Market Conditions: Even With Record Low Mortgage Rates, November Sales Decline 10.4%
The Illinois Association of Realtors is out with the November sales data, and as expected, the Chicago market remains weak.
It was the worst November since 2014.
The city of Chicago saw year-over-year home sales decrease 10.4 percent with 1,659 sales in November, compared to 1,852 a year ago. The median price of a home in the city of Chicago in November was $270,000 up 3.2 percent compared to November 2018 when it was $261,745.
Here is the November sales data for the last 13 years (thanks to G for some of the data):
- November 2007: 1859 sales and median price of $290,000
- November 2008: 1093 sales and median price of $222,500 (16% short/REO sales)
- November 2009: 1905 sales and median price of $215,000 (29% short/REO sales)
- November 2010: 1144 sales and median price of $182,500 (39% short/REO sales)
- November 2011: 1429 sales and median price of $157,000 (43% short/REO sales)
- November 2012: 1750 sales and median price of $180,000
- November 2013: 1844 sales and median price of $200,000
- November 2014: 1638 sales and median price of $230,000
- November 2015: 1661 sales and median price of $233,500
- November 2016: 1937 sales and median price of $260,000
- November 2017: 1959 sales and median price of $256,000
- November 2018: 1852 sales and median price of $261.745
- November 2019: 1,659 sales and median price of $270,000
“When you see an inventory decrease, like we did last month, you’ll likely also see a decline in closed sales, as well,” said Maurice Hampton, president of the Chicago Association of REALTORS® and owner of Centered International Realty. “Both are accompanied by a decline in days on market and uptick in median sales price. Clearly, the demand is there, but inventory isn’t.”
Mortgage rates continue near record lows as the 30-year fixed rate averaged 3.7% in November, up from 3.69% in October. It averaged 4.9% in November 2018.
Statewide, number of days on the market fell 1.9% to 53 days.
“Increases in new home starts in November provide some optimism that continued national employment growth and low interest rates will contribute to addressing the low inventory problem” said Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois. “There is some cautious optimism about an increase in first-time buyers in 2020 as well as the strong increase in contract signings in recent months in both Illinois and Chicago.”
November 2017 was the best November in 10-years.
The following 2 years have been weaker.
Is the decline in sales a cause of concern?
Or will it get hot once the spring inventory comes back on the market?
Illinois median home prices climb higher in November; sales lower (Press Release, December 19, 2019, Illinois Association of Realtors)
I wouldn’t be so concerned with the low number of inventory but rather the slowdown in prices especially at the 750k+ range even with stupid low interest rates…
people just aren’t moving much these days
https://www.census.gov/newsroom/press-releases/2016/cb16-189.html
NOV. 16, 2016 —The percentage of Americans moving over a one-year period fell to an all time low in the United States to 11.2 percent in 2016, according to tables released today by the U.S. Census Bureau.
I believe that a major concern for buyers is the long term viability of owning property in Chicago. Chicago tax rates have increased from 4.8% in 2008 to 6.9% in 2018 A 44% increase over 10 years. So assuming your home value didn’t increase during that period of time your taxes would still be 44% higher. Now, couple that with rising property values(assuming a 30% appreciation in values over this same 10 year period) and you’ve got an approx 70% increase in property taxes over 10 years. That just is not sustainable, and I think buyers are starting to be scared of the uncertainty. For many ppl their property taxes are almost as much as their mortgage, and its out of their control…how do you plan/budget for these tax increases when your income is not increasing at the same rate?
In the Northshore, many properties in the $500 – $900 range so their property taxes double in the last 20 years. DOUBLE. Combine that with aging inventory stock and aging population that’s slowly exiting south, I see housing prices being stagnant for the next five years or so.
Aleks,
I’m on the North Shore and I verify your comment. Our property taxes were around $7,000 when we bought our house in 2002 for around $420,000. The house is now worth $533,000, according to Zillow, and our taxes are $13,000. Agree it’s not sustainable. Incomes haven’t doubled in 17 years. And if you’re retired, as a lot of homeowners are, you don’t have near the income you once did.
Property taxes are regressive and poorly thought out. I agree we need them and I don’t have a better solution. But they seem like a big barrier to home ownership. I suppose that’s why we have rentals. But those prices are rising fast, too.
“Chicago tax rates have increased from 4.8% in 2008 to 6.9% in 2018”
In 2003, it was 6.433%, and in 2004, 6.28%
The rate doesn’t tell us very much.
Real estate taxes buy civilization. Go move to Somalia if you don’t like it. There’s no real estate taxes, just a tribute paid to a local warlord. And Civilization ain’t cheap either, especially when there are so many retired county union workers earning those $100,000+ pensions. And then they move out of state where it can’t be taxed again by the Illinois government. Shut up and pay your taxes, there are retired CPS janitors out there (I know them) who need that $7,500 a month pension, for the rest of their life. They got bills you know – the monthly payment on a F250 truck ain’t cheap! and neither is alimony to the ex-wife. But thankfully, the cost of living in FL is a lot cheaper than IL, so that $7,500 a month goes a lot farther. Shut up you losers, pay your taxes, that’s all you’re good for. You aren’t even good for your vote either – you’ve already given that to the same party for free for years! All you’re good for are your property taxes to fund the lavish lifestyles of retired city and county union members. Now go pay your taxes, your first installment 2019 (55% of last year’s bill) is due in four months, better start saving, losers!
(please give thumbs up, this post is sarcasm!)
I agree partly with homedelete – taxes pay for civilization. I don’t know if real estate taxes alone do that, or if some other type of tax might do it better. Obviously we have other types, like sales, income, etc. Property taxes do seem necessary, but it’s hard to see how older, retired people who’ve retired and may live on a fixed income can handle the constant drip-drip-drip of higher taxes on something that’s not part of their income.
The bit about inventory decreasing…they have to come up with a quote to explain what’s going on so sometimes as long as it sounds plausible they run with it. Yeah, detached inventory and sales are down YOY but attached inventory was actually up slightly from last year yet sales were down more than 9%. I don’t think it’s an inventory problem any more. It could just be that a lot of stuff on the market is overpriced for what it is.
As for tax rates, anon is correct. That particular tax rate is an intermediate step in the calculation. You have to look at the final taxes relative to assessed value and even that gets thrown off because if values go up that tax rate goes down, all else being equal.
Small sample size and all but seems like a large portion of properties fall into 2 categories
Over/highly improved that ring the bell in the immediate vicinity
Folks that were underwater for a fair amount of time, haven’t done anything to improve the property and see the over improved properties and think they can knock $50k off and sell
And the taxes
How much should we anticipate property taxes to increase annually in the city and county for the next five years? 5% a year?
“How much should we anticipate property taxes to increase annually in the city and county for the next five years? 5% a year?”
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If the politicians are honest and follow the actuarial guidelines for pensions, yes, at least. The problem, by the way, has NOT been the government workers putting in too little. They have been contributing their fair share right along. The problem has been politicians refusing to raise taxes/cut spending enough to fund the government’s share of the pension contributions. That’s when the beauty/terror of compound interest takes over.
“The problem, by the way, has NOT been the government workers putting in too little.”
Fake news, lies and misinformation. You might be a Russian agent for all I know!
Many pension recipients get all the money they contributed to their pension back in the first few months. Then they continue to receive benefits for 20, 30 or 40 more years if they live into their 90’s with a 3% per year increase which doubles after 25 years.
Or is 5 months worth of pension contributions a pensioner’s “fair share right along” for nearly half a working person’s lifetime of benefits? You and I live must in different universes, or maybe, just different countries. I live in the US, do you live in St. Petersburg? Are taxes this generous in Mother Russia?
I’m just kidding of course, but there’s a lot of myths and purposeful disinformation floating around out there pensions.
https://www.illinoispolicy.org/chicago-teachers-recover-pension-contributions-5-months-into-retirement/
“The average career Chicago teacher’s pension is worth $6,376 a month or $76,511 a year, despite pensioners contributing a small percentage of their pay to the pension system during the course of their lifetime.
A retired Chicago public school teacher makes back his or her entire pension contribution just five months into retirement.
This type of return on retirement investment is unheard of in the private sector. By contrast, the average Social Security benefit for 2019 is just $1,461 per month or $17,532 per year. The maximum Social Security benefit is $2,861 per month or $34,332 per year. The earliest anyone can qualify for Social Security is age 62 and the full retirement age for anyone born after 1960 is 67.
Like most public workers in Illinois, particularly Tier 1 employees hired before 2011, Chicago teachers receive generous pension benefits that are heavily subsidized by taxpayers. Chicago Public Schools teachers can retire as young as 55, receive up to 75% of their final average salary in pension benefits and receive 3% compounded annual post-retirement increases regardless of inflation. That 3% permanent annual raise doubles the size of the first-year pension benefit after 25 years.
But even more so than other public pensioners, Chicago teachers contribute very little to their own retirement. State law technically requires teachers to contribute 9% of their salary, but CPS picks up 7% of that for employees hired between 1981 and 2017.”
Before pension benefits…cps teachers have the second highest pay in the nation after cola adjustments. Counting benefits they are by far the highest paid teachers. It’s not just pension costs but also salaries that are too high.
The slowdown in residential is nothing compared to what’s going on with commercial properties. Sales are down huge. People need a place to live, people don’t need to invest in Illinois and take on the pension risks when they can invest anywhere.
“State law technically requires teachers to contribute 9% of their salary, but CPS picks up 7% of that for employees hired between 1981 and 2017.”
——————————-
So you hold against the employees the voluntary acts of the employer? On what basis?
“So you hold against the employees the voluntary acts of the employer? On what basis?”
The basis that the two colluded together (though union funded campaign donations to politicians) to create an unsustainable and mathematically impossible financial situation we are in now. It was all done in bad faith and here were are now. It’s absurd, literally crazy insane, that retired CPS teachers are repaid their entire pension contribution in the first five months. Can you name any other solvent and sustainable pension plan that works that way?
“The basis that the two colluded together (though union funded campaign donations to politicians) to create an unsustainable and mathematically impossible financial situation we are in now.”
—————————–
Evidence of collusion? I contribute thousands to political campaigns. I don’t get my way.
“I contribute thousands to political campaigns.”
First, that’s small potatoes on the $$. CTU contributes much more.
Second, do you have 25,000 (plus family member) votes? And the ability to get free press coverage to talk about your preferred candidate basically any day you want? That’s what CTU has.
Lil Richie was so terrified of a teacher strike that he gave away the farm. And he was so terrified of a taxpayer revolt that he never raised taxes enough to pay the freight on his giveaway. And so, here we are.
Chicago’s teacher pension was 100% funded as recently as 1999. It is either gross, disgusting, negligence or an actual willfully executed plan that drives a pension fund into the ditch like that in only 10 years. Lil Richie has to wear one (or both!!) of those jackets.
As in the old Chinese curse, people end up ultimately getting what they want in a Democracy: https://chicago.suntimes.com/city-hall/2019/10/14/20914655/poll-chicagoans-support-teachers-strike-lightfoot-union-ctu-cps
The math in the poll is in my opinion moderately to negative for the teachers union.
A). Polls have huge biases depending on phrasing of question
B). Teachers are a naturally like able group. I don’t think more than 1% of voters realize chicago has the worst financial situation of any state and the highest paid teachers by a huge margin.
C). If the poll was rewarded to ask voters their opinion of teachers turning down average salaries of 100k with great pensions then I bet you would get 80% against striking. Most people don’t dig into the numbers unfortunately.
But I agree with you and I think that’s how we got here. The electorate doesn’t understand the issue and likes teachers. The politicians knew/ know that giving in to teachers will make them more popular than holding a hard line.
Teachers? They are awful. CPS Enrollment has been dropping like a rock as parents literally flee the city for better schools elsewhere in the state, or in other states entirely:
2005: 420,982
******
2013: 400,545
******
2015: 397,833
2016: 392,051
2017: 382,929
2018: 372,214
2019: 363,954
These $100,000 a year teachers can’t even teach. The schools are horribly underpreforming. For example, 2 out of 3 third graders can’t even meet or exceed third grade reading standards. Sure, some gains have been made in recent years, and the results are encouraging (especially among ESL students) but overall the results are, quite frankly, pathetic. I get that there are other issues with students failing in CPS schools, but the entire system does so poorly outside of small percentage of magnet or rich neighborhood schools, that the only cause that is common to every failing student is a CTU union member teaching students 7 hours a day. It’s not like I’m the only person to notice this, look at CPS Enrollment!
An estimated 882,000, or 30%, of adults in Chicago have low basic literacy skills and would benefit from adult literacy and/or adult basic education services. 39% of Chicago’s public school students do not meet or exceed reading standards. 61% of low-income households do not own any children’s books.
http://chicagoliteracyalliance.org/about/why-were-here/
Yes, I’ve pointed this out before. Student performance in Illinois/ Chicago strongly correlates with the child’s home environment. Probably has a lot less to do with the teachers. And you can google “word gap” and see that these kids are screwed before they even enter school. And I’m not aware of anyone really focusing on that except for the Head Start program but apparently that’s not working either.
“And you can google “word gap” and see that these kids are screwed before they even enter school. ”
Then why are we paying teachers $100,000 a year plus pension benefits if the kids are screwed before they enter school? if it’s really a lost cause, then hire the worst teachers, pay them next to nothing, and watch the results stay exactly the same. We musn’t have this defeatist attitude.
Why don’t CPS teachers forego a few hundreds a year in salary at the negotiation table, and instead, make CPS send every student home with 10 childrens books at the beginning of the year (as long as them books aren’t “I am Jazz” and their various iterations). with CPS buying in bulk, and printing costs so cheap, I wouldn’t cost more than $20 per student for 10 books every year. 30 kids in a class x $20 is $600 a year. Did I not see this on the negotiation table with the CTU? Did I miss this? Oh wait, no I didn’t. I saw teachers wanting cheaper housing (doesn’t everyone!), more pension benefits and more bankable PTO days (from 40 to 244! All creditable in retirement, so retire a year early AND get paid out on your sick days!). I saw nothing about helping children out, did you?
Meanwhile CTU President Sharley, the man of the people, lives in a 1.5 million dollar mansion on three lots in Roger’s Park, drives a Tesla (non-union made) and married the daughter of a republican billionaire CEO.
When you see the hypocracy, you understand what a joke the CTU and the CPS is. The problem starts at the top and the rot runs all the way through. To blame the students and the parents of the students is only some of the problem.
I’m not a fan of the teachers union for their financial graft and the barriers they put up against school choice and the overall bureaucratic nature of the public school system. However, I don’t blame them directly for the poor performance of large numbers of students particularly in lower income areas.
Schools reflect the community they serve. Good schools are good not necessarily because of the teachers, but because the students themselves are already high performing.
I get frustrated when discussing improving school systems because no one ever wants to touch the third rail of acknowledging how broken families and cultural dysfunction is the prime contributor.
Headstart doesn’t work because the kids still have to go home to dysfunctional parents / neighborhoods.
“hypocracy”
Government of the underneath? A cousin of idiocracy? Or more a morlock reference?
“I get frustrated when discussing improving school systems because no one ever wants to touch the third rail of acknowledging how broken families and cultural dysfunction is the prime contributor.”
https://www.politico.com/story/2008/06/text-of-obamas-fatherhood-speech-011094
Obama acknowledged most of this in his fatherhood speech in 2008, before he was elected president.
But today his speech is widely viewed as misogynistic, homophobic and transphobic in the sense that children don’t ‘need’ one father – two mothers or two fathers, or in the case of polyamorous relationships, three or five or seven mothers, fathers and caretakers will be just fine. And Obama unfortunately, misogynistically, gives credit to single moms who do it all without any help, which seems nice, but in reality, he failed to to give credit to so many other kinds of parents, including non-binaries, trans and furries. and moreover, Mothers (or ‘individuals’ as they are call in Illinois’s Reproductive Health Act because ‘mother’ is no longer an inclusive term b/c transmen and non-binaries can get pregnant. I’m not kidding, the author of the bill actually said this!) don’t need a ‘man’ to help raise their children. Individuals who choose to raise children don’t need ‘men’ or fathers to help them out. He forgets feminist Irina Dunn’s famous quote “A woman needs a man like a fish needs a bicycle…” He should remember this the next time he tries to insist on imposing his out-dated and culturally offensive values on his former constituents.
wow^ homedelete, you sound like a very oppressed straight white male… I feel you pain… so much of that has been going around lately…
“wow^ homedelete, you sound like a very oppressed straight white male… I feel you pain… so much of that has been going around lately…”
Why do you have to bring race into this? Are you a racist? Why do you have to make racist comments?
You think I make this stuff up? These are your elected reps in Chicago! They’re on your ballot! You voted for them! (and I use them in the non-binary sense).
https://twitter.com/rugger4equality/status/1138834196431069193
“Anyone with a uterus and ovaries can get the reproductive health care they deserve” @RepKellyCassidy on why the #RHA uses term “individuals” & not “women”, acknowledging that IL trusts non-binary & trans People too.”
Rep. Kelly Cassidy @RepKellyCassidy
Jun 10
Rep. Kelly Cassidy Retweeted Hope Clinic for Women
________________________________________________
In the 3 hour hearing on the RHA, one member repeatedly asked me why the word woman was being replaced with individual in the bill – I lost count of how many times I said “people with ovaries and a uterus can get pregnant,” that day…
Rep. Kelly Cassidy added: Hope Clinic for Women @HopeClinicWomen
“Transgender men and other gender-nonconforming folks get abortions, too. But no one’s discussing how the recent abortion bans will affect them.”
______________________________________________
Shame on Obama for his ‘fatherhood’ speech, all about fathers. So very, very unwoke, transphobic, claiming that fathers (which is a totally uninclusive term) have a place in a child’s life.
The proper term is ‘person’ or ‘individual’. Acknowledging that fathers sire children is disgusting, backwards, transphonbic and makes him a TERF.
If only Rep. Kelly Cassidy (from the wonderful northside of chicago) could rewrite Obama’s famous speech…
“Of all the rocks upon which we build our lives, we are reminded today that family is the most important. And we are called to recognize and honor how critical every father is to that foundation. They are teachers and coaches. They are mentors and role models. They are examples of success and the men who constantly push us toward it.
But if we are honest with ourselves, we’ll admit that what too many fathers also are is missing — missing from too many lives and too many homes. They have abandoned their responsibilities, acting like boys instead of men. And the foundations of our families are weaker because of it.”
Russ,
Yes it’s the third rail these days but only because your beliefs are nothing more than an antiquated way of thinking about ‘broken’ families and cultural values.
Obama said back in 2008 that fathers are missing from families. This is truly offensive to many people.
The author of Illinois’s RHA (reproductive healthcare act) doesn’t have a ‘father’ in her family. She chose to bear three children via anonymous sperm donors. Her partner at the time adopted the children. Two moms, no dad. How is that broken? This is 2019!
That relationship lasted only 15 years and they broke up, and hence, had a broken family with only a single mom, a distant 2nd mom, no father, no child support, not even a partner. (No college degree either, writing laws about health care, but whatever…)
Fortunately, the author of the RHA found another love of her life. Her current partner is an ‘individual’ that identifies as a ‘they’. I’m not joking, and ‘they’ is the younger half-sister (and I use sister only in the normative sense, not in the actual sense) of…….Newt Gingrich. I’m not making this stuff up.
Families like this aren’t broken, this is the way they are supposed to be in 2019. Let’s hope for an even brighter 2020 where CPS schools over perform, single parent households are celebrated, and all is well. Happy new year!
https://www.pjstar.com/news/20190621/legislator-kelly-cassidy-gets-deep-into-weeds-loves-work
I have to again side with HD on some of this stuff.
A nurse went off on me the other day because I simply said a transgender person can not change their genotypic sex. Regardless of if they have surgery or not. You can’t change your DNA/ chromosomes, and the fact that you have a prostate gland and no uterus. Your genotypic sex is male. Gender, is another issue. Identify however you please. Have equal rights and a right to live how you choose – I have no problem with that. Here’s what I have a problem with:
1. Now science is supposed to change our viewpoints on genetics and sex because of how an individual “identifies”? As if chromosomes don’t matter? Of course they do. Genotypic females don’t get prostate cancer. Genotypic males don’t get uterine cancer, because they don’t have those organs.
2. I’m called ‘transphobic’ because I told someone I wouldn’t be comfortable dating a trans ‘individual’. wth?
3. The whole ‘They’ Thing. How the heck do I call someone ‘they’ when consenting you for a procedure. And then they get offended If I have to ask about their birth sex for medical purposes. And I’m supposed to ask everyone that seems gender – ambiguous ‘what pronouns are you comfortable with?” – Right. I don’t have time for that while I’m trying to coil a bleeding aneurysm in your brain. Sorry.
And people crack on me for insisting that Bucktown doesn’t go South of Armitage.
Sabrina must be on vacation again
Anyone else see that 51k people left Illinois just last year? Thats a lot of people, I mean, tax payers
“Thats a lot of people, I mean, tax payers”
Depends–if it’s retirees, they don’t pay a lot of taxes in IL, unless they are uncharacteristically big retail spenders.
It’s really more about the lack of new people moving in.
The problem with losing retirees is that they have virtually no burden on other tax payers. Crime is non existent, they don’t have children, they collect social security and pension checks, they spend money on health care, and they are generally the wealthiest cohort of people.
Case shriller is out and Chicago had only a 0.5% gain from last year. This is the slowest growth since 2012 when prices started going up here. An ominous sign of things to come???
“It’s really more about the lack of new people moving in.”
———————— —
And they would not be moving in because . . .? Help us out here. . . .
Before you answer, use your head for something besides a hat rack.
“johnc on December 31st, 2019 at 8:44 pm
“It’s really more about the lack of new people moving in.”
———————— —
And they would not be moving in because . . .? Help us out here. . . .
Before you answer, use your head for something besides a hat rack.”
It took my hat rack of a head a second or two to process this comment but heck that was pretty witty.
“Case shriller is out and Chicago had only a 0.5% gain from last year. This is the slowest growth since 2012 when prices started going up here. An ominous sign of things to come???”
More ominous than what happened in 2019? Because home prices were declining in the city and all over the Chicagoland area.
“It’s really more about the lack of new people moving in.”
But more people ARE moving in. At least to Chicago. They’re still filling up those 70 story high rises. Lots of retirees leaving though. States with the biggest population gains are still the sunbelt and Florida. Cheaper houses costs and no state income taxes. You don’t care if the schools suck because your grandkids live somewhere else.
“She chose to bear three children via anonymous sperm donors. Her partner at the time adopted the children. Two moms, no dad. How is that broken? This is 2019!”
It’s not “broken.” And who gives a shit how she had her kids?
Seriously. Why do you care so much what goes on in other people’s bedrooms or homes HD? Conservatives are such hypocrits.
Seriously, HD, complaining about a family with two mothers? Don’t you have anything better to do? Why are you worried about what is happening in your neighbor’s marriages?
I don’t get it.
There is opioid use probably on your block. Kids are dying from vaping. And we now have to carry guns into our places of worship instead of just banning the damn guns in the first place.
There is a whole heck of a lot of other things to worry about.
Oh- and notice how the “cultural conservatives” have to attack gay families now, or women having kids through IVF or surrogacy, because the divorce rate has actually plunged in the last 25 years so have to attack “single” headed families some other way.
“Shame on Obama for his ‘fatherhood’ speech, all about fathers.”
One other thing, society has changed pretty dramatically in the 12 years since Obama was elected. Gay marriage is legal, for one. You can use cannabis legally in many states. Just for starters.
Move on HD. Get with the times. What some politician said over a decade ago may, or may not, be relevant to today’s society.
And if men are missing from the family, whose fault is that? Look in the mirror.
“I get frustrated when discussing improving school systems because no one ever wants to touch the third rail of acknowledging how broken families and cultural dysfunction is the prime contributor.”
Excuse me???
This is laughable Russ. Don’t act like you’ve been involved with improving the schools. Like EVER. Because organizations have been involved with this very issue for DECADES now.
Go read Savage Inequalities. It still applies.
“But more people ARE moving in. At least to Chicago. They’re still filling up those 70 story high rises.”
Well, Chicago is losing population on a net basis. I assume though that the people moving in average a higher income than those moving out. This article has some good data and graphics: https://www.chicagotribune.com/news/ct-met-census-chicago-metro-population-towns-05172019-story.html
At the end of the day what really matters to the health of the city is the property tax base. As long as that grows faster than the city’s budget (probably not the case) then the city would be healthy. If the budget grows faster then the tax rate (net of all the factors and relative to the true market value of properties) will go up and we have a problem. I’m very curious to see what the new tax rate will be. We were at 2% of assessed market value for 2018.
“More ominous than what happened in 2019? Because home prices were declining in the city and all over the Chicagoland area.”
There is no data to support this assertion at the city or metro level. However, appreciation was almost zero. But some neighborhoods/ towns did show declines.
“And if men are missing from the family, whose fault is that? Look in the mirror.”
Really Sabrina. You’re better than this. Lets not man blame for no reason here.
Some men suck. So do some women. HD hardly strikes me as a dead beat dad.
“Well, Chicago is losing population on a net basis. I assume though that the people moving in average a higher income than those moving out.”
not 100% sure about chicago specifically as most statistics are state wide, but it appears as though that is not the case.
“In all, Illinois suffered $11.4 billion in outflows and gained just $6.6 billion in inflows in 2016, leaving the state with a net $4.87 billion loss in Adjusted Gross Income. More than 50 percent of that came from losing people who made $200,000 or more. ”
https://wirepoints.org/illinois-shrinking-tax-base-state-is-a-national-outlier-when-it-comes-to-losing-wealthy-residents-part-4/
its a multi part series from that website worth reading for sure
“In all, Illinois suffered $11.4 billion in outflows and gained just $6.6 billion in inflows in 2016, leaving the state with a net $4.87 billion loss in Adjusted Gross Income. More than 50 percent of that came from losing people who made $200,000 or more. ”
That is very disconcerting, it is a good example of how statistics can be manipulated. I previously read that the majority of ppl leaving IL were poor ppl from the South/West sides. My opinion on that was good riddance. Let’s get rid of more non-producers. But buried in that stat must have been this new tidbit about $$$$ producers and their leaving Chicago. The Chicago political climate is now…sock it to the rich, which is causing them to leave. Chicago is seriously in a downward spiral with uncontrolled spending(especially pensions for teachers and govt. workers). Hopefully they can fix this soon….
Just posted my December update: http://www.chicagonow.com/getting-real/2020/01/chicago-real-estate-market-december-sales-spike-actually-disappointing/
Although sales were up 9.2% (it will be 8.6% according to IAR) sales were actually pretty low because Dec 2018 was so incredibly low. Also, market times were up.
looks like Illinois lost another 5.6 billion in AGI in 2018 now that new IRS data is out
https://wirepoints.org/new-irs-data-reveals-winners-and-losers-of-wealth-migration-across-50-states-wirepoints-original/
I’m sure the 2019 numbers will be similar if not more
I also moved left Chicago due to tax increases but you have to read those statistics with a grain of salt. People are always retiring to warmer climates so the real issue is who is moving into IL. I know most new housing in Chicago are rentals so it looks to me that most people in IL are not planning a long term stay either because they don’t have the money or they want to keep their options open.
Chicago is gaining high income and highly educated people and is losing lower income less educated people. The population is basically the same as it was in 2010 and now 19.1% of households make over $100K vs. 11.5% in 2010. Now 14.1% make less than $25K while in 2010 22.5% made under $25K.
“the real issue is who is moving into IL.”
What?
I suggested that upthread, and got insulted (I guess…) by someone trapped in the 1970s.
2010 was a low point wasn’t it in terms of stock market and the job market so is that a good comparison? Also, what about inflation? My income has more than doubled since 2010.
Doesn’t seem like high income earners are replacing all the poor people (or the rich people for that matter) that are fleeing the state… and guess what, they are the ones that subsidize the most and pay the most in taxes. Who cares that they are building tons of new luxury rentals downtown, they are just replacing the old crap inventory and such that wasn’t built at all during the real estate crash. and most of them are giving crazy incentives just to get people to try and move in.
https://wirepoints.org/illinois-shrinking-tax-base-state-is-a-national-outlier-when-it-comes-to-losing-wealthy-residents-part-4/
“In 2016 alone, Illinois lost more than 9,200 tax filers earning $200,000 or more, while only 4,700 such filers moved into Illinois. The net result was a loss of more than 4,500 wealthy Illinois tax filers. ” I’m sure this was repeated in 2017, 18 and 19 as the updated stories on this IRS data have been pretty similar
Actually anon, you wrote “It’s really more about the lack of new people moving in.” not who IS moving in. If there’s a lack, where and why are they moving to instead?
We’re losing a large number of poor people and gaining a small number of high income people. Given that the NYT reported last month that Chicago LOST 13,000 tech jobs, God knows how long that will last.
Likewise, Steve, how many people are leaving Illinois/Chicago for Indiana or Wisconsin (Chicago leavers), or Iowa or Michigan? Those aren’t “warmer climes.”
“now 19.1% of households make over $100K vs. 11.5% in 2010. Now 14.1% make less than $25K while in 2010 22.5% made under $25K”
Wait a second–Nationwide, 19.6% of households are under $25k (2018 ACS 1-year, last 12). I have a hard time believing that Chicago is that far below national average.
[looking]
Same dataset apparently not currently available for Chicago, but the 2017 version is. 24.4% of Chicago households had under $25k income.
BUT the percentage over $100k is 29%(!). For families (52.8% of HHs), it’s 35.3%, and for married couple families (32.1% of HHs), it’s 48.4%. For families and married couple families, those percentage are higher than NYC.
You looking at Metro area tone?
” where and why are they moving to instead?”
West Bucktown. Duh.
Kind of crazy the income disparity with so many higher income earning households and so many lower income earning households. That’s pretty typical of big cities these days.
Chicago might be gaining some population but the real story is the loss of 25% of its African-American population in the last decade or two. Hispanics are about to overtake African-Americans in raw population in the city; and Hispanics are already about half of CPS students, soon to be the majority of CPS students (Which itself is losing students too).
I often wonder what percentage the $100k+ households in Chicago are government workers. Apparently 40% of the city’s workforce earns over $100k a year, and two income households, even if they’re less than $100k, likely earn well in excess of $100k+. Throw in state, county and federal employees and sometime it makes we think that the 9.9%er’s in our area is comprised of too many government employees.
I don’t want to sound like a jerk, but I own a unit I bought a while ago in what I consider to be a ‘luxury’ high rise in the prairie / south loop area. Currently renting it out as a 1 bed for 2700/month.
I was absolutely shocked to see that a couple in my building recently posted asking for advice on an interior designer on the community board – for their 2 bed with a den on a high floor ( probably worth near 8/900k easy ) – Both husband and wife are CPS teachers.
not sure if this is their primary residence or a secondary one…regardless, was shocked that they made the kind of money that they could afford the place. Many of mine and my wife colleagues ( physicians and lawyers ) could never afford such a place.
Riz,
When did they buy? At what price? Somebody’s inheritance in play?
Remember, you can get your teaching certificate for a whole lot less than a MD or LLB
anon (tfo), sorry, I was looking at Household Earnings, you are correct Household Income is what you posted.
johnc, the NYT article was about a very narrowly focused sub group of jobs. Tech jobs have exploded in Chicago.
In 2010, 30.8% of City of Chicago households had income below $25K, now it’s 24.4%.
In 2018, 18.7% of City of Chicago households had income of $100K+, now it’s 29%.
“not sure if this is their primary residence or a secondary one…regardless, was shocked that they made the kind of money that they could afford the place. Many of mine and my wife colleagues ( physicians and lawyers ) could never afford such a place.”
First off, they wouldn’t have your student loans. They’ve also been working “real” adult jobs longer (most likely.)
Also, you have no idea what their personal situation is regarding inheritance etc.
If they’re older, they could both be making over $100,000 a year. The condo could be the second or third home that they’ve owned, they likely have equity built in.
Also, did they buy in 2012 or 2013? Could be that they got a deal during the housing bust. Some units have literally gone up $200,000-$300,000 since the bottom (depending on the building.)
“Chicago might be gaining some population but the real story is the loss of 25% of its African-American population in the last decade or two. Hispanics are about to overtake African-Americans in raw population in the city; and Hispanics are already about half of CPS students, soon to be the majority of CPS students (Which itself is losing students too).”
Why is this a surprise? Hispanics are a much larger group nationwide and Chicago has the second largest Hispanic population in the nation, after LA. Go to Mexico and tell them you’re from Chicago. Many Mexicans have either visited Chicago, or their kids have come up (for a Cubs game!) or they know someone who lives here.
African Americans have been moving to the suburbs for over a decade. And good for them. They also are now moving to other cities, like Atlanta.
Chicago’s wealth isn’t from government workers HD. Come on. It’s from its two dozen corporate headquarters and its fantastic financial industry. Big banks, trading firms, the CME, the CBOE. Also, high paying logistic companies. And then there is the tech companies. Most engineers are making $100,000.
“Given that the NYT reported last month that Chicago LOST 13,000 tech jobs, God knows how long that will last.”
Over what time period?
Because Google just took another building in Fulton Market because it already filled up the first one in just a few years. Adding another 1,000 employees. UberFreight is adding a couple thousand at the Post Office.
If we “lost” 13,000 tech jobs, they’ve been replaced. Occupancy at downtown apartment towers, Class A, the most expensive, is still at 94-95% and they continue to build new buildings.
Speaking of which, a friend just listed his downtown condo for rent. Got 48 requests to see it within the first 24 hours. Has a bidding war by renters for it.
Gary would say he underpriced it. Lol. And maybe he did. But tells you that the job market is SMOKING hot. How many people are looking to move downtown? Damn.
“Likewise, Steve, how many people are leaving Illinois/Chicago for Indiana or Wisconsin (Chicago leavers), or Iowa or Michigan? Those aren’t “warmer climes.””
The Tribune already covered this last year.
The vast majority who leave are going to the nearby states. All with the same crappy weather (for the most part, unless you go way south in Indiana or something.)
“and most of them are giving crazy incentives just to get people to try and move in.”
Nope. The 2 or 3 month incentives aren’t happening anymore. That was a few years ago. Demand is stronger than 2016-2017. They don’t have to do it. Even in the 700 apartment building NEMA.
Despite tons of building, there is still demand. The job market is that strong. Chicago is world class. It’s among one of only about 10 cities that has a complete and exhaustive job market in most industries. We obviously aren’t a “one industry town.”
A bunch of people have moved into my friend’s apartment building in the Gold Coast from out of state in the last few months. She talked with the doorman to find out why they left California to come to Chicago, just before winter. Lol. He said they are coming for jobs. It’s always “I got a great job.”
“I’m sure this was repeated in 2017, 18 and 19 as the updated stories on this IRS data have been pretty similar”
Yeah- that’s what data scientists do. They look at 2016 and say, “the other years are probably the same.”
I see almost 10 buildings here alone on this crappy website offering free rent concessions
https://www.domu.com/chicago/apartments-for-rent/latest-special-offers?zoom=14¢er=41.89139%2C-87.628949&domu_keys=&domu_search=&places_api=&domu_bedrooms_min=0&domu_bedrooms_max=&domu_bathrooms_min=&domu_bathrooms_max=&domu_rentalprice_min=&domu_rentalprice_max=&domu_specialoffers=1&sort=rent
and wow, cool story, I know a few people who looked for jobs for over a year and still haven’t found one, its actually a lot harder to find jobs in Chicago than you think based on personal and anecdotal experiences at least IMO
and yea, the data is pretty much the same year in and year out in Illinois, lots and lots of people leaving, sick of the confiscatory local government’s bull crap
“Chicago’s wealth isn’t from government workers HD. Come on.”
That wasn’t the subtext of his comment at all. I thought it was pretty clear–and I don’t really disagree with it (don’t agree completely either).
“lots and lots of people leaving, sick of the confiscatory local government’s bull crap”
I’ve known many (and I am one as well) that feel that most suburbs most places are pretty generic, and if you’re going to live in the burbs, why not do it somewhere else, where it’s cheaper, warmer, less traffic or all three. If you’ve been living in Naperville and working in Lisle, is it really very different than living and working in the burbs of Indianapolis, KC, Dallas?
Bloomberg article via Crain’s about incomes of departing people (without the Rauner-ite slant we get from Wirepoints):
https://www.chicagobusiness.com/opinion/goodbye-illinois-hello-where
Upshot: only states in the top 10 destinations getting a cohort with average income above Illinois average: Florida, California and Arizona.
Reasonable assumption that the ‘typical’ emigre to Florida and Arizona is a retiree, or near retiree. Wonder how many of them are drawing $250k+ public pensions.
“and wow, cool story, I know a few people who looked for jobs for over a year and still haven’t found one, its actually a lot harder to find jobs in Chicago than you think based on personal and anecdotal experiences at least IMO”
I think it depends
I think if you’re young-ish and spent some time in SF/NY/Bos working for Google/Amazon/Etc you you can command a nice salary in 2nd their cities. Not an accountant but guessing it’s similar to the Big 8 back in the day.
“I’ve known many (and I am one as well) that feel that most suburbs most places are pretty generic, and if you’re going to live in the burbs, why not do it somewhere else, where it’s cheaper, warmer, less traffic or all three. If you’ve been living in Naperville and working in Lisle, is it really very different than living and working in the burbs of Indianapolis, KC, Dallas?“
Would you say the same about cities (Tier 1 excluded)?
“I’ve known many (and I am one as well) that feel that most suburbs most places are pretty generic, and if you’re going to live in the burbs, why not do it somewhere else, where it’s cheaper, warmer, less traffic or all three.”
I agree completely, and homogenization is even happening in major cities now as things get more and more expensive, more and more chains and big corporations move in.
The Chicago suburbs aren’t really on the top of many lists in any of those categories… pretty much the only reason most people stay is family and people afraid of change
Honestly, I think Chicago has some of the best suburbs of any major city. We actually have suburbs with real town centers and public transportation.
Despite the political machine running the finances into the ground, Chicago is a world class city. Name another city that as the museums, lake front, arts, food, parks, etc on the same level as Chicago but also that is easily accessible to the average joe.
I honestly like it here because we have all those things but the city is ACCESSIBLE. Normal people can actually afford to live here.
People are moving here and the jobs are plentiful if you are an educated professional. Heck, even if you sling boxes for a living, we have those jobs too. Just read Amazon is opening it’s largest warehouse where the old Maywood horse track was just west of Oak Park / River Forest.
There are other places I could see myself living, but every time I truly compare what I have now vs the other cities, I’d be giving up a ton imho.
“Would you say the same about cities (Tier 1 excluded)?”
Within regions, yeah, probably. Guess it depends on the cohort you’re looking at. But I’d say that there is a meaningful difference between city-livin’ in, say, PDX and RDU, on multiple reasonable-to-care-about vectors.
“Chicago has some of the best suburbs of any major city”
Sure, and that’s a strength of Chicago. But there are plenty of dead-typical burbs, too, and most suburbanites live in them.
““Chicago has some of the best suburbs of any major city”
Sure, and that’s a strength of Chicago. But there are plenty of dead-typical burbs, too, and most suburbanites live in them.””
Agree with both of you. Hinsdale / Winnetka / Highland park etc are all very pretty places to live. Heck, even downtown Naperville and Lagrange are pretty decent. That being said, there are plenty of lombard/tinley park/schaumburgs/skokies and whatever else crap suburbs out there.
As far as the city being affordable to the ‘average Joe’ – Ok I’ll bite. 20 years ago, yeah. I think an average family could have afforded a 3 bed in the city , or a townhouse even. Nowadays, I think there’s no way an ‘average’ couple can afford to live in any desirable neighborhood of the city under normal circumstance. No, I’m not counting Pilsen, Irving Park, Portage park, rogers park, etc as ‘desirable’ – especially b/c some of those may as well be a suburb.
“I honestly like it here because we have all those things but the city is ACCESSIBLE. Normal people can actually afford to live here.”
This is why SF has peaked. Everyone who is willing to live 2+ hours from work with roommates already lives there, even with a $200k+ income. This is why the big desirable tech companies are opening locations all over the country. Who wants to deal with SF BS, when you could live in Chicago or Nashville or Austin, make $125k and live a baller lifestyle?
The median Millenial is now 30. It will be interesting to see where they want to live as they reach the end of their child bearing years.
“No, I’m not counting Pilsen, Irving Park, Portage park, rogers park, etc as ‘desirable’ – especially b/c some of those may as well be a suburb.”
What???
So your definition of “desirable neighborhood” is really just downtown. Because Irving Park is not anywhere close to being a “suburb.” Neither is Portage Park. And Pilsen certainly isn’t.
And what is “desirable”? The definition continually changes. 30 years ago Wicker Park was a gang infested dump. 20 years ago no one would have paid $1 million to live in an area called “Southport” let alone $3 million.
And Lincoln Square? So, so boring in 2000. Who would want to live way up there?
Lol.
That’s the fun thing about urban living. It’s constantly changing.
Smart buyers who want something “affordable” should be looking south, especially in Bronzeville, the Gap, Bridgeport and other neighborhoods on the South side.
“Honestly, I think Chicago has some of the best suburbs of any major city. We actually have suburbs with real town centers and public transportation.”
Agreed Russ. With amazing architecture, to boot. And it’s not just a handful like some cities have. There are literally several dozen suburbs I could easily move to where you have some urban lifestyle, great architecture, good schools, parks, hiking/biking trails etc. And you have the Metra/El.
“Reasonable assumption that the ‘typical’ emigre to Florida and Arizona is a retiree, or near retiree. Wonder how many of them are drawing $250k+ public pensions.”
Fitting that Bloomberg lists out all the states everyone went to just as we were talking about it again.
Illinoisans have been moving to Florida and Arizona for 40 years. Literally. After the horrible weather in the late 1970s, thousands left for Arizona.
I was most surprised that many people were moving to California, given its even higher tax rates and horrible housing costs.
RedEye talked about all the people moving to Austin (it was something like 1,000 a month left Chicago) about 7 years ago. Moving to Texas isn’t surprising.
But it was surprising to see Missouri on the list. Is that all people from downstate?
“and wow, cool story, I know a few people who looked for jobs for over a year and still haven’t found one, its actually a lot harder to find jobs in Chicago than you think based on personal and anecdotal experiences at least IMO”
If you can’t find a job in a year in a massive job market that is Chicago, which is literally teeming with jobs in ALL professions, then you’re not going to find it in any other job market either. Because there are only 5 or 6 job markets bigger in the entire country.
Their lack of a job isn’t the fault of Chicago, that’s for sure.
It’s hard getting past the computer screeners sometimes. Seniority or lack of skills can also be an issue.
It’s always shocking to run that LinkedIn job search in other cities that you would think were “big” and see just how pathetic the job choices are.
Speaking of which, The Guardian is trashing on San Francisco again.
Like I said, restaurants and shops can’t make it there. They can’t find enough employees, even at $15 or $17 an hour. And rents are soaring. So they’re just leaving.
I love San Francisco, but I don’t want to visit there right now because it just sounds so, so, sad.
https://www.theguardian.com/commentisfree/2020/jan/09/san-francisco-gentrification-second-wave
These kinds of articles make no sense. You can’t simultaneously believe that rents are skyrocketing and so are vacancies. Even if it did occur one side of the equation would adjust fairly fast.
And I’ve previously shown data that demonstrated rising restaurant employment in SF. Sure, plenty are closing but new ones keep popping up. It’s just that getting a meal in SF is really expensive.
“Missouri on the list. Is that all people from downstate?”
Yes. Obv not 100%, but mostly.
Old Irving park, bounded by Irving park, Milwaukee, Addison and Pulaski is most definitely a suburban like oasis. It was built that way and 100 years later it still maintains that character. Cross outside of that geofence and Irving park it’s most definitely a congested city environment.
“Missouri on the list. Is that all people from downstate?”
Yes. Obv not 100%, but mostly.
Know 2 couples from Chicagoland that retired around Lake Ozark
If you have over $8 MM in assets (for a married couple) you don’t want to die in Illinois. It’s one of only 12 states (+ DC) with an estate tax. Another reason for the wealthy to leave.
“If you have over $8 MM in assets (for a married couple) you don’t want to die in Illinois”
How many is that?
It can’t be many people.
Not too many qualify for the $5 million federal estate tax these days.
Do you have to pay it when just one spouse dies or can it wait until both die? (if it’s “joint” assets?)
“You can’t simultaneously believe that rents are skyrocketing and so are vacancies. Even if it did occur one side of the equation would adjust fairly fast.”
What are you talking about Gary?
Huge stretches of Lincoln Avenue in Chicago are sitting empty. Same with Michigan Avenue. I think at least 25% of Michigan Avenue is vacant now.
Alderman in Lincoln Park have complained about vacancies on Clark. They’ve been vacant for 10 years. Lol.
In the case of San Francisco, the article said the landlords bought decades ago and have prop 13 low taxes so they’re not willing to rent it to just anyone for less. They’re willing to let it sit vacant, for years, rather than get the lower rent apparently.
Same with Michigan Avenue, Clark and Lincoln Avenues in Chicago.
San Francisco is much more of a disaster, for restaurants and retail, than Chicago is though. A hot dog stand can still open in some neighborhoods of Chicago. Not the case in San Francisco.
“Huge stretches of Lincoln Avenue in Chicago are sitting empty. Same with Michigan Avenue. I think at least 25% of Michigan Avenue is vacant now.”
Then rents are too high and need to come down. That means rents are not skyrocketing.
“Do you have to pay it when just one spouse dies or can it wait until both die?”
If your estate plan is set up properly and you don’t simply give everything to your spouse then $8 MM would be exempt upon the death of the second person but not before then. However, if a single person dies with $5 MM in assets then $1 MM is subject to tax at 16% I believe.
By “not before then” I mean there is no tax due upon the death of the first person.
“Then rents are too high and need to come down. That means rents are not skyrocketing.”
That’s not how commercial real estate has been working over the last 10 years.
Rents are skyrocketing. A top restaurant in Seattle just closed down because they raised their rents again (to $16,000 a month) and labor costs have also increased (when they can even find workers) so they are just throwing in the towel. The chef/owner said, “the customer isn’t willing to pay $25 for a salad.”
Yep. This.
The landlords won’t lower rents. They’d rather sit there with an empty storefront for years (decades?) rather than get rent, especially if they have owned the property for a few generations.
That’s why, in the article, that particular area of San Francisco is now mostly empty. I think there are empty storefronts in North Beach too.
The way a restaurant can survive is if they own their own building. But even that’s not a guarantee.
“The landlords won’t lower rents. They’d rather sit there with an empty storefront for years (decades?) rather than get rent, especially if they have owned the property for a few generations. ”
That makes absolutely no sense at all. Impossible or incredibly stupid. And one person can be stupid but everyone?
Gary,Illinois gives a tax break to vacant commercial buildings, so the carrying cost of a vacant commercial building is low(er) than otherwise.
We’ve all seen commercial lots that have been vacant for years. How else do you explain it?
Current asking rent for the space is about $11,000/month, triple-net.
The referenced recent sale is based on being able to get those sorts of rents, tho, and at pretty low (imo, for retail) cap rates.
Huh, either I failed to hit submit correctly, or something ate my other comment:
Here’s a local article on the closing of Sitka & Spruce (the Seattle resto Sabrina was referring to), which basically tags property taxes and maintenance as the reason for real estate costs rising:
https://www.capitolhillseattle.com/2019/10/15-now-nah-chef-matt-dillon-says-try-triple-net-when-sorting-out-why-hes-closing-capitol-hills-sitka-and-spruce/
Now, putting that together with my other comment, the real answer is probably “both”, tho the implication is that ~$48 psf for gross rent might work, but $48 psf for net rent, plus the rest (which seems to be about a 50% add-on) was too much.
“We’ve all seen commercial lots that have been vacant for years. How else do you explain it?”
You’d have to give me specifics. I have seen some storefronts vacant for a long time but you never know what’s going on. It could be a family dispute, some kind of building issue that needs to be addressed, just a crappy area that nobody wants to be in at any price, or it could be an irrational or senile owner. But you’re not going to have wholesale stupid owners en masse sitting on a vacant property regardless of what kind of lower property tax you’re going to get.
There’s some kind of story on that section of Church St. in SF. Most of the property is owned by a single large corporation and they’re getting tenants here and there. Who knows…maybe they’re trying to get a zoning change and develop the land?
“Here’s a local article on the closing of Sitka & Spruce (the Seattle resto Sabrina was referring to), which basically tags property taxes and maintenance as the reason for real estate costs rising:”
Mostly just property taxes as the building was sold at a higher price, and will ultimately have higher property taxes, passed on through him NNN, and combined with the $15 per hour wage, its untenable.
Additionally, the comments on that article were a freaking joke. Half the commenters lamented that Washington state doesn’t have a state income tax, some of them even naively thought a state income tax might reduce property taxes. They must be smoking too much legal weed out there. Have these west coast morons never heard of Illinois?
We in IL have some of the highest property taxes in the country, and an income tax, but that still isn’t enough to feed the beast. We’re about to raise state income taxes again via the progressive tax, and even that won’t be enough when the estimated $3.5 Billion feeds the beast only for a little while and the beast becomes hungry again.
The $250,000 income limit is way to low to start the massive progressive tax. It will be lowered in short order, and we can look at california to see where the real progressive rates start. The progressive tax rate is 9.3% of all income over $56,000 as it is in California, and 8% of anything over 44,000. And its still never enough! California has problems too! Indiana has a $350,000,000 surplus this year and plans on expanding its colleges using one time CASH payments! Meanwhile, Illinois….
As for landlords keeping properties vacant because they want high rents? This is half true. Because the landlords must wait for higher rents because to cover the taxes.
The floor for rent (on non-NNN leases) is the property taxes. Despite what the article says, there are a lot of non-NNN leases in commercial buildings especially storefronts, strip malls and small office buildings.
Sometimes the rents needed to pay the property taxes isn’t market rate. I’ve seen many small commercial buildings and strip malls in some Cook County suburbs where the rents don’t or just barely cover the taxes. So they sit vacant because the landlord loses less money paying vacant property tax rates than they would lose if they had to pay occupied property tax rates.
I have multiple clients who’ve either purchased or sold commercial buildings in the last two or three years using seller financing because there is near zero interest to buy a property where the rents are $2,200 and the property taxes are $24,000. No bank will finance the buildings either because they don’t cash flow.
I saw one property come across my desk in February of last year in the NW suburbs, $48,000 a year taxes…$4,800 rent per month ($2,400 each space per month). I have another client who seller financed his strip mall for pennies to a tenant, whom he knew would default, because he just wanted to stop losing money every 6 months when he paid the property tax bills.
Thats why in suburb, after suburb, all around the CHicago area, especially in places like Joliet, Waukegan, Elgin, especially Rockford, and other south suburbs, and so on, there are vacant buildings, because the market rate for rent is less than the taxes, and certainly less than taxes AND mortgage put together. It leads to economic depression when it goes vacant, so fewer people go there, which depresses other businesses in the area, and it’s cycle, all related to taxes. But in a blue state like ours, mentioning something like this is heresy, and just a republican talking point, as they point out ‘look at all the cranes’ or ‘this particular strip of places is really busy’ or ‘this place is booming’ while so many other areas are nothing but graveyards for commercial properties.
“Sometimes the rents needed to pay the property taxes isn’t market rate. I’ve seen many small commercial buildings and strip malls in some Cook County suburbs where the rents don’t or just barely cover the taxes.”
OK. Now that makes sense – provided the vacant tax rate is lower than the difference between the occupied rate and the market rate. But these are towns that are in a death spiral so it wouldn’t apply to San Francisco or Chicago.
BTW, I know someone who owns and uses a building in a south suburb where the property taxes are so high that there is no point in paying them. He has the last occupied store front in the strip. The rest are boarded up. So he hasn’t paid his property taxes in 10 years. He’s essentially daring the town to take the property, which they won’t because all they will end up with is another boarded up storefront and one less business in town.
Just ran across this story. It could be told as another narrative about greedy landlords driving businesses out but that’s woefully incomplete. As is often the case the root cause is government regulations – not that I’m saying these regulations shouldn’t exist: https://www.nytimes.com/2020/01/10/nyregion/neirs-tavern-closing.html
Regarding estate taxes and people leaving the state…I was talking to an estate planning attorney the other day. His firm had just worked with a family worth about $8 B and they left Illinois for Florida because of the estate taxes.
“His firm had just worked with a family worth about $8 B and they left Illinois for Florida because of the estate taxes.”
And?
Doesn’t mean they sold a darn thing. It literally is just about filing paperwork. Kind of like what Trump did recently. But it does mean less revenue for the state whenever they pass. But if a family has $8 billion in net worth, just means they already have extensive trusts and would likely pay almost nothing in estate taxes anyway.
This is why Warren’s plan to tax the 1% is so widely well-received. Most Americans are tired of the mega-rich getting out of paying their fair share.
The Mega rich already off shore most of their assets. Look at Gov J.B. Pritzker. He and his family aren’t paying their fair share of taxes and never will thanks to the Caymen Islands and the Bahamas. But you, J.B., and the media always tell me that the rich need to pay more in taxes. Why don’t they practice what they preech?
“It literally is just about filing paperwork. Kind of like what Trump did recently.”
This is why the masses hate the rich. There are all these myths floating around about how easy they have it. It’s simply not true. https://www.nytimes.com/2019/11/01/nyregion/trump-florida-move-taxes.html
“But it does mean less revenue for the state whenever they pass.”
If they really move, as they need to, then it’s less state income tax and less sales tax also.
“But if a family has $8 billion in net worth, just means they already have extensive trusts and would likely pay almost nothing in estate taxes anyway.”
Sure. Another myth. Tell me what these magic trusts are. I’ve had these discussions before with truly rich people. The one that everyone thinks about is the charitable remainder trust but I’ve never been convinced that this is such a great deal. You end up giving away a large percentage of your net worth to charity, which is probably better than giving it to the government but it’s not some magic way to pass all your wealth to your descendants.
“The Mega rich already off shore most of their assets.”
This is another technique I’d like to know more about. Haven’t spent much time researching it but I think to truly avoid income and estate taxes on this wealth you have to do things that are illegal.
“to truly avoid income and estate taxes on this wealth you have to do things that are illegal”
Exactly why the Panama and Paradise Papers were a somewhat big deal (less here, because our politicians use honest graft to get rich, where Putin and his fellow kleptocrats are more direct, if also more hidden). But the US citizens involved were mostly not brand names.
Offshore assets, if completely above board, still provide asset sheltering and at least some ability to time the recognition. Also makes it easier to lave the country if the political environment ever gets really bad for the individual.
“Tell me what these magic trusts are.”
My passing understanding is that offshore the trusts are separate, independent entities not subject to US jurisdiction. The trust, if located within the US jurisdiction, would be required to pay income taxes on any income it earned, and it would have to file it’s own separate income tax return. However, if the trust is located offshore, it does not need to pay US income tax, until a disbursement from the trust is made to the beneficiary, and then only that income is subject to federal income tax. As you can imagine, wealth accumulates offshore virtually tax free or at low tax rates, and the home country is clueless.
Offshore trusts also provide a greater level of protection from creditors, as assets in offshore trusts have greater legal protections than in US courts (Illinois’s wildcard exemption is a measly $4,000 in cash, for example), whereas those limits in other countries are much, much higher, and legal proceedings must be brought locally to collect.
And offshore trusts allow tax swindlers like JB to hide their wealth from prying eyes. There’s literally no way for any of us to know exactly how much assets he has as the money is all squirreled away in the Cayman Islands. I mean, we all know he is a billionaire, but I think, if Illinois’s residents REALLY knew how much money he had (could be in the tens of billions given recent stock market and asset market appreciation), we’d all be at his Astor place mansion with pitchforks and torches. I mean, everyone complained that Rauner was the millionaire governor who didn’t care about the working people; and these same hypocrites turn around and vote for the billionaire who self-funded his campaign to the tune of nearly $200,000,000 million dollars. Think about that for a second, the guy spent $200,000,000 to essentially buy his office, and one of his primary competitors was a bonafide Kennedy!
The wealthy changing state residency is actually a pretty big deal. Any wealthy person leaving a high tax blue state can expect a really in-depth audit, and likely a hearing to contest the state’s initial finding, as the high tax blue state is essentially punishing the taxpayer for leaving. The state taxing agency looks into where their pets reside, where their children go to school, where they park their cars at night, where their eat their meals, and so on. It’s not some simple just fill out paperwork and move kind of situation.
In February 2019, [Gov. Andrew] Cuomo (D-NY) warned that the loss of revenue could not be made up by continuing to tax the rich, the top 1% who already contribute 48% of all New York tax revenue. He said, “I don’t believe in raising taxes on the rich. God forbid if the rich leave.”
“These changes fundamentally restructured our economy. People are mobile. They pick up their laptop and they move, they literally pack up their computer, they move to another state, you do business over the computer which means you’re doing business in that state, and you’re taxed in that state not in New York and we’re losing it, we can’t keep losing people this way.”
“1% of the taxpayers pay nearly half of all the taxes. The top 5%, 63% of all the revenue, the top 10% – 74% of all the revenue. Tax the rich, tax the rich, tax the rich. We did! Now, God forbid, the rich leave. Before SALT, a New York City taxpayer paid about 45%. After SALT, that tax increase goes up about 12%. A taxpayer in Florida would see no increase, probably would see a decrease, and Florida also has the advantage of no estate tax. This is also going to be the tipping point.”
– Gov. Cuomo of New York when explaining why New York has a 2.3 Billions dollar budget deficit – February 2019
“The wealthy changing state residency is actually a pretty big deal.”
When David Tepper left NJ, the state had to *immediately* re-do its budget forecasts.
“Tell me what these magic trusts are.”
Read Forbes Magazine’s report (Nov. 2003) to learn more about Pritzkers’ magic trusts.
https://www.forbes.com/forbes/2003/1124/142a.html
Here are some excerpts from Forbes’ 3700-word report:
Liesel Pritzker sued her dad Robert Pritzker.
[The Pritzker] empire [is] a vast network of domestic and foreign trusts designed to minimize, if not eliminate, taxes.
the [Pritzker] ruling trio [consist of] Tom, Nicholas and Penny.
Don’t even contemplate trying to copy the Pritzker family in using offshore entities to gain tax advantages; the loopholes have been closed. But they remain available to families that had the foresight to set up offshore trusts four decades ago, as the Pritzkers did. At their inception the trusts were seeded with small assets, but since then they have benefited from large amounts of leverage, in part in the form of loans from a Pritzker-controlled partnership and from years of business deals that threw profits from the expanding Pritzker empire into the trusts. Now the offshore entities hold more than $3 billion of the family’s net worth. . . . The [Pritzker] family created hundreds of trusts;
Instigator of many offshore schemes was Burton W. Kanter, a Chicago [tax] attorney
The Pritzkers refused to use some of Kanter’s more strained interpretations of tax loopholes.
It was A.N. Pritzker who developed an addiction to tax-deflecting trusts. The son of Nicholas (who came to the U.S. from Kiev) and armed with a law degree from Harvard, “A.N. was doing leveraged buyouts in the 1930s before anybody had even heard of such a thing,” says a onetime family employee. He also took the family fortune from $250,000 in the 1920s to an estimated $2 billion at his death in 1986. The net worth his heirs reported to the IRS at the time: a remarkable $25,000. “The goal in the family was to die broke,” explains an adviser to the Pritzkers. Or, at least, “broke” on the estate tax return.
The [IRS] agency … insisted A.N.’s estate owed $53 million. The case was settled in 1994 for $9.5 million, plus interest. Jay [Pritzker] paid the sum himself. But he demanded tough terms. In accepting [Jay’s settlement] money, … the IRS was “precluded and barred from raising any [tax] issue in any case …. claim or controversy, whether or not now pending….” In other words, the IRS agreed not to seek any further taxes then or in the future from the family’s oldest offshore trusts.
Here’s another excerpt from the Forbes magazine report:
A.N. [Pritzker] created a second class of trusts in 1971 … set up in Nassau. … A.N. put the [trusts] in the hands of Castle Trust Co., a Bahamian bank part-owned by Burt Kanter, the Pritzker’s Chicago tax attorney. Conveniently, Castle had an office on LaSalle Street in the Loop and a checking account at First National of Chicago.
The [Pritzker] assets in key offshore trusts today include AIC Holding [Hyatt International], … Rockwood, … Triton Holdings, … Western International Financial Group, … and a 20% stake in Royal Caribbean Cruise Lines. These assets produce an estimated $90 million in income each year—but the beneficiaries pay no tax unless there’s a distribution.
Much of that income [produced by the trusts that own those assets] is re-loaned to other Pritzker entities or reinvested; very little, if any, is paid out. The trusts are run from Chicago, yet have a legal presence in the Bahamas, where they have a Bahamian trustee [overseen by] the Chicago-based International Financial Advisors (IFA)…. IFA is run by one Glen Miller…. Miller takes his orders from Tom Pritzker, who effectively controls all the trusts
Nice find wojo, I would actually give that well-nourished fella some respect if he, as governor, forced open the books of the trust, and himself actually paid the Unfair Tax that he claims to champion. But we all can dream, right?
As for that $3,000,000,000 in 2003…who really knows what those trusts are worth today. It’s all just paperwork designed to obscure paying tax.
Very good information, Wojo. However, as you point out these loop holes were closed a long time ago. So people read this stuff and forget that technicality and claim that the rich “can” avoid estate taxes. I’m not sure there are any legal arrangement that you can currently take advantage of to avoid estate taxes. The way the IRS works is that if they find enough people skirting taxes they get congress to shut down the technique. Hell, they just shut down the stretch IRA for god’s sake.