Holiday Schedule: MLK Day
Given the holiday, Crib Chatter will be operating on a more limited schedule. There will only be two posts today.
The real estate scene is still rather quiet. The spring selling season begins (officially) after the Super Bowl but look for momentum to build in the next week or so as new listings come on the market to get a jump on the official start.
Actually, it’s anything but quiet. Contracts in the city are running 76% higher than last year in both December and so far through January. I checked because as I’m out I keep running into other realtors showing properties. We’re even seeing multiple bids on properties and anecdotally I’m surprised at the number of cash deals. Bears beware.
While walking around Gold Coast and River North generally on Saturday, we encountered a steady stream of people with notes or other pictures. It seemed like they were looking at properties — small groups talking about the neighborhood, individuals waiting near places with signs, etc.
I can’t speak to how sales are going, but it looked like there are plenty of buyers out there (probably waiting for good weather).
All us fence sitters missed the bottom! The market is hot hot hot! Buy now or be priced out forever, again!
HD: I don’t think one can extrapolate “The bottom has passed” with “People are looking & buying again”. The latter might well be because the former hasn’t happened!
I was in Lincoln Park last night for dinner with friends. On the way back home, I stopped at North Ave Starbucks to make sure I had enough caffeine to actually get home.
In the store sat 2 different couples with MLS listing sheets having what appeared to be very serious conversations about buying or renting, but certainly about real estate. I was surprised.
These were of course younger couples most likely looking at LP condos (probably were feeling flush with their 100k a year offer out of Michigan State or something). Maybe SoNo was in their future?
However, I do think the older set is feeling good about the stock market’s recovery and, contrary to the amateur market gurus on this board, don’t care where it was in 1997. There has been a lot of activity in the high-end suburbs recently, and some buying at decent prices.
Bottom’s in folks! Just close your eyes and ignore the 3.5 million homes in the shadow inventory, the four million foreclosure filed last year (And probably again this year), the 10% unemployment rate and declining rents! None of that means anything in the real estate market because a handful of big 10 grads have $100k a year jobs. This is going to be a HOT HOT HOT spring selling season (at least until spring passes…)
“We’re even seeing multiple bids on properties and anecdotally I’m surprised at the number of cash deals. Bears beware.”
Bottom isn’t in, but for certain areas where scarcity value exists (east of Greenbay on the North Shore or east of Halsted in LP), people are starting to convince themselves that the time is now.
I also think that due to the market a lot of people have outlived the usefulness of their places and so now need to upsize in the city. More families are staying put, etc.
I meant “quiet” in terms of the number of listings coming on the market. I thought there would be a deluge right after the holidays from all of those who took their properties off the market in Oct/Nov and want to (need to?) list again.
I’m anticipating huge inventory coming on the market this spring as the press (and others) feel that the market has bottomed and is “improving” so everyone who was “waiting” to list will list now. Anecdotally on my end, I know numerous people buying foreclosures in the suburbs because there are some deals.
I also know some 20-somethings buying in the Lakeview/LP neighborhoods because their parents are telling them, “why are you renting?” They are buying in the $330,000 price range (or so.) Make about $75,000. Can get the first time home buyers credit and are buying about 4x their income. They ARE getting mortgages.
I’m going to an inspection today for a short sale-wish me luck!
Of your two areas, east of Halsted in LP is less than 1% of the Chicago market and your other area is in the suburbs.
Sure people have convinced themselves it’s time to buy, especially if they listen to their realtors, it’s always a great time to buy.
“Bottom isn’t in, but for certain areas where scarcity value exists (east of Greenbay on the North Shore or east of Halsted in LP), people are starting to convince themselves that the time is now.”
This will not end well.
“They are buying in the $330,000 price range (or so.) Make about $75,000. Can get the first time home buyers credit and are buying about 4x their income.”
The one I know is already discussing how he’s going to get a roommate for the second bedroom to help cover the costs.
Yet he’s going forward with the purchase.
The mania hasn’t left the market. There is no fear. All taxpayers will pay for the (still) lax lending standards.
“I’m anticipating huge inventory coming on the market this spring as the press (and others) feel that the market has bottomed and is “improving” so everyone who was “waiting” to list will list now”
I think most buyers are waiting until spring early summer for loads of places to jump in the market. (i being one of them). The problem is these sellers wont realize that their place is not unique and now is up against more inventory. they will list at some price above what they paid in 2006 do price drops until late fall and still will be listed in 2011.
“people are starting to convince themselves that the time is now”
time is now-moloko
I will not call bottom, as i am an analyst in a different field, so i have no clue on bottom.
but i will say the time is pretty good this spring and summer for my family. i will be taking a hard hit on my place if i sell but i am not looking to “make a profit” on my next place. my next home will most likely be a place where i will retire in.
“Of your two areas, east of Halsted in LP is less than 1% of the Chicago market and your other area is in the suburbs.”
Ok, yet this 1% occupies more than 1% of our discussion time. The suburbs are relevant insofar as their relative costs and schools can influence people either to stay or not stay in the city.
These are aspirational and very well regarded areas and so I think they lead the market as well.
I think 75k in income *barely* qualifies you on PITI of around $2k (which is what $330,000 seems to imply). That is tight — love those Gen Y optimists!
The net on $75k for a single person (without the RE tax deduction, which isn’t that much anyway, but including health, 401k, etc) is between $4,200 and $4,400 or so a month. SO a $2,000 PITI is pretty tight but do able. Throw in student loans, assessments, maybe a car payment, food, pocket money, and it’s doable, but tight. Renting seems like such a better option.
Hmmm, one area where I have been looking (for the past 3 years or so, so I know the market very well), the listings are at an all time low, people (including an agent selling his own home) have decided to rent out their properties even before the spring market (at rents well below the rent equivalence), or pull their homes off the market all together after 2 yrs on the market, rather than lower price. The shadow inventory – even the one I know about directly – seems huge. We are in our late 30s with kids, and would love to buy for our family (we are renting a huge, cheap apartment at the moment, but with no W/D, no central AC, no parking etc); we know that we would be paying above what it would cost to rent an equivalent property (but I never can imagine renting a house/townhouse) and are fully prepared to face a loss if we were having to sell within the next 5 yrs – but it appears the loss might be substantial. I am very worried about jumping into the market: The huge shadow inventory, the increase in foreclosures, the (likely) substantial rise in interest rates, etc. I also wish the government were not meddling with the market the way it has been with the artificial zirp policy, homebuyer tax credit,government insurance of mortgages,…Who can even imagine what the value of a property without these interventions is right now??
Hmmm, one area where I have been looking (for the past 3 years or so, so I know the market very well), the listings are at an all time low, people (including an agent selling his own home) have decided to rent out their properties even before the spring market (at rents well below the rent equivalence), or pull their homes off the market all together after 2 yrs on the market, rather than lower price. The shadow inventory – even the one I know about directly – seems huge. We are in our late 30s with kids, and would love to buy for our family (we are renting a huge, cheap apartment at the moment, but with no W/D, no central AC, no parking etc); we know that we would be paying above what it would cost to rent an equivalent property (but I never can imagine renting a house/townhouse) and are fully prepared to face a loss if we were having to sell within the next 5 yrs – but it appears the loss might be substantial. I am very worried about jumping into the market: The huge shadow inventory, the increase in foreclosures, the (likely) substantial rise in interest rates, etc. I also wish the government were not meddling with the market the way it has been with the artificial zirp policy, homebuyer tax credit,government insurance of mortgages with low down payments,…Who can even imagine what the value of a property without these interventions is right now??
“The net on $75k for a single person (without the RE tax deduction, which isn’t that much anyway, but including health, 401k, etc) is between $4,200 and $4,400 or so a month. SO a $2,000 PITI is pretty tight but do able. Throw in student loans, assessments, maybe a car payment, food, pocket money, and it’s doable, but tight. Renting seems like such a better option.”
Yeah it’s closing in on biting off more than one can comfortably chew, but it’s impossible to know without knowing all the other factors.
IE for me, I’m looking at trying to buy near the top end of my comfort zone. But that’s only because my monthly debt amounts to almost nothing (no car payment, no student loans, no children nor any desire to have them in anything approaching the near term, etc.) and I’m generally incredibly intelligent about financial decisions and live like a miser. Not that I think I’m some special snowflake, but rule of thumb is just that, rule of thumb.
I just can’t imagine a new Big-10 grad being offered a $100k job. In what field? Certainly not for a B.A./B.S. in engineering, accounting, or business. Maybe for a law school grad or MBA grad, but that is different.
I’m an engineer with 18 years job experience (B.S. from a Big-10 university), and my most recent salary was $80k. According to salary surveys from my trade association, that puts me in the 75th percentile for engineers with my experience.
With the current unemployment rate, I just don’t believe that newly minted grads are getting $100k offers.
I’m curious to see what happens when/if the Fed ends purchases of mortgages at the end of March. Maybe it will be a non-event but I’m still curious.
apparently in cc internets mint many income-rich people
I agree salaries of new grads are not that high unless you got hooked-up. (or some law/mba/i-bank etc)
I doubt they end MBS purchases cold turkey
According to some people who post on this board, $100k a year jobs are neither “unique nor rare” nor difficult to obtain. According to them, if you have 18 years experience as an engineer and you have a BS from a big-10 U then you must be a complete and total loser if you’re not consistently making $100k+ per year. Don’t let facts like being in the top 75% of wage earners for your profession get in the way of cribchatter opinion.
Of course, I completely disagree with their assertions. Yes, there are plenty of people who make $100k a year but quite often those are flukes or temporary things. Plenty of mortgage brokers or realtors made $100k a year during the boom but today they are underemployed. The bubble really distorted the income scales in many industries and only now are readjusting and realigning themselves. Which has been very very painful to the labor market.
“danny on January 18th, 2010 at 11:48 am
I just can’t imagine a new Big-10 grad being offered a $100k job. In what field? Certainly not for a B.A./B.S. in engineering, accounting, or business. Maybe for a law school grad or MBA grad, but that is different.
I’m an engineer with 18 years job experience (B.S. from a Big-10 university), and my most recent salary was $80k. According to salary surveys from my trade association, that puts me in the 75th percentile for engineers with my experience.
With the current unemployment rate, I just don’t believe that newly minted grads are getting $100k offers.”
sorry i meant top 25 percentile.
“With the current unemployment rate, I just don’t believe that newly minted grads are getting $100k offers.”
Yes, this was a thinly-veiled joke at a prior post where poster asserted all his big-10 friends made $100k or more a few years after graduating college.
Russ and I then mused about the starting salary at Goldman from our day (early to mid 90’s, close enough) — $30-35k.
Even big 10 business school grads are hard-pressed to be making over $100K, and that would have to include annual bonus on top of that in most cases. There was a huge correction in the labor market, and bonuses have been extremely reduced and won’t be expected to return to mid-2008 and prior levels for some time.
Even the top big law firms have cut starting salaries, but they also cut their starting classes by 15-20% in terms of number hired.
For corporate jobs, it often takes 8-10 years to reach the $100K mark, if not more, even with an MBA on top of that.
The whole $100k Big Ten grad salary was largely a misunderstanding except for one person that said slightly otherwise. It’s in the 565 Quincy post.
Nobody hass built anything new over the last 2 years so don’t worry about this “shadow inventory”. I’d be more concerned with the unemployment rate. If you have a job that you feel very stable about now is the best time to buy probably in your lifetime if you have a LONG TERM (7+ years) plan of living there.
HD doesn’t understand that housing starts have been cut in well over half since late 2007. In a normal market since 1959 normal # of homes built is anywhere from 1 million to 2 million a year. look at the numbers you’ll understand.
http://research.stlouisfed.org/fred2/data/HOUST.txt
People need places to live!!!
nice stuff sonies; I agree unemployment is a major factor, but going forward it could be MBS market too, ie. lack of credit.
one other factor is accelerated housing destruction because of neglect/abandonment.
Barry:
This $100k a year topic has been ongoing for years now…it resurrected itself again in the 565 Quincy post.
Sonies: Here’s a link to the same data
http://4.bp.blogspot.com/_pMscxxELHEg/SyjhjJmxJUI/AAAAAAAAHCQ/a4kDLqYgo1Q/s1600-h/HousingStartsNov2009.jpg
The overhang from years of overbuilding is still effecting the market today. Look at all the empty buildings around the loop and off the blue line.
Shadow inventory reflects homes in some stage of foreclosure that don’t appear in the MLS. There’s a lot, some think it’s up to 4,000,000 properties. I have members of my extended family who are walking away from their home and haven’t made a payment in a year. The foreclosure was finally filed in Dec after 12 months of no payments.
I guarantee there are tens of thousands of these in the Chicago area, including some of the prime neighborhoods.
“Barry on January 18th, 2010 at 1:19 pm
The whole $100k Big Ten grad salary was largely a misunderstanding except for one person that said slightly otherwise. It’s in the 565 Quincy post.”
Sonies… the “shadow inventory” is much more than new construction coming on-line. It mainly refers to large numbers of properties that have been issued a “notice of default”, but have not yet been foreclosed.
There has been a lot of discussion about banks prolonging the foreclosure process, in order to avoid the rebalancing their ledgers. Check out the blog “Doctor Housing Bubble” to get a much more in depth assessment of “shadow inventory”.
My opinion is exactly the opposite of yours. The difference in our opinions is that I, unlike you, don’t share the same opinion as the NAR.
“now is the best time to buy probably in your lifetime if you have a LONG TERM (7+ years) plan of living there. “
“This $100k a year topic has been ongoing for years now…it resurrected itself again in the 565 Quincy post. ”
If it’s a historical thing I can’t speak to it as I’ve only stumbled upon this place recently, I was just saying that there was a slight misunderstanding in the Quincy thread 🙂
“The overhang from years of overbuilding is still effecting the market today.”
You’re telling me – I was laid off from a formerly prosperous position at an Engineering firm in September. I worked directly or my firm was involved but I wasn’t, in some capacity, on just about every major condo/rental project around for the last few years. All of that came to a screeching halt around the beginning of last year, we were able to milk work for a while after that, and then the gig was up shortly thereafter. There were an awful lot of proposed projects that never even got off the ground, which would make the current inventory glut even more comical.
Yes the 100k comment was a dumb post by someone who is out of touch with the overall market. It’s also one of HD’s mythical characters, and yes, I agree that they are mythical (or in very short supply).
http://cribchatter.com/?p=8055#comment-61214
“According to some people who post on this board, $100k a year jobs are neither “unique nor rare” nor difficult to obtain.”
someone forward me to a 100k a year job fresh out of undergrad please!!!
is it that everyone on the intertubez exaggerates their income and friends income? hmmmmm…maybe.
I remember when i got my first job in accounting (still got the offer papers) it was 33k a year. My wife laughed and said you made more than double that in construction.
i cannot see a wet behind the ears state school with no grad degree pulling in 100k out the shoot in these times.
I can’t find the thread and I don’t have a whole lot of time to spend researching it, but the gist of the thread was that one guy said he was an auditor for large companies and he regularly sees salaries and that it was neither unique nor rare (if I’m quoting him correctly) to have a $100k+ job in the Chicago market nor was it particularly difficult to achieve that level of income. Then a handful of other people agreed with him and some chimed in that everyone in their social circle made $100k+ or more; and then the insults started flying that the problem isn’t homes being overvalued but it’s actually that we don’t make enough money. It’s ridiculous. Then I remembered asking Sonies if he made $100k+ and he said that no he didn’t but he planned on making it in the next few years. This thread must have happened 8 months or a year ago.
the shadow is degrading as the banks drag their knuckles.
how much of the shadow + vacancies is above the normal,
then subtract building deficit,
– being eaten every month, by cash holders, 1st timers and finally knife catchers.
-housing destruction
each market is local so condos south loop, overbuilt areas will drag, but other areas, have already experience a significant decline.
Volume low was start of 2009.
most markets over correct, this debate is similar to the debate about where the income tax rate falls on the Laffer curve, its all about perspective. the numbers will tell. unemployment is and will be the key driver. only unemployment could drag it that low again. not supply issues going forward.
What about the walk-aways and the jingle keys? Those who are in some stage of default? They still live in the property but go two and three years without a payment? Estimated at 4,000,000 properties? I have friends and family members who haven’t made mortgage payments in literally *years* and have yet to move. There properties will hit the market, someday. I’m not talking about crappy subprime loans on the southside either. I mean alt-a and prime type loans. It’s called the shadow inventory because it’s in the shadows. You won’t see it unless you’re looking for it. I work in a world where I’m in the shadows and I see glimpses of the excess inventory everywhere. Don’t discount the laws of supply and demand. Unemployment is one issue among many..
“i cannot see a wet behind the ears state school with no grad degree pulling in 100k out the shoot in these times.”
NYC investment banking (Goldman or similar) or McKinsey, Bain, BCG Consulting. Perhaps as an analyst for a hedge / distressed debt fund. In any event, all these jobs are NYC-pegged and mostly NYC-domiciled and are extremely competitive. Maybe 2,500 or them to go around each year out of a new labor market entrant market of 1,000,000 – 1,500,000 in any given year.
I know a few people on the other end of the spectrum doing very well who do make well in excess of 100k & will say this about them generally: they arent that common, they know this, they NEVER talk about how much they make & they are far too shrewd to get
suckered into a major terrible investment by peer pressure or a talking head on teevee or a highschool edumakated realtor..oh and most live in NYC where even dumps are 500k lol!
The average family income in 60614 was $131k in 2000. I would guess it cannot be more than $150k today. That is average, not median, so it includes high wage earners.
According to Claritas data I saw on a project (very reliable — a research firm used by large CPG companies), there are 5,500 households that earn greater than $500,000 in any given year in the entire City of Chicago. This ignores wealth and the like and excludes the suburbs, but is absolutely striking.
HD it might be 4 mil, but supply destruction, along with growth will eventually take care of the imbalance, if its 1-3 or 7-10, I see where your arguing from but what i have seen (poss. limited) is that it will catch up sooner than later. until what is not being built and what is being destroyed is taken into account, it will be fuzzy math.
1-3 or 7-10 *years
“oh and most live in NYC where even dumps are 500k lol!”
Some of my colleagues make $750k a year and are renting there still. And it isn’t because they want to rent. NYC all in taxes make home ownership the best proposition out there. It is just damn expensive. We in Chicago should consider ourselves marginally lucky.
Sorry, colleagues = people with whom I have crossed professionally before. Many are professional investors.
“Nobody hass built anything new over the last 2 years so don’t worry about this “shadow inventory”.”
Move along folks, nothing to see here.
“People need places to live!!!”
Apparently not as many places are needed anymore. Have you heard about the currently declining homeownership rate and the highest apartment vacancy rate in 30 years? The overhang of vacant units is still very large.
Fed is not ending MBS buying cold turkey on 3/31..already the pace of buying is much lower than it was with only 150B left to buy. I cant wait til 2012 to see sick banks try to roll their TLGP debt & get cash from private investors…boom?
“My opinion is exactly the opposite of yours. The difference in our opinions is that I, unlike you, don’t share the same opinion as the NAR.”
Yeah but my opinion wasn’t the same as the NAR’s opinion 2+ years ago or the same as it has been for the last million years
Fed might try to double their balance sheet again to 4T if housing continues to fall much via buying more Fannie & Feces MBS. Hopefully congress will reign before it comes to that though!
Shadow inventory:
Here is a completely random case – I have nothing to do with this case whatsoever, I merely at random typed a case number into the Clerk’s website and this mortgage foreclosure poped up.
https://w3.courtlink.lexisnexis.com/cookcounty/FindDock.asp?NCase=2009-ch-01234&SearchType=0&Database=3&case_no=&=&=&=&PLtype=2&sname=abdallah+ribhi&CDate=
Case filed in January 2009 which means there was probably 4 or 5 or 6 full months non-payment on the mortgage, let’s say 5 months which means the last full payment was August 2008; the order of possession was just entered on 1/13/2010 which gives the occupants 30 days to vacate the premises and it will be 2 or 3 or 4 months past that before it’s transferred to an asset manager to give the case to a local REO realtor. Which again means it’s 18 months from the default to listing as an REO. There are tens of thousands of these. I don’t even know the address for this property without pulling the file but I’m merely showing shadow inventory.
“The average family income in 60614 was $131k in 2000. I would guess it cannot be more than $150k today. That is average, not median, so it includes high wage earners.”
But JMM, thats spot picking data. and what percent of the chicago population lives in LP?
I just will refuse the notion that a 100k a year job out of undergrad is common. if not extra uncommon.
Intertubez bullshit aside 3 people on Crib Chatter even make 100k a year and that after 5-10 years in the work force.
Here’s another 100% completely random case I found in the computer. Again, I have NOTHING to do with this case whatsoever, I found it at random.
https://w3.courtlink.lexisnexis.com/cookcounty/FindDock.asp?NCase=2009-ch-01245&SearchType=0&Database=3&case_no=&=&=&=&PLtype=1&sname=&CDate=
This case was also filed on 1/13/2009. Judgment was entered in July 2009 then nothing. In theory the bank sells the property 3 months after judgment, and then runs to court a few weeks later to approve sale and get the order of possession. IN this case, nothing, nothing at all has been done since judgment was entered 5 months ago. Even if they filed a motion today the occupants would have 30 days plus a few weeks spindling time before the property went to an asset manager and then to a REO realtor.
Here’s another one:
https://w3.courtlink.lexisnexis.com/cookcounty/FindDock.asp?NCase=2009-ch-01252&SearchType=0&Database=3&case_no=&=&=&=&PLtype=1&sname=&CDate=
There’s some kind of cross-claim or something, and no service. This case is in mortgage foreclosure purgatory. it will be years before this property turns into an REO.
Shall I find one more? OK, This time I’ll look for an 08 case.
One final one:
https://w3.courtlink.lexisnexis.com/cookcounty/FindDock.asp?NCase=2008-ch-40001&SearchType=0&Database=3&case_no=&=&=&=&PLtype=1&sname=&CDate=
Filed 10/23/2008
Judgment entered in April 2009; nothing since. Nothing at all. I would bet a month’s salary the owners are still occupying the home; probably applied for a loan mod which put the foreclosure on hold; and given that more than half of loan mods fail and only 4% have been converted to permanent mods, I’d say this is shadow inventory.
“But JMM, thats spot picking data. and what percent of the chicago population lives in LP?”
Not sure why you are arguing with me. I agree — my data simply supports the notion that 100k is far outside the normal. 60614 is the highest earning zip code in Chicago city limits and household (not individual) income barely breaks 100k. Given the number of $1M+ houses, I would have thought HH income would be 2x-3x. That there are only 5,500 households that make over $500k in a city of 3 million people is telling as well.
“Intertubez bullshit aside 3 people on Crib Chatter even make 100k a year and that after 5-10 years in the work force.”
I would have thought there are more than that. I am guessing all the lawyers that post here clear 100k and a fair amount of the RE pro’s.
“Not sure why you are arguing with me”
i am not sure of that either 🙂 i misread ya though you were taking the side of, ‘100k year isnt that normal?’
“I would have thought there are more than that. I am guessing all the lawyers that post here clear 100k and a fair amount of the RE pro’s.”
i only have counted 2 lawyers so far, and 3 legit RE PRO’s, Two finance Pro’s, and Anon that can have the 100k+ single income.
That’s probably a fair number of the regular posters.
The ‘deals’ in the future will be the million dollar homes in the ‘green zone’ which sell 40% off to $150k income households with large down payments.
Incomes may decrease in 2010 from 2009, but not as much as 2009 to 2008 for many of the $100K+ earners. Household incomes over $100K often have 2 wage earners, and those over $150K as well. 2 incomes of $80K are more of the norm for much of the green zone if there’s more than one person in a household.
I personally think 40% decrease is a good number as well compared to 2007 pricing in the green zone for most single family homes, other than in ELP. This primarily is due to the decrease in income and the more stringent lending standards.
What would you call a “large down payment”? 20%? 25%? 30%?
“Incomes may decrease in 2010 from 2009, but not as much as 2009 to 2008 for many of the $100K+ earners.”
I agree. If you have kept your job, your income is not likely to fall substantially in 2010.
“The ‘deals’ in the future will be the million dollar homes in the ‘green zone’ which sell 40% off to $150k income households with large down payments.”
This would imply SFHs of quality construction fall below $1M in the near future. I do not see this happening in East Lincoln Park or certain areas of Lakeview. Every house sale would more or less have to be a short sale or foreclosure REO.
“The ‘deals’ in the future will be the million dollar homes in the ‘green zone’ which sell 40% off to $150k income households with large down payments.”
Dollar amount wise you will see deals in the green zones as well as the upper crust burbs. these deals are here now. 5mil home in glencoe is now listed at 3mil and will probably close at 2.7mil. now thats a deal!!!!!
will it translate to the 150k household? nope. will translate to the average joe at 60k household? nada
i just dont see steep deals in the range your thinking HD. a 20% discount in green zones are even strecthing it. the Sheeple wont let that happen. a sheeple buyer will come in a get it at th 15% discount before the list gets lowered.
Yeah I was able to parse out the military reference, but I didn’t know if it was some accepted thing in local RE or just an internet term or something else
I hate the term green zone too but basically I take it to mean north side lake front neighborhoods up to about Montrose.
Green zone is an appropriate term though when you compare the contrast in violent crime and poverty between these areas of the city and other areas. I actually would feel safer in Baghdad than the Wild 100s.
I think the 40% off referred to single family homes, and compared to 2006 peak pricing in the green zone. I think it should exclude ELP, which is probably only going to be down 15-20% from peak. Also, most likely we aren’t yet at the bottom due to the employment market not yet settling. Another thing putting pressure on the $800K-1.2m homes is the lack of move-up buyers that previously existed in years past in the 2000-2007 time frame. Now, lots of people lost a lot of equity, if not all, and it will take 6-12 months to sell, compared to the 1-2 months back in the day. This segment of the market is larger than most would think.
“Also, most likely we aren’t yet at the bottom due to the employment market not yet settling.”
The $200k+ executive unemployment situation has likely stabilized. Same for law and post-MBA set. Medicine has always been stable and they have access to financing options many of us do not. Those are your younger buyers and I don’t see unemployment being a significant issue for the 30-40yo demographic in those positions.
“Bottom isn’t in, but for certain areas where scarcity value exists (east of Greenbay on the North Shore or east of Halsted in LP), people are starting to convince themselves that the time is now.”
Yea, one out of 6 homes sold in a one block area in this north shore area, east of the tracks and GB. One home was never completed. All homes over 1 million, some on market for over 2 years.
I think homedelete is right, check out the calculatedrisk blog today on the huge # of probable foreclosures due to ARM resets in the next few years. Then take away government support.
Those in the know are in California. Buy a second home for cheap and rent it out. Default on the current mortgage of the first house and stay as long as possible, recouping your down payment if you put money down. Move to the other house when necessary. Of course CA law is different than IL law.
“The $200k+ executive unemployment situation has likely stabilized. Same for law and post-MBA set.”
Bzzzzzt wrong. Post-MBA employment is terrible. Not sure what stabilization metric you are using. I also anticipate the financial sector to continue its contraction over the years as it becomes obvious there just isn’t enough _responsible_ demand for their services (as in people that intend and are able to pay back their debts). Right now the financial sector is being propped up artificially by government and Fed intervention. Look for a speedy contraction to resume once it is removed.
I’m going to agree with Bob. Post-MBA employment keeps getting worse every day. The best point to be at is someone who makes less than $100K. If you make over that amount, you need to truly be a star performer to keep that job.
Companies want to eventually promote those people into management roles and pay them less than they paid their predecessors. Those that kept their jobs may be doing ok at that level, but the chances for growth are much more limited, due to the younger people waiting in the wings who make significantly less money.
“Given the number of $1M+ houses, I would have thought HH income would be 2x-3x. That there are only 5,500 households that make over $500k in a city of 3 million people is telling as well.”
Welcome to the bubble mentality where you have many who are/were asset rich but income poor. If you think the vast majority of the cost basis of these LP homes that are listed for $1MM was anywhere near $1MM I have a bridge to sell you. Instead you have gleeful people like Stevo happy he levered-up on a 500k property at the right time and it shot up to 900k and maybe now is still at 750k.
Will LP fall? Surely. The low end might remain at 200-250k for a 1/1 though for quite awhile as the government is still giving out 0 down sausage loans via the FHA and tax credit. Until the bill for that tranche of sausage loans comes due to taxpayers and they demand an end to the insanity I don’t see the low end dropping much.
“Post-MBA employment is terrible.”
It might not be great, but it’s the vector that matters. Is it getting worse? Methinks not — which is why the word “stabilizing” was chosen. Are people taking lower salaries — sure, but that is the way it is supposed to be.
You don’t need the McLagan survey to understand the fin svcs situation. Hopefully you read the WSJ? Record bonuses are getting paid out on Wall Street in January. Hiring is rampant right now because so many people were flushed that staffing went to bone levels. Layoffs are done on Wall Street for the time being, which means optimism is back.
Not to mention restructuring and bankruptcy jobs are plentiful right now. A partner in the restructuring practice of a local firm just bought new construction in Bell ($1.6M) with $1.3M in financing. The guy *might* be 40 years old.
We’re not talking about bank tellers and loan officers here. I’d say post-MBA financial services hiring is better than it was circa 2003 which is saying something.
“If you make over that amount, you need to truly be a star performer to keep that job.”
Sorry, but that isn’t true for a top 10 MBA with several years of experience in a stable field. For example, brand management or CPG sales. It’s not rock star comp but 100k-200k is normal for a 35yo junior executive in this capacity (10 yrs total experience).
“Companies want to eventually promote those people into management roles and pay them less than they paid their predecessors.”
On my current project one of the other consultants had TWO prior positions where he was promoted to a role where the previous person had a company car but that perk was removed for him. Just all of the responsibilities but less pay.
Once the economy does organically stabilize we’ll likely see wage acceleration but we’re just not near that point yet. Today’s “stabilized” economy is a mirage created by the illusion of government intervention in the markets.
“For example, brand management or CPG sales. It’s not rock star comp but 100k-200k is normal for a 35yo junior executive in this capacity (10 yrs total experience).”
Brand managers don’t make 200k in the midwest. Maybe in good times all in would be 130k base and 50k bonus. These days its like 110k base. In fact in Chicagoland I know of multiple CPG companies looking to cut costs (and headcount). Hell pick a name out of the air and they probably are.
*maybe 200k for CPG sales not sure. But I know 200k comp is not the norm for anything by the most seasoned brand managers (15+ years exp of a big brand) and even in the midwest not common.
On the coasts probably much more common.
I think those would be typical of NYC or SF salaries for those positions. There’s a lot of qualified younger people moving up the ranks in the 28-32 YO range. They will drive the future economy in the next 15-20 years, and are willing to accept a little less because that is what the market is paying. Finance has had a huge loss in jobs. If you aren’t in investment banking, sales & trading, or at a hedge fund, you probably didn’t get a big bump. PE pay is down this year for all but analysts.
“It’s not rock star comp but 100k-200k is normal for a 35yo junior executive in this capacity (10 yrs total experience).”
Also noticed some funny math here. To get into a top10 MBA you need at a minimum 2 yrs experience. A more realistic number is 4-5 years. So how does one get to 35yrs old with a Top10 MBA with 10 years experience if the MBA took 2 years?
Do you mean maybe that 40yr old brand exec who can afford it will still want to own near Clark St and shut down Cubby Bear?
You don’t see something wrong with a 300k down payment on a 1.3 mil home? First of all it is less than 20pc down. Second of all 1.3 mil is a lot of money to borrow! Especially on an asset that will probably continue to decline in value. Its our culture to lever ourselves up as much as possible in every scenario possible. Hell if I had a 300k down payment id buy a 600k house and send my kids to private school. I’m not impressed with the restructuring guy who levers all his own wealth into a million and a half dollar home. It just seems so unwise and foolhardly. it really makes me question this guys wisdom and integrity. I mean unless this guy has significant family money he plans to inherit ust right ot of the box it seems so ridiculous.
“I’m not impressed with the restructuring guy who levers all his own wealth into a million and a half dollar home.”
Most owners of 1.5MM homes in this area likely didn’t get them via this scenario. They likely got them via being the restructuring guy who levered all his own wealth into a 600k property in 1998 and got lucky via the bubble.
Unfortunately for him if he didn’t sell on top he’s not going to get anywhere near the 2006 valuation of 1.5MM even if he thinks so and is listing the place at that.
Ok in order of decending ignorance (except for HD, which is a clarification):
“Brand managers don’t make 200k in the midwest.”
Really? So, if my little sister were one would you believe me then? CPG firms are global and many are based here — especially for headquarters, compensation isn’t decided by location. P&G is perhaps the best payer in the industry — do you really think it’s to compensate people for the enormous burden of Cincinnati real estate? Do you think Mills pays less because it is in Minneapolis? Don’t you think, instead perhaps, they compete for talent globally (or at a minimum nationally) and don’t you think that the extra 20k is probably worth it? Bob, I’d love to know which multi-billion dollar brand you were affiliated with which gives you such insight into the compensation practices of these companies.
“So how does one get to 35yrs old with a Top10 MBA with 10 years experience if the MBA took 2 years?”
They graduate college (22), work 3 years in CPG, maybe at a smaller company (25), take two years for the MBA (27), and work the next eight at Quaker/Kraft/Unilever/Mills/P&G. That’s 11 years actually, but who is counting. That is taking two years for the MBA never mind the cohort that did their MBA’s part time at U of C or Kellogg. And who cares what sequence it comes in? Not everyone did peace corps or humped a crappy job that has no bearing on what they do after their MBA. I guess people who get nominated for the 40 under 40 list published by Crains come from somewhere right?
“You don’t see something wrong with a 300k down payment on a 1.3 mil home?”
Who said I have to agree to observe it. In fact, I disagree with this much leverage, but its astonishing to see it today, in this market, in this economy. Yet these are the “market clearing” buyers that are out there. Only takes one per property. And acutally, the house was $1.675M (sorry). Said individual put down 20%. Probably has 300k to 500k the last few years of his W2, so perhaps he got comfortable with it. I don’t know, don’t care. They are still out there.
“In fact in Chicagoland I know of multiple CPG companies looking to cut costs (and headcount).”
Yes, for example, Wrigley laid off 100 after its merger with Mars. Mostly bs internal folks, not marketers, replaced by “Bob” from Accountemps. Wait, is that the same Bob that is posting on CC?
I think the general point is that there is not enough income and liquid assets/home equity out there to clear the current market at $800K – 1.2M, and that prices are not going to increase until that happens. The stock market rally in the last year helped with confidence, but how will the move-up buyer get into these properties with such an extreme decline in their home equity of their current place? Or will it be the first time buyer/renter who happens to have $200K saved up for a DP that will save the day?
I must comment how much I enjoy reading this thread. Sabrina should post more “open threads” where people can post general b.s. not tied to a specific property.
“Yes, for example, Wrigley laid off 100 after its merger with Mars. Mostly bs internal folks, not marketers, replaced by “Bob” from Accountemps. Wait, is that the same Bob that is posting on CC?”
Hey JMM if you happen to work there I feel bad for ya. From my friends there they hate the NEW JOOWWWSEY culture that seems to be coming in? Think Buffet won’t want a good ROI on that acquisition?
Also that demographic is pretty infinitesimally small its laughable. P&G in Cincinnati? Probably to compensate someone to move from anywhere else in the country to put up with Cincinnati.
“Bob, I’d love to know which multi-billion dollar brand you were affiliated with which gives you such insight into the compensation practices of these companies.”
Not a single multi-billion dollar brand at at least one company you had mentioned. Most big brands are what 100mm/year? I’ve never worked in brand..selling widgets is painfully uninteresting. I do know at the AD level at P&G thats not even 200k either, at least outside of brands.
How many jobs did Sara Lee cut, or Pepsi? Or (insert random CPG firm here) lately? I know its more than a few. And yeah those senior brand folks, it only takes one down year in a down economy to realize they really ain’t worth 200k/year if that brand might need new life. And theres always a jr. brand mgr in the wings working for much less eager to lead.
To say that there are literally thousands of brand folks in even Chicagoland is laughable. To state that they are a large source of supporting high RE valuations is even more laughable. You live in a bubble, JMM.
“Mostly bs internal folks, not marketers, replaced by “Bob” from Accountemps.”
Also you and I live in different worlds, JMM. I don’t think an educated professional earning a decent living in accounting or some back office function at a company is a “bs internal folk”. Yet there is no doubt what you had described is happening en masse in the workforce today. Professional wage jobs disappearing being replaced with “Bob” from accountemps (different Bob than me) for a fraction of the cost.
And I understand what implication that has for aggregate demand in real estate because unlike marketers I paid attention in all my b-school classes.
Maybe you’re the one doing the firing (in fact chances are they think a lot like you) and maybe that works in the short term and at the low level. But at a higher level with everybody doing this what Consumers (part of CPG right?) are left to buy the products these firms are cranking out?
There will be no consumer driven recovery any time soon. Aggregate demand is decimated by falling wages and a reduction in credit supply & demand.
Oh, I know they’re out there and it amazes me what people will spend. Maybe I”m the cheap one because I won’t leverage myself to the hilt. OTOH people like this are really some of the only buyers left in the high-end market that is people with very high yet stable incomes who are willing to lever themselves into million dollar properties. That’s all that’s left and there aren’t very many of them around anymore. When buyers like this guy run out, then look out below.
““You don’t see something wrong with a 300k down payment on a 1.3 mil home?”
Who said I have to agree to observe it. In fact, I disagree with this much leverage, but its astonishing to see it today, in this market, in this economy. Yet these are the “market clearing” buyers that are out there. Only takes one per property. And acutally, the house was $1.675M (sorry). Said individual put down 20%. Probably has 300k to 500k the last few years of his W2, so perhaps he got comfortable with it. I don’t know, don’t care. They are still out there.”
“I guess people who get nominated for the 40 under 40 list published by Crains come from somewhere right?”
Do you also hobnob with anon(tfo) who also personally knows the other 39 people on the list? Are you guys the power couples I see in Chicago Style magazine?
And can you tell me why if the high-end industry is so good that they drop off free copies of this magazine at my apartment building so I can see full page ads for $3.2MM places at The Elysian when I am on the can?
“From my friends there they hate the NEW JOOWWWSEY culture that seems to be coming in?”
I have no idea what goes on there. But Mars is actually based in Reston, VA.
“Think Buffet won’t want a good ROI on that acquisition?”
If I recall correctly from when we did the merger arb on it, Buffet only provided the debt financing for the transaction. He is a lender and not a sponsor in the deal. I believe they have since refinanced this.
“I do know at the AD level at P&G thats not even 200k either, at least outside of brands.”
Your notions on comp aren’t particularly useful. It’s like comparing the IT guy at Goldman to their investment bankers in terms of compensation. As you might be aware, firms tend to align compensation around their core functions. Let me provide another example. Partners in accounting do quite well at PwC, but the internal controller at a division of Sara Lee, probably less so.
For someone how cannot even add years of experience to calculate an age on a resume, I will take your arguments with grain of salt.
In any event, the conclusion was that you do not need to be a “star performer” to keep a $100k+ job. That is simply what the jobs pay. Granted, if your company craps the bed or you suck, you will probably lose your job.
Bob, I am sorry I’ve touched a nerve, principally that you don’t yet clear six figures. However, given the investment many professionals put into their education (top undergrad, MBA or law school, or med school), I can understand why they are able to command the salaries they do. As Sabrina rightly points out, many of them borrowed to do so. Just like an investment property.
“free copies of this magazine”
Now you’re really disappointing me. You should understand that the business model of any magazine, or any medium really, is advertising-driven.
You might also be interested to know that staffing businesses do in fact pay their people, it’s just conducted on an outsourced basis. So, I think “Bob” (you?) from Accountemps still is a professional drawing a very real and tangible wage, though somewhat more variable and/or part time-ish (this of course is the lifestyle he chooses so he can play golf at 3pm or be with his family).
“Maybe you’re the one doing the firing (in fact chances are they think a lot like you) and maybe that works in the short term and at the low level.”
No firing for me. I run a family office. Strictly investments. Some of which have to do with real estate.
These comments sound kind of Gordon Gekko-like imho. Is it fair to rip down the people who you claim earn less than you do?
“But at a higher level with everybody doing this what Consumers (part of CPG right?) are left to buy the products these firms are cranking out?”
Goldfish crackers? Canned soup? Diapers? Candy? Cereal?
I feel pretty comfortable there will be consumers to buy these items.
“Aggregate demand is decimated by falling wages”
This isn’t true. Wages have remained flat.
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CES0500000032&output_view=net_1mth
Seriously.
I vote that JMM and Bob exchange emails or perhaps have a lunch date.
Painful.
lol. That is what waiting for an overseas conf call will do to you.
Third greatest thread on crib chatter!!!!!!
Quick fact; we have used account temps before to cover maternity and fmla leaves. Last time we used them was to cover an A/P lady they charge us $17 per hour in turn pay the temp $10.
Btw my new phone is awesome i can crib chatter on the go now.
Yes JMM if the BLS says it it must be true because I would never doubt any government published statistics.
http://www.chicagobusiness.com/cgi-bin/article.pl?articleId=32910
But Illinois personal income tax receipts are down $460MM? Must be a widespread conspiracy to cheat on taxes?
What is this whole insolvency thing they speak of? There are surely no Americans in Baghdad!
“Wages are stagnant. Now is a great time to buy real estate and equities! Nothing to see here folks.”
http://www.thehindu.com/fline/fl2008/images/20030425007100510.jpg
I believe everything you are citing has to do with unemployment. Fewer employed means less tax revenue.
Real wages are not falling for those who have jobs. Don’t confuse the two.
To refresh you on your University of Phonex online MBA classes, you can think of wages as “unit price” and employment as “quantity sold.” Unit price x quantity sold = total revenue. Make sense?
Yes, this thread is awesomely enteratining.
I think it’s better than 4 of the last 5 movies I’ve seen. Which leaves it tied neck and neck with “Up in the Air.” (And that was before I knew JMM was George Clooney.)
The mental fixation on “$100k” is silly, I think, but mostly it shows a lack of perspective.
Do you realize that that $131k figure for average per capita for LP is 30% higher than the average per capita for. . . KENILWORTH.
30% higher. And Kenilworth is the highest per capita income for a municipality in IL.
So let’s not disparage an average income of $130k, alright??
As I do know something about this job market (hey, I’m hirin!), I will offer that:
1)Yes, $100k-plus jobs are relatively common in Chicago. (Literally, relatively more common, compared to other markets.) If you work in financial services, probably 20-45% of your office is there, varying by market and sector.
2)Not for straight out of undergrads. Are you crazy? Pay a 22 y.o. six figs and you’ve got nothing but trouble on your hands. As above, you need to put in your time.
3)Not $200k. There are lots of positions with income targets around the $100k mark. Very, very few around the $200k mark. They are treated as equivalent above, and they are not (just ask the tax code!).
4)Doctors and lawyers??? Surely you jest. Average atty makes well under $100k. Cue sob story. . .
“Do you realize that that $131k figure for average per capita for LP is 30% higher than the average per capita for. . . KENILWORTH.”
131k is average HH income in LP, not per person. KW’s average HH income is around 350k and its median is around 200k (due to many retired households).
“If you work in financial services, probably 20-45% of your office is there, varying by market and sector.”
Most fin svcs jobs are in NYC. Chicago is not a large financial svcs community, even if you include commercial banking in the mix. Other than firms based here, it is a financial backwater.
Bob:
“Aggregate demand is decimated by falling wages”
JMM:
“This isn’t true. Wages have remained flat.”
“I believe everything you are citing has to do with unemployment. Fewer employed means less tax revenue. Real wages are not falling for those who have jobs. Don’t confuse the two. ”
Re-read what I stated, pasted above again for your convenience. Also, I really hope for your investor’s sake your reading comprehension is a little better in your prospectuses than on here.
JMM, you don’t rest (or fail to argue with people who agree with you).
I couldn’t find household for Kenil, but the $131k is still over 15% higher than the household income for lake bluff, so that’s good enough for me.
“Most fin svcs jobs are in NYC. Chicago is not a large financial svcs community, even if you include commercial banking in the mix. Other than firms based here, it is a financial backwater.”
That’s fine but I was speaking of fin svcs jobs here in Chicago. We do have the largest concentration of this for several hundred miles in any direction.
Falling wages have nothing to do with aggregate demand. How are wages falling? Unless you mean falling to zero, i.e. unemployment, which of course is different than wages.
It might be correct to say, aggregate demand is influenced by persistently high unemployment. Decimated might be a bit strong.
But still, it has nothing to do with falling wages. That is different and wages have held steady (some actually think they will rise in the near future due to something economists call *inflation*).
So JMM I take it you are taking issue with my statement:
“Aggregate demand is decimated by falling wages”
With the counter-argument that:
“Real wages are not falling for those who have jobs.” and [those who lost their jobs are] “Mostly bs internal folks, not marketers, replaced by “Bob” from Accountemps.”
So no impact on aggregate wages?
Believe what you want but your cherry picked population(s) aren’t going to save RE valuations. Only massive continued government intervention will slow the inevitable decline.
“That’s fine but I was speaking of fin svcs jobs here in Chicago. We do have the largest concentration of this for several hundred miles in any direction.”
I know but we still lag NYC, Charlotte, Minneapolis, San Francisco, Boston, etc. Yet Chicago is the 3rd largest U.S. city. So its underweighted on fin svcs.
Median HH income in KW:
http://factfinder.census.gov/servlet/SAFFFacts?_event=Search&geo_id=&_geoContext=&_street=&_county=60043&_cityTown=60043&_state=&_zip=60043&_lang=en&_sse=on&pctxt=fph&pgsl=010&show_2003_tab=&redirect=Y
Median in 60614 LP:
http://factfinder.census.gov/servlet/SAFFFacts?_event=Search&geo_id=86000US60043&_geoContext=01000US%7C86000US60043&_street=&_county=&_cityTown=&_state=&_zip=60614&_lang=en&_sse=on&ActiveGeoDiv=geoSelect&_useEV=&pctxt=fph&pgsl=860&_submenuId=factsheet_1&ds_name=DEC_2000_SAFF&_ci_nbr=null&qr_name=null®=null%3Anull&_keyword=&_industry=
We agree but 60614 is nowhere close to KW. But, if you carved out 800 homes from ELP, I am sure it would be similar, which is all that KW is (cherry picked houses right off the lake).
“It might be correct to say, aggregate demand is influenced by persistently high unemployment. Decimated might be a bit strong.”
http://www.calculatedriskblog.com/2010/01/cre-sign-of-times.html
(Note: Not the photographer but he does have a good name)
When referring to aggregate demand I thought it was inferred that I was also referring to aggregate wages. It doesn’t matter whether its the unit quantity or the unit price in my view when looking at a macro level, its still Result = P*Q, right? Or did HBS teach you differently? (and Dubya too)
You said nothing about aggregate wages. Aggregate demand decimated by falling wages. I just corrected you, again another raw nerve I touched.
“Believe what you want but your cherry picked population(s) aren’t going to save RE valuations. Only massive continued government intervention will slow the inevitable decline.”
What makes you think I care about supporting real estate valuations? I was just correcting your piss poor arguments and general demonstrable lack of knowledge.
“I thought it was inferred that I was also referring to aggregate wages”
Honestly, real wages is synonymous with per hour wages. It is one of the more watched economic statistics out there. So yes, I had thought that.
Don’t know what Dubya is. Didn’t go to business school (HBS or otherwise).
“your piss poor arguments ”
It appears your argument is the piss poor one:
“Real wages are not falling for those who have jobs.” and [those who lost their jobs are] “Mostly bs internal folks, not marketers, replaced by “Bob” from Accountemps.”
So everything is fine because those who still have jobs count and those who don’t have jobs don’t really count? LOL. If the investments don’t pan out maybe you too can work at the BLS.
Real wages not falling is tremendously important. You should know that.
“Wage drop is steepest since 1990
1.6% decline in ’09 squeezed workers’ spending power”
http://www.baltimoresun.com/business/bal-bz.cpi16jan16,0,5485406.story
Don’t let anything like reality or semantics distort your rose-colored view of the world.
Also why 9/10 investment managers aren’t worth their weight in salt vs. the SPY?
“Real wages not falling is tremendously important. You should know that.”
I only know how to spot a deceptive fool when I see one.
“Workers saw their inflation-adjusted weekly wages fall 1.6 percent last year – the sharpest drop since 1990 – even as consumer prices rose only modestly.”
“Mostly bs internal folks, not marketers, replaced by “Bob” from Accountemps.”
Funny but that was a specific comment from one company in response to your assertion that the sky is falling in CPG land. Actually, if you were on Mill’s last Q, they turned in an exception quarter. Commodity costs are down, defensive demand is up. Things are good there and lots of other places.
“Also why 9/10 investment managers aren’t worth their weight in salt vs. the SPY?”
I wouldn’t know as that isn’t my benchmark.
“Things are good there and lots of other places.”
I listened to some of these conference calls. They’re making money by cost cutting. They’ve cut thousands upon thousands of jobs. Revenue is not up year over year (not yet.) Commodities costs came down but are now rising again (sharply.)
The companies have gotten better at marketing. Cereal makers have shrunk the size of their boxes so that consumers think they’re “still” paying $5 a box when in reality it’s much higher because they’re getting less product.
These companies don’t have nearly the problems of the financial services and things are improving- but they’re still not great. It’s all relative- however.
“Commodities costs came down but are now rising again (sharply.)”
Really? Wheat prices look pretty damn flat to me. Perhaps you were referring to an article you read in the Baltimore Sun?
http://www.mgex.com/quotes.html?&page=chart&sym=MWH0
LOL. Whoops. Sabrina, what are you doing listing to conference calls?
Real Wages Continue to Fall
http://www.businessweek.com/the_thread/economicsunbound/archives/2008/11/real_wages_cont.html
Or that gossip rag Businessweek.
“Perhaps you were referring to an article you read in the Baltimore Sun?”
Wow. Crude prices are sharply higher. Perhaps I’m referring to the massive price increases that ExxonMobil is pushing through on most of its crude related chemicals on the 21st of this month? (not even waiting for the first of the month- which it normally is apt to do.)
And how about those sugar prices? Highest in 30 years or so, the last time I looked. But that wouldn’t have any impact on food manufacturers. None at all.
Just look away.
I own stocks. I actually listen to the conference calls of the companies I own. That’s what owners should be doing.
Its obvious JMM needs an MBA to be taken at all seriously!
Crude was beaten down during the dark days of Q109 — realistically, these are more reasonable levels. Plus, they encourage conservation, not something that was likely to continue in a robust was at $40 / bl.
Distillates just follow crude, so yeah I mean you’re looking at 2006 levels. But what about natural gas? That is a huge consumer break, especially in the midwest where most homes are natural gas heated. And, lots of bakeries consume more natural gas to fire ovens than any other commodity save for wheat. There are puts and takes here.
Funny you mention sugar, but dairy is the one input cost that has really had an impact on food.
Bob, you keep working on that temporary IT gig!
By the way- General Mills grew revenue by 1% over the first 6 months of fiscal 2010 (according to their press release in early December.) This isn’t horrible- considering what other companies were doing at that time.
But I wouldn’t call 1% revenue growth gangbusters either. These companies are recovering in certain areas (and certain parts of the world.) It’s going to take time.
So $80 a barrel is the new norm? That’s a new one on me. Last time we were ever at $80 a barrel was during the crude crisis of the 1970s. (other than in 2008 when we were hitting new multi-decade highs.)
Anyone with a crude based product is getting hammered (think vaseline, chapstick, hair products, etc. etc.) It’s in almost everything.
“Bob, you keep working on that temporary IT gig!”
Hey Jr. Fund Analyst if you ever need a recommendation to UPhoenix (not sure if they require them or not) I’ll be happy to oblige. But only if you invite me to the next CS Style party down in the Gold Coast. My attire might not be up to par with my PBR wifeknocker but remember ol’ Bob next time down there you Big Swingin’ Jr. CFA you. 😀
IT folks are actually much more pleasant to work with than finance people, generally–they don’t have an insatiable need to prove they can talk like talking heads on TeeVee babbling about nonsense that has little correlation to market moves.
Think the market was pretty pleased. 6 month chart has a nice relative strength index.
Most CPGs have hung in there well. The people they have been cutting tend to be ancillary to their core performance (people like Bob). And, a lot of that is done — cost structure is right sized. I’d guess that the successful core business folks are enjoying relatively good stable career progressions with decent COLA increases and bonuses that are at or above targets.
Bob I don’t run public money. Its all alternative investments and derivs.
Actually – the IT guys are the only ones able to get jobs right now (anecdotally, that I’ve heard about, at least.)
“Anyone with a crude based product is getting hammered (think vaseline, chapstick, hair products, etc. etc.) It’s in almost everything.”
Crude prices are up on revised global GDP right? China? So, it signals a global recovery is underway.
“The people they have been cutting tend to be ancillary to their core performance (people like Bob)”
Its obvious you don’t work in or near said companies, but perhaps listen to a lot of conference calls. What you state is again far from the truth.
You don’t really have any idea what people they have been cutting, nor whether I am one of them. But I am thrilled that you believe they are like me–as your wages aren’t falling call I believe to be a good leading indicator of your predictive ability.
“in or near”
LOL.
“Crude prices are up on revised global GDP right? China? So, it signals a global recovery is underway.”
No. Crude is sitting in tankers around the world because there is no demand. Crude prices are rising because the free money that is being printed is going into commodities. Crude should be around $30 to $40 a barrel. Look at the crude shippers (a much better indicator.) They are all hurting. Shipping rates have collapsed and are (so far) not coming back.
I’m sorry but I disagree with you. Crude has become a leading indicator for output (which is sensible as prices are traded on a futures basis). Physical delivery has become a secondary consideration.
And, there was plenty of free money around when crude collapsed as well.
“And, there was plenty of free money around when crude collapsed as well.”
There was? Best I remember in late 2008, early 2009 hedge funds were getting record number of requests from customers who wanted their money out of funds (for good reason). What did they have to do? Liquidate positions. What were they invested in? Crude. What went down in price as they liquidated? Crude.
Seems pretty easy to figure out to me.
Crude hasn’t been a leading indicator of economic strength (or weakness) in several years (not since all the funny money has gone into it.) If it was- then we should have seen the best global economy EVER in July 2008 when crude reached record highs. Instead, the recession had already basically begun.
That’s why I said- you have to look at the shippers. They’ll tell you when the recovery is underway. Right now, they’re not telling an optimistic story.
Actually the unwind in crude wasn’t driven by redemptions. Cheap money continued to exist throughout that entire period.
“What were they invested in? Crude.”
Some broad strokes there Sabrina. Actually the dollars indexed against the credit markets massively outweighed (and currently outweigh) all commodity contract volume. As the dominoes fell, there was a serious lack of liquidty in even the most liquid credit markets (such as commercial paper and even interbank overnight repos). In some cases, funds were actively invested in these markets. Some of this came in the form of carry trades by borrowing cheap short term and making direct investments in mid-long term tenored fixed income. CP markets were an important funding source which completely disappeared. In many cases this was the “cash and cash equivalents” that funds had sitting on the sidelines that all of a sudden became illiquid. That is what “hedge funds were invested in” and it took the U.S. govenment’s intervention to reopen the most simple of credit markets (e.g., guarantees on the commercial paper mkts and repos).
Lets suppose that hourly workers have maintained the same hourly wage but their hours have been cut. Does that count as falling wages? Almost every hourly worker I know made less in 2009 than 2008. JMM you are a smart Guy but don’t confuse massaged stats for what’s happening in the trenches. Its brutal out there and any recovery is nothing more than a slow down in the cliff diving.
“And acutally, the house was $1.675M (sorry). Said individual put down 20%. Probably has 300k to 500k the last few years of his W2, so perhaps he got comfortable with it.”
Actually, $1.625mm. Another nice Mangan project. $1mm first and $300k 2d.
And I sure as hell hope that all of that firm hopping by that troika (and attendant bad feelings in their wake) has netted said individual K-1s (not w-2s) of better than $500k the last few years. Good guys, if you haven’t been affected by the hopping.
“Actually, $1.625mm. Another nice Mangan project. $1mm first and $300k 2d.”
Sorry, anon, this was all from memory, I didn’t bother to pull it. And you are right, K-1s. But one has to wonder why he is financing a 300k second that is i) not tax deductible and ii) has to be L+700 or more. Shows me that liquid net worth is lower than I would expect.
“Sorry, anon, this was all from memory, I didn’t bother to pull it. And you are right, K-1s. But one has to wonder why he is financing a 300k second that is i) not tax deductible and ii) has to be L+700 or more. Shows me that liquid net worth is lower than I would expect.”
Nothing to be sorry about. I checked b/c (1) while I was pretty sure which house you were talking about, I couldn’t remember the price and (2) curious who it was who bought, not haveing looked before.
In his shoes, I’d consider opening an LOC at closing, for less-expensive-than-unsecured-line short-term financing of q’ly taxes ($50k+ payments are tough on the cashflow). I don’t know why everyone always assumes that *every* 2d mortgage at closing is a fully drawn loan (although here I would bet that at least some of it was drawn at closing).
As you correctly point out, this is new money coming in so it’s likely drawn 100%. It very could be a revolver drawn 100% that gets paid down when the participation hits (not sure how the legal community does it). Sort of the personal finance equivalent of a bond anticipation note.
I do want to learn more about Alliant (HD chimed in with some info on them) but I have seen their assets showing up more in ultra jumbo financings recently to high income credits (lawyers, doctors, corporate chieftains). Its a pseudo credit union which anyone can really join and seemed like an interesting financing source for stretch buyers of $1M+ properties.
The Leavitt house was a good seemingly well-built one but that price point is very rich for the neighborhood (evidenced by the other property sitting across from St. Bens). Resale will be tough, so you have to figure he is in for the very long term.
“Resale will be tough, so you have to figure he is in for the very long term.”
One would expect at least until oldest kid hits 9th grade. And, so long as he can tolerate a loss, he could re-sell it today w/o going short.
I do agree* that anything more than purchase is v.v. unlikely (at least in real $$) in any year that starts 201.
*as I am not a fool.