How Low Will They Go? A 2/2 With Parking for Under $125K in Lakeview: 3900 N. Pine Grove
We last chattered about The Coronado at 3900 N. Pine Grove in Lakeview in December 2009 when a 2/2 was on the market for $212,000.
See our December 2009 chatter here.
At that time, the unit, #708, was in short sale. It had a renovated kitchen and hardwood floors.
Some of you thought the price of $212,000 was a deal and that it would sell within a few months.
It finally closed in August 2010 for $202,000.
Currently there is another 2/2 on the market which has been reducing its price frequently in recent weeks so that it is now listed under $125,000.
Unit #201 is a 1000 square foot 2 bedroom, 2 bath with carpeting.
It is a southeast corner unit.
The kitchen has white appliances but is not updated like Unit #708’s was.
There is an in-unit washer/dryer and deeded parking included but no central air- only wall units.
The building was built in 1985 but was converted to condos in 2005. It has 101 units.
There is an indoor swimming pool.
Is this a deal?
Micahel Stark at Keller Williams has the listing. See the pictures here.
Unit #201: 2 bedrooms, 2 baths, 1000 square feet
- Sold in July 2005 for $258,500
- Was listed in April 2010 for $269,900
- Reduced
- Was listed in October 2010 for $249,900
- Reduced numerous times
- Currently listed for $124,900 (parking included)
- Assessment of $374 a month (includes heat, gas, cable, pool)
- A special assessment is mentioned in some of the other listings in the building
- Taxes of $4500
- No central air- wall units only
- Washer/Dryer in the unit
- Bedroom #1: 14×14
- Bedroom #2: 12×10
Deal. The sellers must be trying to set up a bidding war.
This might not be anybody’s idea of a beautiful apartment, but it’s decent and comfortable, and a real value for someone who wants to buy in Lakeview. The kitchen could be greatly improved by walling in that ridiculous little “window” and installing a sleek u-shaped cabinet set with built in appliances. You’d have more counter space and cabinet space and it would actually feel less cramped, not more.
Agree with Laura. I would try to lower the property taxes. kitchen could be improved.
I have to agree…while not everyone’s idea of an ‘dream home’ it could easily be greatly improved with around $25k. Instead of walling in that pass through, I would tear out the wall and extend the kitchen to meet the bdrm hallway opening to feature an island to greatly increase the space.
The bath is an easy enough fix…additon of some color to define the areas and some Armstrong-type faux hardwood flooring would complete what would be a fantastic starter apartment for a young couple or single with room to grow.
It is these types of places…DIYers that should be invested in to give some traction on the market rebound trail. With very livable places like this coming on the market and at these great prices, an optimistic outlook on the RE market is now more realistic.
I would think this would be a good rental property for a cash buyer. The parking alone has to be worth $20,000.
“With very livable places like this coming on the market and at these great prices, an optimistic outlook on the RE market is now more realistic.”
It was always realistic to be optimistic about this inevitable market correction, even in the darkest days of the bubble.
Another lowball price just to bring out the birders. Won’t sell for 125k.
Umm, bidders. Stupid auto-correct on the iPad.
“Instead of walling in that pass through, I would tear out the wall and extend the kitchen to meet the bdrm hallway opening to feature an island to greatly increase the space.”
Agree with you on this improvement. Even though this kitchen may have a blank wall, even one electrical chase or telephone or cable chase feeding other units above can add many $$$s. Upgrading a kitchen can also kick in building code upgrades (for example more kitchen outlets, or a new electrical breaker) that can add $$$ and make the project more complex. Been there, so look before you leap or make assumptions.
“Deal. The sellers must be trying to set up a bidding war.”
Wouldn’t this have been a “deal” two weeks ago at $139,900?
Is it simply because it’s now listed under $125k that it’s suddenly a “deal”?
I could understand trying to get a bidding war if it came on the market listed at this current price. Or if 2 weeks ago it was listed at $200k and now they dropped down to $125k. But wouldn’t someone who was interested at $139k just have made an offer then? They’ve been lowering the price on this one for months now.
Heh! I rather like the idea of a bunch of people with binoculars and notepads circling this well priced 2/2.
I looked at this building back in the spring of 2005. I remember really liking it, however at the time it was a bit over my price range so I couldn’t do it. A co-worker of mine did wind up buying a 2/2 here in early 2006. I remember him telling me about all the probelms with the pool and I believe the parking lot too. The association got stuck with having to fix many things the developers screwed up. After hearing about what my friend was going through I’m glad that I didn’t buy here. The listing mentions a special assessment, perhaps they are still paying for the problems.
S, did you forget that the “Spring selling season” starts on Monday? Of course, you have to pay more now or else be priced out forever!!!!!
yeah this is a deal, this place sucks but would rent for 1500 EASY. probably starting a bidding war
“Upgrading a kitchen can also kick in building code upgrades (for example more kitchen outlets, or a new electrical breaker) that can add $$$ and make the project more complex.”
Notice I mentioned DIY in my post and did not advise anyone to do this to the extent you mentioned. It is relatively simple to do the improvments I stated without having to get so deep as to extend it to messing with additional electrical / phone outlets or building code level rehab.
Sure it might make sense to go to your extreme, but for a quick fix you can do without.
“It was always realistic to be optimistic about this inevitable market correction, even in the darkest days of the bubble.”
I am not speaking in general market terms, but more for those who have been waiting for prices like this to actually jump off the cliff and actually buy.
It’s not where I would want to live, but I definitely think it’s a deal. I’m also surprised at the pricing strategy of making significant (7-10%) price reductions every two weeks. I’d have thought that this would have had a good chance of going for at least $150,000 (perhaps lower if the special assessment is very large).
Sabrina – the drop is a pretty significant % move. If I had my search set for $125 I’d not have considered the $139 property.
While not exact I’ve had this happen to me before when searching for garage parking, I was excluding places that had space to build a garage and were priced low enough that I could use the extra cash to build one.
So, I think it’s become a deal by this type of drop – perhaps not a feeding frenzy drop but enough to open up to more potential buyers. Plus hey – down payment changes from 28k to 25k which also helps. Tough to save as HD points out.
“Sabina – the drop is a pretty significant % move. If I had my search set for $125 I’d not have considered the $139 property.”
Then you wouldn’t bid it over ask, either, if you were locked into that limit.
“actually jump off the cliff and actually buy.”
Like Wile E Coyote?
This price and the aggressive reductions make no sense to me. I would like to know what is the special assessment before saying this is a deal. Something is up.
Spinoza said it best yesterday: “Every time you are reducing the price, you are hitting the max of someone else’s price point.”
To someone who can only go as high as say $125/$130, another $10K could be a scary amount — Not to an investor or savvy experienced homebuyer, but perhaps to a newbie.
Just look at the price history, they aren’t looking for a bidding war, they just wanna get rid of this.
Bidding wars are so aughties. Patience is the new black.
Can not say there are many 2/2 under $125K in the surrounding area. I was unable to locate a single unit that was not a garden apartment in 60613, 60657, 60614 or 60618.
It could be low because you can’t rent it out. Lots of associations are putting rental caps in place because they are reaching 30 percent. If you exceed 30% you can’t get conventional financing and no one can sell. Thus, this may not be an attactive property for an investor even if its cash flow positive.
that would be a twist. negative ownership premium. is painting the walls no longer in big demand.
“negative ownership premium”
Isn’t that the way condos are when times are not bubbly?
“It could be low because you can’t rent it out. Lots of associations are putting rental caps in place because they are reaching 30 percent. If you exceed 30% you can’t get conventional financing and no one can sell. Thus, this may not be an attactive property for an investor even if its cash flow positive.”
This exact scenario is happening in a building in Lakeview that I own a 1/1 in. The association put a rental cap in back in 2006, only 8 of the 48 units can be rental. Thankfully I’m grandfathered in since I rented out my unit from the start. People wanting to sell thier condos now can’t sell to an investor, they have to sell to an owner who’s going to live there. This really lowers the value and some of the units are now listed for sale well below rental parity. Nothing in the building is moving. Should the board have a responsibility to protect owners values by changing the rental cap?
It says it’s a short sale so while they may be lowering the price on the listing to get the attention of lower end buyers, it’s still no guarantee that the bank will accept any contract at that price. The same thing has been happening in my own townhome community, where one unit is currently listed at 99,000 (they should get at least 150K) but the bank turned down offers as high as 144,000 when it was listed for more. They won’t sell it for this low.
Also this 2/2 which had been renovated as mentioned earlier sold a year ago for $299K. That’s a big profit if you could get the place for $125K.
http://www.redfin.com/IL/Chicago/3900-N-Pine-Grove-Ave-60613/unit-801/home/12598562
The special on one of the 1/1 listings is stated as 13,000. So probably more for the 2/2s.
“Isn’t that the way condos are when times are not bubbly?”
I honestly didn’t know this. historically it is generally cheaper to buy condos than to rent? is it bc the downside of owning (special assesment, increasing taxes) outweighs the upside (pride of ownership, wall painting)?
you know what is cool about owning a condo?
I haven’t had to shovel a flake of snow all winter!
priceless!
At this price, it is worth buying and renting out just for the tax write-off!
Chris, and others,I’d be interested in hearing more and how it turns out. My condo association had a motion last year to limit the number of rentals so buyers/sellers wouldn’t be limited in their financing options.
A year or so later we realized that if owners come into some type of hardship and cannot rent their units, they might just walk away. So what is the better approach?
This is an undesirable and dated unit with an uninspiring layout in a lower tiered building on a less than prime block. I am very familiar with this locale. I wouldn’t be surprised if even updated units started selling in the $100’s sometime later this year. $125,000 is a ‘deal’ if only it were compared to 2005 pricing. You people just don’t see it, do you, real estate in Chicago will be cheapity cheap and it will fall to price levels beyond your wildest dreams. That will be one of the benefits of living in the area, is cheap housing with relatively high incomes and high paying jobs. the standard crap 2/2 on a crappy block will be hard to give away. sure the unique properties with some character and class will be more expensive, they always are. But units like this area dime a dozen on the north side all way from roosevelt to the lake to irving park road.
If you want to live there for six or seven years, this is a good price. Tough for recent buyers at much higher prices, but good to see more affordable housing. Plus there is less risk of loss at these lower prices.
Chris, and others,I’d be interested in hearing more and how it turns out. My condo association had a motion last year to limit the number of rentals so buyers/sellers wouldn’t be limited in their financing options.
A year or so later we realized that if owners come into some type of hardship and cannot rent their units, they might just walk away. So what is the better approach?
Exactly Chris, if units cannot get financing b/c the rental rates are to low, this will drag down value too. Possibly more…b/c what is worse never being able to sell it or not being able to rent it. Probably worse if you can’t sell. If underwater owners want to rent, but can’t due to caps (though many buildings have hardship exceptions), they can always try to short sell (and lender eats the differnce). If you can’t sell b/c no one will lend to the buyer b/c rental rates are to high…you just walk away. Walk aways and foreclosures are worse to a buildings value than short sales. Remeber, that if you can’t get financing you lock in many who are underwater and are struggling. The answer is not always allowing rentals b/c what if renting it leads to a negative cash flow (having to supplement rent to cover mortgage, assessments and taxes). Supplementing rent is only doable for so long…then you need to sell. If you can’t sell b/c rental rates are too high, your screwed and your only option is to walk away. Better to have rental caps in place …and allow hardship exceptions but keep rental rates below 30% so that new purchasers can get financing.
Your advice is lost on the seller who has been living there nearly six years.
Maybe if he lives there 7 years instead of 6 years the market will come roaring back?
I laugh everytime I hear the ‘you’ll be OK if you live there 6 or 7 years’
I totally reminds me of the now infamous advice from realtors, bankesr and mortgage brokers alike: “you can either refinance or sell in 4 or 5 years when your ARM adjusts” ….Hahahaha
# Sold in July 2005 for $258,500
“swill on February 3rd, 2011 at 10:54 am
If you want to live there for six or seven years, this is a good price.”
“It says it’s a short sale so while they may be lowering the price on the listing to get the attention of lower end buyers, it’s still no guarantee that the bank will accept any contract at that price. The same thing has been happening in my own townhome community, where one unit is currently listed at 99,000 (they should get at least 150K) but the bank turned down offers as high as 144,000 when it was listed for more. They won’t sell it for this low.”
This is correct. It is funny to see some people here scoffing at these listed prices, only to have the units sell for much more. I personally have made 2 cash offers above asking on CC listed properties, and I did not get either one. I am on my third one now.
And so continues the downward spiral of prices on it’s inevitable march to affordability. Imagine the future ‘deals’ available to Gen Y when they finally decide en mass to purchase! Did you ever once believe that the grossly indebted & systemically underemployed Gen Y was going to bail out the bubble purchasers?
“Exactly Chris, if units cannot get financing b/c the rental rates are to low, this will drag down value too. Possibly more…b/c what is worse never being able to sell it or not being able to rent it. Probably worse if you can’t sell. If underwater owners want to rent, but can’t due to caps (though many buildings have hardship exceptions), they can always try to short sell (and lender eats the differnce). If you can’t sell b/c no one will lend to the buyer b/c rental rates are to high…you just walk away. Walk aways and foreclosures are worse to a buildings value than short sales. Remeber, that if you can’t get financing you lock in many who are underwater and are struggling. The answer is not always allowing rentals b/c what if renting it leads to a negative cash flow (having to supplement rent to cover mortgage, assessments and taxes). Supplementing rent is only doable for so long…then you need to sell. If you can’t sell b/c rental rates are too high, your screwed and your only option is to walk away. Better to have rental caps in place …and allow hardship exceptions but keep rental rates below 30% so that new purchasers can get financing.”
“Your advice is lost on the seller who has been living there nearly six years.”
But when they bought six or seven years ago, it was NOT a good price. Even without hindsight. Anyone with half a brain knew it was a bubble then, it was just hard to predict how high the bubble would go before it burst. It was a buy high, sell higher market.
It is the same as any market (like the stock market). During the internet bubble, you could make money by buying high and selling quickly (flipping), but the smart people were not “investing” at naz 5000. When the market melted down in 2008, and the s&p was at 666, those same smart investors were saying “its a good price now if you can hold for 6 or 7 years”. And it was.
Timing is everything. Real estate is NOT always a bad buy.
Catching a falling knife isn’t easy – gravity causes it to fall so damn fast…
“#chukdotcom on February 3rd, 2011 at 11:01 am
“It says it’s a short sale so while they may be lowering the price on the listing to get the attention of lower end buyers, it’s still no guarantee that the bank will accept any contract at that price. The same thing has been happening in my own townhome community, where one unit is currently listed at 99,000 (they should get at least 150K) but the bank turned down offers as high as 144,000 when it was listed for more. They won’t sell it for this low.”
This is correct. It is funny to see some people here scoffing at these listed prices, only to have the units sell for much more. I personally have made 2 cash offers above asking on CC listed properties, and I did not get either one. I am on my third one now.”
Again, the advice to hold for six or seven years is lost on the seller..
seller: “you meant to tell me that I timed the six or seven years WRONG? That’s not what my realtor/banker/broker/friends/family/mortgage broker/contractor/wife said when I bought in 2005!”
“Timing is everything. Real estate is NOT always a bad buy”
“Catching a falling knife isn’t easy – gravity causes it to fall so damn fast…”
Again, the same thing was said about the stock market on its way from 1200 to 666. Sure, few bought the absolute bottom. But even if you “caught a falling knife”, if your time horizon was sufficient (like 6-7 years), you do not need to catch the absolute bottom.
So what if you buy this place for 125k and it goes to 100k? I believe (and you are free to believe differently, neither one of us is “right”), that in 6-7 years it will be higher than 125k. Only time will tell, and all the blustering in the world right now will not prove either of us right.
“Again, the advice to hold for six or seven years is lost on the seller..”
Huh? Who gave that advice six or seven years ago? That’s like telling people at naz 5000 that you can buy and hold for 6 or 7 years. Good advice at a bad time is bad advice.
If you listen to stupid people, you get stupid advice. There were plenty of intelligent people telling people NOT to buy in 2005.
I’m confident that I’m ‘right’.
As you said above, “Anyone with half a brain knew it was a bubble then” and anyone with half a brain now knows that prices on, as I said above, an “undesirable and dated unit with an uninspiring layout in a lower tiered building on a less than prime block” will sell for peanuts. I still think $125,000 is too high and in a couple of years when we revisit units in this building, you will be *shocked* at the prices they’re selling for.
“#chukdotcom on February 3rd, 2011 at 11:12 am
“Catching a falling knife isn’t easy – gravity causes it to fall so damn fast…”
Again, the same thing was said about the stock market on its way from 1200 to 666. Sure, few bought the absolute bottom. But even if you “caught a falling knife”, if your time horizon was sufficient (like 6-7 years), you do not need to catch the absolute bottom.
So what if you buy this place for 125k and it goes to 100k? I believe (and you are free to believe differently, neither one of us is “right”), that in 6-7 years it will be higher than 125k. Only time will tell, and all the blustering in the world right now will not prove either of us right.”
Nothing is ever going to be truly “cheapity cheap” here if the property taxes on a unit like this remain almost $400 per month or more.
Did anyone notice how they opening up the ceiling on the rehabbed unit? I think the extra few inches of head room is a big improvement, but I wonder if anyone here thinks that was a mistake. My #1 grip with buildings from this era are the low ceilings. This is the first time I’ve ever seen one where they’ve torn it out to reveal the beams.
I did not say you can pay any price if you plan to stay 6 or 7 years, I said this looked like a good price, if I wanted to live in this building for 6 or 7 years. This will allow you to pay down the mortgage to cover transaction costs if you sell for $125k at that point. Also, I did not say no risk of loss, just less risk of loss, than say someone who paid 299k.
who gave that advice years ago? everyone of course. Did the prudent or lucky avoid the bubble entirely? yes.
the going strategy for stocks has always been ‘buy and hold, buy and hold’.
For every seller at the top, there is a buyer. so even at the top, at least 1/2 of all shares of stock sold are purchased by someone who has a differing opinion of when the top or the bottom is.
“#chukdotcom on February 3rd, 2011 at 11:14 am
“Again, the advice to hold for six or seven years is lost on the seller..”
Huh? Who gave that advice six or seven years ago? That’s like telling people at naz 5000 that you can buy and hold for 6 or 7 years. Good advice at a bad time is bad advice.
If you listen to stupid people, you get stupid advice. There were plenty of intelligent people telling people NOT to buy in 2005.”
“I’m confident that I’m ‘right’.”
You may be confident, but it doesn’t mean anything. Only time will tell. While this unit is probably not the best example for the reasons you listed, there are plenty of others that are very likely to be higher 6-7 years from now. 2-3 years? Maybe not. Some prefer to “catch a falling knife” on the way down, and some prefer to chase up from the bottom. What does it matter if you buy this at 125k and it goes to 100k, vs the guy who doesn’t buy now and then buys at 125k up from 100k. Who knows what rates will be then, etc. Unless you have the ability to predict the absolute bottom in advance.
Hindsight is 20/20 and I know tons of stock market doomsayers that were always “waiting for the bottom” and completely missed it. Now it’s “too late” for them to get back in.
When you’re cryin’, you should be buyin’. When you’re yellin’, you should be sellin’. There are plenty of Chicago condo owners crying right now.
The specials, the assessments and taxes are high enough that the principal and interest will low. There’s only so much money in the average purchaser’s budget. if you stretch them too far, like 1999-2008, you get situations like this, short sales, and other foreclosures, walkaways. it’s when the overall payment is low enough to justify staying will people choose to stay.
“Danny on February 3rd, 2011 at 11:18 am
Nothing is ever going to be truly “cheapity cheap” here if the property taxes on a unit like this remain almost $400 per month or more. “
“For every seller at the top, there is a buyer. so even at the top, at least 1/2 of all shares of stock sold are purchased by someone who has a differing opinion of when the top or the bottom is.”
Right. There are smart people and stupid people in this world. It’s not random.
The days of buy and hold in ANY market are gone. When you have such wild price swings in compressed periods of times, only a fool doesn’t take advantage of it. The reality is, the world is full of fools. But that doesn’t mean everyone is.
“That’s like telling people at naz 5000 that you can buy and hold for 6 or 7 years.”
no, its not… 2006 was the real estate equivalent “nasdaq 5000 point”
we are at the “nasdaq 1800 point” circa april 2002
“no, its not… 2006 was the real estate equivalent “nasdaq 5000 point””
Right, that is what I said.
“we are at the “nasdaq 1800 point” circa april 2002”
I agree.
Well if the $125k unit drops to $100; and if the buyer put only 3.5% down FHA, that puts them more than 20% underwater, which statistically, is the most important component of the walk-away theory, which basically states that 20% underwater PLUS one life event (loss of job, special assessment, divorce, child birth, medical expense, other unexpected expense) is the greatest most accurate predictor of foreclosure.
“When you’re cryin’, you should be buyin’. When you’re yellin’, you should be sellin’. There are plenty of Chicago condo owners crying right now.”
i never bought that theory. how did that work for pets.com? or much of south side real estate (englewood roseland lawndale used to be nice but everyone was crying). if everyone is selling, there is a reason.
“What does it matter if you buy this at 125k and it goes to 100k, vs the guy who doesn’t buy now and then buys at 125k up from 100k.”
HD – your arguments are like swiss cheese
then enlighten me.
“#Sonies on February 3rd, 2011 at 11:38 am
HD – your arguments are like swiss cheese”
“There’s only so much money in the average purchaser’s budget. if you stretch them too far, like 1999-2008, you get situations like this, short sales, and other foreclosures, walkaways. it’s when the overall payment is low enough to justify staying will people choose to stay.”
So what does that mean for buildings like River City where values are ridiculously low and assessments keep climbing astronomically? Values stop at zero, but there’s no (for practical purposes) cap on assessments. Is the end-game teardown?
Tear down? probably not, more like abandonment i.e. areas of the south and west sides.
but realistically, I don’t know if the assessments & taxes are so high that the value has become less than zero. it does happen, look at many properties on the southside that the banks give away for $1. I don’t follow river city that closely.
“#EJ on February 3rd, 2011 at 12:02 pm
“There’s only so much money in the average purchaser’s budget. if you stretch them too far, like 1999-2008, you get situations like this, short sales, and other foreclosures, walkaways. it’s when the overall payment is low enough to justify staying will people choose to stay.”
So what does that mean for buildings like River City where values are ridiculously low and assessments keep climbing astronomically? Values stop at zero, but there’s no (for practical purposes) cap on assessments. Is the end-game teardown?”
“i never bought that theory. how did that work for pets.com?”
You can apply exceptions to everything. You need to look at the “market” in total (real estate, stock, oil, whatever). I would bet that on average, prices will be higher 6-7 years from now than they are today. I would not (and did not) say that in 2005. Is today the bottom? Doubt it. Will EVERY home be higher? Doubt it.
How many people will really buy “the low”? Very few. And the perma-bears will miss the bottom entirely, and rent for the rest of their lives (and yes, that is a bad thing).
I think a more moderate point to make here, since we are fundamentally arguing about calling the bottom, is whether your particular risk tolerance puts you in a position where you would rather buy now because you think the risk of further declines is worth the utility you get from the home, or would you rather (in my case) keep paying rent (a put option) to avoid a potentially large decline?
I still feel like we are in unchartered territory, and I won’t seriously consider buying until I see a few consecutive quarters of price increases using a comp method for the types of properties in my budget. I don’t think CS helps much for individual decision making, but more-so for taking the market’s temperature “yep, still sick.”
Three flats, duplexes, and other properties that actually cash flow are a different animal, and I think represent smart moves for those wishing to diversify or hedge inflation using someone else’s money.
I think perma-bears are exponentially happier about missing the top than missing the bottom.
why is renting bad? it’s stupid arguments like “rent is bad, buy is good” that fed the mania in the first place. renting provide a roof over my head, and it is substantially cheaper than buying an equivalent place. I put the difference in the bank like so many others do. Being cash poor but house rich is a recipe for disaster. Will I buy someday? Sure, when the time is right, when the homes I want are within my budget, and when i feel there is low probability that housing prices will continue their precipitous decline. Will I wait a while? of course, but patience and prudence are two virtues; and the ‘perma bears miss the bottom and rent for the rest of their lives’ is not really an argument, it’s a scare tactic.
“How many people will really buy “the low”? Very few. And the perma-bears will miss the bottom entirely, and rent for the rest of their lives (and yes, that is a bad thing).”
“I won’t seriously consider buying until I see a few consecutive quarters of price increases using a comp method for the types of properties in my budget.”
And that puts you in the “buy on the way up” category. And there is certainly nothing wrong with that. But the reality is, you will probably pay the same price as the “knife catchers” did on the way down. But you probably sleep a little better at night.
Another issue is, when markets are on the rise, it starts to turn from a buyers market into a sellers market. You may not have the same selection/choices available to you. You may find yourself losing out on properties because someone else bid 5k more. Even if you are willing to buy, you might find it harder to actually get your offer accepted. It is easy to get into a position where you are “chasing”. And of course by “you”, I don’t mean you in particular.
Different strokes/different folks.
they’re selling like johnny’s hot cakes which makes me believe there might be a bubble in them too. as more and more older dated two flats go onto the rental market, rents depress, which lowers the price of future multi-units sold.
“Three flats, duplexes, and other properties that actually cash flow are a different animal, and I think represent smart moves for those wishing to diversify or hedge inflation using someone else’s money.”
you “may find yourself losing out on properties because someone else bid 5k more.” That’s hilarious.
There are twice as many mortgages 90 days + late right now, not yet in foreclosure, than there are properties currently in foreclosure. 1 in every 8 mortgages in the country is at least 30+ days late. the average bank of america foreclosure takes 503 days. The estimates of the shadow inventory range from 3,000,000 to 7,000,000 depending on who you talk to.
I wouldn’t be too concerned about missing out on a property because someone else bids $5,000 more. if you think there are deals today, there will be even better deals tomorrow. simply think of all the boomer retirees looking to sell and downsize in the next 20 years. Does the gen Y buyer really have that extra $5,000? hahaha
your ‘arguments’ are really just scare tactics worthy of the NAR.
“Another issue is, when markets are on the rise, it starts to turn from a buyers market into a sellers market. You may not have the same selection/choices available to you. You may find yourself losing out on properties because someone else bid 5k more. Even if you are willing to buy, you might find it harder to actually get your offer accepted. It is easy to get into a position where you are “chasing”. And of course by “you”, I don’t mean you in particular.”
It will be hard to miss the bottom of this real estate correction. The comparison to stock and commodities market turnarounds is useless. This RE correction will offer bottom prices for years.
“There are plenty of Chicago condo owners crying right now.”
There are even more to come.
“I think perma-bears are exponentially happier about missing the top than missing the bottom.”
Why is everything extremes? Not everyone bought at the top. Some people bought in 2001 and are perfectly happy.
“why is renting bad? it’s stupid arguments like “rent is bad, buy is good” that fed the mania in the first place.”
It’s not bad. In the short run. Renting for life is bad. Renting when the market is frothy (i.e. 2005) is good.
“Will I wait a while? of course, but patience and prudence are two virtues; and the ‘perma bears miss the bottom and rent for the rest of their lives’ is not really an argument, it’s a scare tactic.”
They don’t ring the bell at the top, and they don’t ring it at the bottom either. And it is no scare tactic. I know many people that live their lives that way.
BTW, how long have you been waiting? Just since the bubble, or all the way back to 1998?
Also, how is your advice that prices will be lower in 6-7 years different than people who said they would be higher in 6-7 in 2005? When the stock market bottomed out, there were plenty of people still calling for lower prices.
You can look back in history and find MANY time periods where real estate was a smart purchase with a 6-7 year horizon. It just doesn’t mean EVERY 6-7 year period.
“There are twice as many mortgages 90 days + late right now, not yet in foreclosure, than there are properties currently in foreclosure.”
Right. And prices are still on the decline. I can guarantee you that won’t be the case when prices are on the rise.
“I wouldn’t be too concerned about missing out on a property because someone else bids $5,000 more. if you think there are deals today, there will be even better deals tomorrow.”
I’m not talking about today. I’m talking about tomorrow. There are few bidding wars, etc now. But rest assured, when the real estate market does recover (whenever that is), people will chase prices up again.
If you didn’t buy on the way down, or at the bottom, you will find yourself chasing prices up. It’s how markets work.
““There are plenty of Chicago condo owners crying right now.”
There are even more to come.”
Sure, and at S&P 800, there was more plenty more downside to 666. It’s at 1300 now. Were buyers at 800 on the way down “wrong”?
“Sure, and at S&P 800, there was more plenty more downside to 666. It’s at 1300 now. Were buyers at 800 on the way down “wrong”?”
Who cares? What does that have to do with the current state of the real estate market?
“Who cares? What does that have to do with the current state of the real estate market?”
Everything. And if you don’t know why, you never will.
OOOOOHHH, really scorched me with that one.
Right HD, but if it cash flows, it cash flows, and should provide some reasonable ROI for someone who did the math ahead of time.
I avoided a calamitous RE purchase in summer of 2005 in an “up and coming” neighborhood on the East coast that would have wrecked us financially if not for a bad home inspection report. I bought into the bubble mentality, as I was convinced I was being priced out of ownership for the rest of my life. I expected that 300k place to be 400k in 5 years, instead its now a $175k place. I was putting 5% down and planned on an 80/15 LIBOR + 75bps with Wachovia.
Thank god I didn’t buy it. Since then I’ve enjoyed my geographic mobility by investing in my own and my wife’s career, and have had to rent. No problemo. I don’t think we would have gone under, but we’d be digging for a long long time, and not happy with where we lived.
For these reasons, I learned a lot about my risk profile. In a few more years, we will really see what happens to many of these 2/2 owners all over the North side who are either stuck, short selling, or bringing money to the table when their family needs expand. Heck, it could be really good for local schools if more people are forced to stay.
“OOOOOHHH, really scorched me with that one.”
I’m not trying to scorch you. I’m trying to inform you.
“Thank god I didn’t buy it. Since then I’ve enjoyed my geographic mobility by investing in my own and my wife’s career, and have had to rent. No problemo. I don’t think we would have gone under, but we’d be digging for a long long time, and not happy with where we lived.”
And you were smart, it was the right thing to do at the time. Just like when you decide to buy, it will probably be the right thing to do at the time.
don’t mind G, he’s the “smartest person in his room”
“I’m trying to inform you.”
LOL. About the stock market? On a RE blog? You have to know you are stating the obvious when sonies parrots you, right?
“LOL. About the stock market? On a RE blog? You have to know you are stating the obvious when sonies parrots you, right?”
Nope. About markets.
So, nothing that isn’t just obvious, but useless as applied to the current RE market, too?
I passed the bar in the early 2000’s. So, by the time I was in any position to purchase, the bubble was well underway. So in that sense I lucked out; i will admit that in the late 90’s I had no idea we were in the beginning of a RE bubble. But i had plenty of time to drink the kool-aid during the mid- to late 2000’s.
i remember being at a RE closing in 2004 and the lawyer and the realtor for the seller were like “you have to get onto the RE elevator” and i remember distinctly thinking “my buyer makes less money than me and yet he purchased a crappy condo on the north side for more money that I would ever feel comfortable doing.” I laughed at the other lawyer and said, “we’ll see how this ends.”
I told a mortgage broker in 2006 that Fannie Freddie were the next to go bust and he said “if they go bust, we’re all F’d” and guess what, two years later, the only one busted is him with the $750,000 4 bedroom home in some nondescript suburb.
“BTW, how long have you been waiting? Just since the bubble, or all the way back to 1998?”
“I passed the bar in the early 2000’s. So, by the time I was in any position to purchase, the bubble was well underway. So in that sense I lucked out”
Obviously you have the ability to spot a bubble and avoid it. Being able to spot bottoms is an equally important skill and time will tell if you possess that skill as well. I do not claim to be an expert on it by any means. I have just seen too many “bear market geniuses” in my time.
“So, nothing that isn’t just obvious, but useless as applied to the current RE market, too?”
The fact that you think it is useless as applied to the current RE market speaks volumes.
ha you’re pretty funny G, but unfortunately I have to dumb it down for most on here, and the law doesn’t allow me to debate specifics
“Nope. About markets.”
RE doesnt experience the extreme volatility of stocks, further stocks can be held practically indefinitely, while RE is traded out of necessity. You’re clueless, the two have nothing in common. By comparing the S&P 500 to RE you’re basically saying “Don’t wait for the bottom, prices are going to double before you know it”.
That’s not going to happen with the absence of easy credit. We’re returning to a normal housing market where annual appreciation will be measured in low single digits at best. Missing the bottom even by years will probably still get you a good deal.
chukdotcom: “Nope. About markets.”
There are major differences between the stock market (and exchange-traded markets in general) and the RE market. The biggest, IMO, are liquidity and barrier to entry.
Anyone with a couple thousand bucks and a computer can sign up for an eTrade account and start buying and selling stocks. And because of market makers and day traders, participants in those markets have access to immediate and constant liquidity. When you want to get in/out of the market, you can. Almost without exception. Sure, major fluctuations can catch you off guard and there is inherent risk there, but the advantages of that liquidity are hard to ignore.
Contrast that with the RE market. Prices tend to move more slowly, limiting that aspect of risk. But lack of liquidity is a huge concern (especially on the sell side) and introduces huge risk. Barrier to entry is also much, much higher (though during the bubble, that wasn’t true) which requires a much higher outlay to participate in the market and also ups your risk by virtue of the amount of capital you are required to sink in.
So comparing a person who bought an S&P index share at 600 to a person who is buying a house near the bottom is, IMO, not an apt comparison. Besides obvious differences like time frame of the price moves (the financial markets rebounded in two short years…how long until RE prices rebound?) the risk factors are completely different and that must be accounted for in any reasonable analysis.
“RE doesnt experience the extreme volatility of stocks, further stocks can be held practically indefinitely, while RE is traded out of necessity. You’re clueless, the two have nothing in common. ”
And RE also doesn’t have the same ability to buy and sell every 2 seconds. The time compression (and expansion) works both ways. It takes months to execute a RE transaction. It takes seconds to do a stock trade. If RE didn’t have the same volatility, you wouldn’t have so many many RE bagholders like you do now. You can’t just sell (or buy) in a day.
“By comparing the S&P 500 to RE you’re basically saying “Don’t wait for the bottom, prices are going to double before you know it”.”
No, i’m not at all. There was an eternity (in stock market time) to buy since 2008.
“Missing the bottom even by years will probably still get you a good deal.”
So, you think the RE market can do down very fast, but not up very fast? How is that any different from buying now? Using your logic, years from now, prices won’t be much lower.
I am not saying prices will increase rapidly at all. But I do think the market is in the process of bottoming, and will be higher in 6-7 years. It doesn’t mean you need to rush out and buy now. But you have plenty of doomsayers here saying that buying now is like buying in 2005.
“So comparing a person who bought an S&P index share at 600 to a person who is buying a house near the bottom is, IMO, not an apt comparison. Besides obvious differences like time frame of the price moves (the financial markets rebounded in two short years…how long until RE prices rebound?) ”
But that is exactly my point. The time periods are not comparable, but the concept is. It takes much longer to execute a RE transaction, which is why the process takes much longer.
It is all about where we are on the price spectrum. We’ve identified 2005ish as the top. Now, we are trying to find the bottom. Just because we haven’t bottomed yet, doesn’t mean that buying now is a losing proposition.
I find it so entertaining to read posts on this site. It always seems as though the usual group of negative nellies (HD, G, southport and Bob) are attacking the lone optimist (today it is chukdotcom, sometimes it is spinoza, and many times it is me). It reminds me of the star athlete joining a losing team and having the untalented regulars attack him until he goes away and makes them feel better about themselves
“Just because we haven’t bottomed yet, doesn’t mean that buying now is a losing proposition.”
Agreed. So long as you can sell when you want to without losing the majority of your savings…
“So, you think the RE market can do down very fast, but not up very fast?”
You skipped over the easy credit part. Without that, no, at least in real dollars we won’t see that again for a long time if ever.
“Agreed. So long as you can sell when you want to without losing the majority of your savings…”
Of course. But that is ALWAYS the case when you are not in a fixed asset. If you need your money tomorrow, buying today is a terrible idea. If you have a 6-7 year plan (I realize not all plans pan out), then I think buying now is not nearly the disaster that some make it out to be.
Again, I do not claim this is the bottom.
I do not claim that the market will shoot up so fast that everyone will miss it.
But there are some here that will NEVER buy. They will always wait for that perfect scenario that won’t ever happen.
If it is so easy to buy at the bottom, why did so many get stuck at the top?
Good assets have already bottomed.
Toxic and semi-toxic assets are a different story and pertain to the “certain” buyer.
“You skipped over the easy credit part. Without that, no, at least in real dollars we won’t see that again for a long time if ever.”
I’m not saying it will go up fast. I’m also saying it won’t go down fast as well (from here).
The credit bubble caused “rapid” increases in price.
The credit bubble has burst already. We have seen the corresponding “rapid” decrease in price.
We are now returning to a more “regular” market. It is probably closer to the beginning on a time scale, but I believe we are closer to the bottom on a price scale.
Homedelete, what do you think this unit would sell for at the absolute bottom of the market? I like this location and I’m wondering what you think is a “too good to pass up” price for this unit. Seems like the biggest drawbacks are the low ceilings (which you might be able to raise) and the fact that this unit is right on the corner on a low floor by the bus stop on Sheridan.
“Homedelete, what do you think this unit would sell for at the absolute bottom of the market?”
A follow up question should be “What do you think rates will be at then?”.
Most people are not cash buyers, and a 2% move up in rates would likely wipe out any discount on the price.
If rates move up 200bps I’m going to make a killing shorting the 10 year, and inflation will wipe away my wife’s med school debt. Let’s root for that, shall we?
Let’s assume I’m paying cash. At what point are units in this building a steal? And is this unit on the top floor a better deal? I like that it has real space for a dining table. http://www.redfin.com/IL/Chicago/3900-N-Pine-Grove-Ave-60613/unit-914/home/28629969
“If rates move up 200bps I’m going to make a killing shorting the 10 year, and inflation will wipe away my wife’s med school debt. Let’s root for that, shall we?”
It’s not that far fetched. We were just there in 2007. Rates are still ridiculously low, and can’t stay this way forever.
http://finance.yahoo.com/echarts?s=^TNX+Interactive#symbol=%5ETNX;range=my
I am all for higher rates. These low rates are brutal on savers like myself. It forces you into riskier assets. I long for the days when I had 13% 10 year CD’s.
Chris, do you have any more specific info on the special assessments? I’d really like to know what the issues are. My email address is artsy1@gmail.com if you or your friend want to drop me a line.
“If rates move up 200bps I’m going to make a killing shorting the 10 year, and inflation will wipe away my wife’s med school debt.”
uhhh – or, she could work for a year and pay it off herself!
I’ve had the RYJAX trade on for about a year, and am starting to get a bit impatient with it. We’ll see what happens when the Fed is done with QE2.
“But you have plenty of doomsayers here saying that buying now is like buying in 2005.”
I haven’t seen any. Any links?
“If it is so easy to buy at the bottom, why did so many get stuck at the top?”
It was a mania fueled by unpayable mortgage debt.
“It reminds me of the star athlete joining a losing team and having the untalented regulars attack him until he goes away and makes them feel better about themselves”
No doubt it does for me. Of course, you, spinoza and now chuk do nothing but state the obvious and erect straw men. No sign of talent there.
Still in Residency Clio; then fellowship in 2012. By then she’ll probably be a government employee.
Oh, so thats your excuse for not contributing intelligent commentary? lol
“ha you’re pretty funny G, but unfortunately I have to dumb it down for most on here, and the law doesn’t allow me to debate specifics”
“We’ll see what happens when the Fed is done with QE2.”
Unfortunately, we will probably see QE3 next. Maybe it will back-fire like QE2 did. I believe rates will be much higher in 5 years or so, but it would not shock me to see them make NEW lows one more time in the next year.
Once again, timing is everything.
What is the rock bottom too good to pass up value? This has two assumptions one being that there will be a rock bottom and two that the deal will be too good to pass up.
however, to answer the question putting aside your the two assumptions….this building was an apartment for many years. it was a bubble conversion. it is dated, uninspiring and has a lot of competition. I think that in a few years time this unit in its present condition will likely be lower than $100,000. if you wanted to own this place it better be damn cheaper than rent because once you buy it – it’s yours. for a long time. Because there is a good chance this will remain a distressed building for a long time to come.
I can’t imagine they would pull of QE3. Ron Paul will strap a bomb to his chest at the next Fed Q&A session before that happens.
“I haven’t seen any. Any links?”
Yes, right in this thread.
“It was a mania fueled by unpayable mortgage debt.”
And the rapid price decline was partially fueled by the same thing.
“Of course, you, spinoza and now chuk do nothing but state the obvious and erect straw men. No sign of talent there.”
I don’t claim to be any special talent, but it is very easy to be a bear in a bear market. Let’s see what you do in the next bull.
I don’t see the political will for another dough4dumps, so don’t be surprised when mortage rates “decline” upon realization that the “Spring Selling Season” is a misnomer, once again.
“Still in Residency Clio; then fellowship in 2012. By then she’ll probably be a government employee.”
Actually – she (and you) are better positioned than you think. The benefits for a doctor working for the government are HUGE and will continue to get better in the coming years.
HD that brings up a great point. Are people who buy into buildings with high rental percentages aware of the risks? Why do you consider this building distressed? And why would a rational person buy in a distressed building?
Oh, so thats your excuse for not contributing intelligent commentary? To me, your posts always read like a knifecatcher wishing for redemption. Very little substance.
sonies: “ha you’re pretty funny G, but unfortunately I have to dumb it down for most on here, and the law doesn’t allow me to debate specifics”
“I can’t imagine they would pull of QE3.”
NEVER underestimate the stupidity of the government. You can rest assured that they will always do the opposite of what they should. When they were busy cutting rates, they should have been raising them. Short term pain is better than long term misery. But they refuse to acknowledge the unavoidable up and down cycles and try at all cost do avoid any down cycle. That just isn’t possible, and it makes the NEXT down cycle that much worse.
Clio, I can’t imagine GI salaries will increase in the long run if Obamacare takes hold, (or worse, fails miserably and results in a a true nationalized program). Friends in finance at a major Chicago hospital thinks that the model is moving towards hospital style employment, reduced specialist comp to pay internists, and general death of the “doctors as entrepreneurs” model of the past.
So Chuck, is there room for conservatice/passive investment strategies, or are we better off finding and riding bubbles. At the limit, your argument can be taken to mean that the USofA is headed to 0 anyway. (well before a supernova that is)
“Yes, right in this thread.”
Where? It was a straw man. Nobody has said that buying today is like buying in 2005.
“And the rapid price decline was partially fueled by the same thing.”
Yes, what’s your point? Your question was “If it is so easy to buy at the bottom, why did so many get stuck at the top?”
“Let’s see what you do in the next bull.”
I was a seller in the last.
“is there room for conservatice/passive investment strategies, or are we better off finding and riding bubbles.”
Unfortunately, I think the days of true “investing” are gone. Buy and hold (stocks or houses) is a losing strategy. I do believe that USA is headed to 0 at some point without some major changes which aren’t likely to occur. It just remains to be seen if that is in my lifetime. Just when you think they can’t kick the can further down the road, they do it again.
When you have multi-decade moves in a matter of years, it is just not sustainable. I have no reason to think the next bull market will be any different.
Nothing has changed.
“Where?”
homedelete:
“Your advice is lost on the seller who has been living there nearly six years.
Maybe if he lives there 7 years instead of 6 years the market will come roaring back?
I laugh everytime I hear the ‘you’ll be OK if you live there 6 or 7 years’”
“I was a seller in the last.”
Well, you’re going to have buy first before you can be a seller again.
Did anyone notice the listing says this building is 90% owner occupied? I wonder how accurate that is. HD, I agree with your point about possibly being stuck with a unit here for a long time. When you look at the past sales in the building, it’s clear there are a LOT of people under water by 100K or more here. This is what really concerns me. Eventually, new buyers who got these units at 50% off 2006 pricing will absorb most of the short sales and foreclosures for the owners who couldn’t hang in there any longer. But does anyone really want to be the first one to jump in knowing you’re going to be dealing with a lot of owners who can’t pay their bills for several years to come? How long will it really take for the banks to unload the last of these units at $125 – $150 per square foot before the building has stabilized?
On the other hand, I think the building amenities look pretty nice and I think almost all housing stock along the lake/train lines comes with its own unique downers. Surely there are maintenance issues and ticking time bombs with a 100 year old building that this place won’t have to face for a long time, right?
“Nothing has changed.”
Sure it has for housing. Finding MBS bagholders will never be the same, so mortgage lending will never be the same as during the bubble. It was an anomaly.
you’re confusing me with G. two completely different posters with similar view points on the direction of real estate.
“chukdotcom on February 3rd, 2011 at 2:32 pm
“Where?”
homedelete:
“Your advice is lost on the seller who has been living there nearly six years.
Maybe if he lives there 7 years instead of 6 years the market will come roaring back?
I laugh everytime I hear the ‘you’ll be OK if you live there 6 or 7 years’”
“I was a seller in the last.”
Well, you’re going to have buy first before you can be a seller again.”
It’ll be less than $100 a sq ft by the time the last FB bubble purchaser is flushed out of the building. And each time a distressed unit goes up for sale it will sell for even less than the last. Hopefully the market will sort these out by 2013 or 2014 which is my general prediction for general stabilization, albeit at much lower valuations.
“How long will it really take for the banks to unload the last of these units at $125 – $150 per square foot before the building has stabilized? “
chuk, nothing there that says that buying today is like buying in 2005.
“you’re going to have buy first before you can be a seller again.”
No chance of a repeat performance. No need, either. But, plenty of time still to make that decision before settling at the bottom for a long time.
“Sure it has for housing. Finding MBS bagholders will never be the same, so mortgage lending will never be the same as during the bubble. It was an anomaly.”
I disagree. They might disguise it differently, but it will happen again. The bubble just might not be quite as large, but it will bubble again.
They banned NINJA loans.
“I disagree. They might disguise it differently, but it will happen again. The bubble just might not be quite as large, but it will bubble again.”
Let me help you with your quote, chuk: “But you have plenty of doomsayers here saying that buying now is like buying in 2005.”
I don’t believe HD said that it is like 2005, just that the same line was being used. Any other “doomsayers” come any closer?
“chuk, nothing there that says that buying today is like buying in 2005.”
Sure there is. Not those exact words, but that was clearly the implication. Someone mentioned that this would be an OK buy if you have a 6-7 year horizon. It was countered with “I heard the same thing in 2005”. My point is, this is NOT 2005. Saying it now is not the same as saying it in 2005.
“I don’t believe HD said that it is like 2005, just that the same line was being used. Any other “doomsayers” come any closer?”
Yes, and the implication was that the results would be the same. Why else would he say it?
With your logic skills you’ll ace the games portion of the LSAT.
“#chukdotcom on February 3rd, 2011 at 2:47 pm
“chuk, nothing there that says that buying today is like buying in 2005.”
Sure there is. Not those exact words, but that was clearly the implication. Someone mentioned that this would be an OK buy if you have a 6-7 year horizon. It was countered with “I heard the same thing in 2005?. My point is, this is NOT 2005. Saying it now is not the same as saying it in 2005.”
“Oh, so thats your excuse for not contributing intelligent commentary? To me, your posts always read like a knifecatcher wishing for redemption. Very little substance.”
whatever you say hoss
I always tell it like it is, and if thats “too real” for you well, I’m sure youre a fun date. I guess i’ll only post when I have something substantial to say, like everyone else here.
Its really a shame that sarcasm is lost in text on the internet.
oh well, back to losing money on my house and on my investments!
“With your logic skills you’ll ace the games portion of the LSAT.”
So why don’t you clarify what you said. Do you think this place will be worth MORE or LESS in 6-7 years? Should be an easy answer for you. A one word answer will suffice.
“Yes, and the implication was that the results would be the same. Why else would he say it?”
The implication was that there would be a loss, not that buying now is like buying in 2005. Besides, who are the others of your “plenty of doomsayers” who have stated anything of the sort?
There’s always some BS line on how long you should own a home before trying to resell.
You can only identify the good years and the bad years of the time line in retrospect.
But that conflicts with ‘it’s a great time to buy!’ Blindly parroting the NAR dogma is not an argument, it’s salesmanship.
“You can only identify the good years and the bad years of the time line in retrospect.”
You couldn’t be more wrong.
You didn’t know that it was a bad time to buy in 2006? You just said you did.
Do you have the skills to identify the good time to buy next?
“You can only identify the good years and the bad years of the time line in retrospect.”
But you are trying to do that RIGHT NOW. You are saying it is a bad time to buy and that the buyer will lose money in 6-7 years. Are you just flipping a coin? Or do you posses the ability to gauge market dynamics and make buy and sell decisions on something other than a “guess”?
“But that conflicts with ‘it’s a great time to buy!’ Blindly parroting the NAR dogma is not an argument, it’s salesmanship.”
But you are doing the exact same thing. You are blindly parroting the bear case. Perma bears are no better than perma bulls.
I just looked at other 2 bedroom listings in East Lakeview (and a bit of Buena Pakr) for under 200K and the 2 beds for sale in this building seem like pretty good deals to me. If you really want outdoor space (which is a must for me), parking, in-unit washer/dryer, no garden/basement living, and reasonable assessments with no doorman, what else are you going to buy that is anywhere near this price per square foot? Maybe this exact unit might go for 100K at some point b/c it’s on the second floor and right next to the bus and needs lots of updating. But I just don’t buy that some high floor 2/2 in this building is going to go for $100 per square foot (now or later).
the last time there was a good period to buy and hold for six or seven years was 2002, at which point if you tried to sell in 2008 or 2009 you might get your money back. Buy anytime after 2002 and held for six or seven years (including 2010), and more likely than not, you will lose money.
Again, I repeat. there are twice as many mortgages in america 90+ plus DQ than there are currently mortgages in foreclosure. Bank of America said in a conference call recently that it takes 503 days to go through foreclosure.
the distressed property issue will be with us for a long long time, and prices will continue to be depressed for a long time too.
Danny: there are no better ‘deals’ because we are nowhere near the bottom.
You ask “what else are you going to buy that is anywhere near this price per square foot?” nothing, the prudent buyer shouldn’t be buying anything right and not for another couple of years.
Prices are too expensive. Sales volume is low because prices are too high. Including this unit here.
Oh, so the “unfortunately I have to dumb it down for most on here” didn’t mean that you consider yourself more intelligent than “most on here”? Because thats how I read it, and I found that to be pretty ironic. Just sayin, Einstein.
Sonies:”Its really a shame that sarcasm is lost in text on the internet.”
No HD, try 4 times:
http://www.calculatedriskblog.com/2011/02/lawler-how-many-folks-have-lost-their.html
It appears they are being worked through, albeit at a slow pace.
“the last time there was a good period to buy and hold for six or seven years was 2002”
Then that wasn’t a good period of time. What about 2000-2006? What about 1996 to 2002?
“Again, I repeat. there are twice as many mortgages in america 90+ plus DQ than there are currently mortgages in foreclosure.”
But you fail to understand what are lagging and leading indicators. Hint: The bottom of the market won’t come the day the last foreclosure is processed.
Much can be learned from prior bubbles (including real estate).
But the day the last foreclosure is processed is the day your neighbor, who is also underwater, decides to sell.
it’s naive to think that the shadow inventory won’t be a drag on prices for years…
“But you fail to understand what are lagging and leading indicators. Hint: The bottom of the market won’t come the day the last foreclosure is processed.”
Bob,
Take a look at the chart on your link. What does the current shape of that bell curve tell you?
close bob, that chart is the number of completed foreclosure and short sales vs. the number 90+ DQ
there’s about 2,000,000 in foreclosure right now, 4,296,018 DQ 90+ as of the end of 2010, and it takes an average of 19 months for a B of A loan to be foreclosed.
but some people think that doesn’t mean anything. they can ignore that figure all they want
until in 2014 the next door neighbor too their investment decides to go DQ and kill his property value.
“it’s naive to think that the shadow inventory won’t be a drag on prices for years…”
It’s naive to think that markets aren’t forward looking.
“What about 2000-2006?”
if you held for 6 years, sure. if you held for 12 years, 2000 to 2012, it’s not looking really good for you.
“Take a look at the chart on your link. What does the current shape of that bell curve tell you?”
To sit back and eat popcorn and work on my savings for the market bottom.
“there’s about 2,000,000 in foreclosure right now, 4,296,018 DQ 90+ as of the end of 2010”
And how much of that is already priced in? Do you think you are the only one in America with this nugget of information?
And this brings us full circle to why the stock market comparison is helpful. Were things hunky-dory in March 2009? Was unemployment still on the rise? Were profits still on the decline? Why has the market doubled since then? Shouldn’t it have “waited” to double until every company had record earnings and unemployment was back to 4%?
Forward looking are the guys like you who see the market through rose colored glasses.
2x as many 90+ day DQ not in foreclosure as in foreclosure right now.
tell me, how exactly is this priced into the market?
“chukdotcom on February 3rd, 2011 at 3:35 pm
“it’s naive to think that the shadow inventory won’t be a drag on prices for years…”
It’s naive to think that markets aren’t forward looking.”
you can’t keep comparing the stock market to real estate.
“if you held for 6 years, sure. if you held for 12 years, 2000 to 2012, it’s not looking really good for you.”
Which is my point exactly. You are claiming that that is always bad advice. Sometimes it is good, sometimes it is bad. You have to have a little knowledge of your own. Just because it was bad advice in 2005, doesn’t make it bad advice in 2011. Which you said it is.
Just like it was good advice in 2000, doesn’t make it good advice in 2006.
Do you now see how you are no different than those you mock?
none of it is priced in. in 2014 if the last foreclosure is sold, the very buyer will pay not a single penny more than the previous foreclosure buyer. Prices will decline until the very last foreclosure is sold. which is gonig to be a long long time coming.
“And how much of that is already priced in? Do you think you are the only one in America with this nugget of information?”
“you can’t keep comparing the stock market to real estate.”
Sure I can. And in 6-7 years you will understand why.
“none of it is priced in”
I assume you are joking.
“in 2014 if the last foreclosure is sold, the very buyer will pay not a single penny more than the previous foreclosure buyer.”
Wow, I had no idea you were that clueless. I guess you aren’t joking…
“Prices will decline until the very last foreclosure is sold.”
Simply unbelievable…
You’ve made a few good points in the past, but this post pretty much invalidates every one of them.
“but this post pretty much invalidates every one of them.”
Says the guy who thinks short term stock speculation is relevant to RE.
it is terrible advice. what makes advice good is its reliability. I give advice for a living so I should know. you can’t say ‘the advice to buy and hold for 6-7 years is sometimes good, sometimes bad.’ that’s bad advice always because it is not reliable.
“#chukdotcom on February 3rd, 2011 at 3:41 pm
“if you held for 6 years, sure. if you held for 12 years, 2000 to 2012, it’s not looking really good for you.”
Which is my point exactly. You are claiming that that is always bad advice. Sometimes it is good, sometimes it is bad. You have to have a little knowledge of your own. Just because it was bad advice in 2005, doesn’t make it bad advice in 2011. Which you said it is.
Just like it was good advice in 2000, doesn’t make it good advice in 2006.
Do you now see how you are no different than those you mock?”
I’m just not sure that it’s reasonable to use a massive national stat on foreclosure inventory to claim that this particular condo is overpriced. There is a relatively small amount of housing in Chicago in areas with relatively low violent crime, true car-free living with short walks to grocery stores, restaurants, an el stop, easy train ride to most of Chicago’s best attractions, etc. Add to that the fact that I’m not interested in a place that requires me to lease parking several blocks away or walk to a laundromat and the question remains am I really going to get something where I want with the features I want for $99 per square foot in a few years?
Granted, the lesson here might be there will be equally good deals later so why rush. And that’s valid. But it seems to me like some people expect properties without any deal-breaker shortcomings to be selling for $75 per square foot in the next few years. And that might be true for some fringe ‘hood or moldy buildings with no HOA in prime areas, but that’s not this property.
“Says the guy who thinks short term stock speculation is relevant to RE.”
Who said anything about short term? Just because the stock market tends to have shorter cycles than the real estate market doesn’t make the comparison any less valid.
So Bob, are you saying you actually agree with hd’s post?
“it is terrible advice. what makes advice good is its reliability.”
Surely you jest. You seem to be confusing “reliability” with “repeatability”.
“I give advice for a living so I should know.”
I’m sorry to hear that.
So, let me get this straight. If someone told you to buy real estate in 1998, and then they told you to sell in 2006, that would be bad advice, because you couldn’t apply it to any period of time?
You just keep digging a deeper and deeper hole.
“So Bob, are you saying you actually agree with hd’s post?”
No, he’s a bit too extreme for my tastes, but you’re not proving anything pulling out stocks all the time.
“it is terrible advice. what makes advice good is its reliability.”
So, you are giving GOOD advice to not buy now, because it will always be reliable, and it will never be a good time to buy. Pot, meet kettle.
“No, he’s a bit too extreme for my tastes, but you’re not proving anything pulling out stocks all the time.”
All the time? Perhaps you are confusing my use of the word “market” with “stock market”.
Care to address my last post that referenced the stock market in March of 2009? Please let me know how you think that real estate market is any different. Do you believe prices will ONLY rise once EVERYTHING is clear sailing?
The reason you fail to understand the comparison is because the housing recovery has not occurred yet. After it has occurred, many of the people here will smack themselves in the forehead and say how “obvious” it was in hindsight. The very same people that are predicting doom and gloom now.
If you gave that advice in 1998 it would have been good advice. if you gave the same advice in 2003, it would have been bad advice.
But what makes it bad advice is that at the time you gave the advice you have no idea whether the advice was good or bad. you only know in retrospect whether it was good or bad.
That’s why giving that particular advice is always bad. you can just look back and say “oooops I guess i was wrong on that one!” but the buyer, they’re totally f’d, underwater, and cannot sell, and maybe stuck in an underwater property with a high interest rate on a block full of foreclosures. and if you buy today, it could still be that way in 7 years. You’ll just have to wait 7 years to find out.
“So, let me get this straight. If someone told you to buy real estate in 1998, and then they told you to sell in 2006, that would be bad advice, because you couldn’t apply it to any period of time?
You just keep digging a deeper and deeper hole.”
“But what makes it bad advice is that at the time you gave the advice you have no idea whether the advice was good or bad”
Why? You said you give advice for a living. Are you flipping a coin when you give advice? What is the point of paying you for advice if you have no idea if it is good or bad?
I had a good idea it was bad advice in 2005. I have a good idea it is good advice in 2011/2012. I’m not flipping a coin.
“you only know in retrospect whether it was good or bad.”
Wrong. You can only PROVE it in retrospect. I knew the market was a bubble in 2005. I didn’t need hindsight to tell me.
i see your point chukdotcom, about repeating the same advice and not knowing whether it is good or bad. however, it’s not a good analogy because my advice will change. I will eventually say “it’s a good time to buy today” based upon my belief when I think it will be a good time to buy. however the advice to buy and hold for 6-7 years remains static regarding of the time period today. that’s the difference. i heard a commercial today on the radio with david hockberg today and he said, “there isn’t a better time to buy than today and if you don’t believe that then…then…then…then..” and big john howell had to cut him off from stuttering.
of course you and I saw a bubble in 2005, but millions of people failed to see it. in fact more people failed to see the bubble in 2005 than almost any other year because it was a record year for new and used home sales.
Even if similar units in this building are selling for $125K in 2017, how is that necessarily a bad investment for someone who would have rented a similar place that entire time? Surely someone would spend at least $1500 a month renting something similar, with no tax break on the interest and taxes and nothing paying down the loan balance. For that buyer, seems like the only way this doesn’t at least break even with renting is if this unit is selling for way less–maybe $100K or 90K–in 2017. And this is also assuming their rent was stuck at $1500 a month that whole time.
I think you answered your own question Danny.
“#Danny on February 3rd, 2011 at 4:16 pm
Even if similar units in this building are selling for $125K in 2017, how is that necessarily a bad investment for someone who would have rented a similar place that entire time? Surely someone would spend at least $1500 a month renting something similar, with no tax break on the interest and taxes and nothing paying down the loan balance. For that buyer, seems like the only way this doesn’t at least break even with renting is if this unit is selling for way less–maybe $100K or 90K–in 2017. And this is also assuming their rent was stuck at $1500 a month that whole time.”
Again, we saw it, but millions up millions did not see the bubble.
regardless, the whole point was that to most NAR parrots (realtors, brokers, etc) it’s never a bad time to buy and its’ especially never a bad time to buy if you plan to buy and hold.
“#chukdotcom on February 3rd, 2011 at 4:09 pm
“you only know in retrospect whether it was good or bad.”
Wrong. You can only PROVE it in retrospect. I knew the market was a bubble in 2005. I didn’t need hindsight to tell me.”
You are the only person I have ever heard of who would compare the housing market to equity markets. Do you know of anybody else involved in the capital markets that does so? Or is this just something you figured out all on your own?
“The reason you fail to understand the comparison is because the housing recovery has not occurred yet. After it has occurred, many of the people here will smack themselves in the forehead and say how “obvious” it was in hindsight. The very same people that are predicting doom and gloom now.”
I didn’t really answer my own question. I offered it up as a possibility that someone thinks this unit might go for $90K in 2017, but I don’t think that’s going to happen. I think most of the readers here seem doubtful it’ll even go for $125K right now, and if it does, I think someone got a deal. Some of the units in this building are currently priced as though this is one of the worst places to live in Lakeview, and I think that has to be at least partly because the non-renovated units don’t show well at all. The building has a core set of things buyers don’t want to compromise on: parking, w/d, outdoor space, and fairly reasonable assessments.
I disagree. The price for distressed units in the building has been trending downward, and as Sabrina above said, why wasn’t this a deal at $139,000?
the questions I have for you are:
what will a foreclosure in this building sell for 3 years from now?
Will it sell for more or less than $125,000?
if it sells for more than $125,000, does it mean that foreclosures in the building no longer affect price?
“The reason you fail to understand the comparison is because the housing recovery has not occurred yet. After it has occurred, many of the people here will smack themselves in the forehead and say how “obvious” it was in hindsight. The very same people that are predicting doom and gloom now.”
You are very confused, chuk. The recovery is currently underway in the form of the necessary correction of bubble excesses. The massive excesses will create an overcorrection that will eventually reach an equilibrium at sustainable housing prices. This is a good thing and the only ones predicting doom and gloom now are bottom callers who expect to see appreciation and another housing bubble.
“Do you know of anybody else involved in the capital markets that does so?”
Of course.
“Or is this just something you figured out all on your own”
Of course not.
No one said it would be the same speed or magnitude of recovery. But different markets have many things in common. Supply and demand for one. Markets are a discounting mechanism for another. Look at Bob’s chart. Housing prices peaked long before foreclosures did. Do you know why? The housing market anticipated it to a degree, and that was factored into the current pricing. Just like it will when the upside comes back.
If the logic is that prices won’t bottom until foreclosures bottom, wouldn’t the same be said about the top? And we already know that wasn’t true.
“You are very confused, chuk. The recovery is currently underway in the form of the necessary correction of bubble excesses. The massive excesses will create an overcorrection that will eventually reach an equilibrium at sustainable housing prices. ”
I’m not confused at all. I just think that overcorrection will happen within 1-3 years, and 6-7 years from now, we will at least be back to today’s levels. No one said anything about getting back to 2005 prices.
I did not say prices won’t go lower than today.
I did say I think prices will be higher in 6-7 years.
Clear enough?
“The recovery is currently underway in the form of the necessary correction of bubble excesses. The massive excesses will create an overcorrection that will eventually reach an equilibrium at sustainable housing prices.”
Again, despite the fact that you mocked my stock market comparison, you unwittingly made it yourself. The stock market did the exact same thing you described. There was a correction of a bubble excess (S&P 1500’s). It overshot to the downside (S&P 666). However, there might be something more telling that happened next. Stocks didn’t just reach equilibrium pricing then create sustainable prices. They almost immediately created ANOTHER stock bubble (which we are currently in). Will housing bubble2 be as big as housing bubble1? I doubt it, but it doesn’t mean there won’t be one.
The only thing we know how to do is inflate new bubbles (or re-inflate old ones).
You know what? I wish you were right. But your logic makes you sound like JMM. And if there are any economists out there that agree with you, please cite them? I can find plenty of them that would back up HD’s and G’s arguments.
“No one said it would be the same speed or magnitude of recovery. But different markets have many things in common. Supply and demand for one. Markets are a discounting mechanism for another. Look at Bob’s chart. Housing prices peaked long before foreclosures did. Do you know why? The housing market anticipated it to a degree, and that was factored into the current pricing. Just like it will when the upside comes back.
If the logic is that prices won’t bottom until foreclosures bottom, wouldn’t the same be said about the top? And we already know that wasn’t true.”
“And if there are any economists out there that agree with you, please cite them?”
You mean the same ones that didn’t see the recession coming? No thanks…
“I can find plenty of them that would back up HD’s and G’s arguments.”
You say that as if its a good thing.
Here’s a little reading for you:
http://www.marketoracle.co.uk/Article25833.html
Also, I highly recommend doing some reading from 1990-93. There is plenty available on the internet even tough it largely pre-dates it. You will see what little foresight the “experts” had at that time as well.
While people were calling for ever lower prices, it turned out to be the bottom and one of the best times to buy.
I bought my first property in 1994 for lower than what the person paid for it in 1989 (sound familiar?). I had sat out and rented during the 1989 bubble, because I knew it was a bubble. I then sold it in 2001 for more than double (and well over the 1989 price). That 6-7 year period worked just fine for me…
“Again, I repeat. there are twice as many mortgages in america 90+ plus DQ than there are currently mortgages in foreclosure.”
HD – Incomplete data used to “scare” and “shock” people. Come on – people are smarter that that – they understand that in order to properly analyze what these “statistics” mean to the market, you also have to provide the number of homes without mortgages, the number of homes with up-to-date mortgages, the number of potential buyers and the number of potential sellers. Without these other numbers, the “statistics” you provide are meaningless.
Oh, so you read Market Oracle? Have you seen this one? a quote:
“We’ll soon be entering a dangerous phase of the long-term Kress cycles once the 6-year cycle peaks later this year. The 6-year cycle is the only yearly cycle of consequence that’s helping to stabilize prices. Once the 6-year cycle peaks in a few months, the major cycles within the Kress 60-year series will all be hard down until 2014. As such, this isn’t the time to be “bottom fishing” for real estate investment opportunities. The upcoming 60-year cycle bottom in 2014 should bring better opportunities for buying low.”
So why would I want to buy now?
http://www.marketoracle.co.uk/Article26024.html
chukdotcom:”Here’s a little reading for you:”
Lucky you. What you got goin’ now sport?
“That 6-7 year period worked just fine for me…”
” I give advice for a living so I should know. you can’t say ‘the advice to buy and hold for 6-7 years is sometimes good, sometimes bad.’ that’s bad advice always because it is not reliable.”
HD – come on….. you state you give advice for a living – is there anything that is a sure bet (other than putting the max amount in a FDIC insured savings account? No – everything has a risk and nothing is 100% reliable. This argument is totally flawed.
No comparison. You’d have to go back to the 1930s to find anything like what is going on right now in real estate.
“Also, I highly recommend doing some reading from 1990-93. There is plenty available on the internet even tough it largely pre-dates it. You will see what little foresight the “experts” had at that time as well.”
“So why would I want to buy now?”
Depends. Maybe you need a place to live? Maybe prices won’t be much lower in 2014, and the advantages of not paying rent for 3 years will be greater than the lower prices. Maybe rates will be 200bp higher, so that 2014 “deal” is not such a deal after all.
I am buying a condo in Chicago now, because I could use one for my job and I think the risk/reward is in my favor over the next 6-7 years. My work frequently takes me there and I am tired of living in hotels. Not all buy/sell decisions are made purely on “is this the lowest price this place will ever be”.
Also, maybe he isn’t exactly right? Maybe the bottom isn’t exactly 2014? Maybe we just bump along the bottom for 2-3 years with no significant declines? Maybe he’s off by a couple of years?
My prediction is the “60 year series” goes a little longer due to foreclosuregate. So add a few more years to 2014 before a bottom comes.
“Lucky you. What you got goin’ now sport?”
Right now, I own the home I live in outright. I bought it for cash in 2001. It was not an investment, but it is still worth more than I paid for it.
In addition, I bought 2 condos in VT in 2000. I sold one in 2004 and one in 2005. One was almost a double, one was more than a double.
I also own a duplex that I rent out that is very much cash flow positive.
I am currently in the market for a condo in Chicago for business use.
Has anyone here heard of “inflation”? Also, you guys fail to realize that most of these foreclosures are terrible units in terrible areas – not many foreclosures or deals in the most desirable areas/units/homes. So go ahead and have your ridiculous arguments about foreclosures – I just hope the rest of the reading audience realizes that you are mainly talking about areas such as englewood, chatham, etc. which really have nothing to do with where the majority of people on this site want to live.
“My prediction is the “60 year series” goes a little longer due to foreclosuregate.”
Could be. I’m certainly not saying it isn’t possible. But never underestimate the greed/stupidity of the common man. If humans were goldfish, we’d eat ourselves to death in a week.
“Has anyone here heard of “inflation”?”
Exactly. Housing doesn’t exist in a vacuum. While prices could go higher on an absolute basis, they could still be down on a relative basis. So, higher prices in the future does not require another “housing bubble”. You may purely have asset inflation.
Yeah, it sucks that the Bernank can only make commodities and equities go up at the expense of granny who is living off her CDs. He WISHES he could have an effect on housing but it ain’t gonna happen.
clio “Has anyone here heard of “inflation”?”
“Lucky you. What you got goin’ now sport?”
Oh, in addition I sold my family’s farmland to a developer in 2006 for 2.8mil. The developer has since offered to sell it back to us for 1.8mil. He wanted to put 36 houses on it. It still sits unused.
Good luck figuring out where to park all your wealth in the next few years. No obvious life boats.
Real farmland has been making some good returns. Small developer parcels, not.
“Good luck figuring out where to park all your wealth in the next few years. No obvious life boats.”
That’s the thing. Bernanke has forced it into the stock market (and oil/gold). I have had it in there for the last couple year, but both are at bubble valuations now. The one thing I have learned throughout all of these various bubbles is that the money doesn’t disappear, it just shifts from one bubble to the next.
I am no longer willing to leave my money in the stock market or gold at these levels. I will leave some in oil for now, because I don’t think that has quite topped yet.
The most recent bubble out there now is private placements (Facebook, Twitter, etc). I have dabbled in that, but that will end very badly for most involved.
I will most likely use my money to bet against the stock market in the not too distant future and make some real estate bets as well. I try to make my money both riding bubbles up, and riding them down as well. It’s not always easy, but if you can ignore your personal bias, there is money to be made.
“Real farmland has been making some good returns. Small developer parcels, not.”
Yup. I have 1/2 a mind to take him up on his offer…
Buy the land back, then find out going rates for renting it out for crops.
“Buy the land back, then find out going rates for renting it out for crops.”
Truth is, I don’t have the cash to buy it back myself and I’m not willing to leverage myself to do it. I was only a fractional owner with the rest of my family. They want nothing to do with it.
“And that’s valid. But it seems to me like some people expect properties without any deal-breaker shortcomings to be selling for $75 per square foot in the next few years. And that might be true for some fringe ‘hood or moldy buildings with no HOA in prime areas, but that’s not this property.”
I actually agree. $75/sf in neighborhoods the majority of CCers would never consider living in in Chicago seems reasonable to me (and that’s the good majority of Chicago neighborhoods). The problem is the bubble brought bubbly valuations to these neighborhoods. People assumed that well if LP is going for $300/sf then Bridgeport/Old Irving/etc must be worth $200. Not true at all: the GZ by and large has a large population of transplants and affluent people willing to pay for walkable amenities and safe neighborhoods AND (and this is kinda key) OTHER TRANSPLANTS.
Many of the other neighborhoods don’t have these features, even if they are relatively safe. When people in Bridgeport/Old Irving/etc find out you aren’t from Chicago or especially even, Chicagoland, you aren’t exactly welcomed with open arms, nor do you share much in common with them and they know it.
This is why I generally agree with HD’s rants as they are focused on neighborhoods that should have never, ever been bid up to the valuations they did, but via the bubble they were able to.
I can see the GZ kinda being the Manhattan of the midwest, if you will. Yeah I know the analogy is tacky and not wholly applicable but its largely white (or the “good minorities), college educated, leftist leaning and they love their rail transit.
Just look at the incomes of these non-GZ neighborhoods and you’ll get the gist. And the amount of rich people at the top end to make up for the lower end is far, far lower than GZ hoods. The high earners from these ‘hoods generally are FROM these ‘hoods which means they represent a population proportionate amount of high earners (ie: very small, 1-2%) unlike the GZ hoods where with the transplants they represent a disproportionately large amount (say 5-20%).
That’s why its my belief that these non-GZ hoods are going to be Mike Tysoned and that’s generally what we’re seeing.
“I have had it in there for the last couple year, but both are at bubble valuations now.”
The use of the term “bubble” is often misused.
Just because something goes up for a few years doesn’t make it a “bubble.”
The S&P 500 is trading at 14x earnings. Is that a “bubble”? That is under its historic long term valuation (since 1957) of 16x earnings. Also I know many people who refuse to put any money into the stock market. Doesn’t sound like a bubble to me. No one I know talks about stocks anymore.
What about gold?
It has not yet returned to its 1981 high and would need to be trading over $2000 an ounce, inflation adjusted, to get there. Doesn’t seem like a bubble to me either.
I can’t comment on oil but considering that 3 years ago it was at $147 and now it’s at $90- it doesn’t seem like a bubble to me.
But what do I know?
“You may purely have asset inflation.”
Of course. But with wages stagnating it won’t be pretty.
“I just hope the rest of the reading audience realizes that you are mainly talking about areas such as englewood, chatham, etc. which really have nothing to do with where the majority of people on this site want to live.”
This may very well be (for now.) But no one is buying anything in the neighborhoods everyone (supposedly) wants to live in who reads this site because the prices are too high. Ultimately, sales volume dictates sales prices. And volumes continue to be at 20 year lows in the neighborhoods we chatter about on this site.
Everyone wants a “deal” now even in the GZ.
“Just because something goes up for a few years doesn’t make it a “bubble.””
Goes up? That’s an understatement. When the market more than doubles in 2 years, its a bubble.
“The S&P 500 is trading at 14x earnings.”
Please. This stat is never accurately reported. I remember at the bottom there were articles stating that it was at an all time high, and other articles that stated it was at an all time low. For a number that can be figured mathematically, there sure are a lot of different answers for it.
“It has not yet returned to its 1981 high and would need to be trading over $2000 an ounce, inflation adjusted, to get there. Doesn’t seem like a bubble to me either.”
It doesn’t? Have you listened to any radio or TV commercials recently? Remember the TV shows “Flip this House”, etc? Sound familiar?
I bought gold for around $335 an ounce from Monex in 2002. I sold it all at around $850, before the bubble really inflated. Then it took off once all the traders piled in (like oil in 2008) and I was forced to chase it higher. Trust me, gold is a bubble. Then again, the naz was a bubble at 3,000 and it went to 5,000. So, it doesn’t mean it can’t bubble higher, but it will DEFINITELY go lower than today when it bursts. I don’t want to be holding the bag.
“I can’t comment on oil but considering that 3 years ago it was at $147 ”
That was a bubble.
“now it’s at $90- it doesn’t seem like a bubble to me.”
I said I didn’t think it was topped out yet. Give it till 120 or so.
BTW, funny that you should declare oil “not a bubble” because you are comparing it to bubble prices. Tell me again about real estate?
“You’d have to go back to the 1930s to find anything like what is going on right now in real estate.”
I agree Emma. I have said many times on this site- this bust is unlike anything anyone here has ever, and will ever, experience in their lifetime. It is a once in a lifetime event (unless, perhaps, you happen to be about 15 right now and live to be 100- wherein perhaps you will see the credit cycle go full circle again.)
If someone is buying property now- please, I beg of you, buy something you can live in for at least 10 years- if not longer. Don’t think “oh- I can sell it in 5 years and move to the suburbs when junior is going to school.” I heard people tell me this in 2007 and now, wow, 4 years later they are even more underwater than before.
Yes- eventually the price declines will stop. But buy something that you can live in for a long, long time so you won’t care about prices and what they are doing because you love the place you live and are living there with people you love.
Smaller condos are going to be decimated in this bust. Not only were too many built/converted but eventually buyers will figure out that there is no long term plan with most of them and will instead simply rent until they are ready to buy the bigger property (either a townhouse, a bigger condo or a SFH.) There will be no buyers.
Unfortunately for this bust, many of those who already bought the smaller condos now want to buy the bigger property but are stuck there. A whole generation financially wiped out. Most of them will be set back a decade or more financially. Some will never recover what they lost in the housing bust.
Until that all works its way through the system, there is no bottom.
This summer, walk around Lincoln Park and Lakeview. Look at all the 1 and 2 bedroom condos that are for sale (and not selling.) Watch how many of them get rented out while the owners “wait” for the market to come back. The long term scenario- even in the heart of the GZ- is not good.
“When the market more than doubles in 2 years, its a bubble.”
That is just wrong. If it were true than the 1981-1999 S&P 500 would have been a bubble several times over.
A bubble is a detachment from actual value. As I said- it is irrelevant that stock prices doubled in two years. Earnings are well under historic norms. The stock market is valued by earnings (as are individual stocks.)
Apple shares could have doubled in the last 6 months. But if their earnings also did- does that mean it’s a bubble? Heck no.
“It doesn’t? Have you listened to any radio or TV commercials recently? Remember the TV shows “Flip this House”, etc? Sound familiar?”
Do you know anyone off the street BUYING gold? I know plenty that are selling. I’ve met people who have taken their grandma’s old chain necklaces to those gold stores for extra cash. But not a single one of them is buying.
One of the signs of a bubble is that people believe the asset can only go up. When people believe that – they’ll do anything to BUY it with the belief they can ride it higher to riches (hence, people buying 10 condos during the housing boom.) But, again, I don’t know anyone running out to buy gold enmass. No one I talk to asks about it- except to ask where they can sell it. Once they all start buying it- I would be worried.
Chuk:
If you’re so concerned with bubbles you must know the #1 rule of bubbles then:
No bubble has ever been reinflated. Ever. So why would you buy real estate at this time? We’re in year 11 of the NASDAQ “post crash” and still no recovery there. It took 26 years for the DOW to get back to its pre-crash high from the Great Depression. Tulips never came back. Gold still isn’t at its last bubble high from 1981. And on and on.
People should buy real estate to live in. That is it (except for those professional investors doing their own thing with multi-units etc.)
Everyone else ask: do you love it? Can you afford it? Can you see yourself there for a long, long time?
Then go for it.
You might find this link interesting re: S&P PE’s:
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
Note the PE’s in 2008/2009. Then note what the market has done since then. Were low PE’s a good time to buy, or a REALLY bad one?
Here’s a link that says the S&P pe is 23.94 right now:
http://www.multpl.com/
What happened to 14?
Don’t believe everything you read.
“No bubble has ever been reinflated.”
Wait. What?!?! You must be kidding. They may not have been re-inflated to the same size, but they most certainly have been re-inflated.
“I agree Emma. I have said many times on this site- this bust is unlike anything anyone here has ever, and will ever, experience in their lifetime. It is a once in a lifetime event (unless, perhaps, you happen to be about 15 right now and live to be 100- wherein perhaps you will see the credit cycle go full circle again.)”
I disagree. The global pool of money grew from $35T to $70T during the bubble. There’s entirely too much money out there chasing too few assets. We could see swings like this in the future especially if effective global regulation on speculation isn’t reigned in (which I put near probability 0).
Yes- maybe you should READ it.
“Price earnings ratio is based on average inflation-adjusted earnings from the previous 10 years.”
The forward P/E of the S&P 500 is about 14. Of course, some of those companies won’t earn what everyone expects they will. But even if they don’t- unless there is a serious double dip- you can still expect a P/E of about 16 or 17. That’s not a “bubble” valuation. It’s around historic norms.
During the financial crisis, the S&P never traded below 10x. It actually wasn’t cheap. In the 1970s it traded as low as 3x and was under 10x for several years in a row. Anyone who bought stocks then got rich over the next 20 years. As Peter Lynch has said about the 1970s- it wasn’t hard. You just had to buy something.
Eventually housing will get down to P/Es of 3 too. It will get down so cheap anything anyone buys will serve them well over the next few decades.
If the S&P was at 14 right now I wouldn’t have my money parked in money market. The S&P is waaayyy overvalued right now. 1990s style except without the booming economy to back it up.
Whats funny is looking at that chart at every instance except for this one corresponded to a booming economy. More credence to my theory that the market these days is disconnected from economic fundamentals (at least domestically) and doing its own thing. Could be an influence from globalization and better economies abroad but dunno.
“The global pool of money grew from $35T to $70T during the bubble. There’s entirely too much money out there chasing too few assets.”
In housing? The money is going into other assets. I don’t disagree. But they have already cut the credit to housing and that’s what fed the beast. There’s no way this Congress is going to allow the spigot to be opened again on housing. And if it was- heaven help us all. The next crash really would bring down the country.
“Smaller condos are going to be decimated in this bust……There will be no buyers……A whole generation financially wiped out. Most of them will be set back a decade or more financially.”
Irresponsible, irresponsible, irresponsible opinions disguised as fact. Shame on you!!
Err every instance with a PE above 20.
Look around you Clio. I see it every day running this site. Owners “losing” $100,000 down payments. Others simply walking away. Not enough buyers to sell them to. Too many sellers asking inflated prices because they have no other choice.
As we have discussed- it will take these homeowners 5 years (or more) to “save” that downpayment back again (probably more- since most people don’t have financial discipline.) It’s total devestation going on out there. They may never recover from it financially.
“There’s no way this Congress is going to allow the spigot to be opened again on housing.”
You give them WAAAAY too much credit. They would like nothing more than for that to happen.
“The next crash really would bring down the country.”
Probably. Or the one after that, or the one after that.
“If the S&P was at 14 right now I wouldn’t have my money parked in money market.”
It is Bob. Hate to break it to you. That is a forward P/E however (which may not turn into reality.) But if you look at trailing you will find this:
“We believe it is best to look straight at the S&P 500 TTM P/E which is at 15.5 as of 31/01/2011. Over the last century, the TTM P/E usually fluctuated between 12 (undervalued) and 18 (overvalued), 15 being the median (neutral).”
http://seekingalpha.com/article/250342-five-reasons-the-s-p-500-could-reach-the-1-500-plus-level-in-12-months
“Earnings are well under historic norms. The stock market is valued by earnings (as are individual stocks.)”
You are extremely naive. At least when it comes to stocks.
“You are extremely naive. At least when it comes to stocks.”
Yep. Me and Mr. Buffett. Following Benjamin Graham’s valuations. Yep. Clearly it doesn’t work. Oh well.
“Look around you Clio. I see it every day running this site. Owners “losing” $100,000 down payments.”
I absolutely agree with this fact – however, you fail to realize that many of these people made many times this amount previously, and will make more money in investments in the future, etc. Sabrina, how much money did people “lose” in the stock market? Much more than in real estate – but you don’t hear people talk much about that – why is that? Because it is not as visible or public as real estate. Believe me – losing 100k is AWFUL – but not necessarily devastating or catastrophic. People WILL recover and continue to make money….
Bob, I think you make an EXCELLENT point that the prime north side ‘hoods offer a Manhattan lifestyle at a much lower price and proximity to other transplants. All of the friends I’ve made here aren’t from Chicago and I find I have a lot more in common with people who know what it’s like move to a big city far away from your hometown. That’s not a jab at lifelong Chicagoans. I just think it’s an excellent point to help people understand why Lakeview/LP (and possibly Wicker Park and Bucktown) are not going to see places with parking and in-unit washers selling for $75 per square foot. I’m renting my place in Oak Park this spring and moving into a rental in Lakeview because almost everyone I’ve met since moving here five years ago lives somewhere on the red line.
Sabrina, is it just me or does it seem like rent hasn’t been going down in Lakeview/Lincoln Park in the last two or three years? I’d think if all these families are outgrowing their starter condos and desperate to rent them and we didn’t have enough young yuppies/gays to take their places, we’d be seeing more price slashing on rent rates. You might say the banks are contributing to this holding pattern because there is a lot of inventory in limbo, but I don’t see what is going to cause some tidal wave of excess inventory to come on the market in East Lakeview so suddenly that everyone can suddenly live there (as owners or renters) for 20% less than they can today. I think we’ll see the same slow inventory trickle happening for five years or more and things being fairly flat for a while.
“It is Bob. Hate to break it to you. That is a forward P/E however (which may not turn into reality.) But if you look at trailing you will find this:
“We believe it is best to look straight at the S&P 500 TTM P/E which is at 15.5 as of 31/01/2011.”
Except it’s not. You would be wise to direct some of your skepticism of the real estate market towards the stock market. What the talking heads tell you simply isn’t true.
“That is a forward P/E however (which may not turn into reality.) ”
forward P/E?
http://www.youtube.com/watch?v=pWdd6_ZxX8c
Clio- very few 32 year olds who have now lost $100k on their condos have a substantial stock portfolio (if they even have one at all.) They make $150k in income and it will take them YEARS to get back that money that was lost. I never said they won’t continue to make money. But they now are set back a decade. Meanwhile, their peers who didn’t have this setback (like HD, for instance) continue to accumulate wealth, saving for retirement, their kids college education etc. But this other person now has to start all over again.
This bust is far worse than a stock market bust for most people because of the reverse leverage.
“Sabrina, is it just me or does it seem like rent hasn’t been going down in Lakeview/Lincoln Park in the last two or three years?”
Rents aren’t driven strictly by housing prices. In some cases, you can even have a bit of an opposite effect. People getting foreclosed on CAN’T buy again (for a while) and are forced to rent. This increases the pool of renters. In addition, you get many people that are too scared to buy (look around here), that add to the rental pool.
“forward P/E?”
I said it may not happen. But the trailing is at 15.5 Bob. That’s not expensive either. Apparently, you’ve been missing out while you’re waiting in money markets.
“But the trailing is at 15.5 Bob. That’s not expensive either.”
And it’s also not true.
Danny: Rents were crushed in Lakeview during the financial crisis. They couldn’t give apartments away as the newbie college grads didn’t have jobs. That has moderated now. The “nicer” rentals (more condo like) are still renting quickly for obvious reasons. And many of the condos that come on as rentals rent fast and for a premium.
There are fewer rent concessions on those. For the most part Lakeview and LP’s rental stock is not very good. It’s not surprising so many people want to buy condos in those neighborhoods just to escape the nasty rental buildings!
The problem going forward is credit. Not enough people have the downpayment or the credit score to qualify. And there aren’t enough banks of Mommy and Daddy to create buyers. Think about how many of the condos featured here have HD posting that the owner had 100% financing? That has gone away. So now they have to find a buyer with at least 3.5% skin in the game (and maybe much more.) It’s not easy.
interesting stuff guys. Sabrina, what’s your background?
“Clio- very few 32 year olds who have now lost $100k on their condos have a substantial stock portfolio (if they even have one at all.)”
Sabrina, how did those 32 y/o (presumably younger when they bought) afford the 100k down payment? Obviously they had high incomes and will likely recover without a problem (otherwise they would never have been able to afford the 100k down payment in the first place).
“And it’s also not true.”
What is it then Chuk? Please tell us. Shiller uses a 10 year average so that’s not accurate for our discussion of the last 2 years being a bubble.
That’s because it IS 15.5.
Wow. Such a bubble. I can’t believe how expensive those stocks are. Gosh darn.
“Sabrina, how did those 32 y/o (presumably younger when they bought) afford the 100k down payment?”
LOL clio if you don’t get it by now you’re not going to.
“Sabrina, how did those 32 y/o (presumably younger when they bought) afford the 100k down payment?”
The ones I know personally- the bank of mommy and daddy. None of the 32-year olds I know put down that much. Some were able to scrape together $50k (with two good professional incomes and some money from wedding gifts.) Those $50k were hard earned. They are so angry that they are losing it all. I don’t know what to tell them except I say they are not alone.
Sabrina, my point is that most people who you see lose 100-200k downpayments may be much better off than you think. Many people tend to put themselves in that person’s situation which is incorrect. To put down 100-200k, you probably also have at least that much (if not more) in other investments or have significant incomes. Therefore, the impact may not be as great as you think.
ss: haven’t you figured it out? I’m a trader! 😉
“The ones I know personally- the bank of mommy and daddy”
uhhhh – so basically they are NOT losing their own 100k and are NOT set back a decade. You are disproving your initial point/statement.
S … i think you are a psychiatrist
chukdotcom – often that foreclosure returns to the rental pool. In addition, household formation is slowing (Someone posted the link the other day); and finally, during the boom, the developers just flat out built too many homes to be absorbed so there is this excess inventory. There’s no housing shortage in Chicago.
Bob – the GZ will fall too. The entire GZ is predicated on out of towners coming to the city from around the midwest. The less wealthy ones buy 1bds and 2bds; the wealthier ones buy the 2/2s and 3/2s and townhomes. They all eventually want to sell to someone further down the property ‘elevator’ which requires a fresh crop of young people to move into the GZ. All it takes is a few years of fewer numbers of big ten grads to move into GZ and the delicate balance is screwed up. Personally I believe this is already occurring, just based upon what I’ve seen. Now condos are languishing, rents are slowly dropping, and SFH’s are selling at 2001 prices or less in some cases (which in 2001 sfh were not cheap then either). COuple that with a 10% unemployment in the state for an extended period of time and that’s not going to bode well for GZ valuations.
“None of the 32-year olds I know put down that much. ”
uhhh – so they are NOT losing a lot even if they lose their entire downpayment and are NOT set back a decade (again, disproving your initial point/statement.
Again, Clio- they are losing their $50k (or however much.) Many of the ones I know will have to short sale (AFTER losing the $50k.) And then it will take them years to resave the money. They cannot then eject out to the suburbs and buy a house because they no longer have a downpayment. So they will rent. And try and save. Meanwhile- it is finacially devestating to them. They are falling behind their peers.
Oh- and they can no longer paint their walls or buy granite counter tops (because they are renting) so life is even worse for them.
I lost 200K last year in a deal. More reason to go out and work your ass off to make it back. That’s the American way.
“COuple that with a 10% unemployment in the state for an extended period of time and that’s not going to bode well for GZ valuations.”
True. But not to the degree of non-GZ hoods. Seriously you’re going to see 50%+ declines in non-GZ hoods whose peak valuations were fueled by nothing but comparability to GZ hood valuations.
Yes the 850k Old Irving/Edgewater/Beverly house in 2006 will be worth less than 450k by 2020.
“Some were able to scrape together $50k (with two good professional incomes and some money from wedding gifts.) Those $50k were hard earned. They are so angry that they are losing it all. I don’t know what to tell them except I say they are not alone.”
Being angry does not equal being financially devastated. I was furious, angry, upset, almost homicidal when I found out what I had to pay my ex-wife but that doesn’t mean that I am financially ruined. These angry whiners need to stop right now – being angry or complaining doesn’t do anything positive. So they lost – whatever. Learn your lesson and move on. Life is about exploring opportunities, forgiving, and achieving your goals while ignoring/avoiding obstacles. Seriously, if you concentrate and focus on your failures, you will become a scared little wimp, constantly second guessing yourself and counting your pennies – not a great way to live at all. Just ask HD….
And if that younger crop that comes to chicago is slightly different than the big ten crop then the GZ has problems. The rise of the hipsters renters who took over logan and pilsen by storm sort of leads me to believe that not everyone believes that living around depaul students or living in expensive pre-WWII vintage highrises along the lake is what they have in mind for their urban experience.
“Yes the 850k Old Irving/Edgewater/Beverly house in 2006 will be worth less than 450k by 2020.”
Interesting. Do you see that as straight down with no dead cat bounce in between? Or a bounce in 2014/2015ish, and then back to new lows?
“Seriously you’re going to see 50%+ declines in non-GZ hoods whose peak valuations were fueled by nothing but comparability to GZ hood valuations.”
50% from here, or 50% from the top?
chukdotcom – you do realize that you are discussing/debating real estate with a bunch of 20 something year old renters who have never owned and who have never experienced a recession. While their opinions are certainly valid – you have to look at the source to understand the chances of them being accurate.
We’ve already seen 50% declines in some non-GZ neighborhoods. But we aren’t anywhere near that in, say, Sauganash, Edison Park, Oriole Park, Edgebrook etc. We’re probably 30% down in those areas though.
Some reaaltor spams me about reos in the nw burbs and im not quite sure how he got my address but here is what he is saying this week:
Last week, much fewer bank-owned homes were listed or re-listed in the northwest Chicago area MLS. There were just 6 new listings, 11 price reductions and 4 homes were re-listed after contract failures. In the same time period, 33 condos and townhouses priced below $75,000 were also listed or re-listed. Fu
“While their opinions are certainly valid – you have to look at the source to understand the chances of them being accurate.”
Well, I’m not looking for advice per se. I like to hear lots of peoples opinions. Some people I use as a contrarian indicator, others not. Sometimes knowing how wrong someone is is as useful as them being right.
I do the same thing with other investments. When I see a lot of ill-informed people on one side of a play, it makes me realize I want to be on the opposite side.
Note, I am not referring to everyone on CC as ill-informed. There are some very valid points made here. And I certainly can’t pretend to be the most knowledgeable one here.
“Interesting. Do you see that as straight down with no dead cat bounce in between? Or a bounce in 2014/2015ish, and then back to new lows?”
Depends on policy makers. Any more ill-advised dough for dumps programs will obviously provide dead cat bounces along the way. Also nothing will be “straight down” as Chicago is very seasonal. However year/year “straight down” I think is fair.
“50% from here, or 50% from the top?”
50% from the top. However most places in Chicago proper other than really dangerous neighborhoods aren’t that far off their peak. So 35% from here I’d say.
“However most places in Chicago proper other than really dangerous neighborhoods aren’t that far off their peak.”
Seems to me the average “non-dangerous” properties are around 30% off the peak right now. The places I have looked at in River North, South Loop and West Loop were all at least 30% off the peak.
Funny translation of Bernanke’s remarks from yesterday:
http://dailycapitalist.com/2011/02/03/bernanke-speech-translation/
Bob:”Whats funny is looking at that chart at every instance except for this one corresponded to a booming economy. More credence to my theory that the market these days is disconnected from economic fundamentals (at least domestically) and doing its own thing. Could be an influence from globalization and better economies abroad but dunno.”
Is food the new bubble?
http://www.msnbc.msn.com/id/21134540/vp/41414080#41414080
Sabrina:”Just because something goes up for a few years doesn’t make it a “bubble.” “
sabrina, hd, et. al.:
I think it’s very interesting that the most successful, optimistic, and financially secure posters on this site are also the ones not spouting all of the doom and gloom…
being optimistic, smart, and hardworking in life and investments gets you ahead… not spouting doom and gloom…
This in anonymous website, Jack, you have no idea how successful or wealthy or not any of us are.
Furthermore, falling property prices are not doom and gloom, it’s optimistic, to think that our children will be able to live in home and not have to pay over 50% of their take home income to the mortgage company.
“#jack on February 4th, 2011 at 9:14 am
sabrina, hd, et. al.:
I think it’s very interesting that the most successful, optimistic, and financially secure posters on this site are also the ones not spouting all of the doom and gloom…
being optimistic, smart, and hardworking in life and investments gets you ahead… not spouting doom and gloom…”
“I think it’s very interesting that the most successful, optimistic, and financially secure posters on this site are also the ones not spouting all of the doom and gloom…”
You mean people that brag about Lambos, while others just wanna talk about real estate? Where did you get this data that Sabrina and all are broke in comparison to the flamboyant possibly fictional characters? People that have money don’t talk about it…
“Furthermore, falling property prices are not doom and gloom, it’s optimistic,….”
Affordable housing is great but a crashing real estate market is NOT the way to get there and does not constitute an “optimistic” outlook.
No, the way to do it is to spark up inflation so that the cost food and energy consumes more than 50% of the average Joe’s wages, all in a vain attempt to prop up housing.
“Affordable housing is great but a crashing real estate market is NOT the way to get there and does not constitute an “optimistic” outlook.”
“Affordable housing is great but a crashing real estate market is NOT the way to get there and does not constitute an “optimistic” outlook.”
What crashing? You keep saying everything is fine and how few people are affected by price declines, foreclosures, wage declines, unemployment, etc. You’ve gone so far as to claim everyone will just have to get used to spending even more of their income on housing since landlords and sellers won’t have it any other way. Regardless, the correction will continue no matter what we say. It is a good thing to be optimistic about it in the long run and I don’t expect bubble-chasers and instant gratification types to agree.
“No, the way to do it is to spark up inflation so that the cost food and energy consumes more than 50% of the average Joe’s wages, all in a vain attempt to prop up housing.”
Yep, and we’ll see the inflation everywhere but housing unless Joe’s wage increases exceed it (in order to burn off the inventory overhang.) Fat chance.
G – I never said the market is crashing. My statement meant that hoping for a crashing market is NOT optimism – it is “vulturism” and “negativity” in its highest (lowest) form – bottom line: it is NOT optimistic to hope for crashing prices.
But clio, clio, clio, crashing prices IS optimistic. You might actually sell your farm in 2013 at market price aka $300,000.
“it is NOT optimistic to hope for crashing prices.”
Vulturism? Because your net worth might take a hit? The average guy can walk away and move on, make adjustments to their lifestyle. Leaving the banks holding the bag isn’t “vulturism”. Those geniuses helped engineer the bubble and should take the hit. You, with your high net worth, can’t do that and seem to feel that taking a hit is a personal attack by the negative nellies.
“G – I never said the market is crashing. My statement meant that hoping for a crashing market is NOT optimism – it is “vulturism” and “negativity” in its highest (lowest) form – bottom line: it is NOT optimistic to hope for crashing prices.”
You can’t just blame the banks. Remember, just cause someone WILL give you credit, does not mean that you SHOULD take it.
“Those geniuses helped engineer the bubble and should take the hit.”
uhhh – the only people that are going to be negatively affected are those that walk away from their mortgages. It will be exceedingly difficult for them for at LEAST 10 years – and even then, just try and get good rates for mortgages, credit cards, autos, etc.
“You, with your high net worth, can’t do that and seem to feel that taking a hit is a personal attack by the negative nellies.”
Emma, emma, emma…. of course I can take the hit. I can sell my properties in minutes for the mortgages I have on them. I am not angry about anything. My posts on this site are meant to bring balance, sensibility and truth to the discussion (eg – all the talk about impending foreclosures without understanding that most of these are undesirable units in undesirable locations, all the talk about poor buyers without realizing that there is a huge contingency out there with a lot of the money, etc.O).
Who is to blame when the banks give credit to someone who does not have the ability to repay it, or there is the substantial likelihood that the borrower will default?
“#A-Fed on February 4th, 2011 at 10:29 am
You can’t just blame the banks. Remember, just cause someone WILL give you credit, does not mean that you SHOULD take it.”
Yes I can. They are supposed to have sophisticated underwriting standards. They were too anxious for short term profits to pay attention and ignored them. That they were able to find willing pawns with nothing to lose made it easy.
“You can’t just blame the banks. Remember, just cause someone WILL give you credit, does not mean that you SHOULD take it.”
So they learn to live without credit. It has been done before you know. At least they can put food on the table and gas in the car.
“uhhh – the only people that are going to be negatively affected are those that walk away from their mortgages. It will be exceedingly difficult for them for at LEAST 10 years – and even then, just try and get good rates for mortgages, credit cards, autos, etc.”
Don’t forget that credit cards been ubiquitous since the 80’s or so. Even as recently as the 90’s late charges were like $10.00 and interest rates were fairly low.
It was during the late 1990’s and early 2000’s that credit card lending blew up.
And how did people live, buy cars, shop at the store before credit cards?
HD and Sabrina, folks can build back up their savings and they are doing it alot faster. Personal savings rates have gone from negative to over 5%.
High income earners are saving alot, and investing that savings, with the stock market skyrocketing in recent years there are alot of people that are flush with cash. I dont know why you guys cant accept that!
I can say for myself, I save 50% of my after tax income. Because I realize the time to invest is now.
My mistake it was never negative but it has increased by over 400%
http://www.bea.gov/briefrm/saving.htm
gesco, I wish I had time to find the link, but I don’t, but if I remember correctly, the ‘savings’ rate includes repayment of debt – and repayment of debt includes default and chargeoff, and god I wish I could find the link, recent charge off rates are very high showing that most of the ‘savings’ rate you linked to is really just smoke and mirrors because it’s people defaulting on debt. Amazing stuff, really.
You’ve always saved your income, so your continued savings doesn’t affect that figure. It’s what other people are doing. And other people aren’t saving, they’re mostly defaulting on debt.
I can say amont my friends in their late 20s or early 30s, everyone that didn’t buy during the peak (basically people who are recently out of grad school) are sitting on a cash, and really want to buy but just don’t know where and how.
haha basically folks that are ripe for a real estate agent, im sure if they met one at a party within 3 months they would have an overpriced condo.
“Who is to blame when the banks give credit to someone who does not have the ability to repay it, or there is the substantial likelihood that the borrower will default?”
Why shouldn’t they? They will either end up with the property or get bailed out for it! They get paid either way. You cant blame them for good buisness – it’s just immoral and flirts with legality.
The borrower’s in fault for overextending, again: just because you can, doesn’t mean you should.
“Yes I can. They are supposed to have sophisticated underwriting standards. They were too anxious for short term profits to pay attention and ignored them. That they were able to find willing pawns with nothing to lose made it easy.”
Sophisticated underwriting by what standards? That of a complex formula equating a percentage stereotype with several work around solutions? I don’t think they ignored the signs by any means, they “corrected” things and ahem, their bank accounts and established a new 10-15 year business plan.
I’m just sayin that you can blame the banks, to an extent, for the loose lending but people are at fault too.
Some of you thought this price might provoke a bidding war- but this unit just closed at…
$124,000.
So- nope- doesn’t appear to have happened. It also took nearly 6 months to finally close.