Living Without Walls in a Triplex Loft: 1000 W. Washington
True loft living means living without walls. In the case of 1000 W. Washington, Unit #141, in the West Loop that is true down to one of the bathrooms, which is “open” to the bedroom.
The main living space has 20 foot high ceilings. Here’s the listing:
CUSTOM & PUBLISHED EXTRA-WIDE TIMBER LOFT W/ 20′ CEILINGS, DARK OAK HDWD FLRS, KITCHEN W/EBONIZED CHERRY HANDCRAFTED CABS, 2.25′ LIMESTONE COUNTERS, GE MONOGRAM, COOKTOP/HOOD, SUBZERO, MIELE, PANTRY, GERMAN STEEL RAILINGS, RAISED LIV RM WBFP W/SANDBLASTED MIRROR MANTLE, ARMANI-ESQUE SPA BATHS, 18 LIMESTONE, AXOR/DURAVIT FIXTURES, BODYSPRAYS, RAIN, STANDALONE TUB, FLOAT VANITIES, VESSEL SINKS, FROSTED GLASS.
You don’t have to worry about finding the bathroom in the dark in this bedroom:
Unit #141: 2 bedrooms, family room, 2.5 baths, 3500 square feet
- Sold in June 2006 for $914,000
- Currently listed for $1.1 million (parking is extra)
- Assessments of $1058 a month
- Taxes of $10,400
- Nicholas Colagiovanni at Baird & Warner has the listing
Why is every unique and exciting place listed above $1,000,000?
This intrigues me (not this unit per se), but the building and concept. Check out unit 541 in the same building — MLS 06447456. Looks to be very similar concept, but damaged and maybe bank-owned? I’ve been meaning to dig into this more and wonder what the story is.
Anybody know the building history? Or the unit history on 541?
Well, there are lots and lots of units for sale in it (and I think Sabrina has posted about the very unit you are interested in before). The assessments are very high, esp. considering they don’t include heat, doorman, etc. Lots of sales, at least one REO, high assessments… I’m thinking the building is in distress, and I wouldn’t buy into it–at least not anywhere even remotely close to the asking prices. The units are unique, high-end, creative designs, etc. I wonder what went wrong? I’m thinking some kind of serious structural problem, maybe, to explain the assessments?
You can almost feel the drafts from this place.
Another listing in the building says assessment includes “Water, Doorman, Common Insurance, Tv/Cable, Exterior Maintenance, Scavenger, Snow Removal.” But yes, high for not having heat — and I’m sure heating/cooling a triplex costs a fortune.
Oh yeah I love this place…
Who did the bathroom? I like it.
The building is not distressed and is very popular. It is right across Harpo Studios and in a great location. The bank owned property has mold and law suits going back and froth for a coupl eof years. This is the only distressed unit.
There are 18 active listings and 4 of them are under contract. This is far from a building in trouble with 183 units. You guys think everything is distressed. Isn’t there a rental blog that you guys can talk about paying rent and how you hope you will not get kicked out?
Anyone have more info about the building?
I found this website:
http://1000westlofts-lawsuit.com/welcome.html
There is no way to confirm the info that is on the link- so form your own opinions.
Does not seem to have slowed down closing considering there have been 12 closings in the past 9 months. I walked through the unit and I still feel okay. The unit and most top floor units had a leaky roof (typical developer lapse). It was fixed over a year ago and this is the only unit one that did not cooperate with the repair process. They had to strip everything out of the unit because there was mold present. There were never any disclosures about asbestos and this is the 1st I have heard it mentioned.
The building is great. Just be sure to fix a leak if you see one and not let it continue for 6 months.
You can almost feel the drafts from this place.
—
Yeah, I can feel the heating bills in this place too…
I’m not sure at this price point the heating bills would be much of an issue. Given how concentrated wealth is in this country, I’d be willing to bet those that can afford a 1MM place have more than 2x the net worth of those that can afford a 500k place..
At 1MM+ its probably someone’s assets/net worth that are the determining factor more than net income.
Steve Heitman,
With 180 units, and 18 for sale/rent, that makes for 10% of the building getting out. This one guy might be some kind of bad apple (who knows), but the fact that 10% of his neighbors are leaving doesn’t give me any kind of comfort.
Your exaggerations don’t help your case. We think that “everything” highlighted on this site is distressed? Evidence, please? This particular building has elements that should give any cautious buyer pause: high assessments despite low amenities, a high percentage of units for sale, at least one unit foreclosed. This warrants further investigation, and just because you “walked through the unit and … still feel okay”–well, let’s just say if you, as an agent, told me that tidbit, believing it should assuage my concerns about mold and asbestos, I’d turn around and never darken your door again.
As for your nasty comment about whether there is a rental blog out there we could all go to… please. For one thing, many of the most active posters on this site–including G, me, Sabrina herself–on this site are, or have been owners in Chicago. For another, there are many, many blogs owned by Chicago real estate agents that do little other than urge buyers to buy. Sabrina even links to yochicago, which self-consciously admits that its “customers” are “developers,” not buyers. I’m not denying there is a place for such blogs, but thank god there is one Chicago real estate blog whose interests align with buyers, not sellers and the real estate industry generally. The fact that it gets so many real estate agents so upset (such that they repeatedly say ridiculous things, as you so often do) makes me think this blog is on the right track.
“Isn’t there a rental blog that you guys can talk about paying rent and how you hope you will not get kicked out?”
So is this the new NAR talking point, insult potential buyers into buying? What happened to “buy now or be priced out forever”?
I live in this building and can say Unit 541 is a unique situation, it apparently has mold and the owner placed blame on the owner association with law suit pending. This is not common and has not happened to/in any other unit. The assessments do include Water, Doorman, Common Insurance, Tv/Cable, Exterior Maintenance, Scavenger, Snow Removal. While it does not include heat, the bills are not high – there are no drafts. When the building was turned over into lofts, they sufficiently insolated the brick walls. The staff at 1000 W. Washington is very friendly and takes good care of the building. This location is ideal not only because it’s across from Harpo, but there are also 4 restaurants in the building and it’s located off Randolph Street Restaurant Row. Out of 190 units, having 14 on the market does not concern me the least bit because there are no structural problems.
18 people are looking to get out…one foreclosure.
that’s 18 people who could, theoretically, decide to stop paying assessments. that’s up to 18k a month in unpaid assessments.
In a building with mold problems. and leaky roofs.
yay. nothing like wasting a million bucks.
Sarte – I can care less if you buy or continue to rent.
Steve,
As you have likely come to realize, 90% of the people on this message board are people who can’t afford to live in any of these homes, were very jealous of all the people making a killing during the boom, and now are rejoicing watching the market go down. They are emotionally invested in a real estate crash and are actively routing for it. I remember the same thing happening after the stock market busted 8 years ago, sad isn’t it?
D
I always lament when my colleagues, in bad times, resort to comments such as Deaconblue just made.
As they say, live by the sword, die by the sword.
Why is it ok for you to root that the RE market skyrocket, but it’s not ok for someone else to root for it to drop?
I love the smell of a buring realtor in the morning.
“I can care less if you buy or continue to rent.”
Steve,
but you continue to make idiotic remarks. LOL, the last time I checked, it wasn’t the renters who were worried about being evicted…
Deaconblue,
Yes, we are enjoying the show, whether we can afford it or not is none of your business, but we did learn our lesson during the dot com days when people said csco was a bargain at 60 :-). Realtors should find a different set of fools to scam. Oh another thing, I saved tens of thousands last year renting, hows that real estate “investment” looking today?
Deaconblue,
Did I miss Sabrina’s demographics and income survey? Because if not, I can’t figure out on exactly what basis you posit that “90%” of the posters on this site are “people who can’t afford to live in any of these homes” and are “jealous” of owners. Or are you just making indefensible, and defensive, comments because people write things that you don’t like to hear?
Satre – “Realtors should find a different set of fools to scam. Oh another thing, I saved tens of thousands last year renting, hows that real estate “investment” looking today?”
You are funny – I bought 3 properties last year and sold them a couple months later for a very nice profit. I also just bought my personal residence and could resell it today for more than what I paid. It is in a very high demand area and had multiple bids 4 months ago when I purchased. It is all about location location location…
Don’t get depressed Satre as I am sure your rental is real nice. Plus you sound like you are saving all kinds of money paying someone else’s mortgage. LOL!
Steve,
So you are a mini donald trump eh, then why are you wasting your time with us lesser mortals? Don’t you have a reality show or something? If you are doing so well on your “investments” then why do you troll a “renters” blog for customers? Its a sad way to make a living my friend.
Actually I sold too in 2007-for 50% more than I bought. The buyer (read investor) who bought from me is now underwater.
I didn’t buy my place as an “investment,” I bought it because I wanted to own my own place. I am not at all concerned about how my place will do over the period I own it. If I happen to lose some money due to opportunity cost then that was worth it for the value of having my own place. Sartre and Investor, at least you are willing to admit that you are routing for a real estate collapse. That’s kind of sad, but whatever.
D
I am not looking for clients Sartre. I am real proud of you for selling last year. You are the real Sartre Trump around here. Be sure to decrease your excemptions back to 0 on your W-4.
What address did you sell at?
Deaconblue,
what we are rooting for is a return to inflation adjusted norm which unfortunately is way down from here. It may be too much for you to see median income families actually afford a median priced home but thats what housing is meant for- for people to live in and not trade like pork bellies. And now it is happening, which makes me happy.
stevy boy, settle down, I was in my condo for 7 years so I wasn’t flipping. The sale was due to job changes etc. but it worked out quite well.
Sartre,
The glee so many people on this board express when evidence of the housing decline appears suggests that you are routing for more than a return to normalcy. I don’t buy it one bit.
D
Deacon,
AFAIK the glee is not directed towards people who bought houses to live in. It is directed towards folks who have turned housing into and “investment” and feel that ever increasing prices are somehow good for the community. The glee also stems from the hope that a misdirected US economy which became predicated on buying and selling houses to each other will see sensible capital investment rather than ever increasing debt load. Finally, part of the anger comes from the fact that your and my taxes are paying for bail outs of every degree imaginable while our infrastructure, education and healtcare continue to suffer and the dollar is devalued. Nobody makes money in a bear market, even the bears.
Here’s the case shiller index for top 10 cities. Notice, that chicago is down 17 points from the peak and in the most recent months the decline has accelerated.
http://www.homeprice.standardandpoors.com
However what this means is that the affordability index is rising, which is something to be gleeful about.
Sartre – why are you even arguing with Deaconblue? After I read the below, I chuckled hard (because you see my name belies my profession) and then with the last sentence realized I’m dealing with a juvenile. Just let it go.
“Sartre and Investor, at least you are willing to admit that you are routing for a real estate collapse. That’s kind of sad, but whatever.”
“what we are rooting for is a return to inflation adjusted norm which unfortunately is way down from here.”
What else drives real estate appreciation besides inflation? Have you noticed any changes in Chciago neighborhoods over the past 10 years? Just taking into account inflation for price appreciation indicates you are holding the demand for the neoghborhood constant. I would argue that the majority of neightbors covered on this board (excluding s. loop for now) are much nicer places to live then they were 10 years ago.
Agree or disagree? Should a more attractive neighborhood cause land / real estate values to increase above the inflation rate?
Steven Heitman, I can neither agree nor disagree to your question without more information. For instance, a neighborhood might gain in “attractiveness” but also have a sharp supply shock (upwards) due to builder overestimating future demand. In such a case RE values should decline. Has the supply in downtown Chicago jumped?
It seems to me demand is waning but supply increasing. Maybe I’m wrong, I haven’t looked into the details. Feel free to correct me with your hard data.
steve,
Inflation applies when increase in prices is accompanied by increase in wages. Inflating one asset class by increasing debt load is unsustainable and speculative. Witness the commodities inflation right now, would you say thats a good thing? As far as neighborhoods being better, notice how california and florida are now reporting a very quick decline in neighborhoods with boarded houses and infested pools. Misdirected investment can cause an asset to shine for a little while…watch what happens to some of these neighborhoods in the next couple of years. It will start from the newly arrived fringe hoods and move up the chain. This is unfortunate and didn’t have to be this way but speculation created neighborhoods which had no reason to exist.
That is why I made the point about location location location. You can’t create a new neighborhood and expect it to shine. Well established neighborhoods in perfect locations hold their value.
You are missing the point. Well established neighborhoods will also decline, but the decline will start from the weakest fringe neighborhoods and move up the chain.This is already happening. The same trend happened in other declining markets. In california bay area, the fringe cities are seeing 50% declines and >50% of sales made up of foreclosures. More recently, however high end counties like Marin are seeing significant declines. I work in the tech industry and travel to west coast often, the sight of subdivision after empty subdivision is unbelievable. Do you seriously think that rogers park and south loop will see declines but not impact Lincoln park?
Here is where we differ. There was never really value in the south loop. 5 years ago there was nothing there and no one wanted to live there. During the boom people made the mistake of paying Lincoln Park / Lakeview prices for new construction in the south loop. They did the same for new construction in Rogers Park. Shiny new appliances drew people to purchase expensive units where there was no land value. These are the areas that experienced double digit appreciation rates while more stable areas of Lincoln Park grew at 5 – 6%.
If you want to know where the values will hold look to the following: Best Neighborhoods, best school districts, proximity to the lake, proximity to downtown, restaurants, shopping, public transportation.
The trend is to move to and stay in urban areas. Chicago is the most livable city in the US. People will continue to flock here and move to the most desirable neighborhoods. Hint: the south loop is not a desirable neighborhood.
I agree that South Loop is not desirable right now but it will be one day down the road. My primary issue with South Loop is the lack of lifestyle that it offers. Main reason why Lincoln Park is one the most desirable places to live is that amenities that it offers. I partially agree with your statement regarding defensibility of the best neighborhoods. However, when there is a macro effects that runs throughout the economy, no one is exempt from taking the hit. LP/LV will be hit less and thats the protection. Only way south loop will develop is if the developers work together to create a desirable living area with restaurants, bars and shopping. If they fail to do that, they are just shooting themselves.
Disagree with your last paragraph. People will continue to come to Chicago. True. But there is a limit of supply in the developed areas. Those who cannot afford will look for alternatives. Thus even areas like south loop will become an option that they cannot ignore.
I agree the south loop will be great some day but I also know that a lot of people over paid for a dream that is not close to coming true. The south Loop will have its day but it will never have the neighborhood feel that some north side neighborhoods have.
Lincoln Park will feel the pain from this slow down but it will not fall off a cliff like so many predict. It is stable with high demand for fairly priced properties.
Steve,
So you do agree that their is pain ahead for the entire market and will just differ in degree. Well, we are in agreement then. In which case why take potshots at renters? they are doing what any wise investor would do– stay out of a declining market unless they are committed to stay in one place for a long time and possibly see no appreciation.
Your opinion is a little extreme. I see this market as a extremem buying opportunity. Purchase with location in mind and your property will make you lots of money. The people who bought in the south Loop seem to have forgotten about the location thing.
From today’s Tribune -“How much is your home worth now?
With the real estate market in turmoil, few financial questions push the anxiety button more than that one. But don’t listen to the national statistics. The truth is, all real estate is local and many Chicago communities have held up surprisingly well. Here’s a guide for using our online tools and other resources to find out what’s happened to the value of your most important asset.”
Here is another “Lissner calls that 5 to 10 percent range the most telling statistic; it suggests that everything will be OK if we’re all patient. While comparison figures for other cities are hard to come by (not everybody calls it the same thing, not every city has a firm like ARC tracking the condo market so comprehensively), the stories out of hard-hit places like Miami and Las Vegas suggest that large numbers of buyers are falling out for financial reasons, not just for “life-change” reasons.
Lissner offers two reasons Chicago has been sheltered from high fallout. First, it’s a fantastic place to live, and most of the area’s buyers have been people who were buying homes or second homes for themselves, not as investments. Second, our prices haven’t fallen as much as those in some more glamorous markets, so not as much value was lost here in the two to three years since buyers put down their deposits. The investment hasn’t soured enough to warrant walking away. “I think we have a lot of people who are believers,” says Lissner. “They believe this is a blip; they believe that living in downtown Chicago is the right thing for them; they believe that long-term we’ll return to the level of appreciation” that prevailed before the downturn.”
Looks like I am not the only one who think this downturn will be over soon.
Both sides have valid points, but know one really knows what will happen in housing. Many people on this site are 100% positive that housing market will collapse. Will housing appreciate like it did pre-bubble….. probably not. Will it collapse… probably not. If there is a collapse, I wouldn’t worry about your real estate holdings since for most people the bank will holding most of the bag. In this senario not having a job and the return of soup kitchens will be the real problem.
But you never know what the future holds… what if the the US enters a hyper-inflationary environment? If you own hard assets those will hold their value while paper assets will evapourate.
Sorry for cross posting but Steve, I left a message directed at Laura and this is why I think there will be slight appreciation of the properties after the properties hit the bottom next year. All based on my armchair guestimates.
I believe that the value of the components in rent parity will be hit soon based on one premise. The commodities prices went up and it will stay this way. The weakness of the dollar helped the rise in the prices but even if the dollar recovers against the Euro and the Sterling, the demand of the raw materials in the emerging markets i.e. China and India et al, will keep the equilibrium point as the supply is being fixed while the demand keeps on growing. If so, the rise in commodities will cause the raw material cost to go up and cause inflation which will lead to higher wages. This vicious cycle of stagflation will cause the housing prices to stabilize at his historical level and the rents will increase in lock step with inflation and more people who are forced to rent due to foreclosures. Thus after 5-10% downward adjustment of the prices, it will stabilize at that point and start moving up. Higher fuel prices will make the commuting distance more important in housing decisions and areas in the city with good transportation and close proximity to public transit will make it more attractive. Even the overdeveloped areas like the south loop will have more people renting and it will come back, albeit a slow process of 3 years or more. I am not an economist but I would love to get some elasticity of the supply and demand curves of all the factors that I mentioned above. This was totally based on my armchair guesstimate.
you all hve not spoken much about supply and employment which are important drivers. there are too many developments in their final stages not to put downward pressures on prices in the near term for the >500K segment. that coupled with stagnant wage growth make buying in the near term a tough proposition.
Steve,
I think to be an optimist in the current market setting is self-deceptive. I certainly wouldn’t expect a turnaround in this market any time this year. In downtown Chicago there is simply too much inventory. When inventory starts clearing then we can talk about a recovery. But until then there is no cause for optimism.
As far as Chicago being the most “livable city” in the US. I’m not sure what the criterion for livability is, but it certainly is NOT the most desirable city in the US. And people aren’t flooding into Chicago like they are, say, into Manhattan.
Also, if this is an “extreme buying opportunity” I take it you are currently loading up your RE portfolio (being “extreme”, after all). I you’re not then what you are stating is just empty rhetoric with no action to back up your supposed belief.
Josh,
Notice that the building construction materials are actually falling due to falling worldwide demand. In addition rental rates are also falling due to increasing supply of housing, especially through investors. Inflation argument holds if there is a corresponding rise in wages along with prices. Unfortunately thats not the case which means that a lesser percentage of income will be dedicated to wants and a large percentage to needs.
From evidence out there it appears that we are witnessing a deflation in things we want (housing,autos,electronics) and an inflation in things we need. Which makes sense since the wages are stagnant. Overall recessions tend to be deflationary.
From Crains:
(Crain’s) — Landlords still have the upper hand over tenants in the downtown Chicago apartment market, but they lost some leverage in the fourth quarter, a trend that could continue in 2008.
After factoring in concessions like free rent, rents at downtown Class A apartment buildings fell 4.3% in the fourth quarter from the third, the largest quarterly decline since 2001, according to a report by Appraisal Research Counselors. Occupancies dropped to 91.3% from 94.6% in the third quarter, the Chicago-based real estate consulting firm says.
It’s too early to say the market has peaked after a three-year boom, but the outlook for landlords is increasingly murky amid a faltering economy and competition from new apartment buildings and investor-owned condominiums.
“It’s certainly going to be a year of options for renters,” says Appraisal Research Vice-president Ron DeVries.
I think these guys keep forgetting that if they get the 30% – 50% decline they are wishing for we will all be out of jobs. It is not in the cards for the vast majority of the country. You will see…
Whoever asked me if I am purchasing properties for my portfolio?? The answer is yes! I have purchased 3 properties in 2008 and hope to add 3 -4 more in the next 12 months. I buy everything in ideal locations where rent is in parity with housing expense (not easy to find but they are out there is you are creative). This of course being with a 20% down payment.
Steve, who quoted 30-50% decline number? Or are you also an “expert” in mind reading. Good luck with your flips.
Great thread other than the occasional elbow jabs between the renters, investors and owners which we’re all used to by now anyway 🙂
Deaconblue wrote:
“The glee so many people on this board express when evidence of the housing decline appears suggests that you are routing for more than a return to normalcy. I don’t buy it one bit.”
Deaconblue your criticism is spot on of me here. I AM hoping for an overshoot on the downside. The bubble allowed many new, NICE developments to be built that wouldn’t have happened under normal economic conditions. Can you blame me for hoping to pick up one of these units at a steep discount? With a big enough correction I might be able to afford a unit that otherwise would’ve been too prohibitive for me.
Also I agree with Josh in that the downturn in Chicago will be far more limited than other areas. Maybe 10-15% more in nominal terms overall, with some segments getting hit less (SFH’s in good burbs) to other places getting hit more (S Loop condos). I disagree that real estate will start to rise immediately after bottoming. I expect the trough to last at least 4-5 years.
Steven,
Best of luck. But unless you bought foreclosures, you bought 9-12 months too early. In fact, those properties you bought have probably already deflated 5-10% in 2008 alone.
Investor – 2 were foreclosures and the other was just underpriced. They have not decreased in value and I could sell each for 20% more than I bought them for. I could sell my own home (purchased in March) for 10% more than I bought it for.
Only 10-15% decline in Chicago? are you out of your mind? The Case-Shiller index shows a 10% decline in the last year! Do you think the downward trend is just going to hit a brick wall and stop declining?
Hi Homedelete – How is your rental studio treating you?
What’s wrong with a rental studio?
Steven, If you are such a savvy investor/assclown why are you on cribchatter?
Homedelete,
I meant a 10-15% further decline in nominal terms. With inflation and a trough it might be moreso. I don’t anticipate further nominal price declines of 25+% in Chicago for the reasons mentioned above.
People tend to forget that the yearly above inflation rise in home prices was an anomaly not a rule. As home load defaults turn into auto loan defaults turn into credit card loan defaults, housing is going to be the least of our problems. Notice that inspite of agressive rate cuts by fed the mortgage rates have barely budged and are actually heading back up again. There is a lot more going on here than meets the eye. Credit-worldwide is becoming more expensive and neither fed nor our congress can do a thing about it.
“Hi Homedelete – How is your rental studio treating you?”
Uh, great ad hominem argument. You don’t like what I have to say so you attack me personally based on your misguided belief that I live in a rental studio.
As I described above, I pay $850 a month for a 1,000 sq two bedroom apartment about a 5 minute drive northwest of Logan Square. I’m getting a great deal. The exact same unit on the other side of the building has been for sale at $289,000 since January with no takers. hum…..I wonder why?
I would like to take this opportunity to inform the entire world that I rent a studio apartment and am proud of it.
I walk to work. I walk to the grocery store. I walk to the movie theater. I walk to restaurants and bars. I walk to the parks, to the lakefront, and to the marina, where I rented a sailboat this past weekend. When I want to drive a car, I rent one.
I’m happy, my wife is happy, and our net worth is extremely happy.
Steven Heitman said “I think these guys keep forgetting that if they get the 30% – 50% decline they are wishing for we will all be out of jobs.”
How do you figure? This makes no sense.
You also said, “Looks like I am not the only one who think this downturn will be over soon.”
You seem to think the downturn is almost over. I can give you numerous reasons why prices will continue to decline. Can you give any reasons why you think that the decline will end soon?
He means that if we see 50% nominal declines that the negative wealth effect will tank the economy and the banking system. He is right about that IMO. Fortunately congress seems to agree and won’t let that happen, or not quickly anyway.
Some areas may see these declines but I think they are overbuilt sunbelt exurbs and condos mostly in CA/NV/FL.
If there are 50% declines there will be pain but, we won’t all be out of jobs. The unemployment rate will increase but, most of us will be fine.
Simply put…
People who believe that the downturn will end soon do so based on emotion and thoughts.
People who believe that the downturn has just begun do so based on economic theory, financial analysis, and prudent research.
I have not heard one good reason why this market will turn around, only ideas based on hopes and dreams.
AD,
Honestly, how can we really predict the future of the economy and the markets? Name one person who can forecast things correctly. One thing I learned in economics is that we cannot predict the future and the timing. Economists can explain the cause after it happens and explain what might happen based on past experiences. I took real estate economics from one of the pioneers of the real estate economics, his brother was the one who originated the rational expectations theory at the Chicago school. Only thing I remember from that class other than talking about the Chicago Bears was that economy tends to decline at the height of the housing market. This was a comment made by the world reknown professor based on his personal observation and experiences.
I am a strong proponent of economic theory and its application through econometrics, fundamental financial analysis and thorough research. However, as professor Robert Schiller at Yale pointed out, we are in a historical high but at a new ground where he cannot firmly make his conclusion. Was there a bubble? Yes, there was a bubble, but I personally believe that housing has hit a new level. Would it stay here or go back down? I do not know, if I knew, I’d win a nobel prize and rule the world.
Market is driven by both rational and irrational factors. More studies show that we are not as rational as we assume we are. The growing fields of experiemental economics and psychological economics headed by departments at Columbia and NYU yields interesting and surprising results. I personally believe the fundamentals will drive the market in the long run, but in the short term, greed and fear will affect the market.
The market is headed for adjustment, but like the 70’s oil shock, we just entered a new realm. Unknown era where new factors and prices are in play and will test the demand the supply of the market forces until we hit equilibrium at some point.
My view is that the market downturn will not be as severe (30% down) as I would like it to be in order to teach the irresponsible a lesson. The market will remain flat for a while once it reaches the trough, but eventually, asset prices will go up as there is too much money in the world chasing limited resources.
The downturn is not over but as long as the government bails out the irresponsible homeowners, it will not be as severe. I would like to see a beating of those who were irrational but I would not like to see them slaughtered outright; at that point, the economic conditions will drive political and social unrest similar to those in developing countries. Then all economic theory, fundamental analysis will go out the door with CAPM being irrelevant.
This was the most entertaining discussion sans disrespectful jabbing.
Josh – Great post.
This unit finally sold on 9.1.10 for $865,000 which resulted in a $50,000 plus loss from when originally purchased.
Interestingly this unit was owned by a Board Member who sold the unit just 2 weeks before the Board announced another Special Assessment.