Free Parking at 1400 S. Michigan in the South Loop
The developers at 1400 S. Michigan Avenue, or Michigan Avenue Tower II, in the South Loop are now giving out free parking when you purchase a unit at the building.
Their ad says:
“About 30 units are still available for purchase, so buyers still have an excellent selection, including residences with Lake Michigan views and 2-bedroom corner layouts.”
First occupancy in the 28 story building is expected in September 2008.
Prices from the developer start at $306,990 for 1 bedrooms that are 692 square feet while 2 bedroom, 2 bath units start at $399,990. That price includes the parking space.
The flipper from December 2007 is still trying to sell a 751 square foot one bedroom for $330,000 plus $35k for parking.
Ouch.
This should guarantee that many “sold” units will not close this fall and the developer will lead the race to the bottom.
Just hold out fellow flippers! Light is at the end of the tunnel.
Linda–
I’m pretty sure living in one place for 17 years disqualifies you as a flipper. Unless you’ve got some investments on the side, that is!
I don’t think the flippers realize that the light at the end of the tunnel is an oncoming train.
That’s hilarious G.
Well the banks should be crying, too. I’m pretty sure even with the bankruptcy overhaul of 2006 it will still allow pinched flippers to declare bankruptcy and absolve negative equity property debt.
And they’ll be waiting in the woodwork for the next niche which requires little money down and provides fantastic leverage.
Although it will be hard to match the leverage of this bubble: with a 0 or negative money down mortgage thats infinite leverage. Would make speculators in the roaring ’20’s even green with envy.
Can you explain in simpler terms, Bob? Trying to understand…
Thanks!
Basically, he is saying flippers are screwed.
Diedre,
Basically it IS that flippers are screwed. But heres the problem: not only are they screwed, the banks that hold their mortgages are too, and that could cause a ripple effect through the economy.
If the flipper put 5% down and the property loses 20% of its value, after the flipper declares bankruptcy (or their flipping shell company) the bank is left holding the underwater mortgage. Bank losses have a big negative impact on the amount of money they can loan out, so they rein in their lending operations further.
New flippers, although bankrupt, aren’t left holding the hot cake. If they were an individual they have a bankruptcy on their record but if it was through their shell flipping co they basically walk away. Only seasoned flippers with positive net worth will truly pay for their rampant speculation.
The banks will pay for their “rampant speculation” as well. That is how it should be. It certainly won’t be painless, but it will cost us all less to see the banks eat their losses than to “socialize” them and make all taxpayers pay in the form of government bailouts.
The abrupt return to traditional lending standards is already curtailing lending operations, which is increasingly feeding the downward spiral in values.
Thanks Bob and G –
Think I got it. I had two past condo investments here when I moved to LA. Both now sold – one a good investment and one that would have been fine, but not a huge money maker. It, however, tanked due to a neighbor (renter) who was selling drugs in bldg./copying passkeys/harassing really good tenants, etc….finally set fire to her unit (gutted/adjacent to mine). Upshot is that I had unit on and off market for close to two years, lost two very responsible tenants, 4 real estate brokers, sold at a loss – after 4 flights back from west coast to appeal to condo ass. (non-responsive) management co. (non-responsive and embezzling, as it turned out)
police. Hard as it was, I ate my shirt (i.e. IRA) and went on.
So, the idea of government bailout for speculators who invested irresponsibly and lenders who helped them to do just that? I don’t have a lot of empathy. I wish I could tell them to eat whatever losses quick and get out without the headache/heartache that I went through. Not worth it – and will seemingly only get worse for those who hang on to dreams of their “100k flip.”
Thanks!
Regarding this boom one thing still has me puzzled: I am still in wonderment how these No or Low documentation mortgages (aka liar’s loans) were and still are allowed to be originated. They (ALL of them) fall into either one of two categories: usury or fraud.
It’s usury and taking advantage of less financially proficient people if they do indeed make the income they put down on their application as they could get a much better rate by providing documentation.
Its fraud if they lie about their income on the mortgage application.
So it begs the question how this particular niche of the market was ever allowed to exist in the first place? Theres no middle ground here and I was under the impression both usury and fraud are bad. If its one or the other what gives? Sounds like everyone in the industry turned a blind eye to this to keep the bubble going and fees coming in.
Hi Bob,
When I applied for a mortgage from my bank in November, they gave me a “no doc” loan (which I had never heard of before), but the rate was NOT usurious. The idea is that it really speeds up your ability to close (and at the time, I was thinking of buying a place immediately and the idea that I could close in two weeks was appealing). In fact, there was no difference in the mortgage rate between the no-doc and the “full doc” loans they offered me.
I do think there is a place for such loans, as in the case of full banks giving loans to customers they’ve had for years. The problem is not their existence, it’s their abuse. Still, if they are abused more often then they are used responsibly, I’d be on board with you to ban them.