be flowing. Remember, these people/institutions are not acting for global/national or even personal responsibility. It is all about the money – and credit is where they make the most.”
No, I’m not kidding. The credit will not be coming back. It already isn’t. Take away Freddie/Fannie and FHA and what banks would even give mortgages? Only those taking a 20% to 30% downpayment (or maybe more.) There’s too much risk.
That’s the whole point of a credit bubble and collapse. The easy money doesn’t come back for a long, long time – despite the Fed and the world’s governments trying to pump money into the system.
“Bob, I’d take a diverse city over a white-bread backwater any day. Last time I checked, Chicago was considered diverse.”
I will repeat my criticism that the bubble largely occurred in metropolitan areas that are solidly “blue state”.
“Clio, your properties are apparently the only ones in all of the city of Chicago that are holding their values (those and Crilly Court- which are also doing well in resale.) What about the seller in the Palmolive who lost over a million dollars? He bought in 2004-2005.”
Sabrina,
what’s really interesting about rich people is that their behavior is unlike the rest of us – in good AND bad times. When I see someone living in an expensive house/condo sell for a huge loss (as you describe above), it is usually one of three things:
1. the person is so rich that 1 million (or whatever the amount) is not going to make a big difference in their lives – think Dimon’s mansion, etc. – this type of thing happens in good AND bad markets.
2. the person really isn’t rich at all and was a poser and got caught and needs to sell
3. estate sale of poorer people (without enought money in the estate to cover the estate taxes) or people who don’t care to get top dollar because it really wasn’t “their” money in the first place.
Aside from these three reasons, rich people won’t sell at such a loss – hence the mansions lingering/languishing on the market. The rich know that the market WILL come back in a couple of years and keeping the house on the market (even if empty) is cheaper than huge losses. Sabrina, it REALLY is quite simple to understand these rich people and the way they behave. On this point, you HAVE to believe me.
“I will repeat my criticism that the bubble largely occurred in metropolitan areas that are solidly “blue state”.”
Really? I didn’t realize that Arizona and Florida were so solidly blue.
““I will repeat my criticism that the bubble largely occurred in metropolitan areas that are solidly “blue state”.”
Really? I didn’t realize that Arizona and Florida were so solidly blue.”
And Nevada. And Atlanta and Charlotte. Bob’s criticism seems to be that the CS index tracks major metros and major metros *are* more dem than the non-major metro parts of the country.
Also, everyone please note that clio’s “2% appreciation” was actually 99 bips of annual appreciation. And his IRR calculation was way off, too. Unless you live in a world of simple interest.
“And what happens when the tenants don’t pay rent and you have to evict them? What about the tenant who “cleans” those nice wood floors with regular floor cleaner so they have to be replaced? What about the tenant who puts a hot frying pan on those nice granite/marble/travertine counters and ruins them? What about the tenant who puts double the amount of laundry in the washing machine and floods the hallway? These are true stories I have heard in just the last year. I could go on and on.”
A friend whose mom owns a 20 unit multifamily building in the Bronx told me yesterday that they had a fire in one of the units. Coincidentally, his sister, her husband and baby lived in the unit below. Luckily no one in the building was hurt.
The tenant who had the fire is a habitual drunk. He had a friend staying with him who was also a drunk. It was the friend who set the fire. That guy is in the hospital. At first they thought he was in for smoke inhalation, however it turns out he is actually in the psychiatric wing. Apparently he has been messed up emotionally for awhile and they think the fire was a suicide attempt.
My friend’s mom has to totally gut reno the drunk’s apartment and her daughter’s apartment.