Market Conditions: Chicago Condo Sales Fall 19.1% in August Year Over Year
The Chicago Tribune digs into the August sales numbers and finds that sales in the condo market are much slower than the single family home market.
Condo sales have crashed in several neighborhoods year over year:
- Rogers Park down 13.2%
- Edgewater down 32.9%
- Uptown down 27.1%
- Lakeview down 35.7%
- Lincoln Park down 12.9%
- Near North side down 13.9%
- Near West Side down 10.2%
- West Town down 29.5%
- Loop down 32.8%
- Near South side down 48.7%
Sales are being hampered by tighter credit and falling prices which puts pressure on other sellers to lower prices, which many are unwilling to do.
“Condo sales, until the beginning of this year, were the best part of our market,” said David Hanna, president of the Chicago Association of Realtors. “There aren’t any buyers for this stuff because the lending process is tortuous.”
Also, the condo market for move-up buyers is hampered by the high cost of jumbo mortgages of more than $417,000 and the higher down payments required for those loans. Foreclosures and short sales are bringing down comparable prices within buildings too.
“Prices are a disaster and it’s creating this vacuum in the market where everyone’s prices are pulled down,” Hanna said. “And it’s happening in the best buildings in the city.”
Some sellers whose property has been on the market for months are going to try and become landlords.
Phil Sammarco didn’t think it’d be so hard to sell his two-bedroom, two-bathroom condo in the city’s DePaul neighborhood when he put it on the market in March for $449,000. Now priced at $435,000, he has fielded — and rejected — a few low-ball offers and showed the unit to a lot of first-time buyers who have indicated they have a wealth of properties to look at.
Now he’s thinking of turning it into a rental instead of lowering the price again.
“You’ve got a lot of choices,” Sammarco said. “Right now nobody is really comfortable that the worst is behind us. If you don’t think the market is stable and you don’t think it’s going to be as good or better, why wouldn’t you rent?”
The article talks about how sales are up in September due to the looming deadline for the first time homebuyer tax credit.
But how many of those buyers are buying $400,000 and $500,000 condos?
Chicago single-family-home sales jump, but condos are still suffering [Chicago Tribune, Mary Ellen Podmolik, Sep 25, 2009]
“when he put it on the market in March for $449,000. Now priced at $435,000, he has fielded — and rejected — a few low-ball offers”
I love how all sellers think every offer they get is a “low ball” offer. Never crosses their mind that their asking price is a “high ball” price.
And then it gets better when they decide to rent it at a significant loss in hopes that the market will be stronger next year.
Phil Sammarco = FB and financial man of genius
If you sell a place for a lower price, but then buy a new place at a lower price as well, are you really taking a loss?
Are there any recent rental stats? With all the condos being put on the market bc they can’t sell, I would think rental prices have a ways to go down.
It’s always ‘just around the corner’…. well, not this corner but the next corner. Or maybe that corner way up there by the cows…
I am sure LP is much better off than this article is stating. Plus condo sales are probably only down in LP because there is so little inventory available in the area.
Phil’s place in the DePaul Neighborhood can’t be indicative of the demand for great LP real estate. After all who doesn’t want to live in LP. It is the greatest neighborhood in all of Chicago, despite the muggings and drunk frat boys everywhere.
“MPS on September 25th, 2009 at 8:30 am
Are there any recent rental stats? With all the condos being put on the market bc they can’t sell, I would think rental prices have a ways to go down.”
I would argue against that principle. Here are 2 things to factor in:
If I am a landlord who bought a 6 unit building with all 2bed/1 bath 10 years ago, my per unit cost is less than the total cost of a condo owner with the similar sized condo purchased 2-5 years ago. Condo owner need to get a high rent (just like they needed to get a high sales price) to cover their nut. Also the condo unit probably has nicer finishes. I think that this keeps prices stable or even increases them slightly, for a certain unit type.
Also there is a significant amount of condo for rent that are larger, nicer, fancier, and in more ammenity rice buildings now that ever. These command a higher rent, in general, than the kind of rental units that were available in previous years. So now there is a different unit type on the rental market that is more expensive, which raises, or at least stablize, rental prices over all.
Now my theory is not perfect and probably applies more to less dense, more residential areas and not downtown/ loop/ GC/ near north which always had lots of rental building. Now I’m still 8-40 years away from finishing my PHD in Econ. so don’t rip me apart for my theory.
That said, with all these condos going rental and first time no-nothin landlords, there are deals to be found. A cousin of mine was renting a 2/2 is a very nice ~30 unit midrise for a price they though was a rather fair or a bit high. They were about to renew their lease when they saw a bigger 3/2 for rent in the same build ing for $150 less. When they called the landlord to see the place he offered it to them on the spot: no appilcation, no credit check, no employement verification. That’s a FB landlord screwing it up for the rest of the building, us, etc. I told them to check the CCRD to make sure the unit wasn’t 6 months into a Lis pende. before they took it.
Dan, I wish there was a ‘ctrl+sarcasm’ key one could press beofre typing here. I started reading your post and I thought you were another LP/LV-loving dope.
I glad reality (or at least acceptance of reality) is finally reaching the diamond encrusted shore of LP.
Here’s my question for DB Phil S. When he got a low-ball offer at his initial list of $449K, was it above the current list of $435K. Is so thats gotta hurt right now as he’s kicking himself for his greed.
“If you sell a place for a lower price, but then buy a new place at a lower price as well, are you really taking a loss?”
Bob.. you want to field this one again? ROFLMAO!
Tom.. try thinking of things as % return on CURRENT asset value. Keeps things to apples vs apples. when you are differentiating in amenities as well as keeps people from the silly part of the bought 10 years ago nonsense. That’s like saying the 2000 sq ft apartment bought in NYC in 1970 only needs to be rented for $200 a month. hope that makes sense.
“Are there any recent rental stats? With all the condos being put on the market bc they can’t sell, I would think rental prices have a ways to go down.”
I think it varies by submarket. South Loop, absolutely. LP/LV or other areas that don’t have massive supply issues, not so much. I’d actually argue that rental rates will stay flat or even increase in areas that didn’t have massive over-building because it is much more difficult to buy a condo today than it was 2 years ago. Less buyers = more renters.
Yes, I can already hear the “but everyone is doubling up to save on rent so demand will decrease” crowd… Maybe true, but there will always be demand for desireable established areas.
the market for condos will continue to fall regardless of whether FB’s agree with it or not. This FB should see the writing on the wall, cut his losses, and move on.
“Also there is a significant amount of condo for rent that are larger, nicer, fancier, and in more ammenity rice buildings now that ever. These command a higher rent, in general, than the kind of rental units that were available in previous years. So now there is a different unit type on the rental market that is more expensive, which raises, or at least stablize, rental prices over all.”
I agree that the mix of condos for rent are higher quality than in the past. However, I don’t think the mix of people willing to pay for them is any higher.
“I love how all sellers think every offer they get is a “low ball” offer. Never crosses their mind that their asking price is a “high ball” price.”
***Let me break down my philosophy on this ‘low ball’ offer issue. For units priced $250-$400k, any offer made that is under $50-100k lower than the asking I would consider low ball and would not accept. (for each $50k asking, generally $10k on top of the $50k cut off point would be added) So $300k would be -$60k (acceptable offer of $$240k..cut off point) and on up the list..$350k would be a -$70k, $400 would be -80k. Using this formula on *most* of current places, I would barely make back the renovation investment costs and perhaps a few hundred profit.
For units priced $400-$600k, a low ball of $75-150 would not be accepted. Same set up. $400k -$75 cut off, $450k -$100 cut off, $500k -$150 cut off, $550k -$175 cut off, $600k -$200 cut off.
Units priced $600-1,000,000 any offer made under $100k would be rejected as I am not moving these without getting my reno costs back and I HAVE to make a profit on these since so much labor and time have gone into them.
On the few mil + places I have left, each would be on a case by case basis as the renovation $$ I have in them are a high amount and I will not sell for under a profit of $100k.
As it stands now, of the offers I am receiving, maybe 25% are low ball and the negos go no further after that initial offer. I guess that is my “not going to speak with you any longer” point.
You go on to say:
“And then it gets better when they decide to rent it at a significant loss in hopes that the market will be stronger next year.”
Why would a seller NOT rent a place that has only received low ball offers? Why give it away when you can retain it, rent it and have some amount of $$ coming in every month? Letting properties languish on a market that is taking a snail pace rebound (in some areas) is not a way of staying in business. Lets see…accept a ridiculous low ball and effectively *donate* the unit to a moron OR rent to someone who is also sitting out the market and have some amount of income flowing.
In your mind, how does that “just get better?”
Hope this all makes sense? It took a good amount of work to come up with an acceptable sales point method while still being fair to both sides. I do not run a charity or non profit company here and as much of a negative image we owners/sellers have in the current market situation, you must consider how we struggle to survive as well. Well…not me personally as I have enough equity to be able to pull out now and retire comfortably. To be under the pressure of having to meet mortgage payments on top of maintenance, taxes, assessments and putting food on the table must be driving some people to the brink of suicide!! Give us a break, not everyone selling or attempting to sell right now are greedy bastards!!
The reality is that the market dictates price. An asset isn’t worth X dollars because you list it at X dollars or an appraiser says it’s worth X dollars. An asset is worth what someone is willing to pay for it.
What’s more likely, most buyers are “lowballers” or most sellers just cannot sell at market clearing prices?
“Why would a seller NOT rent a place that has only received low ball offers?”
Because generating -$10,000 in cash flow per year makes no sense as asset values continue to decline. Most likely scenario is that they rent it out for 2 years, lose 20K, and then sell at the same price they could have got today.
jeez wloop, been drinking some coffee this morning or what?
MJ.. Bravo!
I have a number of clients who are renting their condo units in LP/LV. Most are move up buyers going to the burbs and they can’t sell their 2/2s for what they feel is a fair price. However, nearly all of them are able to cash flow or come damn near close to it in rent on the units. None of them are having problems renting the units either. These are typically “luxury” 2/2s in walkups in the heart of lp/lv/bucktown areas.
From what I gather, they are renting to other DINKS who don’t want to live in the crappy frat boy rentals that are all over these neighborhoods or younger professional types with roommates (right outta college but scored a gig as a banking analyst/consultant, etc).
Fortunately, none needed to sell to make a down payment on their new places.
I run a condo association and we are moving quickly to restrict rentals because of this phenomenon (I am sure this makes me a bad guy nowadays). I can understand hardship issues (and we are providing for this), but most people who bought in the last 5 years really cannot rent economically. Also, I dont know anyone who has rented their unit who doesnt have to repaint and do some amount of repair work after the lease to relist.
I tend to agree with those who say the market has fundamentally reset and there is no “wait until next year”, which should be a familiar sentiment for those on the North Side… So rent for a time, then what? I am fairly confident we will see the same issue next year.
People move for various reasons. If for work, one hopes they get a relo package. If to trade up, perhaps they should wait until they can sell or have enough to buy without selling. If for divorce (which doesn’t apply to many condos), then the financial hit of a slight discount is the least of your financial *and* personal worries. The biggest issue I see is people out of work who need to move for a new job. That is tough and ultimately hampers the long-term economic recovery picture.
“JMM on September 25th, 2009 at 9:39 am
I run a condo association and we are moving quickly to restrict rentals because of this phenomenon”
As I understand it, any owners who purhased prior to the rules change would be grandfathered in and still be allowed to rent their unit. in effect the restriction would only impacted new owners. Of course if you get 100% agreement on the rule change then you could avoid this. But as a fellow HOA Board member, I know there is no such thing as 100% agreement. Please let me know what you have been able to find out about this ‘grandfather’ clause.
“JMM on September 25th, 2009 at 9:39 am
I run a condo association and we are moving quickly to restrict rentals because of this phenomenon”
Think of the bigger picture. If you restrict the percentages of rentals in your building and in this market — you could force homeowners into a foreclosure situation…. then everyone in the building would suffer and be affected by lower prices, low-ball offers, etc!
Ze,
I totally get your point in regards to comparing %return to current value. I am not trying to comparision in the returns. I was trying to provide some historical interpretation on factors that contribute to rent. My point is that most purchases of 5+ multi-unit building (that where not condo converted or torn down) happened prior to the housing bubble. ….
…So since the new condo rental have a high holding cost and are of nicer quality, their owners need and ask for higher rent and the units are nicer so they can command (slightly) higher rents. Since the rental market is an imperfect market-i.e. imbalance of informance, highly emotional transactions, dis-similar products- the right price is not always paid.
My point is that ‘real’ landlords of 5+ multiunit are not feeling the hurt right now because of this added condo-rental inventory.
3-5 years ago there was some hurt because a sub-group of tenants were forgoing renting to purchase instead. That has also slowed down. So now on the demand side, there has also been an increase. This should further help stablize rental rate or cause a slight increase.
Now what I say does not apply to the S. Loop. downtown, GC, or other area with a large proportion of highrise rental and a glut of high rise condo that have either gone all rental (Roosevelt Collection) or whose individual condo owners are amatuer landlords.
…. those are, esp. the S. Loop, have a ridiculous glut and rental rates will drop.
But as the rental rates in S. Loop, downtown and GC drop they become relatively more attractive to ppl who would have previously considered other neighborhoods, putting pressure on the rental rates there as well.
Every association should cap rentals or else you will eventually hit the point where no financing will be available in the building.
What do you think cash only will do to prices?
What is this belief that condo inventory hasn’t exploded in LV/LP/WP/BT etc? Where do you think all the cheap frame ones and twos went? How about the new mixed-use on retail sites and industrial conversions/teardowns?
No way there hasn’t been a large increase in unit numbers (total condos and apts) in those places in the bubble.
“I am glad reality is finally reaching the diamond encrusted shores of LP”… souds like a bitter homeowner who is enjoying the empty storefronts, concrete landscapes, and the prospect of infinitely increasing assessments in a 1/3 full building in the south loop or west loop.
If there is one place where reality exists it is in LP. The average 2b/2b in LP has seen far less % run-up/depreciation than a comparable unit in Bucktown/South Loop/West Loop over this latest housing cycle. I guaranty the average equity in properties in LP is higher than these other areas of the city. The amount of bank owned property/forclosures is significantly lower in Lincoln Park.
How do you justify the 2000-06 appreciation in Bucktown/South Loop/West Loop/Ukrania Village? To the majority, these areas provide a less desirable location, endless supply, and no barriers to entry. LP has the fundamentals: proximity to the lake, greenspace, museums, zoos, transportation and a major university coupled with a lack of vacant land.
It is great to be in a hipster neighborhood…but when people have less discretionary income… the trendy spots close. People gravitate to the simple things…lake, zoo, park.
I know many of you on this site love to bash frat boys and tend to rip professionals such as consultants, traders, and real estate agents. Further you dwell on incidents such as the muggings that occured in LP this summer. When something is an anomoly it tends to get more coverage. Ever checked the police blotter/activity on Western Avenue in B-town or on W. Chicago Avenue?
Your jealousy is so transparent. I’m sorry you made a bad decision getting in the game to late and purchasing in a fringe area. I am sorry the unit next door is bank owned. I apologize you have to take a bus to get to the lakefront. Maybe Mr. Sammarco has to drop his asking price 10% but that pails in comparison to the discounts being offered on Michigan Avenue south of Roosevelt or on West Monroe.
At the end of the day they may be loud or obnoxious but Frat boys are a great source of steady rental income and in real estate investing steady rental income is a huge part of the equation. That is why the smart money will stay in Lincoln Park thus creating a floor. This is also why it has left your hip nouveau fringe neighborhoods leaving you holding the bag!!
G makes a good point on rentals — at a certain proportion of rentals FHA financing is unobtainable by new buyers which would significantly impair value for existing owners. Each association is different but foreclosures aren’t a big concern for ours. Plus the association can always buy the unit.
With regards to grandfathering, there is no requirement to do so, but for political purposes it helps as you need a 2/3 vote on the matter (but not 100% agreement). As long as all owners agree, the rules can change even for existing owners (of course they are implictly agreeing to it, so this makes sense).
Anyway, the rental issue is a tough (and emotional) one. I think it is ultimately a fools errand to rent simply because one bought high and now does not want to sell at market. Investment property prices simply prove the point. I don’t believe LP owner-occupied condos traded anywere near equivilent cap rates over the last 5 years.
The pain will only continue as year-end bonuses across the city will be zero or close to zero for many of the consultants, accountants, bankers, and other professionals who in the past were receiving 5 figure or even 6 figure sums at year-end. Many of these people are the ones who would be in the move-up buyer or $400-550K purchase price category. As incomes go down and more people become unemployed who previously worked in professional white-collar jobs, how will the market recover next year? Who will drive that demand?
I will qualify my previous comment by noting that many traders will be getting decent bonuses this year, but that’s a very small percentage of the population. I recently heard of a trader who bought his condo with all cash and prepaid his assessments for the next year. So if you are selling your place, you should hope it’s a trader who is coming to buy it from you.
Well, if a seller can’t sell and can’t rent, what then? My Gold Coast studio has been on the market for 13 mos. I’ve reduced the price by about 20% and have not received one offer. I bought 7.5 years ago, so before prices were insane. I think my place is priced fairly (I’m sure others would differ).
I tried listing my place for rent (knowing I would probably not get mortgage + association out of the rent, but still willing to eat a hundred or two). I am now advertising my place for rent at $350.00 under my costs.
Who will drive demand? The same people that always did. Prices will need to come down to the level where the very same “consultants, accountants, bankers, and other professionals who in the past were receiving 5 figure or even 6 figure sums at year-end” will be able to pay with without the use of 5 and 6 figure bonuses. These types of things don’t happen quickly, hence, years and years of stationary and/or deflationary home prices.
I can’t wait for someone to come on here and say foreigners and retired baby boomers will drive the demand and keep prices high.
Don’t forget lotto winners, green millionaires, empty nesters, and divorcees!
By the way, I looked up the unit referenced in the article that is listed for $435k. Not only does it appear this individual could comfortably sell for less (owing to a longer hold period and a modest mortgage), it also appears as though $435k would be a very rich price for this place. My guess is $375k is the clearing price.
The one thing that may help the market is the stock market recovery of the past 12 months. It didn’t get to the level it was at back in early 2008, but at least those with savings tied up in equities will have more potential purchasing power. Also helped out from the stock market rally are those people who would need down payment assistance from their parents, whose portfolios have recovered somewhat.
I say we all get together and lock ourselves in a big room until we can sort this whole thing out. Maybe we can have some vodka shots and potato skins, too….
I think the whole situation is fun to watch. All these people who were rushing to buy back in 2006 and 2007 are now losing their shirts. They were telling all their friends to buy too, other wise they would be missing a tremendous opportunity. Looks like it was a tremendous opportunity to lose everything.
The other option for renting your unit is to negotiate a short sale. Chances are your credit score will recover faster than the value of your unit.
“***Let me break down my philosophy on this ‘low ball’ offer issue. For units priced $250-$400k, any offer made that is under $50-100k lower than the asking I would consider low ball and would not accept. (for each $50k asking, generally $10k on top of the $50k cut off point would be added) So $300k would be -$60k (acceptable offer of $$240k..cut off point) and on up the list..$350k would be a -$70k, $400 would be -80k. Using this formula…”
congratulations to westloopelo for finding the world’s most difficult way of saying “20%”
oh, and where’s steve h to use this as evidence that LP is holding up well during the market downturn?
No doubt that sales have fallen but months of supply is actually better than last year. See 4th graph here: http://blog.lucidrealty.com/chicago_real_estate_statistics/ with links at the bottom to individual neighborhoods. So not as many units are on the market now. People just aren’t moving like they used to. So supply and demand is in better balance.
Now market times (5th graph) are up in many neighborhoods (links at bottom of page) – some by scary amounts. See Near South Side – looks like Everest.
yeah months of supply is down, i just don’t know if we should believe the supply numbers with all the “shadow inventory” held by the banks and by people who would like to sell but can’t/won’t accept the loss.
One other thing. I use the number of units that went pending during the month. That number is actually up over last year! The number of closings was down in August. I suspect the difference is a lag, not a failure to close.
LOL @ that observation DC…I was wondering who would catch it and comment on it. Actually it was a teaser to see if our fav re-litter would come on to point out how idiotic I was being. Dropping breadcrumbs but so far no one is following the trail.
True, what I originally thought was going to be a 20% across the board discount, when it came time to actually sell I ended up going far over my cut off point. The largest single discount ended up being 38% due to the location and general lack of interest in that area.
JMM, you run a condo board association and wish to cap the rentals in your building. At the same time you realize that many who purchased in the last 5 years may be experiencing hardship and the only way to stay slightly above water would be for them to rent out their purchase.
Then you go on to say that many who are forced to move do so because of job loss…and they would be the ones coming in to support those who are struggling to make that monthly payment (and keep your assessments at a reasonable level)…that monthly payment that you are so kindly doing everything in your power to withhold to keep the OO/rental ratio at an acceptable level. By not allowing other owners in the building to earn a portion of their payment through rent payments you are contributing to further foreclosures and loss of value of your own units. No contribution, no matter how small, to help stabilize the RE situation.
So would it be better for your building and your neighbors to face higher assessments, the ‘stigma’ attached to owning in a building that is known for it’s high % of foreclosures/short sales and of course, the delightful situation of a building slowly deteriorating (because of abandonment) to the point where EVERY unit loses most of it’s value. What a self imposed dilemna you are facing!!
If I were in your building, I would vote you out in favor of someone with a better understanding of the housing situation and a higher compassion capacity.
Not only has JMM pissed me off, but we also have Dave PM and others of his ilk who take such a heightened sense of enjoyment from seeing others fail economically.
I just don’t get that mentality. While people are losing everything they own (NO it is not all those who bought above their income) there are, unbelievably, people out there who are laughing at families that are falling apart because of their financial hardship.
Disgusting situation.
But these same people losing everything demand to be bailed out by the government. I don’t want to pay for their losses and their mess they created in their bubble with an additional bailout. That’s what would happen if the tax credit is extended to all buyers.
It’s all about risk. Those people who were willing to take the risk and who understood it at the time now claim they never anticipated the fall they are having right now. It will teach future generations to be more conservative with their money and be less likely to “live on the edge.”
Buting a home at jacked-up prices, borrowing more than you should, living beyond your means…. So, life’s cruel teachings. Maybe there is a leson to be learned here. Some people live within and below there means…others try to keep up with the Jones’
Buying a home at jacked-up prices, borrowing more than you should, living beyond your means…. So, life’s cruel teachings. Maybe there is a leson to be learned here. Some people live within and below there means…others try to keep up with the Jones’
Its not just fha which denies financing in buildings with too many rentals (25%+.) It goes for conforming loans too (think fraudie and phoney.) Currently, these two mortgage sources represent over 80% of the market.
Like I said, too many rentals and you may be limited to cash buyers.
“come on to point out how idiotic I was being” Should someone point out the sun rises in the east, as well, 0?
WLemo, look up schadenfreude in the dictionary. For me I enjoy watching the flippers/specuvestors faces as the kool-aid turns bitter. I’d be a homeowner myself today but for the greed of those drinking the kool-aid, driving up my cost of living and making an average bungalow unafforable for so many families absent toxic financing. Greed, pure greed, that’s why we enjoy watching other’s financial ruin. We’re not laughing at cancer or a bad car accident, we’re laughing at greedy specuvestor, even the passive specuvestor homeowners.
You gotta have consequences for not planning properly and protecting your downside properly. That’s how life should work. If you mess up, you shouldn’t have the rest of the world bail you out.
You should watch the movie Wall Street. It’s all about greed and what it makes people becomme. I have no problem with people possessed with pure greed losing their shirts. It’s not like they didn’t take advantage of others on their way up.
The housing bubble was driven by pure greed, which is why I have no problem enjoying watching the fall of the speculators – it’s similar to the tech boom/bust. The looks on the investors’ faces says it all. They f’d up.
Greed is good
oh c’mon.. don’t leave out greeds little brother fear… much of the run-up was peoples fear of being left out as well.
brokers loved playing that card… “buy now or be left out”
Yes, “fear”….even better! Now we are getting somewhere….. Reminds me of when my mom would drop me off at my dad’s house on weekends. Ah, good times….
You don’t make fortunes in anything when “everyone else is doing it.” Overall, it’s better to buy anything when everyone else is trying to sell.
Westloop, you should read the FHA financing rules. Unfortunately, financing isnt available (regular way, short sale, foreclosure or otherwise) if too many units are rented. Sad but true (wish it were not). This simply protects everyone, included renters, because ultimately everyone will sell.
you talk pretty, Dollface.
“Phil Sammarco = FB and financial man of genius”
Yes and I thank him. I am a drunken fratboy..well a little too old to claim that but basically act the same way and am looking for luxury rentals in this area to beat them up. Well its not intentional to beat them up it just kind of happens to places I live in.
“If you sell a place for a lower price, but then buy a new place at a lower price as well, are you really taking a loss?”
If you are upsizing and have no problems coming up with the 20-25% downpayment on the new place then the loss isn’t realized. Most people don’t fit this bill though. For those downsizing or who can’t come up with requisite downpayment for the best mortgage terms, yeah they’re likely taking a loss.
Dollface,
If you bought 7.5 years ago AND are listing it for rent for $350 less than what your costs are its likely priced very competitively. Just be patient I’m sure a renter will come along. One thing you have going for you is GC is not a marginal or “gentrifying” ‘hood and is at no risk of degentrifying.
If you lived in Wicker Park, West Town or Logan Square…well..
LMAO at westloopelo… How can people be losing everything they own when they bought with 95 LTV or better yet, nothing down? Does that mean they had nothing to begin with?
People rent their places for all sorts of reasons, not all of which have to do with scraping by. I have heard stories of people renting month to month or even week to week because of the significant premium they get. I have also heard of double dipping on corporate relos where they pay for your housing while you are temporarily assigned.
If you are under water, which strikes a resonant chord with westloopelo, its a different story. But tell me — what is the difference between losing a certain amount of equity all at once and losing current income every month for several months? The overwhelming majority of people who bought recently cannot rent out and make cash flow; instead, they lose money each month (as dollface is prepared to do). So, its just two versions of the same thing. I’ve got news for everyone (since I own a rental building) — rents are going down too!!
I don’t understand your post Kimo, what exactly are the premiums being offered by renting month to month or week to week? And what is double dipping at a corporation’s expense? I am lost on that comment.
The family owned company that manages my rental properties in Florida (newphew and his wife) deal exclusively with white collar executives. I would say 80% of my tenants are upper bracket wage earners. Over the past two years these executives have had their relocation benefits all but been eliminated. While it was a common practice in the past, it is now a rarity. Most large companies are now hiring only contract workers who receive zero benefits for the first year or until they are made permanent employees at their company.
Worth noting as well is a good percentage of my homes that were sold were sold to the families who rented for the first year or so and decided against moving again. Rather than going through the hassle of searching through the MLS, eliminating the agent/broker and the largely unearned 6 or 7% commission, these one time tenants of mine simply purchased the homes they occupied for a year or more and were comfortable with. In the end, we both benefitted from this exchange.
Any units I purchase now (or ever) for renovation do not rely on bank mortgages. When I do purchase these homes, I pay cash… always have and always will. There is something very freeing about not gambling with an institutions money. Through scrutinizing MLS listings, the units I purchase are generally largely discounted homes. I do use a high quality material but I do so wisely and there is never any waste at all.
I tell you all of these facts to show you that I am not at all underwater…so that resonant chord you hear is not coming from my business. It is usually foolish to generalize and speculate another’s financial standing and dealings and in this case it was especially wrong to do so. While I admit the appraised value of the homes I have on the market has fallen an average of 15-20%, I am in no way feeling the tightening grip on my bank account nor do I face any type of financial hardship….Thanks for your interest and concern though!
I buy and invest wisely in homes that I know are going to turn around shortly after the renovations are complete. What does not sell is used for rental income. Perhaps I am just very lucky, but the rental rates I charge have not fallen at all. I have always priced my homes fairly and greed is not a characteristic of mine. Those who go into this business seeing dollar signs only are now, I am sure, losing their business, have gone bankrupt and are now facing foreclosure of their properties.
I have stated here many times that others in my line of business who do place great emphasis solely on making money with poorly rehabbed units are now long gone. When you focus only on the financial benefits of this industry instead of being a part of a regentrification process, of course you are not going to last long. That is one of the benefits, if you can call it that, of the RE crisis we just went through….only the best have remained and are thriving now.
I am not losing a great amount of money in this RE mess as I have cut back dramatically on purchasing and slowed down my expenditures. Thanks to a dedicated crew who are extremely cost conscious, provide nothing but stellar and extremely detailed renovation work combined with the fact that my properties are located in prime neighborhoods, I am able to stay in business and still have a good solid income every month. All of my tenants have recently renewed their leases without any reductions in rent and I have been fortunate to have had a total of 10 home sales over the past 9 months…3 recently, again without any ‘drastic’ price reductions.
Any other concerns I might address for you?
I didnt read all of the rambling response, but I think all he was pointing out was that a loss is a loss is a loss. I dont think anyone cares how much money you are making.
Illinois banks that have received notices from their respective regulator, these banks are at high risk of failure:
Bank City Assets(in k)
Amcore Bank, National Association Rockford 4,875,326
Park National Bank Chicago 4,821,033
ShoreBank Chicago 2,658,707
Castle Bank, National Association Dekalb 1,165,187
Independent Bankers’ Bank Springfield 695,495
Valley Bank Moline 690,557
Ravenswood Bank Chicago 342,950
First DuPage Bank Westmont 287,103
Second Federal S&L Association of Chicago Chicago 251,245
First National Bank of Brookfield Brookfield 246,734
Baytree National Bank & Trust Company Lake Forest 240,982
The Bank of Commerce Wood Dale 239,016
First Suburban National Bank Maywood 181,423
CenTrust Bank, National Association Northbrook 131,759
Highland Community Bank Chicago 119,558
First State Bank of Red Bud Red Bud 105,501
DuPage National Bank West Chicago 92,462
Freedom Bank Sterling 86,151
Community Bank of Lemont Lemont 82,330
Family Bank & Trust Company Palos Hills 78,325
Arcola Homestead Savings Bank Arcola 18,468
Grand Rivers Community Bank Grand Chain 13,940