Market Conditions: Chicago Sales Fall 28% in the 2d Qtr
The second quarter sales numbers are out from the Illinois Association of Realtors.
Sales (both single family and condos) were down in the 9-county Chicagoland area by 28.9% to 20,679 from 29,092 in the same period a year ago. The median home price fell 2.3% to $250,000 from $256,000 in 2007.
Condo sales fell more sharply, declining 33.6% to 8,828 units compared to 13,289 units in the second quarter of 2007. Median price, however, rose 4% to $238,260 from $229,000.
The Sun-Times has the Chicago specific numbers:
In the city of Chicago, sales fell 28 percent to 6,210 from 8,628. But the median price rose 5.1 percent to $310,000 from $295,000.
From the IAR:
“Our Illinois housing market has been resilient given these pressures with prices registering modest losses and many regions still posting gains since sales peaked during the boom in the third quarter of 2005.”
“It is a good market, especially for buyers who now have many choices. The new first-time buyer tax credit and foreclosure rescue program enacted by the Housing and Economic Recovery Act should help stabilize the housing market,” said REALTOR® Kay Wirth, president of the Illinois Association of REALTORS®.
It never ceases to amaze me how these real estate organizations can put a positive spin on anything. I actually got an email from them the other day telling us that we all need to speak positively about the market. Do they really think they can talk this market up?
Hmmm. This is a bit old news. CAR put out similar numbers for Chicago a while ago. Can’t figure out why numbers are slightly different. Long term trend data is here:
http://blog.lucidrealty.com/chicago_real_estate_statistics/
So the numbers are down 41% from the peak in 2005. Of course, that was a ridiculous level.
Anyway…the usual caveat about the median prices. Totally irrelevant and meaningless. Watch the Case-Shiller numbers to see what’s really going on.
I agree Gary … the opening words “It is a good market…” doesn’t scream bias 🙂
At the end of the day, the tax “credit” (a.k.a. interest free loan that has to be paid back) and foreclosure rescue program Kay speaks of are both geared at continuing to help the irresponsible. These “programs” are more of the same thing that got the housing market into this mess in the first place.
First time buyers can borrow more money they don’t have to buy what they can’t afford …. and financial institutions get help at trying to prevent continued foreclosures/walk aways as a result of bad decisions (bad loans).
Hmmm. This is a bit old news. CAR put out similar numbers for Chicago a while ago.
Gary, part of the problem is that you are required to be a member of CAR, IAR, and NAR at the same time. They are more or less redundant agencies, yet you pay quite a bit per year for membership.
I gave up my broker’s license because I was tired of this crap. And honestly, I’m not sure they’re trying to talk the market up. I think they are trying to keep the Realtors from losing hope and quitting faster than they are now. These associations care about membership dues and very little else.
John, I wouldn’t worry about bailouts etc. Congress likes to pretend it is doing something. By their own estimates the big housing ‘bailout’ will help 400,000 people over 4 years. Thats less than 1 quarters worth of foreclosures.
It would probably be easier to let market take its course and get this over with…
As far as median price rising in chicago, its the same trend as other declining markets. Sales drop, the mix of selling real estate moves to the higher end.
I always wonder, wouldn’t average price/sqft be a better measure?
“First time buyers can borrow more money they don’t have to buy what they can’t afford ”
Why not, the federal gov’t does it, too, in spades. Every single American owes about $30k to future old folks and China/Japan/Oil states thanks to our profligate “leaders”.
You guys are funny – Prices are stable as I have said for months yet you all think the end is near for anyone who owns a home. The bottom line is Chicago is resilient because the city in general is in demand by the rich. It is a world class city that each year is getting a better and better reputation. This attracts the rich with boosts prices along the way. This is why Chicago is holding up so well in the face of the financial crisis.
Other parts of the country have dropped 30 – 40% while the majority of Chicago’s neighborhoods have fluctuated up or down 5%. What do you think will happen when the financial mess is cleaned up?
Did you see the latest census report? Boy that is a lot of people to find housing for in the next 10 years. I better get busy 🙂
“wouldn’t average price/sqft be a better measure”
Sure, but first you’d have top get everyone to agree on how to measure square footage and, even if this were possible, you’d be left with (a) an additional cost for the measurement (one time only maybe, except the measurement standards will inevitably change annually) and (b) an incentive to separately price all the fixtures/improvements/parking. Maybe breaking down the price of residential real estate into land area + occupancy area + fixtures + parking would be beneficial to some people (definitely to trend analysis), but I think that it’s a fraught suggestion.
Here is an example of how you can make statistics say what you want them to say. 1 in 464 homes is 0.216% of homes.
U.S. home foreclosure filings rose 55 percent in July, versus a year earlier, and bank repossessions jumped 184 percent, RealtyTrac said today. One in every 464 houses is now in some stage of foreclosure. “It’s getting worse,” said RealtyTrac’s Rick Sharga. “The number of properties that have been foreclosed on by the banks and still haven’t sold is the highest we’ve ever seen.” Home valuation site Zillow reported earlier this week that a third of home sellers sold their houses at a loss in the second quarter. (Bloomberg)
“As far as median price rising in chicago, its the same trend as other declining markets. Sales drop, the mix of selling real estate moves to the higher end.”
How is that possible, the median is the center point in a range of values, with equal numbers on both sides. It would have to be extremely weighted on one side to pull the median up a significant amount and $15K in movement isn’t all that much.
On another note, if condo pricing is how much of that is a reflection of people moving closer to public transportation? Does anyone think that we might see a shift in buying habits based on the price of energy in the next few years?
Just curious!
Steve,
The Case-Shiller numbers for Chicago do not paint the picture you see. Only 6 Chicago area zip codes show any sign of price increase. Not to mention that the city is having a budget crisis, property taxes and transfer taxes are out of sight, and the sales tax is the highest in the country. People are starting to figure out that you can live in cheaper places and businesses will eventually get it to. There is already a migration under way from the high cost northeast.
Jason R:
Re: the median–true, with a stable n; here we have n decreasing by 28%. If 60% of the “lost” sales were below the median (a reasonable guess, but just a guess), even with exactly the same sales price mix for the remaining sales, the median is going to move up, possibly significantly depending on what the spread was b/t the numbers in the middle (i.e., if it’s a normal distribution, it won’t move much, but if it’s a flatter curve, it could move a lot).
re: future buying habits–yeh, we might. I think we probably will, but it might be over 75 years, so it’s not a good idea to make it a primary issue in a personal residence purchase decision. I think it’s a major issue for investment property, but then it always has been.
“How is that possible, the median is the center point in a range of values, with equal numbers on both sides.”
Here is an example: Let’s say normal sales are distributed in a bell shaped curve across the price spectrum. Then all of a sudden the bottom 20% of the market disappears. Suddenly your median has jumped up without any real changes in prices.
Gary – Just make all the assumptions you need to make your case. If the median dropped I would simply say more bottom end units sold than upper. Spin it how it want and just be happy 😉
Gary – The case-schiller is a little broad-based considering it includes the entire area. The south side has more forclosures than can be imagined. Most selling for 50% of what they were purchased for. Do you think this may have brought down the averages a bit? If the city as a whole is down 9%, and the southside alone is down 30%, what does that make the north side? I bet the answer is relatively flat…
Just curious if you think this is a possibility?
Steve,
It’s theoretically possible. However, Fiserv got the Case-Shiller numbers down to the zip code level for 76 zip codes and only 6 showed an increase – and there was no data for Lincoln Park and Lakeview increased.
Gary – I never said LP and LV increased. I simply said they are not down much if at all. If you have something that shows LP & LV are down more than 5% please let m eknow because it would be a huge suprise.
For the past 3 months, here are the #’s for Chicago according to the Case Schiller Index: March 08 = 150.33, April 08 = 150.44, May 08 = 150.03.
Looks to me like things are not nearly as bad as some on this board like to make it ou tto be. It is as if some of you take pleasure in talking down the market, you are as guilty as the Realtors who have been talking up the market for the last 2 years.
MK, Did you look at the YOY case schiller numbers? Does a drop from 167->150 not look significant to you?
“It is as if some of you take pleasure in talking down the market, you are as guilty as the Realtors who have been talking up the market for the last 2 years.”
Amen to that!
I don’t need to talk down the market – the market is tanking on its own!
“It is as if some of you take pleasure in talking down the market, you are as guilty as the Realtors who have been talking up the market for the last 2 years.”
This is a real estate blog, right? Whats wrong with having a constructive discussion about real estate trends? If you want only happy thoughts, go to people.com.
MK,
This is true and something I am sometimes guilty of. Chalk this up to a combination of factors: envy is one and the belief that maybe if the market tanks enough I will be able to afford a nice unit previously unattainable.
Sure HD, I’m sure you’ll be living in a sweet bungalow in Garfield Park before you know it. Only 5 more years at this rate and even you will be able to afford to live there!
D
LOL!! Quit hoping for lower prices and get a real job that pays you some money!!
I cant quite figure out why Steve is on CC, it is obvious he’s unwanted here.
Steve,
“I never said LP and LV increased. I simply said they are not down much if at all. If you have something that shows LP & LV are down more than 5% please let m eknow because it would be a huge suprise.”
This much I’m agreeing with you on. I actually pointed out that Lakeview showed an increase and I doubt Lincoln Park is down….yet.
I love when people agree with me…
Sartre – Thanks for putting the actual annual decline per Case Shiller out there.
A decline from $167k to $150k seems consistent with what i’m seeing in the market. The smart sellers are pricing accordingly. Overpricers are making a big mistake.
SH says it all: “LOL!! Quit hoping for lower prices and get a real job that pays you some money!!”
This is actually true based on the collapse in sales volume. Either everyone will have to “get a real job that pays you some money” or lower prices will have to happen.
Is it really any wonder which will occur?
MK — I agree with your point that there are definitely some on this board that are hoping for prices to crash. Conversely, there are also the cheerleaders that swear it’s all bunny rabbits and cotton candy — “now’s the time to buy!” (ironically, most of these individuals are Realtors or in a position to benefit financially from spreading their opinion). Take a look at Kay Wirth’s quotes in Sabrina’s post above for an _EXCELLENT_ example.
It is interesting to watch both sides fail to concede the opposing “extreme” view. Statistics aside (because realistically … you can use numbers to support/counter any point), can’t we all just agree that the market is all over the place? Some areas good, some bad, and some alright?
It’s probably tilted a bit in the bad/alright category as a whole, with some neighborhoods in serious trouble. The reckless lending is going to take awhile for things to truly shake out…. but the fallout isn’t going to be uniform (if at all).
The unwinding of reckless lending is demolishing demand everywhere. The resultant price drops will be everywhere, too. Of course, it will not be uniform.
Rates are going to go up to 12% and totally kill the housing market…then there will be locusts, carnage, and we will all die…. 😉
The way I see it is that the only fence-sitters among buyers are those who have refused to pay anything near bubble pricing (out of line with incomes and rents.) Rates going up will speed the recovery. Most who were smart enough to avoid the bubble will realize (the few who haven’t already) that lower rates mean lower prices, down payment savings become a bigger % of the purchase price, and the low rate can be refied when rates drop in the future. A win, win, win for fence-sitters. Only buyers can stabilize the market, and this will help get them back in.
Hey Guys – The dow is 18% off its highs earlier this year. Should we all liquidate our 401K and run for the hills?
It’s interesting how Alan Greenspan, arguably the father of this housing bubble, is now predicting prices will stabilize next year in this article. He states that unsold inventory needs to come down for prices to bottom, but gives no explaination of why or how he thinks inventory will come down. While the man is obviously intelligent, lots of intelligent people have predicted a market bottom and been proven wrong. Since we won’t know when the bottom is in until it has come and gone, meanwhile I’ll add this report to my file of bottom callers which have mostly been proven wrong.
If you had all your retirement funds in one stock and it dropped 18% then yes, run for the hills. This is why real estate markets and stock markets do not correlate: a real estate purchase involves investing a large amount of money in one property. And there are holding costs that stocks don’t have. When will realtor shills ever learn basic economics?
Oh Pete… you are so smart!
“Hey Guys – The dow is 18% off its highs earlier this year. Should we all liquidate our 401K and run for the hills?”
Steve:
Levered 4-to-1 (25% downpayment), an -18% decline would slash nearly -72% off of the 401K investment. Fortunately, noone is allowed to lever equity investments with only a 25% downpayment in a 401K!)
If a hedge fund lost more than -45% of its equity, they would choose (or more likely, their general partners/investors would force them) to liquidate and start over, as the high water-marks and claw-backs make earning future 2%-and-20% on the remainder pretty hard without a real BIG dice-throw(=risk++)!
So, just an 18% drop can be either a small dip/drawdown in an upward-moving curve, (if you had 100% equity), or a huge, gaping ruinous chasm (if you’ve borrowed 75% to fund).
Something to think about, no……?
P.S. Laura: LOVE the blog, keep up the great work…!
“He states that unsold inventory needs to come down for prices to bottom, but gives no explaination of why or how he thinks inventory will come down”
One reason inventory will come down is because we won’t see the thousands of “mom & pop” builders/flippers that the TV channel Bravo has made so popular… Those folks are all starting to declare bankruptcy because they had no business trying to jump into a market they didn’t understand… leave the homebuilding to professionals and part of this problem would not have occurred.
Steve H. — If you think “selling low” (18% down) is a great idea, then yes … sell everything you’ve got. Then you use that money to buy up all the amazing real estate deals and really retire a hero.
Steve H, Deacon Blue: I think it is pretty low class to consistently harp on someone for not having as much money as you.
As for what these #’s mean: median prices will start to drop steeply once volume (# of sales) goes up. Also, it disappoints me that the Fed is trying to inflate their way out of this mess and if they succeed we will all be poorer in real terms. I’m not sure how they can really believe that “inflation expectations” are grounded.
Everyone here loves commenting, so can someone give me a tax rate cuff for a place like Streeterville.
Hey John – So you think holding stocks in the eye of a housing crisis is good but holding reale state is bad?
Trader – if we inflate our way out of this you should buy real estate by the hand full. Higher wages and high material costs lead to higher real estate values. Which is it?
Steve,
Higher wages and material costs do not lead to higher real estate values. These markets are independent of one another. However, these higher costs do lead to decreasing profits, which is a good thing because it will help limit our supply for the future years.
How can real estate values increase if the average joe’s disposable income decreases due to inflationary pressures? Joe will have less money to spend on a home (if any at all), keeping him out of the demand pool. Also, others will not be able to afford to support their mortgage after paying for rising utilities and other generic consumption costs. So what will they do? Dump their home (either by short sale or foreclosure) and rent. Decreasing the demand for housing even further. I have contacts at large energy companies who have indicated that their receivables are increasing tremendously. Whats going to happen when they shut off the electricity/gas?
Steve,
You may own property, but you obviously know very little about real estate economics. Anybody can own property, take a class and be one of the few to understand the nuts and bolts.
Did someone actually mention wage inflation? I don’t think the feds can cause that (beyond minimum wage laws, and we all know ‘those’ people won’t be buying.) Going to be tough to inflate us out of this without it.
Enough meandering. Trader sums up the topic of this post well: “As for what these #’s mean: median prices will start to drop steeply once volume (# of sales) goes up.”
Some 2nd Quarter numbers for Lincoln Park attached single family data from mls (Year-sales-(YOY)-median-(YOY)):
1997 — 413 — $224,000
1998 — 438 (6%) — $228,500 (2%)
1999 — 393 (-10%) — $275,000 (20%)
2000 — 390 (-1%) — $305,000 (11%)
2001 — 356 (-9%) — $339,950 (11%)
2002 — 403 (13%) — $350,000 (3%)
2003 — 431 (7%) — $355,000 (1%)
2004 — 452 (5%) — $375,500 (6%)
2005 — 540 (19%) — $380,000 (1%)
2006 — 439 (-19%) — $393,000 (3%)
2007 — 511 (16%) — $392,000 (0%)
2008 — 300 (-41%) — $432,000 (10%)
I’m not quite sure what to make of these stats except: real estate only goes up!
“1997 — 413 — $224,000
1998 — 438 (6%) — $228,500 (2%)
1999 — 393 (-10%) — $275,000 (20%)
2000 — 390 (-1%) — $305,000 (11%)
2001 — 356 (-9%) — $339,950 (11%)
2002 — 403 (13%) — $350,000 (3%)
2003 — 431 (7%) — $355,000 (1%)
2004 — 452 (5%) — $375,500 (6%)
2005 — 540 (19%) — $380,000 (1%)
2006 — 439 (-19%) — $393,000 (3%)
2007 — 511 (16%) — $392,000 (0%)
2008 — 300 (-41%) — $432,000 (10%)”
Is there anyway to get the “$ per Square Foot” figures for this data?
My thoughts are that larger units are trading as first time home buyers are priced out of the market. So we have a different type of a demand pool making up this averaged data.
The YOY variance could be due to a higher proportion of larger units selling in 2008 than the prior years.
You guys are silly – The data from above makes it look like prices are going up. They are stable and not going anywhere over the past couple of years. The increase is attributed to a higher level of finishes on units that are being built and resold. Expectations have risen in Lincoln park and units have everything but gold plated toilets these days. The price per sq ft has risen dramatically but the cost associated with construction has only risen.
“I’m not quite sure what to make of these stats except: real estate only goes up!”
They certainly are not going down Homedelete now are they. LOL!!
“Is there anyway to get the “$ per Square Foot” figures for this data?
My thoughts are that larger units are trading as first time home buyers are priced out of the market. So we have a different type of a demand pool making up this averaged data.
The YOY variance could be due to a higher proportion of larger units selling in 2008 than the prior years.”
Spin the data is any way that makes you happy AD. How about facing reality that prices have been and will remain good in Lincoln Park
What happened in 2006? Did they temporarily stop building/converting the units, or did people get priced out of the area?
Steve,
You have not and never have addressed my economic points? Why is that? Do you even have a college education?
I’m not trying to spin the data. You simply cant post sales data(by amount) and have that illustrate the health of ANY housing market. Price per square foot would tell a better story, but still weak in the end.
Lets say in 2007, 50% of sales were 1br, 40% were 2br, and 10% were 3br.
And in 2008, 25% were 1br, 50% were 2br, and 25% were 3br. What would happen to the YOY data in this scenario?
I believe that a higher proportion of expensive units (due to quality and size) have traded in the last year as first-time buyers are being weeded out by weak consumer sentiment and stricter lending requirements.
AD – what is your economic question? As far as you assumptions that sales favor the upper end, what support do you have? Don’t you think the data at some point would have supported more lower end data than higher? The data is consistant accross the board. People in Lincoln Park have been the least affected by the new lending standards.
Here is the actual data to support why you are wrong – % of units sold based on bedrooms.
2006 2007 2008
0 Bed .03 .04 .03
1 Bed .27 .25 .24
2 bed .44 .43 .45
3 bed .23 .25 .23
4 bed .04 .04 .04
AD – “Lets say in 2007, 50% of sales were 1br, 40% were 2br, and 10% were 3br.
And in 2008, 25% were 1br, 50% were 2br, and 25% were 3br. What would happen to the YOY data in this scenario?”
Let’s say your assumptions are wrong. What would you say then AD?
Ad – you are referring to stagflation in rant from above. If youa re talking about stagflation in an economy it is a bit different than inflation. With inflation, wages go up. With stagflation, wages stay low while other costs go up.
Not the same thing…
What is your reference for the data? To be honest, unless I saw this data (as well as the price per square foot data) from a reputable source with my own two eyes, I wouldnt believe it. I think you’ve tarnished your reputation enough with your idiotic rants to prevent most from believing you.
I was not referring to stagflation, I was merely addressin one of your earlier posts. All I did was take what you said, disect it, and prove that you are wrong. And now you are bringing up a completely different issue! I dont care about wages, the point to my post was (and I will dumb it down for you because you obviously need it), “if costs go up in real estate, market value does not necessarily go up”. People can and will exit the home ownership demand pool and join the renter demand pool.
I feel like I am arguing with my stubborn Republican friends!
Hello… stop arguing like little girls and actually be helpful. Anyone have an idea on property tax rate in Streeterville?
Steve,
I think that LP and Lview have been shielded from the bubble for the most part. I just thought it might be interesting to see the other more relevant data as well to understand these markets.
AD – the data is fom the MLS.
Steve,
Did you only select LP? If you have MLS, cant you dump out the Price per square foot data?
AD – Only 1 in 5 or 6 properties lists sq ft. It is not reliable data on MLS sheets. Wish it was there but it is not.
“arguing like little girls”?
Huh?
(and why would the property tax rate be different in Streeterville than anywhere else? It’s about 1-2%, depending on an opaque brew of factors that no one can figure out–again, same as elsehwere.)
thanks ken…
i just have a real estate attorney requesting i post 7% of 2008 value in escrow to protect her client. Seems excessive.
To be fair I think it is mostly boys doing the arguing.
Property tax rates are the same for almost the entire city. The formula for the tax bill is assessed value x equalization factor x tax rate = tax bill. The rate for 2006 taxes (pay 2007) is .05302 and the 2006 equalization factor (county-wide) is 2.7076. The assessed value is officially 16% of market value for residential, but is more accurately stated (and legally argued) as 10% of market value, which is supported by assessment studies. Figure a homeowner’s exemption gets you a minimum of 5,000 off the assessed value unless additional deduction is necessary to meet the 7% assessment increase cap (expires 2008.)
So, the effective rate without exemptions:
most likely = 10% x 2.7076 x .05302 = 1.4%
upper limit = 16% x 2.7076 x .05302 = 2.3%
G.. I know but the first time, just asking, didn’t get anyones attention. Thank you very much for the reply.
IB:
Depends on which “value” you’re referring to. The “equalization factor” is in the neighborhood of 2.5; that translates 7% of “assessed value” to about 2.8% of “taxable” value–which is still high, but not impossibly high. Another thought is, are they asking for 7% or an amount equal to 7 percent? If it’s by $$, then they might be asking for 2d half 07 taxes (payable this fall) and all 08 taxes (payable in 09) which then is a rate of about 1.9% * 1.5 years.
Also, for a check, you can look up the last couple tax bills for any PIN at the treasurers website–cookcountytreasurer DOT com.
SH said “Only 1 in 5 or 6 properties lists sq ft. It is not reliable data on MLS sheets. Wish it was there but it is not.”
Don’t we all wish for more reliable info from realtors(tm)?
There were 300 attached single family sales in 2nd Q 2008 for Lincoln Park (area 8007 mls.) 120 (40%) have square footage listed, the median for these was $308/sf.
There were 511 attached single family sales in 2nd Q 2007 for Lincoln Park (area 8007 mls.) 191 (37%) have square footage listed, the median for these was $294/sf.
There were 439 attached single family sales in 2nd Q 2006 for Lincoln Park (area 8007 mls.) 174 (40%) have square footage listed, the median for these was $303/sf.
G–that may have been a Stevo rope-a-dope. He got you to post info that says that prices are going up in LP.
Actually, since he has claimed above that the “increase is attributed to a higher level of finishes on units,” wouldn’t this mean they are going down under his terms (since $/sf should climb to account for this)? Toss in inflation too and the real losses are mounting.
Besides, like I said before, trader has summed all this data up nicely already: “As for what these #’s mean: median prices will start to drop steeply once volume (# of sales) goes up.”
If prices in the good neighborhoods have yet to drop considering all the crap we’ve been through over the last year, what is it exactly that’s going to cause it going forward? You guys will never admit you are wrong and end up being renters for life.
D
G–you must have mistyped or something as you have the progression as 303–>294–>308, such that ’08 is higher than ’06 or ’07, which would support Stevo’s point. Yes, clearly on a real $$ basis, it’s lower, but Stevo never cares about real $$.
Trader,
If you have read any of HD’s moronic posts over the past month, you’d understand that she is an idiot who admits (and demonstrates) that she doesn’t know anything about finance or economics. She also admits that she is hoping prices fall so she can afford a better place. We aren’t making fun of her for her lack of earning power, but we are pointing out that she has no credibility and a vested interested in interpreting everything in the worst possible light. It’s really pathetic,
D
G,
you post the Median, how about the Mean, and Max/Min?
“2006 — 439 (-19%) — $393,000 (3%)
2007 — 511 (16%) — $392,000 (0%)
2008 — 300 (-41%) — $432,000 (10%)”
Wow, sure looks like a collapsing market to me! You guys are s joke!
“We aren’t making fun of her for her lack of earning power”
You might not be Deke, but Stevo has, repeatedly. And you’ve kinda seconded Stevo a couple of times, so “Only 5 more years at this rate and even you will be able to afford to live there!” comes across as making fun for lack of earnings.
My point is that the only reason I mention someone’s income is because it is relevant to their credibility.
D
“My point is that the only reason I mention someone’s income is because it is relevant to their credibility.”
WHAT?!?! So poor people have no credibility?
Deaconblue,
That is laughable. My income is near six figures and I’m in my late 20s, yet I live in a studio apartment. Because I am in a situation very common to my generation: theres a reason they call it generation debt.
Income is not the sole indicator of wealth or financial success in life when you have graduates with education loans approaching and sometimes exceeding six figures. Ask a newer doctor who makes 200k with 400k of med school debt whether they feel rich for a great example.
I guess we found the real joke here! HAHA!
“My point is that the only reason I mention someone’s income is because it is relevant to their credibility.”
Everytime I say something kinda positive about you (or Stevo), the next post, I regret it.
“So poor people have no credibility?”
Of course not, I said nothing of the sort. I also said nothing about income being an indicator of anything, so stop putting words in my mouth. I simply said that when you have someone who has admitted that they want the market to drop because they can’t afford to buy the place that they want, they lose credibility. The fact that they are not high income earners means they have a vested interest in the market dropping. Therefore, they have a bias that needs to be taken into account. In HD’s case, she obviously can’t afford to live where she wants and is hoping the market will drop, so you can’t take her “analysis” seriously because it is clearly biased.
D
P.S. Save your sob story for someone who gives a damn.
I think it’s funny that you all dismiss the opinions of the Realtors on YoChicago because they are biased (and rightly so), but you can’t see that fact that this board is just as biased on the other side.
D
interestingly Steve actually hit on something. For the market to correct wages either have to go up, or prices down. Since wages are down year over year, then either companies need to start paying out more $$$$ like in the 70’s (not happening) or prices come down (happening)
The shifting of prices and businesses in and out of the city will affect every nighboorhood, in its own time, some faster then others
I know this blog talks about Condos alot, but the small building market, 2 – 4 flats, is seriously out of wack and going to start pounding the value of everything next especially in LV and LP
anon, thanks.. Numbers I got here were consistent with what I believed. I need to find out, I believe 7% on sale price. This is for new construction so no previous tax bills.
I second Bob’s statement. I also have student loans, some of which have variable rates. I graduated school early in the bubble and some of my peers immediately bought condos as soon as they got a job. I crunched some numbers and it didn’t make any sense to buy. I had enough fricken debt and I didn’t really feel the urdge to leverage myself any further.
Fast forward to 2006 when everyone and their mother seemed to be buying condos; 26 year old paralegals were buying $360,000 condos in North Center. By 2006 I was making a lot more money than most of my friends who owned condos. Yeah I also had more debt but by this time, even though I had more than enough money to buy, I decided to wait the bubble out.
2008 is where I am today. I make even more money than I did in 2006 or 2003 or even 2000. Prices are faling but they’ve barely returned to 2004 levels in the neighborhoods where I want to live. I used a lot of my money to reduce my student loan debt; my friends who bought condos are watching their values drop like a rock off a cliff.
I’ve got the time, patience, income and money to wait out the real estate depression. Prices will return to affordabilty. When that day comes my student loans will be retired, I’ll have substantial cash savings, my credit will be fantasic and I’ll have my choice of cheap houses to choose from.
Deaconblue:
Saying that money gives credibility is one of the most shallow things I’ve ever heard anyone say in my life.
Deaconblue:
You really don’t know what the heck you’re talking about. You should really pull your head out of your ass. Everything you’ve said about me is not only untrue, but borderline libelous. And your insults don’t really bother me. My job requires me to have very thick skin.
“7% on sale price”
That’s absolutely nuts. Do NOT accept that w/o a detailed explanation (including supporting numbers) AND putting it in a joint escrow (overage rebated to you upon receipt of 08 2d half bill). From personal experience (not a condo, not new construction) 7% of purchase price would have been about 6 years of property taxes. No way that’s necessary to cover (at most) about 1 year, 3 months (assuming a 9/30 closing, before paying 2d half taxes).
Wages are down YOY?
From http://www.bls.gov/news.release/pdf/wkyeng.pdf :
“Median weekly earnings of the nation’s 107.1 million full-time wage and salary workers were $719
in the second quarter of 2008, the Bureau of Labor Statistics of the U.S. Department of Labor reported
today. This was 4.2 percent higher than a year earlier…”
The idiocy on this board is astounding,
D
Deaconblue on August 14th, 2008 at 3:46 pm
My point is that the only reason I mention someone’s income is because it is relevant to their credibility.
D
OK Deacon, how much money does someone need to make in order for you to consider them credible? Don’t claim anyone put words in your mouth; I based my question on the exact wording of your post earlier today.
Incidentally, Donald Trump makes a lot of money. Does anyone think he is credible?
“Saying that money gives credibility is one of the most shallow things I’ve ever heard anyone say in my life.”
I said nothing of the sort, if you could read you’d understand what I said you moron. When someone admits they want the market to fall because they can’t afford to buy the place they want, then their income (or lack thereof) becomes a relevant factor that creates a bias that must be taken into account when evaluating a person’s argument. Also, if there is one thing you have demonstrated you don’t have it’s a thick skin! You go off on rants like a little girl whenever anyone disagrees with you.
D
I didn’t mean general credibility, I mean credibility with respect to the conversation we are currently having about the future of Chicago home prices. That is very clear if you actually read my posts. I love how you turds take something I said out of context in order to change the subject because you know I’m right!
D
HD…… Good plan, Based on the housing enviroment, your age, martial status, etc. I would save my money and buy in the future.
When you buy, expect to stay there for at least 10 years, the days of holding a couple of years and making money are over. My only issue is that prices in the Chicago probably will not fall as greatly as you think.
Steve H also has some valid points as well. During the bubble people bought units, in poor locations, badly designed, and overvalued. I can’t tell you the number of converted/ newly constructed units that I looked at and thought why would anybody pay those prices. Those are the units that will fall dramatically, not the entire market.
dvalsko,
*No one* really knows how much real estate is going to fall. And like they crudely say, opinions are like A**holes, everyone’s got one.
Greenspan just said that prices will drop through 2009 and then maybe drift slightly downward from there; some say look at Japan and the 17 years of declining prices; others think that the market has to work through the alt-a and option arm mess reset mess that’s coming through 2011/12/13. SH refuses to admit that prices are falling in certain areas.
By refusing to buy at this point I’ve put my money where my mouth is. And trust me, if you saw my household’s 2007 tax return, I have the money to buy.
DB: “I didn’t mean general credibility, I mean credibility with respect to the conversation we are currently having about the future of Chicago home prices.”
You being a revisionist. You may have menat something other than what you wrote, but what you wrote sure ain’t what you’re now claiming. It’s all right ther in pixels.
“You go off on rants like a little girl whenever anyone disagrees with you.”
And this is really rich coming from someone who tosses around schoolyard epithets at anyone who disagrees with him. Really nice, DB.
DB: “I simply said that when you have someone who has admitted that they want the market to drop because they can’t afford to buy the place that they want, they lose credibility. The fact that they are not high income earners means they have a vested interest in the market dropping. Therefore, they have a bias that needs to be taken into account.”
Doesn’t that mean that you, as a very recent purchaser in a new Streeterville high rise, also have no credibility? You certainly have a “vested interest” in the housing market NOT dropping, with “a bias that needs to be taken into account.”
Then again, you haven’t offered anything of substance on this Board since the first week or two you posted. I just don’t understand why you keep comin’ back for the abuse you so richly deserve.
DB: “You go off on rants like a little girl whenever anyone disagrees with you.” Guess I’ll add “idiotically sexist statements” to your list of crimes.
I readily admit that I hope Streeterville prices don’t fall, but at least I’m aware of my potential biases and can attempt to overcome them. HD isn’t self-aware enough to do this. I’m sorry that you find “crying like a little girl” sexist, you need to lighten up.
D
Thanks for proving my point for me HD,
D
You guys are pathetic, stop taking things out of context. Immediately BEFORE I wrote that I wrote “We aren’t making fun of her for her lack of earning power, but we are pointing out that she has no credibility and a vested interested in interpreting everything in the worst possible light.”
DB,
Do you have nothing better to do than post your ridiculous thoughts on blogs and then defend them? What’s the point? It is nice to hear thoughts from the other end of the spectrum, but why make an argument out of it. The point of a blog is to discuss, not throw out insults and call the readers/contributors stupid. Lighten up and use statistics and documentation to support your thoughts.
I tried using rational analysis to debate with people on the message board but so many of them are so ignorant of finance and economics that it was a waste of time. HD doesn’t even understand compounding annualized returns (look in the archives and have a good laugh). There is no point in debating with people who are ignorant and don’t even know it.
DB,
If you think we are all ignorant and stupid, then why are you wasting your time at this blog?
No one can “win” this argument. Only history will be the judge.
Let’s try to stick to the properties, shall we?
Thanks to G, as always, for providing excellent historic sales and pricing info on LP.
G – Everyone knows the sq ft listed in the mls is bs. Some include deck sie int heir sq footage. Others include closets, bathrooms, ect. some just use livavle sq ft. The numbers listed are not reliable as I said earlier. You can use the data for your own agenda but anyone who knows what they are doing knows the data is worthless.
“Besides, like I said before, trader has summed all this data up nicely already: “As for what these #’s mean: median prices will start to drop steeply once volume (# of sales) goes up.”
Sp prices are going to collapse just like they did back in 2001 – 2005 when sales vollumes jumped. That makes a lot of sense. Are you guys really only like 21 or something?
First off, I think this site provides a wealth of information and some of the most unintentional comedy on the web.
Homedelete – Personally I don’t consider sitting on the sideline “putting your money where your mouth is”. If you are sure of your position it would be foolish not to invest in an ETF that shorts real estate, then you would be taking a position.
Place your bets and let the chips fall.
Sabrina – No thanks to me for providing proof that prices in general are not dropping in LP? I think the proof is right in front of us. Come on Sabrina… just a little shout out for the one who is right.
So in summary – Prices in LP have increased or remained flat as indicated by median price and price per sq ft. Now the only outlier is Trader who suggests that increased volume will cause pricing to collapse. Please expand on this.
JohnnyU,
While I too am hoping for big drops I can’t be sure so am unwilling to take a positional bet on them. Instead I’ve been in junk bonds the past year and they’ve paid handsomely. Any thoughts on WaMu 2010 bonds?
“Any thoughts on WaMu 2010 bonds?”
If WaMu has a two-tier structure like many banks (e.g., IndyMac), it is possible that the parent could survive into 2010 even after the big child is taken over by FDIC. Bonds of a non-bank part of WaMu might pay off (although I’d demand a fairly large premium); I wouldn’t touch bonds of WaMu bank with a ten-foot pole.
WaMu stock should be fairly worthless — if WaMu bank is taken over, I’d expect WaMu parent to declare bankrupcy on its way out. That should wipe out equity nicely.
Deaconblue,
Condo and home prices throughout Lincoln Park, Lake View, South Loop,etc. do not match the median income levels for their respective neighborhoods. Prices increased from 2000-2006 due to overstretched buyers using very risky leverage strategies. That game has come to an end. Now you really do need the income to buy these places, and as you are seeing people don’t have that income to support these ridiculous prices!
If there wasn’t a housing bubble, than you could easily say “John, the median monthly income for Lincoln Park is $3000 and that easily covers the monthly cost of $1600 for a 1 bd. condo.” BUT THE REALITY is not everyone in Lincoln Park or Chicago is a lawyer or doctor. EVEN IF YOU DO HAVE A HIGH INCOME JOB, what matters is not GROSS but NET PAY. People normally save 20% for your 401K, need $$$ for food and going out, save for an IRA, have numerous other expenses like car, phone, insurance, etc. Don’t forget taxes !!
If you ran the numbers using median monthly income, subtracting out taxes, expenses and savings, even a high income person wouldn’t have enough to buy any of these condo. So how are people doing it? Because they are not saving and are using their entire monthly pay to just buy a condo!! Buying the condo is, in their minds, their savings and investment. As long as they could find another fool who is will to leverage and spend all his salary on a condo before their option arm expires the game continues. This is why it was and still is a housing bubble!
Normally, people only spend 30% of their net pay towards housing. Notice I said housing costs, which includes the mortgage, taxes, assessments, etc. Banks actually required this prior to the housing bubble. Moreover, banks also required a 20% down payment not to long ago. Now you probably can connect the dots and understand how outrageous lending practices with a national obsession for housing (“the can’t lose bet”) created a massive housing bubble.
If you need more information please watch the following videos:
http://www.youtube.com/watch?v=6G3Qefbt0n4
http://www.chrismartenson.com/bubbles
“Sabrina – No thanks to me for providing proof that prices in general are not dropping in LP? I think the proof is right in front of us. Come on Sabrina… just a little shout out for the one who is right.”
There is no “right.”
There is only information. G provided excellent information.
Thank you G.
CNBC’s Dennis Kneale puts our current conditions in perspective.
http://www.cnbc.com/id/15840232?video=780461999
Bob
Hoping (IMO anyways) is a lot different then making statements that the market will fall. I “hope” the market falls/corrects as well. I’ve been thinking about relocating back to Chicago and one of the main reasons I haven’t pulled the trigger is the spread between salary & housing prices in Chicago and my current locale.
I can’t intelligently comment on the WaMu bonds as its not an area that watch very closely.
There is not a more retarded economic commentator than dennis kneale. he’s like the basketball cheerleader rooting for her team to score a touchdown, but worse because he’s not even pretty.
Hey Deacon blue,
reading must be hard for you, since if you had read the next sentence in your link you would have read that while wages were up 4.2% the CPI was up 4.4%
If you had been able to read the paper the last few days you would have seen inflation clocking in at 5.6%, ahead of wage gains. wage pressures domestically are indeed subdued (unlike in the 70’s). And this is exactly why US consumers are being squeezed at the gas pump and at the grocery store
your are right, The idiocy on this board is astounding
Steve H, Deacon: I think you both explained yourselves well. I just hope that your points aren’t lost amidst all the unnecessary insults.
Why I believe increased volume will coincide with falling median prices: there are numerous “owners” that have a tenuous hold on their financial situation. They would like to sell, but they cannot afford to sell at a loss. However, if prices start dropping they will be forced to sell and/or face foreclosure. Some catalysts that could start the downward trend: Alt-A resets, weakness in the economy/stock market, inability to get refinancing, etc. Once this happens they will price to sell (i.e. price drop). Obviously, pricing to sell will mean it will get sold (volume goes up). In this scenario, there could be a vicious cycle if prices drop enough to force more people to sell.
This could very well not happen (Bernanke is trying valiantly). If so, I will be the first to go long WaMu, Freddie, etc.
Haywood,
Two things- First, when we are discussing whether home prices will fall, I’m sure you will agree that most on this board are talking about nominal prices. Thus, you can’t say that real incomes have fallen and then compare that to nominal home prices. The reality is that incomes are up 4.2% YoY so that gives home buyers more buying power. If prices stay flat in the better areas over the next couple years, that nominal increase in income will allow income/home prices ratios to come back to historical levels. We are already more than halfway there when you include interest rates in the calculation. Secondly, the inflation rate is currently being distorted by the large increase in energy costs over the past few months. Once you get to the end of the year, however, you will likely see inflation rates drop like a rock once the YoY energy comparisons become more difficult.
D
“If you think we are all ignorant and stupid, then why are you wasting your time at this blog?”
Because I find it an interesting sociological exercise to see how people react to markets. The irrationality and lack of knowloedge one’s own biases is really fascinating to me. Most of the people on this board are just as biased as the realtors, but aren’t able to recognize it. We see the same phenomenon in the stock market all the time and as a student of behavioral finance, I find it interesting how people are hard-wired to make bad investment decisions over and over again. The people on this board waiting for a 20% drop in LP are just as stupid as the speculators in the South Loop and both groups will end up getting what they deserve.
D
DB, that explains why you read, not why you post (about how all of us are “turds,” etc.) The logical explanation for your venom-laced, repellent posting is that you are a bitter, lonely person with not much to do, and venting your spleen on the faceless denizens of this Board distracts you from your terror about the viability of the largest purchase you’ve made in your life so far (a unit in 600 N FB at the top of the market).
Hey, you’re an amateur sociologist; I guess I’m an amateur clinical psychologist.
Sorry, but you are incorrect. I’m not at all concerned about the mortgage I am carrying at 1x my household income. I actually find it fun to bait you guys, because you all take yourselves so seriously!
D
Oh, ok, then. Carry on; enjoy yourself. Glad it brings you such happiness. (Suggestions for something else you might also enjoy: pulling wings off flies! shoving old people off the sidewalk! kicking dogs is always good for a laugh!)
Are you comparing yourself to flies, dogs and old people?
“Suggestions for something else you might also enjoy”
More in keeping with what he’s doing here:
Being the “voice in the head” for mentally-ill homeless people from just out of sight.
Tapping random blind people on the back–repeatedly.
Placing food just out of reach of chained or caged (preferably hungry) animals.
DB could be the biggest loser blogger I have ever encountered… I think a good lay could cure what ails him!
I love the fact that you are equating yourselves to blind-people and caged animals, this is classic! You are making this way too easy!
I wish I live in a studio rental in Uptown like you guys, I’m sure the garden view is a real panty-dropper.
Wow, DB, you can’t even recognize a “friend” when you see one. Anon was joining your game. (But I guess it’s hard to recognize friends when you don’t have any, as I can only guess you don’t given that you profess such pleasure in simple hatefulness.)
Actually, I have no idea why I am even responding to you. Sabrina, wish you had the ability to let us filter commenters. Take the last word, DB–try to work in the words “turd” and “you guys” and “renters.”
Good call, I missed that one! I guess there is something to be learned from renter turds like you guys.
D
“I…said nothing about income being an indicator of anything…”
“…the only reason I mention someone’s income is because it is relevant to their credibility.”
Those were your exact words. I put no words in your mouth. You directly linked ones income with their credibility and then said you didn’t.
“The fact that they are not high income earners means they have a vested interest in the market dropping.”
The fact that you are a RE owners means that you have a vested interest in the market staying artificially high which ruins your credibility.
To DB’s defense here: I don’t think income is near a perfect correlation with credibility. However, if someone has a high income and isn’t working for a family business, you can be reasonably assured they are intelligent. Yes even the plumbers making 80k/year with all that overtime: its takes a lot of skill and work ethic to make decent coin, generally. Family businesses/nepotism are obviously excluded from this generalization.
This doesn’t mean that lower income people aren’t intelligent-many, MANY people don’t measure success solely by monetary rewards, only that the prerequisite isn’t there. The intelligence and work ethic of lower income people is all over the map, so to speak, making generalizations difficult.
Go back and read my whole thread! That comment is taken out of context, it was written in relation to the comment I made before it. I don’t believe income and credibility are linked in the way that comment makes it seem. All I’m saying is that when asking people their opinion about something’s cost, their income has an effect on the credibility of their answer.
Here is an example- If you ask someone who makes $1 million a year if raising taxes on the “rich” would be good for the country and they say “no,” doesn’t their income need to be taken into account when evaluating the credibility of their response? Likewise, when someone is not able to afford the condo they want and they rant about how prices are going to fall, their income is relevant when assessing whether their arguments are biased or not.
D
“The fact that you are a RE owners means that you have a vested interest in the market staying artificially high which ruins your credibility.”
I already commented on this, please actually read the posts before attacking me.
RE watcher on August 14th, 2008 at 3:38 pm asked
“G,
you post the Median, how about the Mean, and Max/Min?”
There were 300 attached single family sales in 2nd Q 2008 thru 8-13-08 for Lincoln Park (area 8007 mls.)
median $433,500
mean $461,990
high $1,290,500
low $129,500
120 (40%) have square footage listed:
median $308 psf
mean $308
high $457
low $180
st dev 51
There were 511 attached single family sales in 2nd Q 2007 for Lincoln Park (area 8007 mls.)
median $392,250
mean $432,409
high $1,700,000
low $128,000
191 (37%) have square footage listed:
median $294
mean $305
high $502
low $160
st dev 59
There were 439 attached single family sales in 2nd Q 2006 for Lincoln Park (area 8007 mls.)
median $393,000
mean $449,704
high $6,000,000
low $102,900
174 (40%) have square footage listed:
median $303
mean $307
high $750
low $194
st dev 57
“2nd Q 2008 thru 8-13-08” s/b “2nd Q 2008.”
For the statistics buffs, the combined standard error on price-per-sqft is about 6.5 for each pair of years. That means that differences in means need to be at least 13 to be significant (not just random chance).
That is, average prices in LP have not changed significantly since 2006.
(The same calculation for order statistics such as median, min, and max is substantially harder and very sensitive to assumptions about the underlying distribution. The difference required for statistical significance will be larger.)
Redfin is starting to publish data on areas (and zip codes), although their Chicago database is just starting to be built.
Look at these two pages for price trends in parts of near north (60610) and Lincoln Park (60614). Basically, the $/sqft trends for condos in both areas appear to be flat since Oct 2006. $/sqft for homes in 60614 may be falling from a Spring 2007 peak, but there is a lot of noise.
http://www.redfin.com/zipcode/60610
http://www.redfin.com/zipcode/60614