Chicago Tribune: Realtor Optimism Grows as Housing Sales Pick Up
How important is the housing story? Important enough that the Chicago Tribune put it on the front page of the Sunday newspaper.
From the Tribune:
“I’m so thankful,” said Mark Zipperer, a Re/Max Edge agent in Chicago, as he ticked off his busy schedule of appointments last week. “It’s like after a drought, it’s raining. Not only did I have a lot of people sitting in my car [last weekend] but one of my oldest listings sold.”
In the past few weeks, agents say an undeniable scent of sales is in the air, and data released Thursday gave credibility to their talk.
March sales of previously owned single-family homes and condominiums in Illinois posted their second consecutive month-over-month gain, and for the first time since June, the statewide median price for a home rose from the prior month.
Realty agents are taking pains to not get too giddy. After all, that 38 percent one-month gain in sales in Cook County translated to 2,409 properties sold. In March 2008, 3,432 homes sold in Cook County.
“We’re starting up from a very low base,” said Pat Callan, a Wheaton real estate agent and president of the Illinois Association of Realtors. “We’re starting to baby step off of that and it’s good. It gives me confidence we’re heading in the right direction.”
First time homebuyers appear to be fueling the recent surge in sales, as 53% of March sales nationally were from first time homebuyers (however, I haven’t seen any data on how many buyers in the Chicagoland area were first time buyers). Record low interest rates combined with the $8,000 tax credit are pushing some buyers off the sidelines.
An $8,000 tax break made the decision easier for Naperville renters Chad and Michelle Gargrave. After saving for five years, the couple began looking for their first home in early March, shortly after the tax credit was announced. They zeroed in on a 2,400-square-foot Woodridge house that went on the market a few weeks before at $337,500.
After negotiating, the seller accepted their $320,000 offer and they closed on the purchase Thursday, having locked in a 4.75 percent interest rate on a 30-year mortgage. Chad, a telecom industry lawyer, and Michelle, a 4th-grade teacher, had reservations about taking such a big step, but friends and family pushed them forward.
“Everyone we talked to was like, yeah, this is the time,” Chad said. “Housing prices are low, mortgage rates are low and with the tax credit, it was almost too good to pass up.”
Hinsdale renter Alan Reck, 24, said his father’s advice was similar, and he began shopping for a one-bedroom condo in Lakeview or Lincoln Park. With a maximum budget of $250,000, he’s found “there’s just tons to look at.”
With the market stirring, agents are telling serious sellers to offer their homes at prices lower than they would have sold for at least two years ago. Advice for buyers? “I’m telling them the seller doesn’t have to be bleeding on the floor for them to get a good deal,” said Todd Szwajkowski, an agent at Keller Williams Realty.
Home sales in the Chicago area start to show more signs of life [Chicago Tribune, Mary Ellen Podmolik, Apr 26, 2009]
Realtor optimism growing? When did it ever shrink? As far as I can tell it has always been a great time to buy according to them…
John
I don’t know who is more desperate.
The used-home salespeople and the record low sales they herald as a turnaround by ignoring seasonality?
Or, the PTB at the Trib who are so transparently desperate for ad revenue that they are back to being shills regardless of the facts?
So predictable.
G- I say its the newspapers that are desperate for revenue and will print anything. Realtors are no different than car salesmen- they will always say what needs to be said to get the sale.
I find it hilarious a Sam Zell publication is pitching bad investment decisions against all data showing the contrary. So emblematic of their owner. Maybe Sam Zell’s ego can turn around the RE market. lol
Pay no attention to the Trib – it’s simply gasping for air before it dies and fade away into obscurity. The Trib stopped being an objective journalistic news organization years ago and it’s downright propaganda this past election was the final nail in the coffin. It doesn’t surprise me at all that the trib would put this fluff article on the front page and call it news.
HURRY UP AND BUY BEFORE YOU’RE RPICED OUT OF THE MARKET!!!
Pay a lot of attention to this article. It is exactly what I said last week and March numbers are nothing. May & June #’s will not only be higher month over month, they will also we higher than 2008 numbers. This is a big step forward.
Most have realized that prices are inline with rental rates (at least the properties that are moving) and at 4.5% a 30 year fixed looks much more attrative than rental rates that will certainly rise in the next 10 years.
I personally like the article. People need something positive and the economy will come back. We all need to live somewhere. The quote from the last realtor in the article is especially true.
“I find it hilarious a Sam Zell publication is pitching bad investment decisions against all data showing the contrary. So emblematic of their owner. Maybe Sam Zell’s ego can turn around the RE market. lol”
What data are you talking about Bob? Magic 8-ball said what?
“Agree with Wicker….there are MANY 20 somethings purchasing their first homes in the $250-300k range and think nothing about it. At that age, esp in Chicago, there are an abundance of owners who rent out spare rooms in the $600-900 range or half of their total housing expense.
I know many of my places are in large part financed by parents who reward their graduating offspring with enough $$$ to get a head start into adulthood and that first house is usually the way they do it.
I think we are underestimating the economic savvy of recent college grads who have just witnessed a financial meltdown and now have learned a valuable lesson. That and of course, the plentiful supply of $1.00 PBR cans to keep them weekend drunk and happy…nearly no worries for that crowd.”
Westloop (from the other thread):
There’s no doubt it’s the bank of Mommy and Daddy that are funding the 20-something purchases. After all, what 24 year old has even $10,000 saved (let alone $25,000 saved- if they’re putting down 10%)? None that I know.
And what is their income? Maybe $40,000 (or if they’re an engineer right out of school- $50,000 to $60,000.)
How are they affording the $250,000 on that salary? It is STILL 4 times the $60,000 income- way beyond the “affordablility” indicators. And they’re not renting out spare bedrooms in a 1-bedroom.
They need to be buying a $150,000 1-bedroom. Max.
Housing prices still aren’t cheap enough compared to salaries. The Fed can pump up demand artifically all it wants with low interest rates. Eventually (by next year) those rates will rise. And then what?
“Most have realized that prices are inline with rental rates ”
I have yet to see this in Lincoln Park. The market is flooded with cookie-cutter 2bed/2bath units and the typical asking price is 550K (non-garden unit with parking and no major renovations needed).
Let’s use some very optimistic assumptions to calculate the cost of owning this place.
Mortgage: 417,000 at 4.5% with 30 yr. amort. Clearly below market rate. Assumes the seller would come down to 521,250 so the buyer could get a conforming loan at a below market rate.
Taxes: 6,000/yr
Assessments: 200/mo.
Insurance: 600/yr.
Mortgage PMT – $2,112 /mo
Taxes: 6,000/12 = 500
Assessments: 200
Insurance: 50
Toal: 2,862
While this doesn’t account for tax benefits, I doubt this is in line with rents for a 2bed/2bath unit in LP.
MJ – $550,000? Really? See below…
2619 N. Seminary #2 – $474.5k (cookie cutter 2bd/2ba) – hitting market next week
on market now:
2712 N. Wayne #2 – $449k (cookie cutter 2bd/2ba)
2623 N. Sheffield #2S – $419k (cookie cutter 2bd/2ba)
2735 N. Kenmore #2S – $424.5k (cookie cutter 2bd/2ba)
850 W. Diversey #2 (not cookie cutter but cookie cutter enough 2bd+den/2ba) – $399k
844 W. Diversey #3E – 1600 sqft cookie cutterish 2bd/2ba) – $434.5k
No Sabrina, you got it all wrong. The mythical recent college grad making $70k – $100k a year flush with parental cash will save the languishing $250k+ high end luxury 1br market. These elusive high paid grads work hard during the day at their plush corporate job in a Class A high rise downtown, and, at night, they spend spend spend at clubs, fancy restaurants and boutiques. And they still have money for the mortgage every month! Members of this demo are not rare or even unusual – they’re everywhere – it’s just that you don’t see them because they’re wealthy they hang out at places you don’t. They’re special and elite, and if these people would just get over their ‘fear’ of buying then everything will get back to the way it used to be.
also, stevie said rents are in line on the units that are selling.
MJ – I totally agree that most $550k 2 bed, 2 bath are overpriced. Where I don’t agree is that $550k is the average price of a 2bed, 2 bath cookie cutter unit. The actual price on these units are clsoer to $435k.
So at $435k, the monthly housing expense is under $1,800. Could I rent out a 2 bed, 2bath with parking for $1,800 per month? The answer will tell you if you should be a renter or an owner.
Honestly, are you guys all this lost?
MG – I should have been more clear. Yes, there are a lot of cheap 2bed/2bath units, but they are ususally not very well located (on Diversey, on Hastad, 20 ft. off of Lincoln, etc.). The area of LP I have been focusing on is bound by North Ave to the south and Fullerton to the North. Sedgwick to the east and racine to the west. Yes, I know LP is larger than this (aparently it goes all the way to Target on Elston), but this is the area I was referring to.
A $435k unit with a $348k mortgage at 5% is $1,850 a month so lop off $400 bucks from MJ’s assessment.
“Honestly, are you guys all this lost?”
Renters don’t pay assessments, taxes or insurance. So it’s blatant misrepresentation to say that the monthly housing cost is only $1,800 for a $435k 2/2. Nice try.
“The Trib stopped being an objective journalistic news organization years ago”
Yeah, before your grandparents were born, HD. Col. McCormick was the originator (or at least the prime perpetator) of yellow journalism. The Trib has *never* been known for objective journalism.
Last election cycle you could have swapped the Trib for Time and I wouldn’t have noticed the difference. I’m sorry for expecting some level of journalistic integrity from the Trib, I guess that’s my naivety.
“anon (tfo) on April 27th, 2009 at 8:17 am
“The Trib stopped being an objective journalistic news organization years ago”
Yeah, before your grandparents were born, HD. Col. McCormick was the originator (or at least the prime perpetator) of yellow journalism. The Trib has *never* been known for objective journalism.”
“Eventually (by next year) those rates will rise.”
Actually if this is the big D, or even a U shaped bottom, don’t look for interest rates to rise anytime soon. And don’t worry about them crashing the RE market. The RE market is already in crash mode.
The difference between the early 80s deep recession and today’s is huge and a lot like a pregnancy: the early 80s recession was planned for. This one wasn’t. Ponzi economics off of inflated asset values are long gone, only knife catchers to pick up the slack on the way down.
One thing I found chilling about the article was all of the apparent peer pressure to own for our 24-year old. Rates are at 4.75% and you can get 8k cash back. This logic is akin to gambling at the casino to earn comps.
“I’m sorry for expecting some level of journalistic integrity from the Trib”
The Trib spent most of the 30s calling Roosevelt a communist, so it’s apparently about long-term balance in Tribune Tower.
“Renters don’t pay assessments, taxes or insurance. So it’s blatant misrepresentation to say that the monthly housing cost is only $1,800 for a $435k 2/2. Nice try.”
I did it at 4.5% and HD for the last time you do not include princilap in a rent vs own comp. Honestly, that is like subtracting your 401K contribution from your salary and trying to make a job choice.
Stevo:
Did you see the closing price for 410 Webster? Any rationalization?
Wow old man those must have been hella times living during 1930’s. What was it like?
“#anon (tfo) on April 27th, 2009 at 8:26 am
“I’m sorry for expecting some level of journalistic integrity from the Trib”
The Trib spent most of the 30s calling Roosevelt a communist, so it’s apparently about long-term balance in Tribune Tower.”
“I did it at 4.5% and HD for the last time you do not include princilap in a rent vs own comp. Honestly, that is like subtracting your 401K contribution from your salary and trying to make a job choice.”
Not this argument again; I’ve got work to do today. See y’all later
purchase price $435k, 20% down at 4.5% (taxes – $4,500 and assessments $100)
Int – $1,305
Taxes – $375
Assess – $100
Total HOSUING EXP = $1,780
There is definitely some pick up in purchases. Most are first time homebuyers although they aren’t the 22-23 year just out of college types. However, I am seeing a few parents looking to buy places for the young’n as an investment.
I think some of you put too much stock in the supposed median income to housing prices statistics. Not saying it isn’t relevant, but I don’t think it is all that accurate either. There are plenty of households making $150k+ in this city. I don’t know why people on this board seem to think they are some rarity.
The only reason realtors are “so busy” these days is because 75% of them went back to their old profession of being a receptionist/waitress/bartender. So the few that are still left are actually busy.
Stevo,
Where can I get taxes that low? I thought taxes in Cook County were ~1.3-1.4% of purchase price, which for 435k would be $5700-6100. Am I missing something?
Also what about homeowners insurance? Presumably this would be required for the mortgage holder. Also what about estimated capital expenditures to replace things like HVAC when the break?
As always never the deep dive Stevo, just the back of the envelope all is well in Mayberry calculations coming from you.
Sonies – The top 5% of realtors make well over $300k per year and some even make over $1 million.
We all go to work to make money. Might as well go to where you can actually make it…
Typical real estate taxes are 1% – 1.25%.
Thanks…
What’s that saying steve? That 10% of people in sales make 90% of the money? Something like that…
I’m sure the top 5% of copier salesmen make 300k too. The other 95% are scumbag idiots though.
sonies:
In most sales field, the top guys ALWAYS are making money. In real estate is it probably 10% of the people, doing 90% of the business. On the mortgage side, as Steve noted, the top 5% of mortgage brokers never had a significant slow down in business. Unfortunately, because the barriers to entry in real estate are so low, when times are good it attracts a lot of people into the field as it becomes relatively easy to make a decent living. However, when the overall business slows down, only the top guys still continue to do well.
The washout in real estate was much needed and those of us that are left couldn’t be happier.
“I think some of you put too much stock in the supposed median income to housing prices statistics.”
Yeah, it’s of limited value b/c the “median” household in Chicago (city only) rents (i.e., over 50% renters). So median income does not properly reflect median likely buyer.
But then I’ve posted that here many times before.
“There are plenty of households making $150k+ in this city. I don’t know why people on this board seem to think they are some rarity.”
According to the link below there are actually very few households in Chicago earning 150k+ as of 2007. It seems rare indeed. Are you arguing with the validity of this data?
http://www.city-data.com/city/Chicago-Illinois.html
The data is probably valid, but the issue is that the data takes too broad of a cross section of all of Chicagoland relative to who actually buys houses within certain neighborhoods in the city.
For example, the data also says that the median detached home price in ’07 was $322k. Do you really believe that you can buy a single family house in a neighborhood that most upwardly mobile professionals would consider – LP, Bucktown, A’ville, Lakeview, hell even Rogers park for $322k? However, if you include shit holes like Austin, Far Far Southside, it brings down the numbers just like it would bring down the income stat.
The townhome median is higher because most townhomes are in higher cost areas which demonstrates the point above that the overall data is too broad to be really meaningful.
Most major cities will show out of whack median incomes to housing prices because the overall income data includes all people, whether or not they are actually capable of buying a home.
What would be more meaningful to me would be the average or median income of current home owners relative to housing prices because that would truly show how out of whack or inline housing prices are.
Just to clarify, you need a smaller subsection of data to be more meaningful. I would like to see the breakdown of income of home owners to housing prices in Lincoln Park, not all of metro Chicago.
“Are you arguing with the validity of this data?”
I’d argue with the legibility of the data.
The left-hand scale is “Number of households per $1000 section”, thus for the “$150k-$200k” section, it seems to be saying that there are x (which looks like ~625 (1/4 of 2500)) times 50 households in that income range. Then the over $200k section goes to “max” which is undefined.
Since the counting relies on households per $1000 section, it matters a great deal if “max” = $1mm or $100m, as at $1mm, it’s x times 800, and at $100mm it’s x times 99,800–which seems a little high to me, givne that the $200k+ bar is the same height as the $150-200 bar, indicating about 625 households/$1000 section, or a range starting at around 500,000 and going up to 20% of the total US population.
This is why charts are so easy to manipulate, especially when they’re made so small.
Most people who can afford to buy in Chicago, will not be able to get the $8K tax credit (or at least most of it). If you can afford to own in Chicago, you probably make over $75K or $150K for a couple. Looks to me like congress is trying keep the bubble going by helping people who can’t afford to buy, buy more than they can afford.
agree. that chart blows.
Oh, and on comparing median income to median house price, not that New York City’s median income is within a few percent of Chicago’s median. Even the median household income for Manhattan alone (easy to find, as it is New York County) in 2007 was “only” $63,704, while the median value* of o/o housing units was $1,000,001 *in 2000*, before the bubble.
But only 20% of Manhattan’s 738,644 households owned their home, so “median” isn’t very useful.
*however defined
From the website Bob pointed to:
Averages for the 2004 tax year for zip code 60614, filed in 2005:
Average Adjusted Gross Income (AGI) in 2004: $133,271 (Individual Income Tax Returns)
Here: $133,271
State: $54,625
“I would like to see the breakdown of income of home owners to housing prices in Lincoln Park”
The LP homeowner is a very small subsection of all of Chicago. I’ve argued in the past and continue to do so that the bubble inflated all of Chicago real estate. You really do have working class neighborhoods trying to command a similar PPSF as Lincoln Park or downtown.
Yes there are households that make 150k+ in the city, and LP & River North/Gold Coast probably have among the highest proportion of them, but these few don’t justify the ridiculous prices of real estate all over this city.
From looking at incomes in neighborhoods such as Andersonville, Rogers Park, Bucktown, Lakeview there is no way they support home ownership at current valuations. Even the top two quartiles of income which should approximate the median homebuyer don’t jive when you look at incomes.
The only thing I can chalk this up to is the ponzi economics of the bubble. The morons at the margin really did do a number on valuations with the banks money. Its not surprising given we see it all the time on this site.
“Most people who can afford to buy in Chicago, will not be able to get the $8K tax credit (or at least most of it). If you can afford to own in Chicago, you probably make over $75K or $150K for a couple. Looks to me like congress is trying keep the bubble going by helping people who can’t afford to buy, buy more than they can afford.”
Not totally true.. I mean the tax credit only counts for FIRST time buyers so I mean if a couple makes $125k as a household they should easily be able to afford a $250-375k place. Singles on the other hand might have more affordability troubles.
Runner:
Right, which means that $150k households are not all that rare in certain neighborhoods. I would bet that number would be even higher if you look at the actual homeowners considering the $133k takes into account all the renters and just out of college folks as well.
Bob:
Real estate is local. Very local. If I want to buy in LP, I could careless what the valuations are in other neighborhoods. The LP market may be small relative to the overall population, but LP IS THE MARKET and that is all that matters. You cannot use all markets to value a specific market.
I agree that those on the margins did screw everyone over. However, I don’t think it was as bad here as in other places. I have said many times over, the housing issues are driven by just four markets – CA, NV, FL, and AZ which were wrought with out right fraud and speculation. Chicago had issues too as did all markets, but nothing near those four markets above. There were plenty of overpriced properties in certain edge neighborhoods, but I think most major hoods with solid infrastructure, amenities, and overall location will be ok.
I just don’t think you are going to see this massive crash where you are going to pick up a sizable 2/2 with all the bells & whistles in LP for $250k that some of you seem to be waiting on. If we do get to that point, it won’t matter anyway because most of us will probably be homeless by then anyway.
I know the incomes and prices purchased for a couple of my neighbors. Just a small sample but very relevant.
House $1 million and income $285k
House $1 million and income $400k
house $1.4 million and incoem $650k
LG is absolutely right. Tax credits might be suitable incentives for the post-college crowd buying 1 BRs, or for families in “shit holes” (as Edumaketed put it), but they do little for the folks looking to buy nice 2/2s or 3/3s in prime neighborhoods.
The counterpoint is that $150k times 4 is $600k. Frankly though, I don’t know how people swing that, but it doesn’t seem like a very wise decision to me. If I’m at $150k, I think the absolute highest I go is $520k or so.
Frankly, I think once you go down to $130k, I think $450k is as high as you go then. To each their own, but hopefully everyone has learned their lesson. So as far as nice 2/2s or 3/3s in prime neighborhoods go, there’s a very small section of the market that will benefit from the full tax credit. And it’s phased out to zero at $170k.
LG is dead on.
This tax credit is pretty much a worthless piece of crap.
It only encourages those that shouldn’t buy to do so and does nothing to motivate the people that maybe should actually buy.
> After all, what 24 year old has even $10,000 saved (let alone $25,000 saved- if they’re putting down 10%)? None that I know.
I do/did.
“Yes there are households that make 150k+ in the city, and LP & River North/Gold Coast probably have among the highest proportion of them, but these few don’t justify the ridiculous prices of real estate all over this city.”
I don’t think anyone is suggesting that it does. Nor would your typical $150k+ household be looking to buy a house in those working class neighborhoods.
But you frequently contend that there is a lack of potential buyers for expensive places in “prime” areas. Maybe yes, maybe no. I think probably insufficient to absorb *all* the $500k+ units, but then there’s a lot of variation in the desireability of the $500k+ units, and the better ones will probably be okay (there are also way too many $1.5mm+ houses, but that’s another story).
But I think almost everyone here would agree that there is a dearth of potential buyers of “ordinary” $500,000 homes in, say, Englewood or Cragin or Archer Heights or wherever, without access to “creative” financing.
when prices are discussed compared to incomes. are the incomes usually referred to pretax, or after tax…ie takehome?
Having financed 100’s of condos over the past couple of years, hardly any of my client’s bought more than 3x’s income. Usually, we see the stretched debt ratios at the lower end of the income ladder. Higher income households have more disposable income even at higher debt ratios than lower income households.
If you have a debt ratio of 50%, but make $300k that means you still have $12,500 pretax disposable income to play around with. You are hardly broke. If you have a 50% debt ratio at $50k, you only have $2083 disposable pretax. Big difference.
What is appropriate depends upon your current income. Higher incomes can usually afford to spend a little more and not be as stretched.
“House $1 million and income $285k”
Big downpayment, dependable near term income growth or both?
If neither, that fits the definition of “house poor” to me.
I could not have said it better edumakated!
“I just don’t think you are going to see this massive crash where you are going to pick up a sizable 2/2 with all the bells & whistles in LP for $250k that some of you seem to be waiting on. ”
No just a really nice house in a non-prime neighborhood for 450k 😀
And yeah I am hopeful it will come true. I can always El it to LP to drink and p_ss.
The only thing that has slowed the $500k+ condo purchases down imho is the larger down payment requirements. High incomes don’t necessarily reflect personal liquidity. Most of the buyers of these places do not have the cash for the down payments and are reluctant to put it up in uncertain economic times even if they do have it.
“If you have a debt ratio of 50%, but make $300k that means you still have $12,500 pretax disposable income to play around with. You are hardly broke. If you have a 50% debt ratio at $50k, you only have $2083 disposable pretax. Big difference.”
But at $300k, 30%+ of your gross income (assuming OI, not CG & Div) goes to taxes, and at 50%, it’s about 6.5%. Making it $5000 v $1700. Still a big difference, but not nearly the same.
“Most major cities will show out of whack median incomes to housing prices because the overall income data includes all people, whether or not they are actually capable of buying a home.”
Edumakated,
Why would “most major cities” be “out of whack” in 2009, but not in 1999, or 1989, or 1979. Not a rhetorical question, what is your explanation if not over-valuation?
Also, why would the sales price/median income ratio for “most major cities” be “out of whack” all in the SAME direction??
Although the ratio may be of limited value as a single data-point (for the reasons you describe), it becomes much more useful when comparing the same city over different time periods. What would (besides overvaluation due to massive groupthink and easy credit) cause this ratio to, let’s say, double over a 10 year period for a given city?
Also, when the sales price/income ratio AND the sales price/rent ratio both increase drastically (virtually in every major city) over a period of 10 years or so, does this not tell us something about valuation? What is the alternative explanation?
John
The tax credit is not a piece of crap… how many FIRST TIME homebuyers should be or will be buying 500k+ properties anyway? Not many I’d imagine.. and think outside the 3 primo neighborhoods in the city. That’s like comparing all real estate in NYC by just using Manhattan as a sample.
“Why would “most major cities” be “out of whack” in 2009, but not in 1999, or 1989, or 1979. ”
Depends how you define “major” and how you define “city”. The ratio has been out of whack in most of the coastal cities and Chicago for a long time, largely because of the high percentage of renters skewing the “median” homeowner up the wealth scale and high rate of poverty skewing the median income down. As I noted above, the median income in Manhattan in 2007 was under $64k, but the median home value in *2000* was $1mm, so the 1999 ratio was really, really bad. SF would look similar, Boston, Chicago, LA, DC, etc not as bad but not “sustainable” either.
It’s a different question when you look at metro-area medians, which may be what Ed was thinking about.
I agree that the ‘median’ income vs the ‘median’ housing cost is not an accurate indicator of who is actually buying and what exactly they are paying for their homes. Just in the short time I have been living here and buying property, it is plain to see that there are MANY households that make over $150k easily.
Of course we cannot expect them to go out and purchase a broke down shack in South Chicago for $150k! Nor can you say that those households (or singles) in the $60k range will buy a property in the $500k range. Extremes on both ends do not make the majority of buyers.
Rather than quoting the median housing price in Chicago from a random source, to those of you who are actually in the business (brokers, agents, attorneys) what would you consider the median price for a 2/2 is currently and what the median income is for those who are currently purchasing that 2/2?
Perhaps I should not, but whenever one of my rehabs sells, I find out as much as I can about the person who does make that purchase…their income, what they do and even how long they intend on staying in the home. I may be an exception to the rule or maybe it is because I attract a certain niche buyer in the market, but those who purchase my properties have the sole purpose of buying to live in for an extended time rather than to buy as an investment to make a large profit at a later date.
While I enjoy reading here, it seems as though the focus is not always on RE, but rather on speculation about who can or cannot afford to buy and what they SHOULD be spending or even IF they have saved up enough cash to make a decent (and now required) downpayment.
Sabrina, I don’t understand why you quoted two different posts of mine to make a point? And as far as buying a $150k house in Chicago…can you please tell me where such ‘livable’ homes are located? Try as I may, whenever the prices for what I was seeking went below the $175-200k mark, the amount of cash and time I would have to invest in them would not have allowed me to make any profit or to even break even on my purchase/material/time cost in either reselling or renting.
I stand by what I said earlier, many recent college grads do have the privilege of having a good deal of help from their parents to purchase their first home. If they are looking at $300k started homes on a $60-70k salary, it almost goes without saying that they do have a boost that allows them to do so…and I was not speaking of 1/1s rather I was referring to 2/2 that would allow growth or the possibility of roomates to share the expenses.
“The tax credit is not a piece of crap… ”
The tax credit IS A PIECE OF CRAP. In a declining RE market it, along with teaser mortgage rates of under 5%, are akin to getting comped by the casino for blowing a bunch of money at the craps table. Yeah you won a free hotel room and buffet but had to drop $800 at the table.
Its disgusting how our congress continues to try to entice people into poor financial decisions in a vain effort to stabilize the housing market.
“along with teaser mortgage rates of under 5%”
They aren’t teaser rates; they are 30-year fixed rates, up to $417k.
“They aren’t teaser rates”
They are teaser in that a few years time when they try to sell the place rates will likely be higher, putting further downward pressure on their resale value.
Slightly off topic question.
While there are rates in the conforming area that are attractive, has there been any movement on Jumbos.
Or better yet, why hasn’t LP/LV/etc. had its conforming loan limit bumped up? I thought that they were going to be reevaluating areas and allowing for increase conforming loan limits on sub-areas.
I have a general question – does it make any sense for the Mortgage + Taxes + Assessments to be cheaper than the rental equivalent? Let’s assume 20% down payment.
We are seeing improvement in jumbo thirty year rates. You can get a 30 year now in the mid to upper 5’s. Down payments are the problem. Need 25-30% down.
No movement on the conforming limit yet. Congress doesn’t understand the issue, but there continues to be a lot of lobbying. It should be raised across the board nationally to $729k and just call it a day.
I can’t speak for other neighborhoods, but the purchases I see in my neighborhood (LP) don’t fit any statistical chart.
-unmarried couples, especially gay, buying expensive houses/apartments (so the official household income of say $175k is much greater when you factor in the other person’s income which the charts don’t – no joint filing tax returns),
-family money (my neighbor probably makes around $250k, but his wife has so much trust fund money that’s probably off the books, they could easily afford their $2m place, plus the costly renovations.
-corporate transfers, where the firm picks up some of the tab for a new place, or compensates them for their losses if they transfer/sell. 410 Webster??
-overseas money/foreign buyers, and god only knows where that really comes from
-home offices (a neighbor down the street writes of MAJOR federal tax deductions by working out of his house more than 50% of the week). Makes that $1m mortgage actually affordable.
-buyers from the east coast who think $2m for a real house is a give-away.
Not what you think when you see the hordes of 20/30 somethings drinking along Lincoln and Belden, but it’s not as cut and dry as you think, lot of grey (literally) area buyers here… and just one reason why RE prices remain high at least in LP.
“Or better yet, why hasn’t LP/LV/etc. had its conforming loan limit bumped up? I thought that they were going to be reevaluating areas and allowing for increase conforming loan limits on sub-areas.”
AFAIK the areas they re-evaluate are at the metro area level. Chicagoland does not qualify as a higher cost county overall. I agree it IS a bit unfair Jackson, Wyoming has a higher conforming limit than Lincoln Park or Gold Coast, but then again you shouldn’t expect efficiency from government.
” It should be raised across the board nationally to $729k and just call it a day.”
Nope, it should remain at 417k. If the increased jumbo rate of 100bps or so causes someone financial ruin who is overextended on an 800k property I’ve got my popcorn ready.
No reason our government should be in the business of subsidizing the lifestyle of the wealthy. The FHFA and Fannie/Freddie were created to create housing affordability for middle and working class Americans. People who own property above the conforming loan limits are not middle or working class.
“No movement on the conforming limit yet. Congress doesn’t understand the issue, but there continues to be a lot of lobbying. It should be raised across the board nationally to $729k and just call it a day.”
I think this illustrates what a mess we have on our hands. We’re lobbying politicians to change the interest rates that mortgage companies charge. I thought we were supposed to have a free market.
“The tax credit is not a piece of crap… how many FIRST TIME homebuyers should be or will be buying 500k+ properties anyway? Not many I’d imagine.. ”
Eh, not so fast. I could have become a first time homebuyer back in 2006. Many of my friends and colleagues did just that. I rented instead, and now I am becoming a first time homebuyer in 2009.
Some first time homebuyers are 24. Some are 30.
I’m shocked there are still gays buying in Lincoln Park. don’t they know that neighborhood is OVER.
Bob,
I understand the argument for a lower limit. What I don’t understand is the rationale for why some areas are at 729 when others are at 417.
over as in long term real estate still being a good retainer of wealth?
I actually don’t understand the rationale for keeping it lower. I don’t understand the rationale for lowering it further. I also don’t understand the rationale for raising it.
To me, these are all decisions based on things like default rates, risk profiles, RE market analysis, foreclosure costs, etc. All things that I don’t have a the tip of my fingertips.
And frankly, neither does Joe Congressman. So I’m not really sure why we’re letting him decide. Why not have Congress figure out the prices of Cubs tickets, a large pizza for Malnati’s, a 2500 minute cell phone plan, and a gallon of milk while we’re at it?
“So I’m not really sure why we’re letting him decide. Why not have Congress figure out the prices of Cubs tickets, a large pizza for Malnati’s, a 2500 minute cell phone plan, and a gallon of milk while we’re at it?”
When the Federal govt. provides an implicit guarantee against default and then acquires substantially all of the equity interest in the Cubs, Malnati’s, at least one mobile phone provider, they can.
And they **DO** determine the price of a gallon of milk.
“When the Federal govt. provides an implicit guarantee against default and then acquires substantially all of the equity interest in the Cubs, Malnati’s, at least one mobile phone provider, they can.”
But see, that’s the problem…
“And they **DO** determine the price of a gallon of milk.”
Er, um, how so? I agree that some actions they take influence it, but AFAIK the govt doesn’t actually set the price.
“Many of my friends and colleagues did just that. I rented instead, and now I am becoming a first time homebuyer in 2009. ”
So did I, now what’s your point? Did you pay over $500k for your first home? I doubt you did, so you’re probably going to be taking advantage of the 8k the government is giving you, just like I am.
“So did I, now what’s your point? Did you pay over $500k for your first home? I doubt you did, so you’re probably going to be taking advantage of the 8k the government is giving you, just like I am.”
Not to turn this into a “look at me!” discussion, but since you asked, I actually did, and no, I will not be taking advantage of the government’s program.
““And they **DO** determine the price of a gallon of milk.”
Er, um, how so? I agree that some actions they take influence it, but AFAIK the govt doesn’t actually set the price.”
They set a minimum price for milk purchased from farmers. It’s really *more* government control, altho on an entirely different scale, than FNMA/FHLMC–who act as indirect competitors in a market. There is no prohibition on another lender charging more or less than, or holding their loans or selling them to someone other than, Fannie/Freddie, as there is with the milk price controls.
What are they supposed to do right now? Just put FNMA/FHLMC into run-off?
“They set a minimum price for milk purchased from farmers.”
Like I said, that’s not setting the price of milk purchased from the store, though I agree it’s too much intervention.
“What are they supposed to do right now? Just put FNMA/FHLMC into run-off?”
Don’t know what you mean by that.
Howabout the government get out of a homeownership as a value judgement altogether?
Why not eliminate the mortgage interest deduction and eliminate Fannie and Freddie and the FHA? (They can keep the VA given military people are egregiously underpaid). Don’t they see these things, initially intended to make home ownership more affordable, only helped inflate the bubble at a cost of hundreds of billions of dollars to taxpayers?
Why is our government passing a value judgement that increased home ownership is a net benefit to society and what data are they basing it off of?
“Not to turn this into a “look at me!” discussion, but since you asked, I actually did, and no, I will not be taking advantage of the government’s program.”
Understood, but you do realize that you are probably in the large minority of first time home buyers, correct?
“Why is our government passing a value judgement that increased home ownership is a net benefit to society and what data are they basing it off of?”
You got me, Bob. In fact, there’s a lot of evidence to the contrary. For instance, home ownership is inversely correlated with employment. That is, the lower the home ownership, the lower unemployment is. The thinking is that people who aren’t tied to a mortgage have an easier time taking lower paying jobs, jobs in other cities, etc.
I’m sure RE agents, mortgage brokers, and bankers would all disagree with me, and sadly in politics it’s too often the squeaky wheel (with his millions of lobbying dollars) that gets the grease.
“Why is our government passing a value judgement that increased home ownership is a net benefit to society and what data are they basing it off of?”
You really think that it isn’t a benefit to society to have people in control of their properties as opposed to paying “the middle man (landlord)” every month? Also, homeowners typically take better care of their homes, as well as better care of their neighborhoods and what direction it is headed.
“Like I said, that’s not setting the price of milk purchased from the store, though I agree it’s too much intervention. ”
and participating in the mortgage market thru Fan/Fred is not “setting the price” either.
““What are they supposed to do right now? Just put FNMA/FHLMC into run-off?”
Don’t know what you mean by that.”
You want the Fed Govt to stop participating in the mortgage lending market. The Fed Govt owns the two largest participants. Should they simply have them stop buying any new mortgages and just manage their existing loan portfolios until they’re all paid off (i.e., run-off)? If you’re saying they shouldn’t have started, that ship done sailed over 70 years ago.
“You really think that it isn’t a benefit to society to have people in control of their properties as opposed to paying “the middle man (landlord)” every month? Also, homeowners typically take better care of their homes, as well as better care of their neighborhoods and what direction it is headed.”
That’s too simplistic. I could easily suggest that landlording is a skill, even self-landlording. And because we’ve made landlords out of so many, we’re not confining the landlording business to the best landlords out there.
And even if homeowners take better care of their homes, why is this objectively better? Do you not believe that an overinvestment in one’s home is possible? Isn’t it true that we could be taking too much care of our homes – at the expense of working longer hours at the office, inventing things, or just relaxing? There’s simply no reason to believe that more well-kept homes equals more efficiently-kept homes.
And maybe renters would be more vocal and proactive in their neighborhoods if they didn’t have the belief that they wouldn’t be in the neighborhood in a year or two. It’s because they all think they’re going to be homeowners soon that contributes to the apathy about the neighborhood – it’s not some inherent side effect of writing a rent check.
“You want the Fed Govt to stop participating in the mortgage lending market.”
Yes. Technically, FM&FM are supposed to be private entities. If FM&FM won’t lend (ie, if the market won’t bear it) BUT FOR the guarantee of govt, well, then they shouldn’t be lending. I don’t know if that will happen or not, but I can’t think of any reason to subsidize housing in this manner.
So we should leave it to the banks to collapse our entire financial system? without govt intervention all banks would have collapsed.
You do realize this right?
“Technically, FM&FM are supposed to be private entities”
But they are not, b/c they’ve been taken over. They are not operating as private entities. They are not operating with the “guarantee” of the gov’t, they are the government, as FNMA was until 1968.
“You really think that it isn’t a benefit to society to have people in control of their properties as opposed to paying “the middle man (landlord)” every month? ”
You have no more control than if you can find a landlord willing to let you customize the property. Yes I’m sure its possible and negotiable, especially if wanting to sign a long-term lease.
“Also, homeowners typically take better care of their homes, as well as better care of their neighborhoods and what direction it is headed.”
This is the old adage. And much like most old adages I doubt it is applicable to reality in every situation. I’d say non owner-occupants who are going bust are less likely to take care of their homes, especially if they realize they are going to lose money.
Non owner-occupants could care less about the neighborhood, its all a business transaction to them. For owner occupants I am unsure about your statement that they somehow tend to their neigborhoods better. I think you’re confusing correlation with causation here. Just because that may be the observed phenomena it could be the case it is that way precisely because owners are more responsible and concerned generally, because they had to meet certain hurdles to get the mortgage in the first place.
“So we should leave it to the banks to collapse our entire financial system? without govt intervention all banks would have collapsed.
You do realize this right?”
There is a middle ground, right? When this kind of thing happens in other countries, you know what happens? Nationalization. It’s what the IMF pushes for, what the US pushes for, and they all tell the banks “tough s###.”
Within a few months (usually less than that), someone else comes along and buys the bank for pennies on the dollar. Who loses? Bank investors.
What we’ve done instead is to buy bad assets for dollars on the penny in order to preserve the ownership stake of bad banks. Who loses? Everyone who isn’t a bank investor.
If you can figure out why what we did is better than what we tell everyone else to do, I’m all ears. Frankly, my suspicion is that we resisted nationalization because bank investors happen to be very tight with some important people.
jr is right and the rest of you are clearly in the wrong. You may have economic reasons for believing so (ie: long real estate), but that doesn’t change the fact that my tax dollars, as a non-owner, go towards subsidizing home ownership, keeping interest rates artificially low and keeping loans flowing to people not qualified to get them in the private market. You are all welcome, especially Stevo.
Bob: “I doubt it is applicable to reality in every situation”
If that’s your standard, no wonder you doubt almost everything. Of course no general statement is “applicable to reality in every situation” (except “we all die someday”).
“my tax dollars, as a non-owner, go towards subsidizing home ownership, keeping interest rates artificially low and keeping loans flowing to people not qualified to get them in the private market”
And they were doing so before the bubble and will continue to do so. You might be right, but you’ll never win that one.
“But they are not, b/c they’ve been taken over. They are not operating as private entities. They are not operating with the “guarantee” of the gov’t, they are the government, as FNMA was until 1968.”
Conforming loan limits were set long before September 2008. Consider your nit picked.
What about long term renters? In the 6 units in my building which I share a stairwell, the person across the hall has been there 15 years, below me – 28 years (no exaggeration!), 1st floor person about 13 or 14, I’ve been here 4 or 5, and the other two units less than 1 year. Do they not care about the neighborhood either?
jr: you wrote: “I think this illustrates what a mess we have on our hands. We’re lobbying politicians to change the interest rates that mortgage companies charge. I thought we were supposed to have a free market. ”
“We” (not me) are lobbying Congress to change it now, b/c Congress is the de facto board of directors, now. What happened in the past–for good or ill–is not really relevant to any changes going-forward.
And, besides, whatever Congress does, it is *not* setting the interest rates mortgage companies charge. They are setting the terms on which Fan/Fred are allowed to purchase loans. A nit to you, I’m sure, but a non-trivial distinction from a market policy perspective.
anon (tfo) –
Do you really think that there would not be any lobbying if FM/FM had not been taken over? From my understanding, lobbying over these limits has been going on for a long, long time – well before they were taken over.
There’s no rent control in Chicago so basically you’re living with two people who aren’t very bright. Who rents the same place for 28 years? Or do they just enjoy paying their landlord’s mortgage and then some? O.o
That’s just repeating the same line “it’s always better to own than to rent” which in their case might not even be true. What if they invested the difference between owning and renting and today they are sitting on a million dollars cold hard cash? I have no idea why they chose to live there 28 years as a rental but I’m sure they have their reasons.
“Sonies on April 27th, 2009 at 12:35 pm
There’s no rent control in Chicago so basically you’re living with two people who aren’t very bright. Who rents the same place for 28 years? Or do they just enjoy paying their landlord’s mortgage and then some? O.o”
“Do you really think that there would not be any lobbying if FM/FM had not been taken over? ”
Of course it would be, but the context is also obviously different now. They are no longer private entities.
But, at this point (and probably for some time), you just think I’m being pendantic about it.
Sonies:
“There’s no rent control in Chicago so basically you’re living with two people who aren’t very bright. Who rents the same place for 28 years?”
Lotsa people do. Why would they incur the expense and disruption of a move if (1) they like their place, (2) the LL is responsbile and doesn’t gouge them and (3) the rent is affordable?
“What if they invested the difference between owning and renting and today they are sitting on a million dollars cold hard cash?”
During the times it would have been “cheaper” to own during the past 28 years, did they deduct the difference from their investment account?
Oh, and they lost ~50% of their savings in the past 18 months, unless you assume they timed the peak perfectly. And don’t say they weren’t in equities, else they wouldn’t have accumulated $1mm in 28 years on invested “rent savings”.
Maybe our theoretical long-term tenant has a bunch of kids and laughs at the single, childless owners around him who pay for his children’s education?
The issue with the conforming limits is that they use the same flawed methodology as we discussed earlier in this thread. Raising the conforming loan limit would provide much needed support to our downtown housing market which is been hurt by lack of financing.
Our market is penalized due to the diversity of housing costs in how the stats are calculated to come up with the conforming limit. In the past, having lower conforming limits wasn’t such a big deal because there were nonconforming options either through portfolio lenders and second mortgages. Right now, there aren’t any good options which again is why the market above the conforming limit is practically dead.
EVERY major city has a higher conforming limit than Chicago.
Raising the conforming limit to $729 would almost immediately breathe life back into our market. You still need at least 10% down to go above $417k. FHA would also increase a little bit as well.
The last few years have shown us that renters generally take better care of property than a zero-down ARM “buyer” who only wants to stay in a place for a couple of years until they flip it and move on. Even worse is what happens when people are stuck in this situation due to the bad market and have a house they can neither afford to keep or sell. These “owner occupied” homes are real eyesores as they wait to become bank-owned.
Raising conforming loan limits is the LAST thing we need to do. Taxpayers do not need to subsidize artificially high housing prices. I’d much rather be able to buy a house at a price I can reasonably afford rather than being a debt slave like all the other buyers who bid up the prices using someone else’s money.
Whats funny is that Edumakated is right in that the jumbo market has suffered disproportional effects of this financial crisis, indicated by much higher default rates and interest rates.
What is funny about it is that all efforts by our government to stabilize the housing market have been aimed squarely at the conforming loans, despite that their default rates are much lower.
The schadenfrude (?) is hilarious. Edumakated if you were planning on the government to ride in on a horse and save you you were mistaken. The gubmint doesn’t do anything efficiently.
You guys should stop posting and read a book or something. Boy are some of you dumb 🙂
“Maybe our theoretical long-term tenant has a bunch of kids and laughs at the single, childless owners around him who pay for his children’s education?”
That makes no sense since you are paying not only the landlord’s mortgage (and then some) you are paying a portion of the property taxes and the assessments as well. All without getting a tax break… Landlords don’t do business for free! Face it, someone that rents the same place for 28 years is not very bright.
“Steve Heitman on April 27th, 2009 at 7:19 am
Pay a lot of attention to this article. It is exactly what I said last week and March numbers are nothing. May & June #’s will not only be higher month over month, they will also we higher than 2008 numbers. This is a big step forward.”
Yes, the SHill said that about Lincoln Park last week. Doesn’t he know that it is normal to see MTM increases in the first half of the year?
Just like ‘seasonality’ has suddenly disappeared from the UHS lexicon, another deception is brewing. This will be the one where a slowdown in the market sales decline will be heralded as a turnaround when it hasn’t turned positive.
We are left to wonder how LP sales will be higher YOY in May when contracts thru 4/26/09 are down YOY?
Lincoln Park
Q1 Contracts Signed
Attached Single Family (condo/TH)
Jan Feb Mar Q1 4/1-4/26
2005 172 155 252 579 175
2006 97 132 179 408 140
2007 90 141 166 397 159
2008 63 97 131 291 93
2009 22 49 89 160 80
Detached Single Family
Jan Feb Mar Q1 4/1-4/26
2005 17 26 28 71 17
2006 12 29 20 61 12
2007 12 20 16 48 12
2008 9 14 12 35 12
2009 8 7 9 24 9
“EVERY major city has a higher conforming limit than Chicago.”
Dallas? Houston? Philly? Atlanta? Detroit? Phoenix? Miami? All of these are not major cities?
8 of the 12 largest Metros have the $417k limit. And 27 of the top 40 overall.
Do it by the central cities, 14 of the 20 largest cities are at $417k. And 14 or so of the 2d 20, for 28 of the 40 largest cities.
Is it crazy that Providence has a higher conforming limit ($426,650) than Chicago? Yes. So, too, with all of the vacation-home counties in Colorado, Wyomaing, Idaho, coastal Carolinas. And Salt Lake City, WTH?
But absurd overgeneralizations like “EVERY major city” don’t help the point.
Bob:
That jumbo stat means absolutely nothing unless you strip out all the stated income/ninja/investment property/option arm loans.
I guarantee you that jumbo defaults are much lower than conforming loans when you control for those factors. I am talking about true jumbo financing, not alt-a specuvestor loans. Non-conforming can cover a bunch of different loan types, so it isn’t accurate to just say it all is jumbo financing defaulting at 6%.
I am talking full doc with reasonable down payment financing. Big big difference. Instead of spouting off stats, it might help if you actually knew what they represented or what is behind the numbers.
“jumbo market has suffered disproportional effects of this financial crisis, indicated by much higher … interest rates.”
Nah, the Jumbo interest rates sort of reflect the real risk; conforming loans understate risk b/c of Fan/Fred.
Anon:
I guess we disagree as to what constitutes a major city. Those are not high population density cities by in large. Major cities in my mind are Boston, LA, Chicago, New York, DC, San Fran. Center of business and industry. Dallas, Phoenix, Atlanta, Charlotte etc are sizable cities, but they are pretty suburban and have vastly cheaper cost of living than the ones above. Not on the same page in my book, but we just have to agree to disagree.
Home ownership is overrated. Lets be conspiracy theorists and say the government and creditors would like to for us to own a home because it makes us planted and slows migration in highly tenuous times. This prevents people, for example, from evacuating a town like Detroit and reduces the speed of people moving into a strong area, like most of Texas, too quickly.
Edumaketed – and you’re not necessarily wrong, and anon is not necessarily wrong either. In the end, this sort of line-drawing will have very little to do with the relevant considerations (default risk, RE market, foreclosure costs, etc.). Of that I’m sure.
“Non-conforming can cover a bunch of different loan types, so it isn’t accurate to just say it all is jumbo financing defaulting at 6%….Instead of spouting off stats, it might help if you actually knew what they represented or what is behind the numbers.”
Nope, its class envy at its finest. I see the chart in the WSJ on jumbo defaults on my L ride in the morning and I have a big, dumb smirk this segment of the market is getting decimated and DC isn’t going to help them. 😀 Haha.
Like I care if some aging bigwig boomer can’t get financing for his Wisconsin lakefront retreat? Cry him a river. LOL.
I should mention that I own a home. I am just frustrated with home ownership right now, hence the comment about home overship being overrated. If I have a child, I am sure I will change my mind.
Bob, at least you are honest…
I am. I don’t want taxpayer dollars making financing “more affordable” for the jumbo segment. I don’t care if rates are much higher than conventional financing, its not a problem that concerns me and likely never will.
“Boston, LA, Chicago, New York, DC, San Fran”
6 major cities. Good enough. But LA County is below $300k for median prices, and Orange is under $400k, so they’ll likely drop back to $417 for next year. I’d expect the same from Boston, which is only at $465,750 for 2009. So then you’re down to 3 of 6, with DC possibly not maxed out at $625.
It’s absurd to make it MSA-wide based on the highest priced county–that’s why we get SLC at $600k b/c of Park City (Summit Cty) and Staten Island and 12 counties in NJ at $625k so long as Manhattan (NY Cty) stays over $543k (i.e., until they change the rule).
They **need** to limit it to sub-areas that actually have the higher median prices–but the smallest areas they’d use is zip codes. What’s the current median sale price for all housing in 60614 or 60610? $475k and $438k, respectively, right? So, the limits would be $546k and $504k under the current rules–which isn’t *so* much more.
anon, curious where your medians are from?
I have YTD 2009 att/det single family medians as follows:
60610 = $399,500
60614 = $413,500
Howabout $417k across the board and if you live in a more expensive area and are having trouble making ends meet you pack your crap up and move to a less expensive area?
“anon, curious where your medians are from?”
From me making a poor assumption and doign something else at the same time. I came back to note my mistake, but you beat me to it.
“Howabout $417k across the board and if you live in a more expensive area ”
How about 1.15x zip-code-median *everywhere* with the $625k (or whatever) cap? To avoid subsidizing really big houses in cheaper areas?
Does anyone else find it ludicrous to suggest that the government’s answer to an economic collapse due to an enormous credit bubble is to encourage more borrowing?
The conforming limit is (more or less) based on the median home price in the county. Cook County is huge and contains lots of low income housing which drags the median down. That’s why we are a 417.
http://www.fhfa.gov/GetFile.aspx?FileID=134
“Does anyone else find it ludicrous to suggest that the government’s answer to an economic collapse due to an enormous credit bubble is to encourage more borrowing?”
Unfortunately their creditors (taxpayers) really get fucked over if they decide to default on their payments. Awesome… NOT!
It’s really not a question of if the US government will default on its debt, but when. Nationally, we are doing the equivalent of taking a credit card cash advance to make the minimum payment on another card. It can’t go on forever. The only way out of this is to massively raise taxes and massively cut government spending at the same time. Default is the only other option. Guess which one is most politically viable?
> It’s really not a question of if the US government will default on its debt, but when.
Did you forget we can print money?
You obviously not a monetarist. Some people in our government, as they look down on the economy from their ivory tower, after years of training in the most elite universities, truly believe that printing money and spending it is the only way to get out of a recession. And when that idea always and inevitably fails, the monetarists just say “oh we didn’t spend enough, our plans were not grand enough, if we could just do even more, it would work.”
“The only way out of this is to massively raise taxes and massively cut government spending at the same time. Default is the only other option. Guess which one is most politically viable?”
“when that idea always and inevitably fails”
Really?
I’m getting the feeling that we have a few teabaggers here…
I’m with anon — really? You people would rather just have a total economic collapse?
Take cuts are immediate. Incentives to buy a home (done) or create a job (not done) have an immediate impact. One time stimulus checks get saved. People are not as stupid as politicians think.
Reminder….when “Wall Street” was making money so was “Main Street.” Wall Street is not making money and neither is Main Street. We win as a team and lose as a team. Could there be greater equality? Of course, but you do not “spread the wealth” in a downturn.
My favorite conversation
Employee: “I would like to share in your profit.”
Me: “Well would you like to share in my losses right now?”
Employee: “No”
This is for Chicago or nationwide? Where did you get this stat? I’m finding numbers that indicate much lower… then again, I see a lot of people on TV that make $250K+ by working part-time from home.
“Steve Heitman on April 27th, 2009 at 8:40 am
Sonies – The top 5% of realtors make well over $300k per year and some even make over $1 million.
“
fullhouse:
What don’t you get? $300k or over 1 million?
The only way out is to inflate our way out and cut long term costs that are making our workers less competative. We are dumb and broke. GDP = C +I + GS + X – M. The C is going to be down for a long time to come because of the debt we have accumulated over the past 20 years. If we don’t replace the c we will be faces with a contracting defaltionary economy for years to come (see Japan). The government is printing money and growing to replace what the consumer can no longer offer. The hopes are this will create enough inflation to eliminate our debts in a shorter period. There is no alternative.
A $12 million agent earns $300k per year. There are lots of $12 million agents and even some $100 million agents who make well over $2 million per year.
OK, I guess you just made up the 5% stat – seems to be inflated from what I can find…
“Does anyone else find it ludicrous to suggest that the government’s answer to an economic collapse due to an enormous credit bubble is to encourage more borrowing?Does anyone else find it ludicrous to suggest that the government’s answer to an economic collapse due to an enormous credit bubble is to encourage more borrowing?”
YES! With ponzi economics, i guess that’s all they can come up with. I just made my first gold purchase last week.
I have a sick mind, so I started to wonder today if pandemic swine flu will wipe out enough homowners to reduce values or if the estates (trustees, whatever) of thousands of now-dead homowners will insist on selling the properties at 2005 prices. (Sorry, I go to a dark place sometimes when the world is in free fall. It’s my way of coping.)
Mess… World is not in free fall… Waiting list here to buy cars… America is in a free fall. People exceeded their carrying of debt ratio beyond their discounted future value. Basically, they are all tapped out and others are overextended lending to those tapped out people. America spent it’s forward value. Uh Oh! Most of the rest of the world will eventually write off the debt and move forward in a more balanced fashion. All will be good!
Have a nice day everyone… off to the beach 🙂
Btw.. the debt has already been defaulted on, now we are just watching everyone try to delay accepting it and/or push it to other places. Fun!
“A $12 million agent earns $300k per year. There are lots of $12 million agents”
And that’s the problem with the real estate industry. We don’t need $12 MM agents. They can be replaced with 4 $3MM agents making $50K each.
Case-Shiller numbers are out. Chicagoland declined to a value of 126.3, a 3.44% month over month decline. The only metropolitan areas with larger month over month declines were Las Vegas (-3.65%), Detroit (-3.82%), Phoenix (-4.46%) and Cleveland (-4.99%).
Cleveland becomes the second metropolitan area surveyed after Detroit to dip below its nominal home price values in the year 2000.
Here is a timeline of when Sherman and Mr. Peabody would have to set the WABAC machine in order to witness the current metro area prices in the CS Composite 20 Index:
Apr-96 MI-Detroit
Jun-99 OH-Cleveland
Sep-00 CA-San Francisco
Feb-01 GA-Atlanta
May-01 MN-Minneapolis
Jun-01 CO-Denver
Feb-02 AZ-Phoenix
Apr-02 TX-Dallas
Aug-02 CA-San Diego
Dec-02 NV-Las Vegas
Jan-03 IL-Chicago
Mar-03 MA-Boston
Aug-03 FL-Miami
Aug-03 Composite-20
Sep-03 CA-Los Angeles
Sep-03 Composite-10
Nov-03 FL-Tampa
Feb-04 DC-Washington
Sep-04 NY-New York
Jul-05 NC-Charlotte
Jul-05 OR-Portland
Jul-05 WA-Seattle
OH noes why did I buy a house? Teh world is endingz! Teh valuez dropped 3%!!!!! NOOOOOO! I am ruined!
Doesn’t that put you upside down on your mortgage?
He’s upside G but real estate *always* goes up in the long run! It’s a great investment!
“Doesn’t that put you upside down on your mortgage?”
That’s just mean, G.
Actually I think he put down 3.5% like he said so he’s still got 0.5% in equity remaining. Until next month’s Case-Shiller of course. Then we can call him ‘knife-catcher’.
Hey I don’t care, I got my check for 8k from the GUMMINT yesterday and my monthly nut is affordable. also I paid far less than the place apprised for so I’m not at negative equity just yet (give it a few months)! Whoopie!
“OH noes why did I buy a house? Teh world is endingz! Teh valuez dropped 3%!!!!! NOOOOOO! I am ruined!”
Sonies for your ease of writing you can bookmark this link, then each month for however many future months, you can copy and paste the above.
Don’t most brokers that post large sales numbers do it because they are representing a developer on a specific project? In this case the developer is not paying the “in-house” sales team a full 2.5% – 3.0% commission.
When the development proformas are created they budget paying out the co-op commission of 2.5% at 60% of the time. The in-house sales team is paid something less than 1% per sale, correct?
Does anyone have any specific experience?
Imagine a high-rise building with 200 units that average $400,000, that’s $80 million in sales. The developer will never hand over 3.0% of that to the selling broker(s), because that would be $2.4 million!! They can negotiate and find a 3 broker team willing to do it for $200,000.
So, when determining the net for a broker based on sales, one has to consider whether or not those sales figures were based on sales from a captive sales center at a project, or not.
“A $12 million agent earns $300k per year. There are lots of $12 million agents and even some $100 million agents who make well over $2 million per year.”
Good idea Bob!
“Cleveland becomes the second metropolitan area surveyed after Detroit to dip below its nominal home price values in the year 2000.”
Using CPI (iknow,iknow) to determine “real” prices, Chicago is almost exactly at January 2000 in real terms.
Repeat from another thread:
Here is excerpt from an interview with Roubini in Monday’s Washington post:
“I don’t believe we are going to end up in a near-depression. Six months ago I was more worried about an L-shaped near-depression. Today, after the very aggressive policy actions taken by the U.S. and other countries . . . we are, instead, in the middle of a U.”
When a guy like Roubini makes a call like that maybe some of you dreaming of the housing market coming down to your income level might not get what you are hoping for after all.
If prices aren’t going to come down to levels that people can afford then I guess we’re going to have an anemic real estate market for another decade or so. Roubini is losing his edge.
“#RunnerRunner on April 29th, 2009 at 9:05 pm
Repeat from another thread:
Here is excerpt from an interview with Roubini in Monday’s Washington post:
“I don’t believe we are going to end up in a near-depression. Six months ago I was more worried about an L-shaped near-depression. Today, after the very aggressive policy actions taken by the U.S. and other countries . . . we are, instead, in the middle of a U.”
When a guy like Roubini makes a call like that maybe some of you dreaming of the housing market coming down to your income level might not get what you are hoping for after all.
That is the dubmest statement I can imagine. If the US is really going to go through a deflationary period then income levels will come down as well. The ONLY way to get yourself into a new class of housing is to wrof harder and make more money.
You all were smoking way too much crack! The market is soft and on its way back. LP was a 5.7% inventory as of today. Oh the pain!!!
“If the US is really going to go through a deflationary period then income levels will come down as well.”
ROFLMAO!! Exactly! So many people think they will be brought into a game by falling prices when 95% of them would be the first ones without a penny left.
I understand people may think real estate is over priced, but it is comical that they think they will move to a new housing class with falling prices. Most of you rent because you HAVE BAD JOB AND DON’T MAKE ANY MONEY 🙂
Ah Steve.. say something smart and have to follow it up by being a douchebag. I’m not around much lately but at the bottom your dbag comments were missed. 🙂
One shill erects a straw man, and the main SHill destroys it.
Impressive.
Still at record low sales and contract numbers for April in LP.
The only thing “soft” is the gray matter of those who believe the price declines are complete.
Hey homedelete, how come both the east coast and west coasts have permanently higher price/income ratios than Chicagoland? Have they had “anemic housing markets” for decades, even before the bubble? You’re getting more shrill and desperate by the day, it’s really sad.
Turd the markets are anemic, especially on the higher end, because primarily lower priced homes are selling, and that’s true everywhere around the country. Your overly generalized ‘coasts’ were booming due to toxic financing. How quickly you forget that most of the subprime lenders originated in CA to help facilitate the higher price/income ratios. How’s that higher price/income ratio working out today on the ‘coasts’? It’s amazing to watch how fast the bottom is dropping out. In ’05 and ’06 it was like watching a slow moving train wreck; in ’09 the case-shiller numbers provide some real excitement.
My income hasn’t changed over the past year, yet I see things getting cheaper all the time around me.
Some of us rent, Stevo, because we can’t afford to piss money away. Once the expectations of capital appreciation on a real estate purchase are diminished or non-existent all of a sudden rental yields matter again.
Within a year’s time it is possible for me to save up a sizable downpayment on an entry property. Not wanting to bail out someone who overpaid, though, I think I’ll sit this one out and maybe buy a nicer place a few years later.
You are completely wrong HD. The coasts had higher price/income ratios long before the bubble of this decade and they will continue to into the future. Your idea of what prices people can “afford” are completely subjective and based on your own wishes, not an understanding of housing dynamics.
“Roubini is losing his edge.”
I think you are right- we should ignore the economic prognostications of one of the only people to get this whole crises right, and instead listen to an anonymous message board posting paralegal from a fourth tier law school who is praying for housing to fall so he can finally afford to buy something. HD definitely has a credibility edge here.
Claims of a return of the RE market are greatly exaggerated, as the following link shows:
http://www.city-data.com/zips/60608.html
Sales volume for the period 2003-2008 isn’t coming back at current valuations. Capitulation is happening all over the place.
But claim victory when the CS index stabilizes in the summer as it always does, and the bear will reclaim victory next winter when it continues its downward descent.
Another nail in the coffin for jumbos! Thornburg Mortgage files BK…and how is this going to help the market?
http://www.forbes.com/feeds/reuters/2009/05/01/2009-05-01T212559Z_01_N01338772_RTRIDST_0_ACCREDITED-THORNBURG-BANKRUPTCY-WRAPUP-1.html
NEW YORK (Reuters) – Two large providers of U.S. home loans during the housing boom, Accredited Home Lenders ( LEND – news – people ) Holding Corp and Thornburg Mortgage Inc ( TMAPRC – news – people ), filed for Chapter 11 bankruptcy on Friday, according to court documents.
The San Diego, California-based Accredited is owned by U.S. private equity manager Lone Star Funds, which bought the provider of subprime mortgages in 2007 for $296 million.
The lender will wind down operations, and is looking for a buyer of assets including its servicing business and properties owned through foreclosure, according to a source close to the matter.
“Extremely challenging market conditions” led to the bankruptcy of Accredited, the source said.
Accredited last year tried to revive itself after halting offering loans in August 2007 as the subprime lending market began to unravel. The company resumed making loans after its purchase by Lone Star, and its executives expressed hope that funding from securitizing mortgages into bonds would bounce back.
Accredited listed between $100 million and $500 million in liabilities and between $10 million and $50 million in assets, according to court documents.
It listed HSBC USA ( HBAPRD – news – people ) NA as its largest unsecured creditor, which it owes $90.8 million. Other large unsecured creditors include Citigroup ( C – news – people ) Global Markets Realty Corp, owed $33.1 million, Goldman Sachs ( GS – news – people ) Mortgage Co, owed $21.1 million and Morgan Stanley ( MS – news – people ) Mortgage Capital Inc with a $13.2 million unsecured claim.
Thornburg Mortgage ( TMA – news – people ) was once one of the leading providers of “jumbo” home loans, or those for more than $417,000.
It also said it plans to wind down and sell key units.
The company, which said last month it planned to file for creditor protection, had assets of $24.4 billion and debts of $24.7 billion, according to court documents.
Like Accredited, the company struggled with liquidity problems starting in the middle of 2007, when the value of the mortgages on its balance sheet began to fall which eventually led to margin calls by its creditors.
The largest of Thornburg’s unsecured debts was $1.3 billion in outstanding senior subordinated notes. Other large unsecured debts included about $3.7 billion in master repurchase agreements owed to various financial institutions including RBS Global Banking and Markets, Credit Suisse ( CS – news – people ) Securities, Citigroup and J.P. Morgan.
Thornburg also has $304 million in senior notes outstanding and $213 million in junior notes outstanding.
The company said it wants to sell its Adfitech unit, which provides outsourced services for the mortgage industry, as a going concern, and wind down the rest of its business. It said it has access to about $25 million in unrestricted cash to fund the bankruptcy.
The company has hired law firm Venable LLP as its bankruptcy counsel and investment bank Houlihan Lokey to run the Adfitech sale, according to court papers.
The Accredited case is In re: Accredited Home Lenders Holding Co, US Bankruptcy Court, District of Delaware, No. 09-11516.
The Thornburg case is In re: Thornburg Mortgage Inc, U.S. Bankruptcy Court, District of Maryland, No. 09-17787. (Additional reporting by Jonathan Stempel and Emily Chasan, writing by Tom Hals; Editing Bernard Orr)
Copyright 2009 Reuters
It was already priced into their delisted stock (market price = .02/share). Thronburg was ALSO one of the five leading originators of Option ARM loans. I wonder how those other four are doing these days…Wachovia, Countrywide, Indymac..hmm..lol?
http://news.yahoo.com/s/bw/20090420/bs_bw/apr2009bw20090416103126
The government can only stem the oncoming tsunami of foreclosures with moratoriums and other band-aid measures to make joe average investor confident and put his money in the market. Which he will then lose it when the real data reappears.
Five years from 2007 is 2012 until these people might have to start paying their catchup amount. And the default rates are astronomical on these loans.
60608? Yuk.
Look at 60622, 60614, 60657 and you see some very different stats. Like I keep saying, declining volume does not always lead to declining prices.
“Another nail in the coffin for jumbos! Thornburg Mortgage files BK”
Huh? Please explain how Thornburg BK effects the Chicago jumbo market.
“Another nail in the coffin for jumbos! Thornburg Mortgage files BK”
“Huh? Please explain how Thornburg BK effects the Chicago jumbo market.”
You don’t get it Runner, we this is worse than the great depression- it’s more like the panic of 1907. I predicted we will be at 1905 prices by the end of the summer. HD is going to be living in the Trump penthouse for 3 bars of gold!
Try:
http://www.city-data.com/zips/60611.html or
http://www.city-data.com/zips/60613.html
Sure looks catastrophic to me!
leave it up to Bob to provide evidence with a zip of an area he would never live in, and when the next property from that area comes around, discuss how he lives his life better than those folks, and how they deserve the hardships they experience.
So all the people on the sidelines waiting for a drop gonna capitulate and buy instead?
“Still at record low sales and contract numbers for April in LP.
The only thing “soft” is the gray matter of those who believe the price declines are complete.”
Sales will be flat or slightly higher for May and June. You look in the rear view mirriw and I will look at what is coming.
I have an appraisal question for you G. What do you use for comps if nothing compariable has traded int he past 3 months?
Thanks in advance…
[Removed by the Editor]
Please stay on topic. Thanks!
RunnerRunner said: “Like I keep saying, declining volume does not always lead to declining prices.”
Can you please give specific examples anywhere in the United States where this has not happened with real estate?
It goes against historical precedence. (And economics…)
Homedelete said, “Turd the markets are anemic, especially on the higher end, because primarily lower priced homes are selling, and that’s true everywhere around the country.”
Sales are picking up at the lower end- as is evidenced by the nearly 50% of March Chicago sales being distressed properties.
If you look at the daily closings in some of the “prime” near north side areas, you’ll see many more units closing under, say, $350,000 then you will over $600,000.
Some first time home buyers are jumping in because parents are still telling 25-year old children, “why are you renting? You’re throwing money away.” Additionally, the $8,000 tax credit is spurring some to buy.
Those who will have real skin in the game, and need $150,000 deposits or higher, are much, much rarer.
$105,000 to $5,900 in three years. Ain’t gonna happen in Lincoln Park but come one this is ridiculous.
http://www.redfin.com/IL/Chicago/6627-S-Laflin-St-60636/home/13932743
$155,000 in ’05 to $7,900 today:
http://www.redfin.com/IL/Chicago/1537-W-59th-St-60636/home/13939841
Northwest side:
$329,000 (10/29/2004)
listed yesterday at $119,000
Homedelete:
These are some good examples of the housing bubble (and bust) in Chicago. The $1,000 house isn’t happening just in Detroit.
“Sales will be flat or slightly higher for May and June. You look in the rear view mirriw and I will look at what is coming.”
Steve: Compared to what? The months prior? Or year over year?
“Look at 60622, 60614, 60657 and you see some very different stats. Like I keep saying, declining volume does not always lead to declining prices.”
It already has in those zips so what you “keep saying” is nonsense.
Steve Heitman on April 27th, 2009 at 7:19 am
“Pay a lot of attention to this article. It is exactly what I said last week and March numbers are nothing. May & June #’s will not only be higher month over month, they will also we higher than 2008 numbers. This is a big step forward.”
Steve Heitman on May 2nd, 2009 at 4:53 pm
“Sales will be flat or slightly higher for May and June.”
Already backpedaling, I see.
year over year Sabrina.
G – You did not answe my appraisal question. Can you share your expertise?
“year over year Sabrina.”
So, will they be “higher than 2008 numbers” and a “big step forward” as you claimed 6 days ago, or ” flat or slightly higher,” as you claimed yesterday?
Or, should we wait a few more days for further backpedaling?
Oh G. What are you going to say this winter when sales are 2X what they were last year?
How are appraisers dealing witht he new Fannie regs that went into effect on May 1st. Are you out of work 🙂
I look forward to the incease in sales since it will be the result of further price declines.
I also look forward to correcting your sure to be incorrect analysis of the market change.
I don’t know why you think it would be insulting to be a home appraiser but you are wrong again about me.
I sure hope some are reading here, though, to see what a self-described “successful” (ha ha) LP broker thinks of them.
G, the typical 2 bed condo in Lincoln Park is off less than 5% in the past 2 years. I love your continued speculation that the “big one is coming” when the rest of the country is already recovering.
Let me understand what you are saying. Is this correct? Lincoln Park has held up while others areas crashed but Lincoln Park will soon crash?
If this right, please tell us why it has held up so well and why it is waiting so long to fall off a cliff?
Indeed the entry level properties in LP & LV do seem to be “dumb money”. Anybody can save up 25k for a 10% downpayment on a 250k property, even a 24 year old. I’d be willing to bet if we had underwriting standards increased to 20% down/no second mortgages he would not be in a position to buy. Since its a 1/1 I am betting his holding horizon is not that long. And as I’ve said before the 8k tax credit is like getting comp’d at the casino with a free buffet after losing hundreds at the craps table.
Revassal you are quite incorrect about me. I posted that zip precisely because I am interested in some properties there (remember zips are large and cover many different neighborhoods) and its transaction volume fell off a cliff.
Steve the latest Case Shiller numbers show respective -2.1% and -2.2% decline in the 10 and 20 city index composites. The rest of the country is not recovering, in fact no city among the 20 showed a gain and only Dallas was about even.
“Steve the latest Case Shiller numbers show respective -2.1% and -2.2% decline in the 10 and 20 city index composites. The rest of the country is not recovering, in fact no city among the 20 showed a gain and only Dallas was about even.”
You are living 3 months in the past. Any shit head can see what happended in February. How about telling us what is happending in May of 2009.
What is happening in May? The trend is your friend, Steve! Actually, the trend isn’t *your* friend considering that you sell used homes. How much longer can you hold out before you become completely destitute?
“You are living 3 months in the past. Any shit head can see what happended in February. How about telling us what is happending in May of 2009.”
Buffett Says He Sees ‘No Signs’ of Recovery in Housing, Retail
http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=aGH_rFa9KgqY
Yeah I’m gonna trust StevO over this crazy guy who lives in a shack out in Nebraska and drives around in a town car. Poor dumb Warren, he just doesn’t get that debt = wealth…right?
You know I was thinking the other day how crazy it was that the lenders were basically giving away houses to people. Not just one but two three or four. All you had to do was sign a piece of paper and walk away with a house or two, and in some cases, get cash at the closing! They were paying you to buy a house. Of course it failed spectacularly. Who in their right mind would give somebody a piece of property worth hundreds of thousands of dollars not even ask for money down? Because all the banks did that now they’re getting their collateral back and it ain’t worth anywhere near as much as they thought it was. Just a thought.
This happens to be “just a thought” that you’ve been ranting about for 6 months (or more). Same thought phrased differently today. We get it okay…we need to find you a hobby other than this board 🙂
Reese,
I dunno about HD but I’ll tell you when I quit ranting: when the bankers are out of a job. Although what HD posted sounds ridiculous (paying somebody money to take a loan) that is exactly what they did. Such ridiculously stupid behavior should not be without consequences, right?
The rest of the economy is certainly feeling consequences, why are the bankers at Citigroup/BofA/Fifth Third/etc not suffering the consequences of their flawed business decisions?
I don’t think its fair because the financial services industry has the best lobbyists and access to our lawmakers that they alone should not bear the consequences of their business practices and everyone else should.
Here is a question for those of you who are praying for a collapse-
Our current situation is as follows:
– We largest real estate bubble in history popped about 3 years ago.
– We are past the worst of the most significant financial crises in 80 years
– We are past the panic phase, which happened to be during the most seasonally slow period for housing.
– Mortgage rates have collapses to all-time lows.
– Non-prime neighborhoods have seen prices drop 20% or so and prime neighborhoods 5% plus or minus.
– The affordability index is lower than it’s been in a decade.
– Housing inventories are slowly starting to clear.
– There is a special tax credit for first time homeowners
– The fed is doing everything in its power to inflate the economy and make banks lend
– Even the most bearish economists (Roubini) are predicting the economy will start growing again next year.
Here is my question- what else could you possibly be looking for to buy a place? I’m sorry, prime real estate in Chicago is not going to collapse and all the wishful thinking in the world isn’t going to change that.
“I don’t know why you think it would be insulting to be a home appraiser but you are wrong again about me.”
I still contend that G is a junior office worker at a realtor’s office. What else would explain his access to the MLS, hatred towards real estate brokers (who make more than him) and unusual amount of free time to spend on the internet?
U.S. Home Prices May Be Lost for a Generation
http://www.bloomberg.com/apps/news?pid=20601039&sid=aiiT.sNeq2YQ&refer=home
Not sure this bodes terrible for the condo market but it certainly looks like overpriced SFH markets are in for a big correction. Nobody is waiting in the wings to buy up baby boomers bloated homes–younger generations just don’t have the money.
“I love your continued speculation that the “big one is coming” when the rest of the country is already recovering.”
First, I never said the “big one is coming” about LP. I have said that volume will not return without continued price declines. We have seen more sales at a loss each month while volume remains at record lows. Contracts in April were still at historic lows, which was the SHill’s favorite “forward-looking” indicator until he realized he didn’t understand the data last week.
Second, where is this recovery occuring, other than the SHill’s unsupportable conclusions here?
“Let me understand what you are saying. Is this correct? Lincoln Park has held up while others areas crashed but Lincoln Park will soon crash?”
Nope. Wrong again. LP is more likely to continue declining steadily unless sales volume spikes. An unlikely volume spike would be the result of seller capitulation and result in steeper price declines.
Turd Ferguson:
“I still contend that G is a junior office worker at a realtor’s office.”
Can RE offices still afford staff?
“Can RE offices still afford staff?”
Yes, because people like you are very, very cheap.
I agree. Today’s 25-35 year olds (at least those in Chicago) who spend between $1000-$1600 on rent in the city don’t have the income to support $2,000 – $2,500 a month mortgages for 4 bed ranches in Niles or even $350k SFH’s in fringe but safer city neighborhoods, especially at a time when mommy wants to stay at home with the babies. Especially the hipsters; they have no money at all. They think it’s cool to dress like that – but that’s what you look like when you have no money to spend on clothes and you are poor. If hipsters had any money they too would buy $550 gym shoes and all the other trapping of affluence.
The vast majority of people I know in my peer group (whatever demographic you want to describe that as) spend between $1000 to $1600 a month on rent. Nobody wants to leverage up and buy some boomer’s home for a mortgage payment of $2,400 bucks or more (taxes, insurance , P&I, mainten, etc).
Those I know who bought during the boom also happen to be the same people who lost their jobs or have had a reduction in hours in the last 12 months (four separate households!). Their housing payments were in the $1,800 – $2,400 and higher range. After witnessing what happened to the so called owners in my social circle none of us renters even talk about buying anymore. Of course you cannot extrapolate my little social circle on greater market but I’m a fairly representative subset of middle class 25-35 year olds so I can only imagine there are plenty others out there like me. And even if there is only a minority of people like me, there are far more boomers looking to sell than gen x/y’s looking to buy. Sonies may have been convinced to buy with 3.5% down and an $8,000 tax credit but every household he knows makes well north of $100k; but that obviously hasn’t convinced the 85% or 90% of the population that makes less.
“#Bob on May 4th, 2009 at 5:17 am
U.S. Home Prices May Be Lost for a Generation
http://www.bloomberg.com/apps/news?pid=20601039&sid=aiiT.sNeq2YQ&refer=home
Not sure this bodes terrible for the condo market but it certainly looks like overpriced SFH markets are in for a big correction. Nobody is waiting in the wings to buy up baby boomers bloated homes–younger generations just don’t have the money.”
I wasn’t “convinced” hd, I wanted to buy. Renting sucks and I couldn’t stand our place in SW lakeview anymore so we looked for a really really long time and finally found a place that had everything we wanted. We negotiated to a price that works for our budget and I can tell you we are VERY happy to be where we are at!
And whether or not we make money on the place, I could really care less, as its a great place to LIVE. I plan to sock away lots of cash during my time there and if I have some equity when I need to sell in 5-10 years, GREAT! If not, no big deal. And we don’t plan on squeezing out any kids in at least 5-10 years anyway so I won’t “need” to sell.
The stock market is surprisingly sustaining this rally. So did you buy at the bottom? Have fun trying to time the housing market bottom 😛
Sonies I’m not trying to time the bottom I just want to buy a home in a neighborhood with similiarly minded and incomed people like me without having to overleverage myself with an unsustainable housing payment. The neighborhoods I want to live in have made some progress but we have a long way to go. I refuse to buy out an overleveraged FB or finance some spendthrift boomer’s retirement. I can’t afford that and neither can most of us 25-35 year olds burdened with student loans, stagnating wages at the time wanting to start a family.
“that’s what you look like when you have no money to spend on clothes and you are poor. If hipsters had any money they too would buy $550 gym shoes and all the other trapping of affluence.”
This may be the dumbest thing I’ve seen on here. Dumber than the dumbest insults from Stevo and Turd/DB/T2. You can’t even properly identify the group you are ragging on. There are plenty of hipsters with money, plenty w/o, and evidently you wouldn’t recognize the “trappings of affluence” that they would value.
Indeed, many of them exhibit the greatest trapping of affluence–“working” as a hobby rather than out of need.
Are you realy comparing stock market timing to RE market timing?
BTW, we haven’t seen the bottom of either, yet.
“Are you realy comparing stock market timing to RE market timing?”
Yes, because its nearly impossible to time any market. And yes we haven’t seen the bottom of either, yet.
Hey check out this site, its what i’ve been looking for for a long time. Home Price/Income for a ton of cities all over the US. As you can see, Chicago isn’t anywhere near as bad as the coasts. But we still have a ways to go.
http://www.zoyzoy.com/realestate/ofheo.php?msa=16974
If you want to see a longer term trend, drag the bar on the bottom around 2000 to back to 1975ish.
Anon(tfo) defending hipsters? Hahahahaha. Too easy of a target now.
“I refuse to buy out an overleveraged FB or finance some spendthrift boomer’s retirement.”
This is why foreclosures are, IMO, the way to go. In fact even Bob’s parents, who live in a smaller midwest city that was never hit by the bubble, sunk a bunch of money into their home (granite, redone bathroom, etc) and now are trying to sell it at a markup from cost basis.
I love ma and pa but I don’t see their house being worth 340k. (260k is more like it). But trying to tell someone who doesn’t really need to sell that their prime asset is worth 25% less than their tax assessor tells them is a difficult pitch.
That’s an interesting chart Sonies, thanks for the link. The long term trend was that housing closely followed per capita income; that diverged around 2001 and now the gap is closing but still has a way to go.
Look at some of the cities in CA & FL, and look at some of the crappy cities, like Gary, or Alabama towns. Amazing. Its like with all that “free money” everyone was buying up vacation homes!
“Anon(tfo) defending hipsters? Hahahahaha. Too easy of a target now.”
No, defending people who make different lifestyles choices than you do, especially when you exhibit your ignorance about “them”. Your bitterness is showing, HD.
Sonies: “Hey check out this site, its what i’ve been looking for for a long time. Home Price/Income for a ton of cities all over the US.”
The Price:Income map is hiding– http://www.zoyzoy.com/realestate/ofheomap.php –and still relies on a index of prices and incomes, rather than actual prices and incomes. It totally diminishes the point that certain East and West coast metros have persistent, historicly higher price-to-income ratios than Chicago. The current Chicago metro P:I (imo) isn’t sustainable thru an extended period of higher interest rates–if conforming loans are 8%+ for several consecutive years, we’ll get back to ~3:1 price:income.
I posted in another thread a link to price to income–Coastal Cali was at about 4:1 in the early 80s, when interest rates were mid-teens. NYC and Boston were similarly high, notwithstanding the higher cost of borrowing. LA County isn’t going to see 3:1 P:I unless they *really* run out of water. They’ll bottom at about 4:1, as they do every time.
I’m still waiting for you bears to address my post on the current environment, or do you all simply ignore factual arguments?
“The long term trend was that housing closely followed per capita income”
Comparing home prices to income without taking interest rates into account is meaningless, but I’m sure you knew that, right HD?
Rates are the lowest they have been in like 40 years, so where are we headed? Not much further downward in the primo hoods would be my best guess. Outskirts and the burbs will fall further due to high unemployment and forclosures (and IO’s and Neg Amo Option Arms. so they could afford a mccrapbox in Plainfield)
The city is becoming more popular to live in now that more douchebags want to be “green”. Low utility costs, and no dependance on cars are very appealing to empty nesters as well as the younger crowd. I wouldn’t expect this crowd to be artificially supporting prices in “pioneer” neighborhoods, I’d expect them to live in the primo areas.
“We largest real estate bubble in history popped about 3 years ago.”
Its still in the process of popping, actually.
“We are past the worst of the most significant financial crises in 80 years”
You are making the assumption that you can predict the future and that we’re on the way out of this crisis. I don’t see that to be the case quite yet, GDP numbers support my view. GDP contracted more in the 1Q than it did in 4Q08.
“Mortgage rates have collapses to all-time lows.”
True, but only due to government intervention. They don’t have the money to buy down interest rates forever, at some point fairly soon they will stop and rates will rise, putting further downward pressure on pricing.
“Housing inventories are slowly starting to clear.”
The data on this is far too tenuous for my tastes. I don’t see Chicago’s inventory improving at any significant level.
“There is a special tax credit for first time homeowners”
Again getting comp’d at the casino with a free buffett for blowing $500 at the craps table. This is also temporary. All this will do is distribute the surplus between buyers and sellers and keep pricing propped up slightly higher.
“The fed is doing everything in its power to inflate the economy and make banks lend”
They are. But they aren’t superman. This problem may be bigger than world governments can effectively address. Trillions in global wealth have been wiped out. And on Roubini he also says that growth will be so anemic last year that it will still feel like a recession.
Anyhow this is my rebuttal and I put my money where my mouth is, I’m long in SEF and SKF for a combined bear bet of -1.2x financials. We’ll see..
anon(tfo), I’m not bitter, it’s just hip to make fun of hipsters; wait, maybe that makes me a hipster! Oh no, the irony!
Have you all been drinking the NYC Kool-Aid?
http://diehipster.com/
For a laff..
be careful with those etf’s bob. sef is short the financials which are down on the year but it is too. skf down bigger.
LMAO! Substitute “Brooklyn” for “Wicker Park” and boom..
“The city is becoming more popular to live in now that more douchebags want to be “green”. Low utility costs, and no dependance on cars are very appealing to empty nesters as well as the younger crowd. I wouldn’t expect this crowd to be artificially supporting prices in “pioneer” neighborhoods, I’d expect them to live in the primo areas.”
there are loads of these people in Logan Square, Uptown, Pilsen, and other neighborhoods that have good transit infrastructure.
and not needing to rely on a car isn’t just “green,” it’s smart – who wants to be stuck in Sat afternoon traffic if they don’t have to be?
“Oh no, the irony!”
*That* is what makes you a hipster, man. It’s all about the irony.
“there are loads of these people in Logan Square, Uptown, Pilsen, and other neighborhoods that have good transit infrastructure. ”
I wouldn’t consider Logan, Uptown, or Pilsen to be “urban pioneer” neighborhoods though.
Still, I have yet to meet a ‘hipster’ or at least anyone that dresses like a hipster, who has any money. Parents money maybe but none of their own. I’ve met some real dbags who make a decent buck but never one that looked like a hipster.
HD,
But if you have a worthwhile career outside the arts and make money you’re just buying into the machine, man. Didn’t you know that taking what is a supposed voluntary step into poverty/lower class puts you on a spiritual pedestal above the yuppies, man? (Even though most hipsters didn’t voluntarily go this route they just aren’t destined to work in skilled labor).
LOL @ hipsters. I wish they would all stay in Seattle. Failing that I’m glad they at least stay mostly west of the river. When I see a bunch of hipsters out and about I immediately check to see if I am wearing a collared shirt. If so I immediately pop my collar and give them a sideways peace sign with both hands.
One of my latest hobbies I’ve picked up is to laugh at hipsters in public.
“I have yet to meet a ‘hipster’ or at least anyone that dresses like a hipster, who has any money”
“most hipsters didn’t voluntarily go this route they just aren’t destined to work in skilled labor”
“One of my latest hobbies I’ve picked up is to laugh at hipsters in public”
Whatever, guys. I don’t get the animus, but if it makes you feel better, have fun.
maybe a hipster stole their girlfriend.
“maybe a hipster stole their girlfriend.”
The bigger problem would have been that the three of them were sharing one girlfriend.
Not surprising sentiment coming from anon(tfo). Anon(tfo) doesn’t care about society, as evidenced by his opinions as to how those should be dealt with who brought society to near economic meltdown (bankers).
I’m similarly not surprised to see him rushing to the defense of the idle class (the comical idle class, actually).
In short he is as bad as they are as he supports economic misallocations and the exitence of such an idle class, regardless of the consequences borne on the productive class of society. Anon loves deadweight losses to society.
In short anon(tfo) hipsters are dangerous because of their hive-mind collectivism of their paradigm and and political persuasions influence their voting (liberal). So they live in the urban core in their 20s, take the blue line to work then flee for the burbs once the kids come. They never equate the failure of the city for family living with their liberal voting habits. That would require independent thought and analysis. Shocking, isnt it?
Most people who vote for the machine in Chicago have a vested economic interest in it, so they aren’t as contemptible. Hipsters are just stupid beyond belief, they are the most contemptible of all.
one of the dumber things I’ve read in a while. you could substitute red or brown line and be describing (nastily) a sizeable chunk of the Big 10 grads who live in LP, etc in their twenties – they certainly aren’t “liberals,” though.
skeptic,
If they don’t overwhelmingly vote for the machine they aren’t contributing to the problems. Of the big 10 grads who vote its probably a good mix of affiliation most of which cancel out. The hipsters not so much: its all slanted one way. And we know what way that is.
are there no hipster big ten grads? even from NU?
“I wouldn’t consider Logan, Uptown, or Pilsen to be “urban pioneer” neighborhoods though.”
I guess it’s all relative. In general I’d say “urban pioneer” neighborhoods are any neighborhoods where non-Chicagoans are moving in, thinking that other similarly-inclined folk will follow, in large part replacing the people currently there (or at the very least, “improving” what is already there).
That’s about as value-neutral as I can make it, as it’s hard for me to describe without getting back to that central aspect of displacing people.
What I have yet to see in my life (but I’d like to) is a community where largely the current residents improve it on their own. Not easy in a City where the political climate discourages that (can’t have people thinking too hard, then they start asking questions…), but the neighborhoods I mentioned have that happening to various degrees.
this is also why, even though some aspects of gentrification truly annoy me, you gotta have the new blood – because newcomers don’t buy into the whole “it’s like this because it’s always been like this” attitude so many Chicagoans have, they often come from more functional towns and see no reason to put up with the bullshit so in vogue here – see the 32nd ward for a picture-perfect example. professionals took a serious look at Matlak and probably concluded their 10-year-old kids would be more competent.
“If they don’t overwhelmingly vote for the machine they aren’t contributing to the problems. Of the big 10 grads who vote its probably a good mix of affiliation most of which cancel out. The hipsters not so much: its all slanted one way. And we know what way that is.”
that’s because most of them don’t vote, period. ever gone door to door canvassing in Lincoln Park? jeesh, most of them don’t even know who the hell their alderman is, and I wish I was joking.
and on the flip side of the coin, a lot of hipsters are likely that apathetic as well, but look at the 35th – that was astounding to see Dick Mell’s puppet get bounced in 03.
““it’s like this because it’s always been like this” attitude so many Chicagoans have”
So many *people* have. It ain’t unique to Chicago. And it ain’t unique to the working class/poor either; the wealthier just get a fancy name for it.
“Anon(tfo) doesn’t care about society”
No, Bob, I do care about society. I just recognize that society belongs to everyone, not just people who agree with (and look like) me. Not that I like it, but bitter and hateful ain’t no way to go thru life.
As a transplant myself, I have noticed the prevalent belief of many Chicago lifers is to put up with mediocrity either because it’s familiar. In addition to the continual reelection of crooks, there’s the unwavering support of the local sports teams.
Why do people fork out ever-greater amounts of money to watch the Bears/Cubc/Bulls continually lose? Sure there’s a glimmer of hope every now and then, but the same cheap ass owners continually under-invest in their teams knowing that fans will fork out the money nonetheless. In many cities, when the team starts losing people quit buying tickets. And when politicians start to think their shit doesn’t stink, they get voted out of office. In addition to the winters and traffic, this is the only thing that really bugs me about Chicago.
sort of true, anon.
most places don’t have the peculiar political system Chicago has simply as the patterns of immigration & concurrent economies of the time can’t be replicated.
and this is why I completely disagree with Bob – I find it’s the wealthier 20 somethings who are actually far more dangerous than their hipster counterparts, as you throw them a street festival and give them some flower boxes and they overlook the $550m annual TIF boondoggle.
say Pete, you might have missed this Michael Jordan fella… : )
but yes, I agree. what I don’t get is why the (allegedly) smarter/better educated/more gainfully employed are so easily fooled.
I can see how the guy who barely speaks English can be suckered into thinking that plowed streets and trash pick up mean this is the City that works, but doctors, lawyers, etc? No excuse. If they demanded the same performance from their politicians that they do from their mechanic, we’d be in business.
“If they demanded the same performance from their politicians that they do from their mechanic, we’d be in business.”
Are there as many doctors/lawyers/phds/whatever in the Metro Area as there are City & County employees + Retirees + immediate family just in the City?
What do we get for our trouble? An alderman that doesn’t like our precinct b/c his vote percentage is one of the lowest in the ward, so we don’t get very responsive ward service.
Sabrina said:
“Can you please give specific examples anywhere in the United States where this has not happened with real estate?”
I was replying to the graph on the web site Bob posted of 60608 which showed sales going down and price along with it. I countered with other zip codes showing sales going down but median price staying pretty much the same.
Sabrina said:
“It goes against historical precedence. (And economics…)”
Traditional economics teaches us that price follows the supply/demand curve. Demand is falling, supply is increasing so price must drop. Yes, but only for sellers who choose to enter the market. Most people wanting to sell who can afford not to will not even bother listing their place. It is still a buyers market, no doubt. There are fewer people forced to sell in the more affluent areas, hence the disparity we see in the graphs of 60608 and 60622.
The lesson from previous housing recessions is not to panic. Just wait it out.
“Traditional economics teaches us”
You failed in your first four words. Please provide quantitative data and examples where “traditional economics” mimics reality. Oh wait, not familiar with an adjusted R-squared? Then what exactly are you talking about.
Traditional economics might as well be voodoo magic. Until you can quantitatively prove otherwise please leave your secular religion at the doorstep.
Economics is not a science in the sense of other sciences. It masquerades as one. Did you hear what Benny & Timmy said recently about the bailout? If the economy doesn’t improve markedly its because the bailout wasn’t big enough.
Did it ever cross your brain to consider that perhaps their ideology/thought process or political persuasion were wrong instead?