Market Conditions: December Sales Rise 6.4% YOY But Median Price Declined Again
It’s time for more monthly housing data from the Illinois Association of Realtors.
We already know from G and Gary that sales rebounded year over year but the median price continues to slide.
From the Illinois Association of Realtors:
In the city of Chicago, December 2011 home sales (single family and condominiums) totaled 1,536, up 6.4 percent from 1,444 homes sold in December 2010. The city of Chicago median home sale price for December 2011 was $156,000, down 6.2 percent compared to December 2010 when it was $166,250.
Here is a comparison of the last several years (thanks to G for the data and the percentage of REO/distressed sales).
Chicago’s median price is now under the 1999 median price of $165,000 (but median can vary greatly depending on the mix of what is selling, of course.)
- December 2004: 3,719 sales and median price of $267,000
- December 2005: 2,847 sales and median price of $283,000
- December 2006: 2,241 sales and median price of $279,000
- December 2007: 1,629 sales and median price of $287,000
- December 2008: 1,263 sales and median price of $235,000
- December 2009: 1,820 sales and median price of $208,000 (34% short/REO sales)
- December 2010: 1,475 sales and median price of $166,000 (43% short/REO sales)
- December 2011: 1,536 sales and median price of $156,000 (44% short/REO sales)
For Condos/Townhouses:
- December 2009: 1,024 sales and median price of $279,700
- December 2010: 827 sales and median price of $222,000
- December 2011: 841 sales and median price of $182,500
For the year, sales and prices also fell year over year.
For the year, home sales totaled 17,715 in the city of Chicago, down 7.2 percent from 19,089 sales in 2010. The year-end statewide median price for 2011 was $175,000, down 13.8 percent from $203,000 in 2010.
“December ended the year with an optimistic showing of buyers coming out and making decisions about investing in a home. While the year-end numbers for 2011 were down over 2010, a positive uptick in sales toward the end of the year is a great indicator of a strong winter and spring season for buyers and sellers, alike, looking to get off the fence,” said REALTOR® Bob Floss, president of the Chicago Association of REALTORS® and Broker-Owner of Bob Floss and Son Realty. “Still problematic is the downward pressure distressed properties are putting on the market and a trend we will continue to monitor this year as we observe changes in median pricing throughout the city.”
Chicago was weaker than the 9-county Chicagoland area and the state for the year.
Foreclosures and short sales continue to put pressure on prices. There doesn’t appear to be any indication this is going to change any time soon.
“Housing market forecasts for January, February and March 2012 for Illinois and the Chicago PMSA suggest that sales volume will be significantly higher than the same period last year, although prices will still be lower than a year ago. Until these foreclosed properties and additions expected in 2012 clear the market, sustained upward movement in prices will be unlikely,” Hewings said.
It seems as if some people are anticipating a much more buoyant spring market.
Is that just wishful thinking?
December Illinois Home Sales Mark Sixth Month of Year-over-Year Gains; 2011 Sales Close to 2010, Chicago PMSA Up 1.3 Percent [Illinois Association of Realtors, Press Release, January 20, 2012]
“It seems as if some people are anticipating a much more buoyant spring market.
Is that just wishful thinking?”
Not really – people are VERY picky about where they live. They are not going to buy something just because it is a foreclosure (ie, someone looking in Winnetka is not going to buy a house in Englewood bc it is cheap!!). Furthermore, because most people have already waited 4 years to buy, there are increased pressures for them to move (usually bc of children). Most are just going to bit the bullet and go for it. This huge inventory of foreclosures is NOT what it seems (most of them are 2/2s in less than desirable areas or are very crappy houses in undesirable areas with VERY VERY few nice homes in good areas – and again- THOSE foreclosed properties will go FAST and for cash). People are truly delusional if they think there are a glut of foreclosures of GOOD properties in GOOD areas – there are not.
City of Chicago condo/th/sfh closed totals
year/4th quarter/2nd half/annual
1997 4,504 9,766 18,055
1998 5,306 11,520 21,313
1999 5,806 12,383 23,182
2000 5,646 12,078 23,776
2001 5,549 12,829 24,120
2002 6,654 14,640 28,052
2003 7,905 17,425 31,431
2004 9,062 19,032 35,611
2005 8,306 19,235 37,351
2006 7,103 16,470 33,512
2007 5,495 13,504 28,442
2008 3,920 10,017 21,014
2009 5,793 11,788 19,885
2010 3,885 8,494 19,635
2011 4,219 9,205 17,871
Friends, how do you think about this new listing in west loop?
http://www.redfin.com/IL/Chicago/1151-W-Monroe-St-60607/home/12591884
““Housing market forecasts for January, February and March 2012 for Illinois and the Chicago PMSA suggest that sales volume will be significantly higher than the same period last year, although prices will still be lower than a year ago.”
For IL and the PMSA, that appears to be possible. Note that he correctly left the city of Chicago off the list, although it will see a lower median. The GZ, in particular, will not see significantly higher sales and will likely see some YOY sales declines.
Basically once the houses are priced right, then people will start buying which makes sense. The problem is we are still off on the prices except when the properties are distressed. Hence over 40% of the sales are short sales. The market will still be slow for a while until folks realize their neighbors short sale constitutes a comp for their home.
“Housing market forecasts for January, February and March 2012 for Illinois and the Chicago PMSA suggest that sales volume will be significantly higher than the same period last year, although prices will still be lower than a year ago. Until these foreclosed properties and additions expected in 2012 clear the market, sustained upward movement in prices will be unlikely,” Hewings said.
“(ie, someone looking in Winnetka is not going to buy a house in Englewood bc it is cheap!!)”
That’s some real wisdom there.
Is the City of Chicago not part of the PMSA?
“Basically once the houses are priced right, then people will start buying which makes sense. The problem is we are still off on the prices except when the properties are distressed. Hence over 40% of the sales are short sales. The market will still be slow for a while until folks realize their neighbors short sale constitutes a comp for their home.”
Yep, and anyone who buys anyway is a knifecatcher (not that there’s anything wrong with that.)
“Is the City of Chicago not part of the PMSA?”
Gee wiz, what do you think? He mentioned IL stats and PMSA stats and omitted Chicago stats. You know, how they are reported every month. I’ll concede that the omission may not have been intentional, but it will be correct.
I’m of the opinion that inventory will stay low and tight for a while. Distressed sales will drive down prices but ‘new’ seems to derive a premium in most markets, but that premium does not appear the be the balance of the 2007 mortgage refi. I’m seeing non-distressed renovated properties sell at 2002 prices, or exactly the same price the seller bought the home for pre-renovation. Estate sales seem to be like distressed sales and there are a lot of deals to be found out there in older established subrubs (other than oak park/river forest/evanston) and non-gz city neighborhoods.
Just about every sale derives a premium while the correction is ongoing.
“Friends, how do you think about this new listing in west loop?”
Considering previous sales in that development, it appears to be priced right. But all of those previous sales sat on the market for a very long time before selling.
If you are really dead set on selling at that price you’ll probably get it. You will just have to eat 6-12 months of carrying costs to do it.
When you look at contract activity for the city of Chicago it has been running well ahead of 2010 since May: http://www.chicagonow.com/getting-real/2012/01/chicago-december-home-sales-strong-contract-activity-but-flat-sales/ so sales should run ahead of last year.
Now to clarify, these are contracts that have not been cancelled yet. For the older months we shouldn’t see many more cancellations and for the most recent months I whack the numbers by 15% for the most recent month and 5% for the previous month. G will point out correctly that I am probably underestimating cancellations by 10 percentage points for the most recent month and I will probably increase my whack factor going forward but you get the idea.
The problem is that the only stuff that can sell is the distressed properties. This is why the inventory sucks so bad in terms of quality properties.
Your average buyer isn’t looking to buy a dilapitdated DIY foreclosure nor do they have time for an uncertain short sale purchase either. The properties they would like to buy can’t be sold because the current owners are underwater or not in a position to write a check at closing.
Until there is meaningful price appreciation OR principal reduction, you won’t see a normally functioning market. Sellers simply won’t sell unless they are unfortunate enough to have a “life event” that forces the sale – death, divorce, job loss, etc. So you basically get this drip of properties from sellers who have no choice and everyone is scrambling to find the few normal sellers who can let the place go at the lower prices.
Well said Russ. I have my eyes on some properties and they either languish on market without price drops or are chasing the market down with meager cuts. I am not going to purchase in such uncertain times. In fact, I’d rather rent a larger place if I truly have to rather than buy a depreciating asset. I believe many buyers feel the same and many sellers just cannot sell as you pointed out.
Russ and miumiu describe my situation perfectly. I *want* to buy. But sellers are either being unrealistic or are selling something I just don’t want.
“The problem is that the only stuff that can sell is the distressed properties”
HUH?!! wtf are you talking about? I see “normal sales” involving “normal sellers” and “normal buyers” every day. Not everyone who is selling is underwater, not all properties are foreclosures, and not all buyers use price as their most important criteria in buying their home.
You’re totally correct Russ. What further complicates the matter is that when a lot of these properties that are underwater finally hit the market; they too will be old, or outdated or dilapidated. Today’s ‘updated’ properties are simply tomorrow’s crapshacks. In my opinion like I’ve said for a while now, it seems like the best ‘deals’ out there today would be to buy a foreclosure, renovation using a 203k loan, and then live there. The ppsf jumps significantly higher after the house is remodelled. Of course this is work, and stress, but that work and stress creates what appears to be long term value. But if you pay too high today, then you’re basically screwed in the long run.
” it seems like the best ‘deals’ out there today would be to buy a foreclosure, renovation using a 203k loan, and then live there. The ppsf jumps significantly higher after the house is remodelled. Of course this is work, and stress, but that work and stress creates what appears to be long term value.”
HD – you are correct – BUT 99% of buyers out there are NOT willing to do the work to get these foreclosed homes to habitable status. This is why all this talk of the “shadow inventory” is really detrimental to the market and paints an incorrect picture. Most buyers are not that informed and picture their perfect house in the perfect neighborhood coming on sale as a foreclosure at a cut-rate price (I see and hear it everyday from the common person – I have heard so many people say that they are waiting for the “glut” of foreclosures in Hinsdale to come on the market. When I tell them that there already are some foreclosed houses and show them, they are like ” ohh, those are in the “bad” areas of hinsdale and are too expensive – we are waiting for something in southeast hinsdale to come on the market for cheaper” – it truly is unbelievable how clueless people are regarding these foreclosures. It may take a couple of years for people to realize that this shadow inventory (even if large) consists of crappy crappy houses in crappy crappy locations.
“When you look at contract activity for the city of Chicago it has been running well ahead of 2010 since May”
Coincidentally, I’m sure, it is interesting how you try to pass off the comparison of contract numbers to 2010 beginning in May, since so much activity was moved forward to meet the April 2010 contract deadline for free govt cheese (dough4dumps.) This is the type of deception (or incompetence) that typically defines a shill.
Besides, it’s not like we can’t get an idea of how closings for these contracts have been doing. I wouldn’t say 2nd half 2011 sales ran “well ahead” of the second half of 2010 as if that alone means something without context. Specifically, that context is the June 2010 deadline for dough4dumps closings, and still 2011 2nd half sales couldn’t even top the demand-depleted 2010 sales by 10%. A simple look at the historical sales totals puts your “running well ahead” statement into the proper context.
Here are the Chicago closed sales totals for condo/th/sfh for 3rd quarter, 4th quarter and 2nd Half:
year/3Q/4Q/2H
1997 5,262 4,504 9,766
1998 6,214 5,306 11,520
1999 6,577 5,806 12,383
2000 6,432 5,646 12,078
2001 7,280 5,549 12,829
2002 7,986 6,654 14,640
2003 9,520 7,905 17,425
2004 9,970 9,062 19,032
2005 10,929 8,306 19,235
2006 9,367 7,103 16,470
2007 8,009 5,495 13,504
2008 6,097 3,920 10,017
2009 5,995 5,793 11,788
2010 4,609 3,885 8,494
2011 4,986 4,219 9,205
“Russ and miumiu describe my situation perfectly. I *want* to buy. But sellers are either being unrealistic or are selling something I just don’t want.”
So you can’t afford nice homes, and don’t want crap.
“So you can’t afford nice homes, and don’t want crap.”
That is not at all what she/he is saying. You need to work on your reading skills. BTW, whose alter ego are you? You only post once in a while to insult people.
” BTW, whose alter ego are you? You only post once in a while to insult people.”
1. I don’t see the conspiracy.
2. What do you expect from a new yawker?
I think NYC hit the nail on the head. People are unrealistic. They EXPECT a great house in a great neighborhood at a foreclosure price. They believe and expect this because of the nonsense being spouted here and in the media about the “shadow inventory”. This false expectation is the most detrimental factor influencing the market right now (bc it results in gun-shy buyers).
NYC: “So you can’t afford nice homes, and don’t want crap.”
So you are an east coast asshole who misrepresents positions. Got it.
I see conspiracy. This guy has an NYC tag yet is reading a Chicago RE blog. Never shows interest in any hoods/properties. Never asks any questions that a buyer coming from another city might have. Just insults folk whenever he gets a chance.
Clio, you are a common person. And you speak spanish also, to the common man, nonetheless.
To expound a bit for my friends from the east coast or the realtor community…
I’d love to buy either a fixer-upper or a nice property at a reasonable price. And they do exist. But guess what? They move relatively quickly when they hit the market because, like me, other potential buyers don’t want to get screwed over. The ones that don’t move are the properties that are expecting at (or, amazingly, over) bubble prices. And interestingly, both the crap shacks and the nice properties will languish when offered at unrealistic prices.
I’m not expecting something for nothing. I’m not being unrealistic. I don’t want to get screwed by overpaying. And the nice thing is we have great benchmarks to measure against to see if a price is fair. Properties are selling and, mostly, are selling for a deep discount from the peak. If your offer is near peak pricing, they don’t reflect the reality of the current market.
To call this position entitled or unrealistic is to not understand it.
In 25+ years of paying attention, the only times I have seen buyers satisfied with the range of properties available, at prices they were willing to pay, have been near a debt-fueled bubble peak. I believe the satisfaction came from knowing that real estate only goes up.
“I will probably increase my whack factor going forward but you get the idea.” I was going to do that as well, but couldn’t take the chafing. Thank you, thank you! I will be here all week, and don’t forget to tip your waitresses.
As we say in my industry, a good price is when both parties walk away from the table unhappy. one party feels they paid too much, and the other feels they paid too little.
but speaking of “buyers satisfied with the range of properties available, at prices they were willing to pay” I know a couple that bought a very expensive house in 2007 thinking they were getting a ‘deal’ because they negotiated 10% off list; only to discover two years later that deals were selling 20% of their purchase price on a regular basis.
“Not really – people are VERY picky about where they live.” Based on my time on CC, I’d beg to differ.
“Based on my time on CC, I’d beg to differ.”
Says the pickiest person I’ve ever encountered! 😉
“I see conspiracy. This guy has an NYC tag yet is reading a Chicago RE blog. Never shows interest in any hoods/properties. Never asks any questions that a buyer coming from another city might have. Just insults folk whenever he gets a chance.”
1. I am a native New Yorker, who has lived in Chicago for a few years.
2. I have shown plenty of interest in “Green Zone” hoods.
3. I don’t have questions, because I already bought a house here.
4. I only insult incredibly stupid posts.
My point to you is that the sellers you speak of aren’t unrealistic because you don’t like the price they want. They hold the asset and are entitled to ask whatever they want. If you can’t find something that suits you, well….you are priced out or unwilling to grab a true fixer upper.
I thought NYC scored a deal on a SFH in the GC?
“4. I only insult incredibly stupid posts.
My point to you is that the sellers you speak of aren’t unrealistic because you don’t like the price they want. They hold the asset and are entitled to ask whatever they want. If you can’t find something that suits you, well….you are priced out or unwilling to grab a true fixer upper.”
Wow. Let me get this straight: if a person bought a house at peak price (2006-ish, let’s say) and is now trying to sell that house, having done absolutely no work to it whatsoever, for more than the price they paid, you don’t think they are being unrealistic?
I agree that they have the *right* to ask whatever they want. But that says absolutely nothing about whether they are asking a fair or realistic price. The market has changed. Sellers need to deal with that reality or their properties won’t sell.
As a buyer, I’m being pragmatic. Why would I want to pay an unrealistic price that will make my own financial situation more difficult down the line? It really has nothing to do with whether I can afford something. I simply don’t want to piss my money away.
I’m saying nothing controversial. The fact that you feel the need to insult over something so basic says a lot about your character. I’ll refrain from speculating about how your recent housing decision is factoring into your surliness over this issue…
As for the solution to not finding something that suits you, well…just wait. It’s been a winner for years for a reason.
Talking about incredibly stupid posts, this one takes the cake.
“My point to you is that the sellers you speak of aren’t unrealistic because you don’t like the price they want. They hold the asset and are entitled to ask whatever they want. “
“I’ll refrain from speculating about how your recent housing decision is factoring into your surliness over this issue…”
LOL. You didn’t refrain.
Of course you can “be pragmatic.” The market has 2 sides. Just because you read the papers and see an economic downturn and busted real estate market in the headlines, doesn’t mean that you get to dictate what fair and reasonable prices are.
“if a person bought a house at peak price (2006-ish, let’s say) and is now trying to sell that house, having done absolutely no work to it whatsoever, for more than the price they paid, you don’t think they are being unrealistic?”
Obviously, this guy ain’t selling his house to anyone but a sucker.
But you also said you have seen good properties sell quickly. So….put an offer in, already! You are ready to buy! Or so you claim.
“Not really – people are VERY picky about where they live.”
“Based on my time on CC, I’d beg to differ.”
Also possible that, for various reasons, other people are not so public about their requirements, and don’t think everyone else should have the same preferences. (FWIW, I really enjoy the anonny character, even–perhaps especially–when it verges on caricature.)
I’ve had a suspicion that many who are buying today are falling prey to snob appeal as a marketing tool.
“So….put an offer in, already! You are ready to buy! Or so you claim.”
“LOL. You didn’t refrain.”
I know. 😉
“But you also said you have seen good properties sell quickly. So….put an offer in, already! You are ready to buy! Or so you claim.”
Actually, I just lost a bid on a competitively priced fixer upper. Low price, good quality, multiple bids. Imagine that! There are realistic sellers out there, they are just seriously outnumbered by people who won’t (or possibly can’t) offer a fair market price. As a buyer, that is frustrating as it makes my job harder.
“As a buyer, that is frustrating as it makes my job harder.”
OK. Peace. I can relate.
I just see many on this board (and constant complainers in my life) who are just absolutely terrified of losing a couple of bucks of equity of the short term, that they lose sight of the big picture.
Good luck to ya.
“I just see many on this board (and constant complainers in my life) who are just absolutely terrified of losing a couple of bucks of equity of the short term, that they lose sight of the big picture.”
Agreed. This is one of the few things that clio and I agree on. You need a place to live, and there are many reasons it may be better to own your own property than to rent a similar place (if you can find one), even if you feel like real estate may not appreciate nominally over the next few years.
Many of these people are also scared to death of the stock market. In my experience, the stingiest, most frugal people I know are often the ones that are scared of taking financial risks like buying real estate or stocks. They’re willing to forego potentially significant gains because they’re far too risk averse and can’t stand the idea of being in a situation where they could lose money. Better to get their .85% APY before taxes or ladder some CDs and get 3% before taxes with a lot of legwork.
“Foreclosures and short sales continue to put pressure on prices.”
Perhaps, but don’t you agree that the significant declines in median prices are primarily a result of the change in the sales mix (i.e. greater portion of distressed properties, REO, etc.)? Or do you actually believe that the value of the real estate is down ~50% since 2007?
In other words, it’s important to understand the significance of mix when considering sales data and trying to use it to draw conclusions and make decisions.
This advice is CLASSIC. The advice stays never ages or gets old, it stays exactly the same, regardless of the real estate market. Imagine giving this classic advice in 2007!! Which makes this advice completely worthless!
“You need a place to live, and there are many reasons it may be better to own your own property than to rent a similar place (if you can find one), “
“Or do you actually believe that the value of the real estate is down ~50% since 2007? ”
Yup. I do, in many chicagoland areas, it’s definitely 50%. Especially in the suburbs, and even more so in the far flung areas. The GZ has held up fairly well, for now, but it’s dropping. I’m seeing solid homes, but in need of renovation, selling at 1995 prices and earlier in some north/northwest suburbs. The collar counties have been slammed.
“Especially in the suburbs, and even more so in the far flung areas. The GZ has held up fairly well”
Location, Location, Location.
“Perhaps, but don’t you agree that the significant declines in median prices are primarily a result of the change in the sales mix (i.e. greater portion of distressed properties, REO, etc.)? Or do you actually believe that the value of the real estate is down ~50% since 2007?
JJJ is totally and completely right. It is very obvious that the price declines are due to the mix of sales – not overall value decrlines. Everyone should understand this. People who don’t are just arguing because they are scared, need rationalization for not buying, just messing with the rest of us, or are trying to stimulate discussion/fights (or a combination). To argue this point is ridiculous – it is obvious.
“Yup. I do, in many chicagoland areas, it’s definitely 50%.”
you are so god damn stupid, it isn’t funny. seriously, dude, you are a moron. there is a reason you didn’t go to a decent school and it ain’t bc you couldn’t afford one. i am not trying to insult you for fun, or to be mean, but I am trying to get u to understand the truth – you HAVE to listen to people smarter than you. Just because you deal with people who are bankrupt and are in foreclosure does NOT mean that EVERYONE is in the same situation.
You mean to tell me that averages and medians are made from various individual sales? Who could have known?
“This advice is CLASSIC. The advice stays never ages or gets old, it stays exactly the same, regardless of the real estate market. Imagine giving this classic advice in 2007!! Which makes this advice completely worthless!”
I think that you’re an idiot, and I know that you know I think that you’re an idiot, and so does everyone else, so I won’t spend too much time on this.
But I want to point out your basic error – your summary of my argument is inaccurate. My point is that, for someone who is not an idiot, the fact that a property might depreciate over a certain period should not be an absolute bar to buying property. It should be part of a more comprehensive analysis of expected value, and an appropriate decision might result in someone buying a property when the value could go down.
For you, the fact that a property might depreciate and your obsession from buying at the bottom of the market prevent you from evaluating, in any comprehensible way, the pros and cons of a current purchase. You’re so paralyzed by your fear of a possible negative outcome that you’re unable to consider whether you are accurately assessing the expected value of that negative outcome. Your knee-jerk reaction is, you would never buy anything unless you were assured of buying at the bottom of the market, and that is stupid.
I really do hope that HD buys at the verrrrry bottom. Or else he couldn’t live with himself.
HD, at some point, you are going to have to make a decision. Prices will not fall forever. If you are going to buy there is the potential to lose in the short term. The question really is if there is the potential to gain in the long term far above any short term losses?
If you buy in 2012 at $200k and value goes to $175k in 2013 but you aren’t really going to move until 2020 when values could be $300k who cares that the value went down in 2013? The only folks that are screwed are those that must sell at the low point and unless you have a crystal ball there is no way to predict it.
Sooner or later you have to live your life and enjoy it. Otherwise, you are destined to be a miser always worried about things not working out.
I’m not saying folks shouldn’t be assessing the market and trying to understand the potential implications and risks, but at the same time if you are constantly waiting for the numbers to only be going up at the macro level and everything to be perfect and risk free, you’ll never get anywhere.
“You mean to tell me that averages and medians are made from various individual sales? Who could have known?”
It can be very easy for people who work with data a lot to forget (or underestimate the frequency or amplitude of the errors) all the ways in which people who don’t can misinterpret that data and reach erroneous or unsupported conclusions.
“Perhaps, but don’t you agree that the significant declines in median prices are primarily a result of the change in the sales mix (i.e. greater portion of distressed properties, REO, etc.)? Or do you actually believe that the value of the real estate is down ~50% since 2007? ”
For a lot of that crap that is selling, the value is down 70%+ from 2007, back to values in line with their values from 1970 to 1997.
“It is very obvious that the price declines are due to the mix of sales – not overall value decrlines.”
This is totally wrong. Obviously a portion of the decline in median prices since 2007 reflects real and nominal declines in the actual value of specific properties. I can’t believe that anyone would argue otherwise. These are not discrete options – it’s a spectrum.
Did somebody really thumbs down “location, location, location”?
Must have bought that sweet new townhouse in Schaumberg.
“For a lot of that crap that is selling, the value is down 70%+ from 2007, back to values in line with their values from 1970 to 1997.”
Sure, but I would suggest that the fact that the least valuable properties in less desirable areas have depreciated so much has little correlation to other properties. When I said “real estate,” I meant in general, not with respect to a specific crappy property.
Where is C-S at these days? That is a far better measure of the actual decline in values. I am just saying that it is really disingenuous to use decline in median sale price as a measure.
“This is one of the few things that clio and I agree on. You need a place to live, and there are many reasons it may be better to own your own property than to rent a similar place (if you can find one), even if you feel like real estate may not appreciate nominally over the next few years.”
This is one of those “the sun rises in the east” revelations. Even HD acknowledges it. Has he ever expressed that he would only buy at the bottom? I think that’s a straw man erected by the village idiots.
“even if you feel like real estate may not appreciate nominally over the next few years”
How many is a few? Is “may not appreciate” the only choice?
“Many of these people are also scared to death of the stock market. In my experience, the stingiest, most frugal people I know are often the ones that are scared of taking financial risks like buying real estate or stocks. They’re willing to forego potentially significant gains because they’re far too risk averse and can’t stand the idea of being in a situation where they could lose money. Better to get their .85% APY before taxes or ladder some CDs and get 3% before taxes with a lot of legwork.”
I disagree with this comment – there are lots of financially conservative people who invest heavily in the stock market, but are hesitant to pull the trigger on real estate because of the lack of liquidity. Also, a person early in their career that is expecting a lot of income growth over the next 5-10 years doesn’t want to lock in to a monthly payment on a place they don’t want to be living in in 5 years when they can afford a much bigger and more expensive place. I have several friends who are traders who love to not be “tied down” and save 20-30% of their incomes each year, and like having the option of moving to Australia in 2 months if they want, or some other location. Owning real estate is not the “in” thing right now with the 22-29 age group, much different from 5 years ago when it was the opposite.
“Prices will not fall forever.”
Nice straw man.
“If you are going to buy there is the potential to lose in the short term.”
This from the guy who was giving the following advice back in 2006:
“One of the excuses I often hear as to why someone is paying rent as opposed to owning their own home is “I am saving for a down payment and closing costs.” Well, that is no longer a valid excuse!”
“I have several friends who are traders who love to not be “tied down” and save 20-30% of their incomes each year, and like having the option of moving to Australia in 2 months if they want, or some other location. Owning real estate is not the “in” thing right now with the 22-29 age group, much different from 5 years ago when it was the opposite.”
You’re right, I certainly agree that traders and others in financial services are exceptions to the correlation between being scared of real estate and scared of the equity markets. Traders are some of the biggest risk-lovers ever, in my experience. And, to me, high valuation of liquidity and mobility are appropriate decisions for a person to make. But the few exceptions make the rule.
JJJ – I’m the idiot, but interestingly enough, you agree with the ‘village idiot’ Clio. Yes, you agree with clio, and clio backs you up. I need say nothing more.
I’ve never said I would buy at the bottom, I said that I would buy when it makes sense for ‘me’, that is not necessarily the bottom. Others can buy as they feel, but there are an awful lot of knife catchers out there. I think that whatthewhat who bought a house to gut rehab in the villa a year or so ago got a good deal. I’ve pointed out other deals here and there. I pointed out plenty of park ridge properties I thought were steals. but sabrina tends to highlight overpriced unique (or cookie cutter) properties that sit for months and years.
Don’t know if this is close enough to the freeway for HD, but its the sort of thing he’s (or, at least claims to be) looking at, to provide some idea:
http://www.redfin.com/IL/Park-Ridge/720-N-Delphia-Ave-60068/home/13648723
55% off ’05 price and 35% off ’02 price.
“JJJ – I’m the idiot, but interestingly enough, you agree with the ‘village idiot’ Clio. Yes, you agree with clio, and clio backs you up. I need say nothing more.”
Even a stopped clock, etc…
“Where is C-S at these days?”
The YOY decline streak is 54 months and counting. The SA hit a new low for the correction in the last report. The NSA will hit a new low by spring. More green shoots for increased affordability.
anon(tfo) I actually looked at this house but 1) flight path; 2) just too big of a project for me as you could imagine. But I knew others would find it appealing, this will be a nice nice house remodeled.
http://www.redfin.com/IL/Park-Ridge/1219-S-Washington-Ave-60068/home/13567461
There’s no doubt that JJJ erected the same straw man as clio and russ, that’s for sure. HD has always admitted to non-financial considerations entering into his buying decision.
http://www.redfin.com/IL/Park-Ridge/Undisclosed-address-60068/home/13647174
Here’s another one. On a busy road, but not too busy of a road. Dated but in solid condition. Overlooked and overpriced for many years. No mortgages on the property. 2 car garage, little backyard, 1,200 sq ft finished space, walk to metra, short drive to highway. Near parks, short bike ride/drive downtown park ridge. This house would be $270-$300 on a side street.
“Even a stopped clock, etc…”
You mean to tell me those “sun sets in the west” comments actually count?
ps. the washington property above – the wife hates the parquet floors, which were in pretty good condition. I liked them, but wife hated them. No way did I want to buy a place where I would have to replace perfect good, attractive floors b/c the wife didn’t want them. So I moved on.
Anon does that park ridge house come with a time machine back to 1966? And what about a band with that backyard bandstand?
All of park ridge is 1966. Which is better than some of the estate sales you see in the city, which are decrepit crapshacks stuck in the 1950’s decor but originally built in 1920 with the same electricity, plumbing, etc.
But those estate sales, with a little bit of vision, turn into very nice looking, affordable smallish upper middle class housing in a nice, moderate density quasi-urban, suburban neighborhood just outside of the city limits. The schools are in the top 10% in the state. The commute on the metra is 32 minutes. The highway is 10 minutes away and it’s only 20 minutes downtown without traffic. Just outside the city.
“All of park ridge is 1966. Which is better than some of the estate sales you see in the city, which are decrepit crapshacks stuck in the 1950?s decor but originally built in 1920 with the same electricity, plumbing, etc.”
In many, many, many cases, the 20’s era plumbing is better than the 60’s era plumbing. Electric is a wash, as the older homes are more likely to have been seriously upgraded, while the 50 year old places are more likely to have aluminum wire.
“All of park ridge is 1966. Which is better than some of the estate sales you see in the city, which are decrepit crapshacks stuck in the 1950?s decor but originally built in 1920 with the same electricity, plumbing, etc.”
Used to work with a guy from Park Ridge who owned a house that was built in the 1920s and he would tell me about some of his renovation stories…finding 1920s era newspapers behind the plaster when doing renovations, etc. So there goes your theory.
“Used to work with a guy from Park Ridge who owned a house that was built in the 1920s and he would tell me about some of his renovation stories…finding 1920s era newspapers behind the plaster when doing renovations, etc. So there goes your theory.”
Yep, your anecdote trumps HD’s anecdote. No doubt about it.
I’d take 1950’s / 1960’s over 1920’s any day of the week if I were doing my own renovation. But that’s just me, right or wrong.
http://news.yahoo.com/existing-home-sales-hit-11-month-high-december-150459429.html
“All of park ridge is 1966.”
HD – honestly, come on…..get real. stop the madness.
“Agreed. This is one of the few things that clio and I agree on. You need a place to live”
Concur. Said it several years ago, even at my peak of bearishness. I would never be comfortable renting.
Custom-built 50s construction tends to be solidly-built, but 50s and 60s (and younger) subdivision construction needs close inspection. Houses older than 50s-era definitely need close inspection of water main service entry pressure and vertical/horizontal pipe condition inside house. A lot of older houses have already had their water and/or sewer service pipe replaced from house to curb, and their horizontal water distribution piping due to corrosion. If not, well that’s a replacement item to consider. Check water pressure, rusting in waterflow, etc. It’s also worth considering replacing vertical pipe when wall cavities are open during remodeling.
“In many, many, many cases, the 20?s era plumbing is better than the 60?s era plumbing. ”
yeah, lead pipes are totally awesome quality vintage stuff right there!
….so now everyone is going to agree that new mccrapbox construction is better than 90 and 50 year old stuff?
After reading 85 comments it is apparent that the vast majority of people who are bullish on RE write with the ASSUMPTION that long term RE appreciation above inflation is a foregone conclusion. Until the general public gives up on this fallacy RE will continue to decline. Will prices go down “forever”? Of course not. But can prices go down for the rest of your mortal life, sure that is a distinct possibility (especially for anyone over 40). A distinct possibility which you hadn’t even considered, which of course makes it all the more likely. Keep in mind that the government through countless programs is propping up the market, keeping it artificially inflated, this creates the higher prices in the short term that we are seeing today. But it is cold hard economic reality that the long term prices will be set by aggregate supply vs aggregate demand. Instead of just letting the market go through a natural correction, these non-market forces have dragged it out and continue to drag out the slow decline for decades. Japan’s RE bubble took a good 17 years to deflate. Ours was much greater with more resistance on the way down. So in a best case scenario we are less than 1/3rd of the way through it. In a more realistic scenario we are probably closer to 1/5th of the way through it.
Anyway, you guys have fun bleeding from those knife cuts, haha.
“But can prices go down for the rest of your mortal life, sure that is a distinct possibility (especially for anyone over 40).”
“distinct possibility” – No it is not.
“A distinct possibility which you hadn’t even considered, which of course makes it all the more likely.”
I accept it is possible for year over year declines in price for 40 years. Just far from a distinct possibility.
“So in a best case scenario we are less than 1/3rd of the way through it. In a more realistic scenario we are probably closer to 1/5th of the way through it.”
I’ll vote for 73% of the way through it, maybe further…
“which of course makes it all the more likely”
My not considering of something, or considering of it, will not cause anything to happen. That’s X-men super power stuff.
“After reading 85 comments it is apparent that the vast majority of people who are bullish on RE write with the ASSUMPTION that long term RE appreciation above inflation is a foregone conclusion. Until the general public gives up on this fallacy RE will continue to decline. Will prices go down “forever”? ”
Brad – you are missing some very important factors:
Rents go up w/ inflation. Mortgages are stable and don’t go up. Take a house where you pay 2000 and an apt where you pay 2000. The ITI on the house will likely decrease over the next 30 years while the rent will increase (remember, although taxes and insurance will go up, the amount you pay in interest decreases every month). By year 30, it would be VERY likely that rent will be over 3000 AND YOU DON’T OWN ANYTHING. At the same time, by year 30, your cost for your house would be about 1000 AND YOU OWN YOUR HOUSE FREE AND CLEAR – therefore, even if house prices keep up w/ inflation, you are WAAAAAAAAAAY ahead. More likely, house prices will increase more than inflation (and no, we are not and will never be like Japan for many many reasons), and you will be even more ahead. It really isn’t that hard to understand – and it becomes easier once you are older and see the equity you have built in your house.
Oh, and I am not even going to go into the largely perceived (and therefore “true” in today’s society) “psychological and emotional” benefits of owning
Let’s not forget the psychological and emotional benefits of renting! I’m not the slightest bit worried about huge increases in taxes, insurance, or long term quality problems from bubble-era construction. I have a huge choice of available properties to move up to as my saved wealth from renting increases. And the choice and value of available properties gets better everyday as the bubble continues to deflate. And as an added plus I get to watch plenty of specu-owner fools continue to loose their shirts year after year, because they drank the cool-aid of “ownership” when in reality most of them are just renting from their mortgage bank. So essentially they are just long-term renters locked in at stupid high prices – wow sounds great.
Ze, yes I agree, your not considering a possibility doesn’t effect the likelihood of its outcome. It’s when tens of millions of people act as a group and don’t consider that possibility is what effects it’s likelihood.
It’s no different from dutch tulip bulbs, east india shares, japanese re, or any other bubble. When LARGE portions of the population believe that something that dosesn’t make financial sense is somehow going to constantly rise in value and make them wealthy, it of course doesn’t.
Prices will not go up more than inflation in the long run – it’s just not feasible or possible to have a significant spread between the 2 because eventually no one could afford to buy anymore except for the super rich.
There are so many young people who are sidelined for many reasons, but much of it has to do with student loan debt, and the fact that prices are still too high unless you are looking at distressed properties. The government should not be involved in the housing market at all, and has wasted too much time, money, and effort in propping it up.
I like the 2/2 condos in a certain tower. One average they sold for 900K at the top of the bubble. Last year when I started looking one was listed at around 750K, finally it sold for 600K. I want to hear your arguments as why it was a good decision to buy at over 750K? Seems to me waiting has been a much better strategy.
Also I would not be surprised if the prices come down to 500K soon. This is a nearly 40% reduction from the initial purchase price. If I were the owner I would feel horrible about losing 400K in 5 years. Also think about the assessments, taxes, mortgage interests these guys are paying.
I love owning and I believe in having a diverse portfolio which includes RE but at certain times buying is financial suicide.
Well said. One’s RE ownership should be a part of someone assets, not a large (or infinite) multiple of one’s net worth. This means most people should be renting. But instead most are leveraged to the hilt like a piss-poor south american country!
“I have a huge choice of available properties to move up to as my saved wealth from renting increases.”
In my daydreams, when I think about winning the lotto or “making it” in my profession, I never picture myself in a sweet rental. Perhaps I should adjust my aspirations.
“And the choice and value of available properties gets better everyday as the bubble continues to deflate.” Perhaps you have other sources for rental listings, but that’s not been my experience. I tried a year and a half ago to find a suitable rental within my (purchase) price range, to no avail. Today, I’m having a hard time finding such a property as well (mainly to get a sense for what the market rate rent should be for my place), and, as with a year and a half ago, I’m unable to find a suitable rental that is comparable to my next indended purchase.
“And as an added plus I get to watch plenty of specu-owner fools continue to loose their shirts year after year, because they drank the cool-aid of “ownership” when in reality most of them are just renting from their mortgage bank. So essentially they are just long-term renters locked in at stupid high prices – wow sounds great.”
I’ll not address any of the deep-seated resentments baked into those words, but the “just renting from the bank” phrase…this isn’t the 50’s. With rates what they are, I imagine that mortgage-burning parties would be poorly attended events.
“like a piss-poor south american country!”
Yep.. like livin inbetween the 2nd and 3rd circles of hell… Now off for my pre lunch swim…. Ze avoids the beaches on weekends, so I am a bit overdue! 🙂
If you “win the lottery” as you mentioned have RE as a portion of your portfolio, by all means. But your RE daydreams should be based on the property itself, not on whether you are paying up front or paying as you use it.
Ze, i’m sure you realize the “piss-poor” line was a movie reference and nothing against south america. Right?
“Ze, i’m sure you realize the “piss-poor” line was a movie reference and nothing against south america. Right?”
Figured it was.. I know you have heard me say, more than a few times, how absurdly expensive this place is. I just don’t understand how people can live here anymore?
Bri, In case you missed Bloomberg today… Help jog my drug addled brain. What was that again you gave me a bit of sh*t over having a very different perspective than most analysts over??? Hmmm… what was that last month… I’m struggling.. hmm.. I was wearing a cheerleader costume?? .. Just not coming to me.. 🙂
“Foreign direct investment in Latin America’s biggest economy rose last month to $15.4 billion, more than three times the $5 billion median estimate in a Bloomberg survey of 11 analysts. FDI last year of $48.5 billion, also a record,”
“Global FDI was up 17%… even more interesting.
“this isn’t the 50?s. With rates what they are, I imagine that mortgage-burning parties would be poorly attended events.”
Interestingly enough the last time rates were this low was in that time period. Yet they had those parties nonetheless. I think it has more to do with overall sentiment towards risk tolerance/aversion. And likely back then there probably weren’t 30yr mortgages to push up property values–everyone and the joneses didn’t have 30-year mortgages yet.
City of Chicago condo/TH/SFH closed totals January
year/closed/median/% REO-Short Sales
1997 953 $122,500
1998 999 $128,000
1999 1,236 $147,000
2000 1,186 $149,850
2001 1,277 $180,000
2002 1,517 $182,900
2003 1,751 $205,000
2004 1,693 $230,000
2005 2,113 $250,000
2006 2,009 $258,000
2007 1,850 $279,900
2008 1,203 $290,000
2009 918 $205,000 25%
2010 1,237 $195,000 42%
2011 1,060 $149,500 50%
2012 1,094 $148,500 49%
City of Chicago condo/TH closed totals January
year/closed/median
2007 1,313 $290,000
2008 843 $314,500
2009 474 $308,625
2010 675 $279,000
2011 585 $180,000
2012 623 $185,000
Lake View condo/TH closed January
year/closed/% REO-Short Sales
1988 35
1989 50
1990 46
1991 34
1992 43
1993 54
1994 62
1995 65
1996 70
1997 81
1998 83
1999 112
2000 72
2001 95
2002 80
2003 123
2004 95
2005 120
2006 127
2007 95
2008 67
2009 42 7%
2010 50 2%
2011 48 19%
2012 57 28%
Lincoln Park condo/TH closed January
year/closed/% REO-Short Sales
1988 35
1989 56
1990 56
1991 41
1992 35
1993 54
1994 89
1995 48
1996 72
1997 67
1998 69
1999 71
2000 59
2001 60
2002 47
2003 63
2004 72
2005 133
2006 63
2007 71
2008 44
2009 14 7%
2010 43 7%
2011 34 21%
2012 42 14%
Near North condo/TH closed January
year/closed/% REO-Short Sales
1997 98
1998 107
1999 122
2000 140
2001 136
2002 117
2003 153
2004 221
2005 217
2006 323
2007 280
2008 187
2009 91 14%
2010 119 18%
2011 102 26%
2012 111 34%
Loop condo/TH closed January
year/closed/% REO-Short Sales
1997 19
1998 31
1999 34
2000 20
2001 22
2002 39
2003 44
2004 68
2005 40
2006 29
2007 62
2008 77
2009 43 5%
2010 76 4%
2011 25 24%
2012 35 31%
Near South condo/TH closed January
year/closed/% REO-Short Sales
1997 1
1998 5
1999 16
2000 10
2001 9
2002 36
2003 53
2004 50
2005 77
2006 45
2007 80
2008 34
2009 38 8%
2010 42 19%
2011 24 33%
2012 31 55%
Volume increases as price decreases. They’rd be hella more sales if it wasn’t so f’in difficult to close on a property these days. You want to buy a car? Try leaving a dealership lot without a car….hahaha…want to buy a house? Expect a roller coaster of a ride with failed deals, obstinate sellers, completely moronic sellers agents, incompetent brokers, terrible selection of homes, unreasonable parties. Most of the ppl left in the industry were too dumb to find other work…..more deals seem to fall through these days than actually close. How many properties have you watched in the mls sit ‘contingent’ for months and months…….? I see plenty. Park ridge has 300 house for sale, 110 under contract and 4 closings in the last week. They must be broke in the RE industry.
Thanks for the data G.
Wow- 55% of the meager South Loop sales were REO/Short sales? Yikes. I’m not surprised to see the percentage spiking in Lakeview though. I’m now surprised if a listing ISN’T a short sale or REO in Lakeview. We have years to go before that neighborhood hits bottom.