Market Conditions: Chicago September Home Sales Were the Best in 7 Years
The Illinois Association of Realtors is out with the September 2013 home sales.
Both sales and prices continued to rise.
The city of Chicago saw a 23.4 percent year-over-year home sales increase in September 2013 with 2,352 sales, up from 1,906 in September 2012.
The median price of a home in the city of Chicago in September 2013 was $231,000 up 22.6 percent compared to September 2012 when it was $188,400. Chicago condo median prices continued to see double-digit gains, posting a 18.7 percent jump to $273,000. Average time on market in the city was 50 days, down 30.6 percent compared to 72 days in September 2012.
September sales for the last 7 years:
[unordered_list style=”bullet”]
- 2007: 2172 sales
- 2008: 1816 sales
- 2009: 1918 sales
- 2010: 1403 sales
- 2011: 1498 sales
- 2012: 1845 sales
- 2013: 2352 sales
[/unordered_list]
Median prices for the last 7 years:
[unordered_list style=”bullet”]
- 2007: $267,750
- 2008: $268,600
- 2009: $225,000
- 2010: $180,000
- 2011: $190,000
- 2012: $188,900
- 2013: $231,000
[/unordered_list]
Thanks to G we also have a longer history of the September condo/townhouse sales. While prices were up year over year, it still trails the Great Recession year of 2008 though it is now beating the second Great Recession year of 2009.
The higher median price is also probably due to fewer distress sales.
Year/Sales/Median
1996 757 $127,000
1997 959 $142,900
1998 1,158 $158,950
1999 1,195 $180,000
2000 1,255 $219,900
2001 1,249 $223,000
2002 1,621 $245,000
2003 2,114 $255,500
2004 1,960 $269,450
2005 2,344 $276,538
2006 2,006 $285,000
2007 1,650 $310,200
2008 1,188 $311,750
2009 1,159 $270,000
2010 820 $240,000
2011 863 $234,600
2012 1130 (don’t have median price data)
2013 I don’t have the number of condo sales but median price was $273,000
“The city of Chicago saw a 25.4 percent year-to-date home sales increase through September 2013 over the same nine month period in 2012, to 20,904 units sold, over last year’s 16,674,” said REALTOR® Matt Farrell, managing partner at Urban Real Estate and president of the Chicago Association of REALTORS®. “The surge we’ve seen is likely due to an increased feeling of stability in the housing market, as well as the return of jumbo loan options for buyers. Chicago remains among the most affordable urban markets for families looking to make a world-class city their home, and still offers attractive housing options for those in the first-time buyer or move-up marketplace.”
“The partial government shutdown has dampened the housing market’s continuing recovery,” noted Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory of the University of Illinois. “However, both sales and prices are forecast to continue at a much faster rate than a year ago and continued completion rates for foreclosures promise a return to a more normal market situation within 6 to 12 months.”
These are solid numbers at a time when interest rates were rising.
With inventory still low, why aren’t more developers building more new product?
Illinois housing gains extend into fall; Sales up 19.8 percent, median prices rise 12.9 percent in September [Illinois Association of Realtors, Press Release, October 21, 2013]
I thought “skyrocketing” rates were supposed to put a damper on sales? What happened?
“With inventory still low, why aren’t more developers building more new product?”
You are confused on why inventory is low. Let me help you out:
There is not a shortage of housing in Chicago. There is a shortage of people willing to sell at today’s prices. It costs too much to build new. Current market pricing doesn’t support it (other than the luxury buildings). The market has still not reached an equilibrium point. Which is why prices continue to rise. If prices went up 50% overnight, your “low inventory” problem would be solved immediately. New construction is most definitely NOT the solution to this issue.
Would September 2008 sales really qualify as Great Recession? The signs were there before September (eg Bear Stearns), but the market didn’t crash and people didn’t really freak out until September when Lehman went down. So, a lot of those September sales were already done deals before that happened.
“It costs too much to build new.”
No it doesn’t. You are wrong, yet again, Chuk. If it did we wouldn’t see 10-15 (or is it 20?) new high rise apartment buildings being built all over the downtown and up to Old Town.
And there is some new construction out in neighborhoods like Avondale. Plenty of people willing to pay $500,000 for a townhouse in Avondale.
Must be that the builders can’t find the right types of land and/or they can’t get financing for it.
Prices are back to 2007-2008 in some downtown locations now. It makes no sense why EVERYONE isn’t listing and trying to dump their properties and why builders aren’t scrambling to get new product on the market. Luxury 1-bedrooms priced at $500,000 are selling like hotcakes. Just convert one of the already built high rises (like the Streeter) and cash in with $700,000 2/2s.
Maybe the market is really not that good.
In the burbs, I get it. Prices haven’t rebounded enough out there and there is still utter devastation in prices. Lots of owners are still going to lose money if they sell. But in the GreenZone? It’s party on again. It’s like 2007.
“You are wrong, yet again, Chuk.”
Says the person that was predicting horrible September sales…. When was I wrong before? You do realize you’ve been COMPLETELY wrong about everything for the last 3 years, right?
“Prices are back to 2007-2008 in some downtown locations now. Luxury 1-bedrooms priced at $500,000 are selling like hotcakes……Maybe the market is really not that good.”
Huh? THAT is your takeaway from this?
Isn’t most of this simply about affordability?
Lots of housing experts are predicting a flat 2014 with little to no price increase. We’ve seen this huge reflation in housing prices now but incomes haven’t gone up at all and unemployment remains high. You can’t get blood from a stone. At some point, even with relatively low rates, people are priced out.
Unless incomes start rising dramatically, it’s going to be a rough housing market for several more years to come. The Fed is helping out homeowners with QE. Maybe they continue it for another year (as a gift). Because once that goes away and rates rise further, with the recent price increases, it could get nasty out there again.
I’ve pondered whether we will actually see declining home prices again sometime in the near future -if incomes don’t rise. The national affordability index is back to bubble levels. Housing is as unaffordable as ever (kind of ironic.)
“Lots of housing experts are predicting”
I’ll stop you right there.
“it’s going to be a rough housing market for several more years to come.”
I’m confused. Are you saying it is a rough housing market now?
“I’ve pondered whether we will actually see declining home prices again sometime in the near future”
I’m sure you have.
“We’ve seen this huge reflation in housing prices now but incomes haven’t gone up at all and unemployment remains high.”
Do you think housing prices went down because incomes went down? Why would they need to go up just to get prices back to where they were when incomes were the same?
There is plenty of new construction going on all over the city. Ask me about a price range and I’ll show you what’s going on – at least in SFHs. As I’ve mentioned before my neighborhood, East Village and Ukrainian Village, 19 new construction permits were issued in a 6 month period between Grand and Chicago. It sells in 30 days.
I actually did some research on median prices. I was surprised to find out that the mix of distressed sales was not the explanation and it’s mostly SFHs driving the variations. It’s just the mix of non-distressed sales that are changing.
Why aren’t more people selling? Actually plenty of condos are listing and selling quickly. It’s the SFHs that are not being listed. I can only speculate about why the difference. People live in SFHs longer? People are more underwater? But I will tell you that dated finishes are a real sticking point on SFHs.
Oh…and the Case Shiller futures for Chicago show expectations of solid gains for several years. Unfortunately, the CME took delayed quotes down on this product.
Call me shocked that so many homes sold with such low inventory!
Gee Sabrina, I thought “skyrocketing” rates were going to kil the housing market? LOL
Oh and how are rates doing since my call of 3% as the near term top on the 10 year? only down 20% to 2.5% today
I feel bad for my friend who is going to be looking for a place to buy in January, he’s going to have to overpay a lot for a 2/2 in a decent hood. It is no wonder realtors are begging people to sell their homes, the transaction volume has picked up drastically, avg. market times of less than 2 months must be a dream come true for the realtard cartel!
“Prices are back to 2007-2008 in some downtown locations now. It makes no sense why EVERYONE isn’t listing and trying to dump their properties…”
Owners aren’t listing in droves because they have to live somewhere. With rents at all time highs what is the point of selling your home to rent something? And if they want to sell their home to buy a new one – inventory is low and prices are high so not reducing your housing exposure. Also – this massive rebound back to bubble pricing is only in select areas and not across all of Chicago. I think rents are in bubble territory and need to come down. 2/2 pricing downtown is similarly bubbly because it is priced off of bubbly rents.
Regarding incomes – as I said above we are only back to bubble pricing in the GZ and some other select areas. Incomes for the top 5% are back to where they were during bubble times (and for the 1% they are higher). So there is income growth to support the GZ pricing. It just looks so outrageous when compared to the average.
“avg. market times of less than 2 months must be a dream come true for the realtard cartel!”
And don’t you know that they are all running around taking credit for the quick sales as if they have some kind of magic dust, when in fact they are often underpricing the properties. And the sad thing is that home sellers are falling for it.
Sabrina you need to read the methodology of how the affordability index works
http://research.stlouisfed.org/fred2/series/COMPHAI
Measures the degree to which a typical family can afford the monthly mortgage payments on a typical home.
Value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. For example, a composite housing affordability index (COMPHAI) of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home. An increase in the COMPHAI then shows that this family is more able to afford the median priced home.
If you understand the methodology you will understand why the chart looks that way, and it has very little to do with how luxury properties are priced
And also affordability is waaaaaaaay higher than bubble times, so not sure where you’re getting your numbers from
Chuk, prices were really high in 2005/2006 an inventory was extremely low then too. It wasn’t until prices started falling in 2006/2007 that everyone ran for the exit and inventory increased throughout the recession; and then slowly dried up after the recession ended, bringing us to the ‘low’ inventory we have today.
As far as incomes go, incomes for the top 20% or so, which represents the UMC suburbs and the GZ area are doing pretty well; and those in the top 10% are killing it. Anecdotally, and I’m not trying to brag, I’m killing it this year, the best year of my life, by far. My law school sent out it’s class notes last week, and firms have finally started making partner again. I went to a wedding a few weeks ago and the big accounting firms are making partners again. It takes 18 years to make partner these days, but for a while there, they were barely making partners at all. Even in my suburb, the standard 1,500 sq ranch on a 50×125 lot – even the ones *underneath a flight path* (aka the belle plaine runway) are selling for close to $230 per sq foot for dated housing ( http://www.redfin.com/IL/Park-Ridge/200-Imperial-St-60068/home/13637900).
These aside, the opening of the 10c-28c runway (aka cemetery runway) means my house is no longer in the flight path of a diagonal runway. The sun-times described the change between the two as ‘flipping a switch’ and wow, I have yet to see a plane anywhere near my yard since 8 am last Thursday. It really was like flipping a switch. The diagonal runway only intends to be used sparingly during incremental weather, something like less than 1% of all arrivals, and the change is noticeable. Not only did I buy at the BOTTOM of the bubble, I also bought a home shortly before they changed the flightpaths reducing my flight noise to zero!!! I researched that before buying it too. ANd a little bit of research pays dividends.
Sonies: According to NAR (the ultimate real estate mouthpiece themselves)- affordability is now at 5-year lows.
Like I said- we are nearly right back to the same problem we had the height of the bubble (minus the super speculative loans and giving jumbo mortgages to strawberry pickers in California- which DID happen.)
People can’t afford homes again.
How did we get in this problem…AGAIN? It’s absurd. But everyday I thank my lucky stars I don’t live in London. What a nightmare of affordability there.
http://www.marketwatch.com/story/housing-affordability-at-five-year-low-nar-2013-10-21?reflink=MW_news_stmp
“Incomes for the top 5% are back to where they were during bubble times (and for the 1% they are higher).”
I think you mean “assets” are back to where they were during bubble times and even higher for the 1%. Luxury real estate is booming because the global stock markets are at all-time highs. It’s as simple as that. It has NOTHING to do with incomes. In fact, incomes continue to trail for big firm lawyers, doctors and all the rest. Big firm lawyers continue to take pay cuts! (at the partner level.) That ship has sailed. And associates haven’t seen pay raises (in the lockstep) in 5 or 6 years. They are losing ground compared with inflation (even as little as there is.)
“Gee Sabrina, I thought “skyrocketing” rates were going to kil the housing market? LOL”
I’m surprised too. In other markets, the higher rates hit their sales numbers (in San Francisco and LA, for example.) But median prices are so high in those cities that even a 1% increase in mortgage rates knocks a lot of people out of the game.
The 10 year is down because it’s obvious the Fed cannot taper until well into next year. Duh! So yeah- mortgage rates will now go back down (for now) to allow the mini-bubble to reflate. We’ll get a bubble in stocks too- but too many people are obsessed with real estate (for now) to really pay any attention to stocks. They have no idea the wealth they’re missing out in on Wall Street. But they’ll figure it out (eventually) and pile in there just in time for that asset class to crash.
The Fed has NO WAY OUT. It must continue to feed the beast.
We’re all screwed. It’s every man for himself.
“There is plenty of new construction going on all over the city. Ask me about a price range and I’ll show you what’s going on – at least in SFHs. As I’ve mentioned before my neighborhood, East Village and Ukrainian Village, 19 new construction permits were issued in a 6 month period between Grand and Chicago. It sells in 30 days.”
Compared to what Gary? Compared to 3 years ago? Compared to 5 years ago? Compared to 10 years ago? Compared to what?
19 permits. That sounds low. In your neighborhood, there were whole huge block long construction projects that were planned before the bust. Whatever happened to those? The land is sitting there empty. In some cases, the old development signs are still on the site. I would assume they’re going to build on those plots eventually though.
“Are you saying it is a rough housing market now?”
Yes. I would say- out of the listings I look at in the city and the suburbs- probably about 60% – 70% are STILL losing money on the transaction. But ya gotta move sometimes.
It’s pretty awful out there for sellers still. For buyers- it’s brutal.
“I feel bad for my friend who is going to be looking for a place to buy in January, he’s going to have to overpay a lot for a 2/2 in a decent hood.”
Why buy? Just rent the darn thing.
I don’t understand the “must buy” mentality. It’s stupid. What a moron to buy right now with prices rising an inventory at multi-decade lows. There are thousands of apartments scheduled to come on the market in the next 12 months. Rents will come down. Just rent a luxury unit. So much easier.
I’ve recently seen a few 2/2s come on the market that are decent in the GZ. I did the mortgage calculator. They are still way more to buy than to rent the same thing. One of them was in Lincoln Park. A unit in the building just rented for $2350. If you put 10% down on the place for sale the monthly payment was $2695. Sure- you get the tax break. Maybe it comes out about even in the end with that. But it’s just a 2/2. How long are you going to live there? 3 years? 5 years tops?
“A unit in the building just rented for $2350. If you put 10% down on the place for sale the monthly payment was $2695.”
Except you are including principal payment in there. It will be easier for you to compare if you run it as an interest only loan.
“According to NAR (the ultimate real estate mouthpiece themselves)- affordability is now at 5-year lows.”
That’s true in Chicago as well. It all happened in the last year. But it’s still way better than it was in 2008.
“It will be easier for you to compare if you run it as an interest only loan.”
Who the hell is getting interest only these days? Not a single buyer I know and I know quite a few of them.
Hey Gary- how many of your buyers are doing interest only? Are they buying 2/2 condos with interest only loans?
Come on Chuk. That game has gone. In all reality- it is STILL a better deal to rent for 3 years than to buy a condo in the GZ. And you don’t have to come up with thousands of dollars for the downpayment or worry about any special assessments etc.
“Why buy? Just rent the darn thing.”
It’s always a case by case thing but I’ll tell you that I bought about 18 months ago and now I live in a much better home for a fraction of what I used to pay in rent. My monthly cost went from $3200 to $2000 and that $2000 is tax deductible. Yeah, I only borrowed like 55% but the opportunity cost on the 45% isn’t that high right now. I recently refinanced and bought down the rate to 2.25% on a 7 year ARM. And I don’t care what happens in 7 years because I need to move to a warmer place with a lower cost of living then.
“Compared to what Gary? Compared to 3 years ago? Compared to 5 years ago? Compared to 10 years ago? Compared to what?
19 permits. That sounds low. In your neighborhood, there were whole huge block long construction projects that were planned before the bust. Whatever happened to those? The land is sitting there empty. In some cases, the old development signs are still on the site. I would assume they’re going to build on those plots eventually though.”
OK. Here’s the whole story: http://www.chicagonow.com/getting-real/2013/08/new-construction-in-chicago-a-far-cry-from-its-peak-levels/ 19 permits between Ashland and Western and Grand and Chicago in 6 months is a TON. I don’t know anything about huge block long construction projects planned back when but when Noah did one at Erie and Damen it sold out in 30 days. There is almost no vacant land here and in the last couple of years teardowns have gone from $180K to $325K.
It’s pointless to compare today’s real estate market to bubble years. Those were aberrations.
“too many people are obsessed with real estate (for now) to really pay any attention to stocks. They have no idea the wealth they’re missing out in on Wall Street. But they’ll figure it out (eventually) and pile in there just in time for that asset class to crash.”
Yep, I’ll agree with you on that one… people pouring money into longer term bonds… won’t enjoy looking at their statements in a few years very much… at least they’ll get their money back eventually though
as for this
“Why buy? Just rent the darn thing.
I don’t understand the “must buy” mentality. It’s stupid. What a moron to buy right now with prices rising an inventory at multi-decade lows. There are thousands of apartments scheduled to come on the market in the next 12 months. Rents will come down. Just rent a luxury unit. So much easier. ”
I told him what an idiot he’s being and he knows it, but he wants to buy for purely emotional reasons (long story i’m not going to go into on here) but I have told him for hours that he should just rent, but he doesn’t want to listen. At least he’ll be staying in his 2/2 for over 5 years, so thats good I guess.
“I think you mean “assets” are back to where they were during bubble times and even higher for the 1%. Luxury real estate is booming because the global stock markets are at all-time highs. It’s as simple as that. It has NOTHING to do with incomes. In fact, incomes continue to trail for big firm lawyers, doctors and all the rest. Big firm lawyers continue to take pay cuts! (at the partner level.) That ship has sailed. And associates haven’t seen pay raises (in the lockstep) in 5 or 6 years. They are losing ground compared with inflation (even as little as there is.)”
There is so much wrong with this.
“I think you mean “assets” are back to where they were during bubble times and even higher for the 1%.”
Nope – incomes are back. Try google.
“It has NOTHING to do with incomes.”
Wrong. It is partially incomes coming back for the top brackets + confidence in the economy + rates still low. As chuck said earlier the drop from bubble can’t be explained solely by incomes decreasing.
” In fact, incomes continue to trail for big firm lawyers, doctors and all the rest. Big firm lawyers continue to take pay cuts! (at the partner level.) That ship has sailed. And associates haven’t seen pay raises (in the lockstep) in 5 or 6 years.”
So so wrong. My SO is a lawyer at a big firm and we have many lawyer friends. Their firms (and them) are having record years. My good friend is at a big 6 accounting firm – he is swamped with work and is making more than he ever has. Don’t know about doctors – don’t have any friends in medical field. It took me literally 30 seconds to find this:
http://www.nalp.org/associate_salaries_sept2013
Here is the first sentence:
“Starting associate salaries at large law firms have remained essentially flat since 2007, despite some erosion of the prevalence of $160,000 as the norm.”
a big 6 accounting firm
What year is it? 1997?
Here is the first sentence:
Which proves half of Sabrina’s point–that there has been no raise for 1st year associates in 5 or 6 years. What are you disputing? And if you don’t know biglaw partners getting pay cuts, you just don’t know many and/or much-variety-of (age, practice, firm) biglaw partners.
I think it’s a bit of the game of musical chairs. The older partners are getting pushed out and their incomes are dropping; but the younger partners are working their way up and their incomes are going up too – and they’re the most likely parties to be purchasing/upgrading their housing; unlike the older partner who has different expenses.Things are definitely better for a lot of people.
anon – This is what Sabrina said: “incomes continue to trail”. I showed that salaries are back to 2007 levels and thus do not “continue to trail”. Do you dispute that incomes for the top 5% are currently above incomes in 2007?
“And if you don’t know biglaw partners getting pay cuts, you just don’t know many and/or much-variety-of (age, practice, firm) biglaw partners.”
I don’t know any partners getting pay cuts. All of my SO’s colleagues make more today than 2007. I can’t find data on revenue / profit that isn’t behind a pay wall. What I do know is that if starting lawyer pay is back to the bubble level you can bet partner pay is back to or above bubble levels. The distribution in the profit per partner may be different now with some getting more and some getting less but overall it is higher.
The top 5% is really in a different economy than the other 95%. And when we talk about GZ prices / rents we are pretty much talking about the upper 5%.
“Who the hell is getting interest only these days?”
You are confused. I’m not saying to actually get an interest only loan. But that appears to be the only way to get you to take out the principal payment in your “rent vs buy” calc. I’m just trying to make the math easy for you so you stop getting everything so wrong.
“Which proves half of Sabrina’s point–that there has been no raise for 1st year associates in 5 or 6 years. ”
But first year associates become second year associates and get raises in lockstep until they make partner or leave. there is a huge pay raise upon partnership, and a flattening out (or often decrease in pay) upon leaving a biglaw job.
THe corporate world seems to be going well too. I’ve recent gotten involved in a different area of law that requires me to see the financial statements of non-financially distress parties (well, not financially distressed yet!) and I’ve seen a lot of $100k or higher bonuses for 2012 for mid-level and higher level management/executives/sales. Things still suck for a lot of people; but things have generally sucked for the third estate throughout all of history. The introduction of the middle class is an anomaly and not a feature of human social conditions. It’s no surprise that the top 10% is doing great again 6 years after a financial crisis and trillions of dollars of financial stimulus later.
Sabrina,
You have been saying the same thing for the past 4 years. “Can’t squeeze blood from a stone.” Give me a break. Anyone who listed to you and stayed out of the market has lost their ass by not getting in when prices were low, or by renting and paying these skyrocketing rents. As I have told you 1000 times… the city is where people want to live and this, combined with the recovering economy, is why the better areas of Chicago are appreciating rapidly. Why are you so negative on everything? You were obviously very wrong with your predictions over the past 4 years, and I was obviously right! Not only right, but some of us have made a killing buying up the distressed properties you told so many to stay away from.
Give it up already…
“But first year associates become second year associates and get raises in lockstep until they make partner or leave. there is a huge pay raise upon partnership, and a flattening out (or often decrease in pay) upon leaving a biglaw job.”
A lockstep raise is NOT a raise. It’s the same damn lockstep that someone got 5 years ago when inflation was like 12% lower. The 2nd year associates now are making LESS money than the associate in 2000 when inflation is factored in. Yes- go back and look. It’s true. The legal profession is DYING (at least the BigLaw model.) What doesn’t anyone understand? BigLaw just laid off a bunch of associates AGAIN in Chicago just this year.
You know how much it costs to attend GW in DC for one year of law school now? $88,000 a year. That’s more than most of those grads will EVER make in a year. (Let alone 3.)
I just saw this on one of those lawyer blogs:
http://abovethelaw.com/2013/10/more-jobs-with-better-training-but-at-lower-pay-welcome-to-the-future-of-biglaw/
They’ll be lucky to make $70,000 for a 1-year contract (do or die in that job).
What a nightmare.
The partners are no better off. Profits per partners have fallen every year since the Great Recession at most of the major firms. It’s why they’re getting rid of nearly all the secretaries and most of the paralegals (mass layoffs of secretaries at most biglaw firms. I happen to know one and she’s safe- for now- but she’s near retirement so she knows the reality of what will happen to her soon.) The secretaries are non-billers. They are expendable. They don’t bring in income.
Want to know more on how awful it is out there from that summer article on Big Law firms dying:
“Meanwhile, other data show the problems for the legal profession continuing. Of the law students who graduated in 2008, 75 percent of found a legal job within nine months, according to the National Association for Law Placement (NALP). For those who graduated in 2012, the number had fallen to 64 percent, a record low. Of course, Big Law firms typically hire associates well in advance, so these numbers partly reflect the hiring environment that existed a year or more earlier. And, in fairness, NALP reports that hiring at big firms did recover a bit for the class of 2012 after a terrible 2011, even if it was still well below the 2009 level. Still, the fact that the market for lawyers was historically weak more than three years after the recession is pretty alarming. NALP refers ominously to a “new normal” in law-firm hiring.”
http://www.newrepublic.com/article/114065/death-big-law-firms-cant-be-ignored
“I don’t know any partners getting pay cuts. All of my SO’s colleagues make more today than 2007.”
This is not true (not at the big law firms.) They have been letting go of partners, down grading them to income partners etc. This has been well documented by many newspapers over the past few years including the WSJ and the NYT.
Things are much, much worse in the legal profession. What planet are you on? As I said- they are STILL DOING LAYOFFS! They are STILL pushing out partners.
Lol.
From this summer:
“The crisis in the profession isn’t likely to improve, either. In late June, the New York–based Weil Gotshal, one of the most alabaster of white-shoe firms, announced it was laying off 60 associates, about 7 percent of its total. A few dozen of the firm’s 300 partners will see their pay cut, in many cases substantially. The news shook the legal community, both because of Weil’s pedigree and because it was one of the few firms that had weathered the recession intact. Almost as disconcerting as the firings was the way the firm’s executive partner, Barry Wolf, explained them. “We believe that this is not just a cycle, but that the supply-demand balance is out of whack across the industry,” he told The New York Times. “If we thought this was a cycle and our business was going to pick up meaningfully next year, we would not be doing this.””
This whole article is about Mayer Brown – a Chicago firm. You can’t say it’s only happening in NY. It’s bad everywhere.
http://www.newrepublic.com/article/113941/
“In May, I spoke to a former Mayer Brown associate who joined the firm’s finance group out of law school in 2001 before transferring to the pensions department so she could work saner hours. The associate, call her Helen (not her real name), survived two rounds of layoffs, then got pregnant in 2009. Helen had previously felt she was on track to make partner—her performance reviews were consistently strong—but she began to worry as she was preparing to go on maternity leave. “We would have these group meetings where we’d talk about billable hours, how down they were for our group. I knew that, if there was another layoff, we were going to be hit.”
Helen’s son was born on March 19, 2010. Just before he turned three weeks old, she received the call she’d been dreading. Mayer Brown gave her the rest of her maternity leave, plus another three months pay as severance. It was, under most circumstances, a fair offer. But Helen was in a bind. Her husband was a stay-at-home dad, and the couple owned a condominium in downtown Chicago. “I sent out a ridiculous number of resumés,” she says. “If I didn’t have a job lined up by time the time the severance ended, I didn’t have a way to make payments on my house.” She landed two or three interviews and no offers. “The market was so bad in the spring of 2010. Not a single law firm was hiring.”
Inevitably, the bank foreclosed on her condo. She and her husband relocated to the Michigan town where he grew up, and she eventually joined a local firm. Her annual salary when she left Mayer Brown was $230,000. Last year she made $40,000. It was barely enough to put food on the table and clothe her children, much less keep up with tens of thousands of dollars in law school debt. “There’s probably a bankruptcy in our future. I don’t think there’s a way out of it,” Helen told me. “In ten years, hopefully we’ll be financially recovered, we can buy a house, have a credit card again.” Before we hung up, I pointed out that the legal market had improved since 2010. Why not look for another fancy job in Chicago? “There’s no way I would go back to Big Law,” she said. “I’m doing a lot of criminal law now. I love it. It’s originally what I’d intended to do when I went to law school.””
“As I have told you 1000 times… the city is where people want to live and this, combined with the recovering economy, is why the better areas of Chicago are appreciating rapidly.”
If it wasn’t for the sorry state of the Chicago public schools, I would agree with you on this Steve. But the schools push people to leave. I know plenty of people who move into the B school districts (Bell, Blaine, Burley) but leave when their oldest is around 10 because the high schools are just so awful.
You can “solve” the grade school problem but not high school. It’s shocking how quickly enrollment drops off at the good elementary schools by the time you get to 7th and 8th grade.
Here’s a great article from the Reader on 3 families who tried to make the city work but ultimately had to retreated to the suburbs.
http://www.chicagoreader.com/chicago/cps-alternatives-suburbs-magnet-selective-enrollment-lowincome/Content?oid=11046489
And 10 years ago those B schools were awful as well. The elementary schools have been taken over by the neighborhoods and the same is underway for the high schools. No one I know (and I know a lot of families) have any plans to move to the suburbs when their children get a bit older. We are hear for the duration and we will make the schools exactly what we made the elementary schools – great!
How was my prediction that Lincoln Park was a smart place to buy? Come on Sabrina… give me some loving! The top 5% are doing great, and guess what? They all decided to stay in the prime areas of the city and drive prices back through the roof. Lincoln Park is just getting started too. The city is growing and our great mayor knows where to concentrate the money. Look for Lincoln Elementary (best Chicago school by far) to get a nice sized state check to build a new building in the next few weeks (announcement is coming). We don’t need a new school, but Rahm wants Lincoln Park to shine. What Rahm wants, Rahm gets…
That is a cute Reader article and I have read it in the past. I don’t know the families selected for the article are the exact families I am referring to.
Stop being so bitter and except the following.
1. The dooms day scenario you predicted has not materialized.
2. The rich are getting richer, regardless of your flat income data.
3. The rich have decided that urban living is appealing
4. Downtown Chicago (2 miles from state / Madison) has seen an increased population of approx 200,000 over the past five years.
5. This increased population has created a demand for housing and driven both land values and rents higher.
6. Many low income families have moved from Chicago to the out circle of the suburbs over the past 5 years.
Do you see a trend?
The both of you are right. The legal profession as a whole isn’t thriving and it is definitely not doing as well as it was pre-recession; but the profession has come off its bottom and has been steadily improving. From where I sit, I see things getting better than they were. The laterals out of this office have steadily improved their situation overall and I know that I’ve improved my situation remarkably too. Also, other professionals seem to be doing pretty well too. I’m not taking about the guy at wal-mart, I’m talking about the GZ type of crowd, where the wealth is increasingly concentrated. They’re still buying houses – but the days of IO Ninja loans are over; so many buyers have down payments, and suitable income; and it’s difficult to get the large jumbos or super jumbo loans without more than sufficient income and/or assets. I know people who took out a 1,000,000 loan in 2007 who definitely shouldn’t have been purchasing a 1,000,000 home; whereas today there’s exactly zero chance that loan would have ever been made. In short, borrowers are qualified and can support these prices.
I always predicted that prices would bounce off the bottom, and rather quickly. I was a few months off in my prediction (I thought right now would be the bottom, rather than last spring when I bought). I always said 2013-2014, and my predictions have proved pretty accurate.
“And 10 years ago those B schools were awful as well. The elementary schools have been taken over by the neighborhoods and the same is underway for the high schools. No one I know (and I know a lot of families) have any plans to move to the suburbs when their children get a bit older. We are hear for the duration and we will make the schools exactly what we made the elementary schools – great!”
Then why is enrollment in the 8th grade at these schools only about 30% of the enrollment in kindergarten?
Because the parents all flee.
I have friends who are teachers. We talk a lot about this issue. They tell me it’s nearly impossible to turn around a high school (by parents anyway). There are too many kids, too many teachers etc. And the kids are only there for 4 years versus elementary school where parents have more invested. It’s just too overwhelming so parents don’t even try (your kid will have 7 or 8 teachers, for example, versus just 1.)
If so many in “good” school districts were staying in the city (or at least the public schools) then Lakeview High School would be one of the best in the state. Why isn’t it? Lane Tech would outscore New Trier. Why doesn’t it?
But steve heitman is only partially correct about parents staying in the city. I’d say 95% of the parents I meet with children under 10 are city transplants. I’m not talking about parents from norwood park moving to park ridge; I’m talking old town, lake view, lincoln park, south loop, etc, moving to this suburb for the schools. Sure some parents are staying, and things are changing, but they’re not changing everywhere and it’s confined to a small subset of parents in a handful of neighborhoods who can ‘afford’ to stay in the city; whereas everybody else seems to opt for the slightly bigger house with a smallish yard in the suburbs.
Try again Steve:
“More than 48,000 moved to downtown Chicago in the last decade, according to the report. New York City saw a 9.3 percent increase in its downtown population, or about 37,000 people.”
If you’re going to come on here touting your “facts” at least get them correct.
The city isn’t just a few miles in Lincoln Park. I feel sorry for you Steve. You have no idea what this city offers. Sad.
I didn’t even post that last comment. Who is using my handle?
Sabrina – I think you are confused about the current legal profession. Firing paralegals / secretaries is to reduce costs and put more $$ in the partners pockets. Those paralegals / secretaries are not in the 5% / GZ crowd – the partners and senior associates are. The legal profession as a whole is in a tough spot – there is an oversupply of under qualified lawyers – those are the “lawyers” who are getting screwed by the environment. There is always turnover at law firms – the sub-par lawyers are pushed out and replaced by the younger associates. Those pushed out lawyers end up in house. This has always been the case.
Regarding inflation – your argument is that lawyers are making less than they were in 2007. You are wrong. Inflation adjusted they are making slightly less but on an absolute level they are making the same. And since we are comparing absolute housing levels we should be comparing absolute incomes. So – incomes have rebounded (but still slightly lower inflation adjusted) while housing has rebounded (but still lower absolutely and inflation adjusted). You were arguing that incomes haven’t rebounded and the housing price increase is not supported by rising incomes – you are incorrect.
“Profits per partners have fallen every year since the Great Recession at most of the major firms.”
http://abovethelaw.com/2013/04/the-2013-am-law-100-a-year-of-slow-growth/
From the article:
“For the Am Law 100 as a whole, gross revenue rose by 3.4 percent (representing a new record), revenue per lawyer rose by 2.6 percent, and profits per partner rose by 4.2 percent.” Care to revise your statement?
TLDR: You are confusing oversupply in the legal profession with the performance of Big Law professionals (top 5% type people who affect GZ prices). Run of the mill law graduates are in a tough spot – but Big Law people are doing as well as they were pre recession.
” if starting lawyer pay is back to the bubble level”
Um, it never went down, as far as starting salaries. And failing to go up is the same as ‘falling behind’ unless there is deflation.
“And 10 years ago those B schools were awful as well. ”
WTF are you talking about? Is there anyone here who actually knows anything about CPS?
” whereas everybody else seems to opt for the slightly bigger house with a smallish yard in the suburbs”
Where n = HD and his friends.
*TONS* of people opt for the much bigger house and/or the big yard outside the inner Cook ‘burbs.
Oh, meant to include this, too:
“It’s shocking how quickly enrollment drops off at the good elementary schools by the time you get to 7th and 8th grade.”
WTF are you talking about? Is there anyone here who actually knows anything about CPS?
Also: “I don’t know any partners getting pay cuts.”
Like I said, just means you don’t know enough partners who are candid enough with you. They’re out there.
But yes, those who are doing well are doing very well. It’s just that the aggregate number of the ‘doing well in biglaw’ set is smaller than it was 6/7/8 years ago.
it’s almost like old times, this thread. where is anonny and G?
anon – “” if starting lawyer pay is back to the bubble level”
Um, it never went down, as far as starting salaries. And failing to go up is the same as ‘falling behind’ unless there is deflation.”
http://www.abajournal.com/news/article/40_of_firms_cut_starting_pay_for_associates_while_44_consider_2010_cut/
Care to retract your statement?
G obviously left since the market isn’t following his/her wishes. Someone said anonny moved.
“HD and his friends”
HD has friends? I cannot recall any evidence to support this.
“it’s almost like old times, this thread. where is anonny and G?”
G was on hiatus before cc 3.0, but, yes, where is nonny?
nonny must have somehow justified moving to Lake Chelan and starting his own practice there
“Care to retract your statement?”
Nope. Unless you can name two firms in Chicago that were paying $160k to 1st years in 07/08, and then cut first year pay to below $160k. No one here cares what Davis Wright Tremaine may or may not have done.
“WTF are you talking about? Is there anyone here who actually knows anything about CPS?”
I just looked at the data that is out there by googling it. I’m sure CPSObsessed has all of this on its site. But at some of the “top” schools there will be like 125 kids enrolled in kindergarten and by the time you get to 7th and 8th grade it’s only like 34. I always wonder, “where did they all go???”
“And 10 years ago those B schools were awful as well. ”
Actually- if you click on that link to the Reader article the one family who lived in Bucktown and sent their kid to Burley talks about how bad it was when they first enrolled their son which, if doing the math, would have been 2004.
“The neighborhood school, Pulaski, was just two blocks from their home. When Ingram was old enough for preschool, Melissa also visited Burley elementary, a school two miles away, in Lakeview at Ashland and Barry. Burley was a neighborhood school but it had a magnet component. The Burley principal gave her a tour and was very welcoming. “I don’t know what it was, but I thought, ‘This is where we should go,'” Melissa says.
Burley was predominantly Hispanic when Ingram started going there. But the composition of the Lakeview neighborhood changed, and Burley’s composition changed along with it. By last year, the percentage of white students had more than doubled since 2003 (to 56 percent), and there were fewer than half as many Hispanics (28 percent). Only 20 percent of Burley’s students last year were low-income, the 16th-lowest proportion among Chicago’s 681 public schools. The school’s standardized test scores when Ingram started at Burley were “nothing to write home about,” Melissa says, but by last year they were far above national averages.”
“Sabrina – I think you are confused about the current legal profession.”
Dude- you have no idea what you are talking about. Go read the New Republic article or the many articles in the NYT and WSJ about layoffs at the premier law firms in this country.
You are too young to know this- but these same law firms NEVER did layoffs. It wasn’t even a possibility. The first ones happened in the early 1990s recession. The most notorious was right here in Chicago at Winston & Strawn. They started laying off associates on the top floors of the buildings. Those associates called their friends on the lower floors to tell them that the partners were “coming” and, literally, the other associates were seen running out of the building. It didn’t stop them from getting laid off too- but they simply just panicked. It actually really hurt Winston’s recruiting ability in the decade after it happened. Didn’t they call it Black Monday or something there?
Lol.
But that was just the start of things to come. The dot-com bust really decimated the legal industry. Everyone thought that the early 1990s layoffs were a 1-off. But that was the start of changes in the profession that never went away. The BigLaw system is broken. The billable hour system, the way associates are hired and trained, the up and out mentality.
There’s outsourcing now. Many of the things my ex-boyfriend, who was a BigLaw attorney for 6 years did in his early years, like document review, are no longer even done in-house. Much of it is now outsourced to India.
He left BigLaw for an in-house corporate gig. You know what those pay these days? $125k. Lol. He took a big pay cut to get rid of the billable hours. And heaven forbid he gets laid off by the corporation because he won’t find another gig like this one.
I once met an in-house attorney who got laid off and used to scour the obituaries looking for in-house lawyers who had died. Because that was the only way a job would open up.
Yikes.
Awful. Just awful.
That’s why law school applications are plunging at all law schools. The students have FINALLY figured out. The debt load is too high and the odds of getting the $160k starting salary job are too low- even from Northwestern or U of C.
“But at some of the “top” schools there will be like 125 kids enrolled in kindergarten and by the time you get to 7th and 8th grade it’s only like 34.”
Which ones? There are about a dozen “top” schools, and only two or three big enough for 100+ in K. And since “some” indicates more than one, you’re saying that at least 2 of Lincoln, Bell, and Blaine has only 34 (btw, oddly precise) 8th graders?
“Burley [wasn’t good 10 years ago]”
The statement was “10 years ago those B schools were awful”, and you cite an anecdote for *1* of the three. I ask again, WTF are you talking about? Does anyone here know anything about CPS?
“But Helen was in a bind. Her husband was a stay-at-home dad, and the couple owned a condominium in downtown Chicago. Inevitably, the bank foreclosed on her condo. She and her husband relocated to the Michigan town where he grew up, and she eventually joined a local firm. Her annual salary when she left Mayer Brown was $230,000. Last year she made $40,000. It was barely enough to put food on the table and clothe her children, much less keep up with tens of thousands of dollars in law school debt. “There’s probably a bankruptcy in our future. I don’t think there’s a way out of it,” Helen told me. “In ten years, hopefully we’ll be financially recovered, we can buy a house, have a credit card again.” Before we hung up, I pointed out that the legal market had improved since 2010. Why not look for another fancy job in Chicago? “There’s no way I would go back to Big Law,” she said. “I’m doing a lot of criminal law now. I love it. It’s originally what I’d intended to do when I went to law school.””
Um, what???! These people are entitled and deluded. Am I supposed to feel sorry for them? How much did they pay for their Chicago condo? How much of a downpayment did they make? I’m sorry, but they can’t have the luxury of owning an expensive home, making babies and paying off student loans with only one spouse working. And then she wants to keep her job she loves making 40K because she doesn’t want to work in big law again? Ridiculous! Do these morons have ANY idea how people really live?
Stay at home dad?? BWAHA!
“anon (tfo)
October 24, 2013 at 5:17 pm
“Care to retract your statement?”
Nope. Unless you can name two firms in Chicago that were paying $160k to 1st years in 07/08, and then cut first year pay to below $160k. No one here cares what Davis Wright Tremaine may or may not have done.”
http://www.chicagolawyermagazine.com/archives/2010/10/9164.aspx
From the article: “Other large firms, including McDermott Will & Emery, Katten Muchin Rosenman and Schiff Hardin, reported a decrease in their first-year Illinois associate salaries, from $160,000 in 2009 to $145,000 in 2010.”
McDermott is #29 and Katten is #62 on Am Law 100.
You going to retract now?
“There’s probably a bankruptcy in our future. I don’t think there’s a way out of it,”
“much less keep up with tens of thousands of dollars in law school debt”
Um, bankruptcy isn’t a way out of that, either. Just makes it worse. I have to presume that she’s on an income contingent repayment plan, too, which, if fully performed, ‘keeps up’ with paying off the school debt while actually paying very little.
Sabrina – all professions have changed since the 1990’s. Look at profits per partner – they have skyrocketed since the 90s. Starting salaries in Big Law? Skyrocketed also. Law firms are now run as businesses – not partnerships where as long as you show up you get paid and making partner meant you rested on your laurels and collected lockstep comp. This culling of under performers happens in all industries (and probably happened to your ex).
You sight an episode from the 90s recession to say Big Law is dying. What has happened to Big Law since then? They have seen record revenues and profits!
I Agree they obviously spend way beyond their means
Sabrina – I generally agree with you that the recent run up in housing prices is too acute and overblown. I also agree that rents seem to be in bubble territory. I disagree with your thoughts that the bottom will fall out and the economy for the top 5% is horrible. You seem to be arguing that housing prices should still be close to the bottom. Do you think that or do you think they should be somewhere between current prices and the bottom?
“I Agree they obviously spend way beyond their means”
It’s the thing about not being able to make payments if she didn’t get a job right away that seemed like they were living too much on the edge, even allowing for a bit of hyperbole. But they did get hit in a couple of directions–housing crash (so that they couldn’t sell for at least what they owed (yes, depending on how they financed etc.) and terrible lawyer job market–at the same time. Being a single income family is def riskier, though the person at home does contribute significant implicit income esp if there are young kids.
“I just looked at the data that is out there by googling it. I’m sure CPSObsessed has all of this on its site. But at some of the “top” schools there will be like 125 kids enrolled in kindergarten and by the time you get to 7th and 8th grade it’s only like 34. I always wonder, “where did they all go???”
I think you are proving my point Sabrina. The trend is family with young kids staying in the city. The fact that there are so many kids in the lower grades proves my point. You will have to wait 6 more years to see if the 8th grade numbers hold consistent, or if in fact your are right that everyone ends up moving to the burbs. I will say you very wrong and the trend will continue and these families will stay through high school.
Burley, Bell, Audubon, Lincoln, Skinner, ect are all examples of schools that 10 years ago were not close to as highly performing as today. Lincoln is top 10 in the entire state and Bell & Blaine are not far behind. This is due to the trend I am talking about; families taking over the schools with the plans to stay for good. The majority or the families in our school do not plan to leave. If fact, many of them would never move to the suburbs regardless of the school situation. Urbanization is well underway and it is here to stay…
“You going to retract now?”
I was wrong. Why would I retract? Just wrong, like you are about drawing conclusions about individual partner comp based on your anecdotes, plus aggregate numbers.
“McDermott is #29 and Katten is #62 on Am Law 100.”
On which ranking? Gross Revenue? PPP? RPL?
“Burley, Bell, Audubon, Lincoln, Skinner, ect are all examples of schools that 10 years ago were not close to as highly performing as today.”
Stevo moving the goalposts, as always. Defend your statement: “And 10 years ago those B schools were awful as well.”
anon – “I was wrong.”
Yup.
“wrong, like you are about drawing conclusions about individual partner comp based on your anecdotes, plus aggregate numbers.”
And how do you propose drawing conclusions on partner comp if we exclude “aggregate numbers”?
““McDermott is #29 and Katten is #62 on Am Law 100.”
On which ranking? Gross Revenue? PPP? RPL?”
Revenue. The reason I included it is to preemptively shoot down your challenging that they aren’t Big Law and requiring another post. But looks like one was required anyway!
Biglaw isn’t dying but the wealth is being concentrated in the top. Fewer partners are being made and those that are being made are generally income and not equity partners. Biglaw has a place and a time but it’s just not the same as it once was. But that’s neither here nor there.
http://www.adamsmithesq.com/2013/08/checked-your-demographics-lately/2/
Proof that they’re not making new equity partner. Lots of new non-equity partners.
“Revenue. The reason I included it is to preemptively shoot down your challenging that they aren’t Big Law”
Whatever. “BigLaw” doesn’t compare itself to Baker (regardless of Baker’s self-image), which was top of the Revenue list for how long?
“Biglaw isn’t dying but the wealth is being concentrated in the top.”
But HD, based on the people y2 knows (and assuming they are all 100% truthful about a sensitive subject) and the knowledge that total profit is going up, how can you say that, much less *know*?
anon (tfo) ““Revenue. The reason I included it is to preemptively shoot down your challenging that they aren’t Big Law”
Whatever. “BigLaw” doesn’t compare itself to Baker (regardless of Baker’s self-image), which was top of the Revenue list for how long?”
So what is your definition of Big Law? Enlighten me.
““Biglaw isn’t dying but the wealth is being concentrated in the top.”
But HD, based on the people y2 knows (and assuming they are all 100% truthful about a sensitive subject) and the knowledge that total profit is going up, how can you say that, much less *know*?””
Ok – so no counterpoint to using aggregate data as a proxy? Where is your “data” that Big Law partners as a whole are suffering? I said profit per partner is back to where it was pre crash – again a true statement. How that profit is distributed could be different.
“the wealth is being concentrated in the top”
Welcome to America!
“It will be easier for you to compare if you run it as an interest only loan.”
“Who the hell is getting interest only these days? Not a single buyer I know and I know quite a few of them.”
You’d be drunk not to get an interest only loan at the rates they are offering if you only plan on living in the condo for a short period of time and you qualify.
“Where is your “data” that Big Law partners as a whole are suffering? I said profit per partner is back to where it was pre crash – again a true statement. How that profit is distributed could be different.”
The biglaw firms are smaller and continue to shrink. That’s why there is consolidation all over the place. That’s why Orrick is merging with Pillsbury (sad.) There isn’t enough work for all of the attorneys at that price level anymore. Once they lay off all the secretaries and paralegals and have 6th year associates billing clients to do photocopying on Sunday nights (which is what is happening now- OR the firm is eating the cost)- then there will be nothing more left to cut to keep PPP up except further shrinkage.
Many of the so-called “big” firms won’t survive on their own. Hell- if even Orrick can’t survive most of Chicago’s “big law” firms are also doomed.
And then, ultimately, a whole new way of billing for legal services (which is a long time in the making.) 10 years from now there will be a lot fewer lawyers as well as the law schools cut their class sizes. That will help too.
“the economy for the top 5% is horrible.”
I NEVER said this. What are you talking about? It’s the BEST IT’S EVER BEEN! That’s why there are suddenly $12 million mansions selling again on the North Shore and new luxury high rise buildings being proposed downtown. The stock market is at a record high and is only going up, up, up. If you own stocks, which most of the top 10% do, you’re RICH.
Ah- but every time this happens it seems the rug is pulled out from under these asset classes. But when will it happen? That’s the big question. (Shrugs.)
” I said profit per partner is back to where it was pre crash … How that profit is distributed could be different.”
So, you agree that there biglaw partners getting paycuts isn’t impossible? My only point on partner comp–that despite record profits, it’s become *more* concentrated, which means fewer people with the $$ to buy the $2m+ house, but a lot more in that $10m+ tier.
“Orrick is merging with Pillsbury”
Believe that only after it happens.
“anon (tfo)
So, you agree that there biglaw partners getting paycuts isn’t impossible?”
I never said that. Even in the boom years older partners would be getting pay cuts.
“My only point on partner comp–that despite record profits, it’s become *more* concentrated, which means fewer people with the $$ to buy the $2m+ house, but a lot more in that $10m+ tier.”
Could be – but there aren’t many $10mm+ listings in the Chicago area.
“Orrick is merging with Pillsbury”
“Believe that only after it happens.”
Supposed to announce it this week.