Market Conditions: Foreclosures Increasing in Chicago’s Most Exclusive Neighborhoods
Both the Chicago Tribune and the Sun-Times reported yesterday on the new foreclosure data compiled for Chicago and the Chicagoland area by the Woodstock Institute.
Some of the data was for the third quarter and some of it was for the first 9 months.
But what both articles point out is that foreclosures appear to be increasing at a more rapid rate in Chicago’s more affluent neighborhoods rather than those that had, until now, been hardest hit.
Chicago’s once-hot neighborhoods are getting hammered by foreclosures.
In Chicago’s Loop, for instance, 73 foreclosure filings were made during the three months ended Sept. 30. Combine that with filings made earlier in the year and foreclosures are up almost 77 percent from the first nine months of 2009, to 205 properties. The Near North, Near South and Near West sides, as well as Lincoln Park, also saw double-digit increases, according to a third-quarter foreclosure report scheduled to be released Thursday by the Woodstock Institute.
Many of the buildings with the most foreclosures in Loop and the South Loop are familiar to Crib Chatter readers. We’ve been chattering about distress sales in these buildings for several years now.
Of the 73 new foreclosure filings in the Loop, 16 were at River City, 800 S. Wells St.; nine at Century Tower, 182 W. Lake St.; and six were at Park Millennium, 222 N. Columbus Drive, the report found.
Meanwhile, buildings responsible for two-thirds of the filings on the Near South Side during the quarter included 1620 South Michigan Ave. with 12; Vision on State, 1255 S. State St., with 11; and 1720 South Michigan Ave., with eight filings.
“The reason (the South Loop) is getting crushed is it’s only the South Loop in a good market,” Greco said. “In a bad market, it’s no man’s land. In a good market, people assume neighborhoods will be expanding. When the market crashes, it’s like the Sycamore or Moline of Chicago.”
Below is some third quarter data for those who argue that the “overall” percentage increase is irrelevant to the argument because in some neighborhoods there are few foreclosures to begin with.
Lincoln Park: up 94.7%
- 2009: 38 foreclosures
- 2010: 74 foreclosures
Near North Side: up 42.9%
- 2009: 126 foreclosures
- 2010 180 foreclosures
Loop: up 30.4%
- 2009: 56 foreclosures
- 2010: 73 foreclosures
Near South Side: up 102.4%
- 2009: 42 foreclosures
- 2010: 85 foreclosures
Near West Side: up 48.6%
- 2009: 72 foreclosures
- 2010: 107 foreclosures
For the first nine months of the year, foreclosures rose 14% for Chicago but were up 28% for the entire Chicagoland area.
The Near North Side neighborhood now ranks #4 as the neighborhood with the most foreclosures in 2010 with only Austin, Belmont-Cragin and West Ridge beating it out.
Here are some 9-month statistics from various neighborhoods of interest.
Only one neighborhood, West Town, of those that we actively follow on Crib Chatter, actually saw a year over year decline in foreclosures.
Austin: up 0.5%
- 2010: 663 foreclosures
- 2009: 660
Belmont-Cragin: up 9.4%
- 2010: 662
- 2009: 605
West Ridge: up 6.9%
- 2010: 525
- 2009: 491
Near North Side: up 41.5%
- 2010: 515
- 2009: 364
Rogers Park: up 55.3%
- 2010: 368
- 2009: 237
Logan Square: up 10%
- 2010: 362
- 2009: 329
West Town: down 1.3%
- 2010: 299
- 2009: 303
Albany Park: up 17.5%
- 2010: 269
- 2009: 229
Edgewater: up 58.9%
- 2010: 267
- 2009: 168
Lakeview: up 21.2%
- 2010: 223
- 2009: 184
Lincoln Park: up 63.9%
- 2010: 195
- 2009: 119
Lincoln Square: up 20.3%
- 2010: 166
- 2009: 138
Jefferson Park: up 59.6%
- 2010: 158
- 2009: 99
North Center: up 30%
- 2010: 91
- 2009: 70
Beverly: up 4.8%
- 2010: 87
- 2009: 83
Hyde Park: up 17.8%
- 2010: 53
- 2009: 45
Remember, these stats are for those properties that actually went into foreclosure and does not include short sales, which I have argued, are the much bigger “story” in the more affluent neighborhoods in 2010.
Does this data confirm what several posters have commented over the past year- that the foreclosures will come to the more affluent neighborhoods as it’s only the larger resources of the owners which have “delayed” the foreclosure?
On a side note, this data seems to confirm that, at least in Chicago’s affluent neighborhoods, the housing market is far from stabilized.
Foreclosures put chill on hot neighborhoods [Chicago Tribune, Mary Ellen Podmolik, October 21, 2010]
Foreclosures moving into once trendy neighborhoods [Sun-Times, David Roeder, October 21, 2010]
As ‘G’ would say, looks like alot of folks just got CMK’d. 1620 and 1720 michigan look like nice buildings on the outside too. I wonder if this means that the prices at 235 van buren will be going lower as they try to sell the remaining units.
I don’t know much about most of the neighborhoods for which data is listed above, other than a couple of the so-called affluent hoods. What I do know is that there is “Lincoln Park,” and then there is Lincoln Park. In the past two years of watching the market and viewing dozens of places, I have not detected any great avalanche of foreclosures (or even short sales) in ELP (or even in ELV, where I also looked for a while).
Not that such activity isn’t happening in the prime areas, but I think a great deal of product got built or reno’d in some fringe areas.
this info makes me curious.
Where is that list that shows foreclosures over total number of housing units by neighborhood/community area?
I’m still surprised by some of the areas that have >500 foreclosures!
I keep an eye on the distressed sales and it’s shocking. In September 44% of all Chicago closings were either short sales or foreclosures. And the total sales for the month are going to be reported on Monday down about 29% from last year. It’s ugly. Buyers are clearly in the bargain shopping mode more than ever.
Bargain mode is the new normal and will remain so for years to come.
“In the past two years of watching the market and viewing dozens of places, I have not detected any great avalanche of foreclosures (or even short sales) in ELP (or even in ELV, where I also looked for a while). ”
That’s becaure there is NO avalanche of foreclosures. I CAN’T TAKE THIS DATA MANIPULATION anymore. Everyone is hell bent on looking at things as a percentage instead of actual numbers. Look at the numbers – in L.P. there were only 74 foreclosures – but instead of concentrating on this number, the media focuses on saying that there are 94% more forclosures in L.P. (a whopping 36 more than last year). OK OK – if you guys want percentage data, why don’t you figure out the percentage of foreclosures in relation to number of units/houses in an area (and not necessarily those for sale). You will see that the number is probably far less than 1%.
The reason I get so frickin angry at this data is that I just don’t see any bargains out there!!! I absolutely 100% am itching and chomping at the bit to buy something else but can’t find ANYTHING ANYWHERE that is a deal. WTF?!!! The only thing I can think is that things are NOT that bad out there…
“The reason I get so frickin angry at this data is that I just don’t see any bargains out there!!!”
that’s because everything being offered in the mkt is at a price so high above fair value that there are no “bargains” at current asks. people are so underwater on their mortgages that they will hold out for someone to pass the knife to as long as they can.
but, youre right clio, clearly there isnt a issue with forclosures. the real estate market is as healthy as ever.
“that’s because everything being offered in the mkt is at a price so high above fair value that there are no “bargains” at current asks.”
I second the motion. This is absolutely the case in parts of the city and for certain types of housing and this is why sales are down so much. Huge bid/ask spread. Except there are “bargains” to be had in certain areas. For instance, in Uptown and the South Loop you can find lots of homes marked way down. There are some motivated sellers out there.
Gary what is a 1/1 without parking going ooking for a ballpark.for in the south loop. I know this is vague but l am looking for a ballpark idea of what my wides condo might be worth in today’s market. It is currently rented out at as a wash on costs + the special assessment.
It’ not really about knife catching as much as it is about passing the crack pipe. To buy at anything close to asking price is akin to sleeping on a ledge at El Capitan in a big storm without being strapped in..
Jp3chicago on October 22nd, 2010 at 7:12 am
Gary what is a 1/1 without parking going for in the south loop. I know this is vague but l am looking for a ballpark idea of what my wifes condo might be worth in today’s market.
Never call your “wife” your “wide” that’s a good way to become a homeless man! Damn spell check.
Is the near north foreclosure number more a function of a larger population of owned units? Also due to higher density? kind of surprised by that one.
Realtors will do whatever they can to manipulate data and make it seem like now is the time to buy real estate “at any price point”. They are all about driving sales volume, so they can put food on the table, akin to used car salesmen.
I was kind of surprised North Center has only had 91 foreclosures this year so far.
Jp3
I’m not a realtor, but I watch the South Loop market. I’d guess that a deal for a 1/1 in the Sl without parking would be 199,000. That would put the market at 2002 prices–Gary?
Has anyone else noticed that it’s like the holidays came early to the real estate market in 2010? New listings have slowed to a trickle. And I don’t mean just foreclosures either.
But appropriately priced multi-units sell in a heartbeat; they go on the MLS and two days later they’re under contract.
“I absolutely 100% am itching and chomping at the bit to buy something else but can’t find ANYTHING ANYWHERE that is a deal. WTF?!!! The only thing I can think is that things are NOT that bad out there…”
If things weren’t “bad” out there- there would be few foreclosures at all in LP (and other areas) instead of it getting worse.
As I’ve said many times- it’s really about the short sale in LP and Lakeview (for now.) Most are going that way- so they are never getting to the foreclosure.
And I agree with the others who said that there seem to be no deals because the asking prices are just way too high (for the rest of the properties.) This is definitely true. Unless it’s a short sale and the bank is aggressively lowering- I see properties just sitting and sitting.
“Has anyone else noticed that it’s like the holidays came early to the real estate market in 2010? New listings have slowed to a trickle. And I don’t mean just foreclosures either”
duhhhh – that’s because things are not as bad as people make it out to be!! It is like going into a great bar – you tend to only notice the gorgeous people – all the others blend into the background – but if you actually compare the number of gorgeous people to average/ugle people, the percentage is very small. Seriously, next time you are at Underground, Sunda, or the Witt – do a little experiment and you will see that this is true!!!
“Has anyone else noticed that it’s like the holidays came early to the real estate market in 2010? New listings have slowed to a trickle. And I don’t mean just foreclosures either.”
Yes- homedelete- it is DEAD out there. Much slower for this time of the year than it should be (for new listings and sales.)
From what I’m hearing- many sellers are convinced that by next spring the market will be “better” so many are waiting until then to list.
I just saw that nationally- prices have fallen 6% in the last 2 months- basically wiping out all the gains from the tax credit.
Housing is double dipping. I’m still seeing strong downward pressure on Chicago prices.
Im with clio on one point, Is there any study/data out there comparing amount of homes (for sale and not for sale) to foreclosures?
“In the past two years of watching the market and viewing dozens of places, I have not detected any great avalanche of foreclosures (or even short sales) in ELP (or even in ELV, where I also looked for a while).”
You keep mentioning that there are no “deals” in ELP (and/or ELV) when there have been short sales of vintage units selling at the 2000/2001 prices in ELV for quite some time now.
So I guess the question is- what is a “deal”? You seem to think that these prime areas have to go much lower for it to be so- when they are now down anywhere from 10% to 20%.
Yes- the reality is- that the prime neighborhoods ARE still holding up better than other areas. That’s the whole point about location, location, location.
No- you’re not going to get a 2/2 in ELP for $200k with parking, w/d, c/a. At least not this year.
So maybe you are simply being unrealistic? Prices have come down significantly everywhere in the city- but the prime areas are still in demand.
“I just saw that nationally- prices have fallen 6% in the last 2 months- basically wiping out all the gains from the tax credit”
As most people are quick to point out, real estate is regional. Sabrina, how are these numbers calculated? I mean, what if sales prices are down 30% in Las Vegas but are up 10% in New York, could you say that the average is down 10%? I know that there are more than two data points, but you get my drift…
Sabrina, thanks for confirming what I’ve been thinking for a few weeks. I’ve heard other people reporting the same too. It’s supposed to be a long cold winter too.
I think there’s a mix of pricing. Some (a minority) of listing prices are reasonable relative to the current market, many are not. Of the ones that are unreasonable (which I think of as 15+ percent), some come down over time, some get sold at a big discount to list, many (probably most) just sit there.
This is grossly unscientific, but I looked at homes I flagged as favorites on redfin in the spring. My reasons for favoriting were varied, but mostly homes that were within realm of possibility for us and where prices did not appear grossly unreasonable. And there were plenty of homes we were interested in that were not flagged. But generally I didn’t flag what I thought was really overpriced. Of the 12 I flagged, 7 sold, 3 have pending sales, 1 is off market, and 2131 Dickens is still for sale (although I haven’t looked at in person and I think anon just said it was prob a piece of crap). I don’t have time to look at sale v list prices of these right now, but I think most sold at relatively small discounts. So there are some that are reasonably priced, relative to the current market. Few (I think just one) of these were marked as short sale or foreclosure.
And every once in a while I see a place that sold at a surprisingly large discount off list (like that aspen 6 penthouse on damen in btown IIRC).
“Sabrina, thanks for confirming what I’ve been thinking for a few weeks”
Wait a minute… there is no “confirmation” here – this is just opinion and conjecture – put out there by fear mongerers. I tell you, wait until next year (or perhaps the year after) – once the economy gets better and all the sidelined players are back on the field, it will be a buying/renting frenzy. Seriously, people NEED a place to live and this is a priority for most – once they can afford it (and it WILL happen in the near future), the market will come roaring back. Most people on this site are too young to have gone through any major recession (housing and financial). When you are in one, it seems awful and there will be no end- then, slowly over a period of a couple of years, things turn around and you forget how “bad” you thought things were going to be. Seriously – ask any old timers – they are the best people to get some “true” advice.
ok so by looking at the foreclosures in “uppity” hoods we are not just paying our taxes to help out the less fortunate idiots, we are also paying to help out the FORTUNATE idiots.
F’ing this sucks i am moving to Peru or Uruguay
Prime areas are still in demand, yes, but prime areas also have a higher percentage of their residents still employed. Many make less money and have become more austere and they’re still making the mortgage payment to the detriment of other expenses usually paid for by disposable income.
Someone on other website I often visit said that this recession won’t be notable for it’s depth, but rather, for it’s length and duration. How long will the prime areas hold out? How long before the U of C professor type people finally throw in the towel and short sale or walk-away or what not? I mean really, are all these underwater owners going to hold out for years and years and continue paying on an underwater home until it’s finally paid off? Will Lincoln Park and Lakeview be filled with families of four living in 2/2’s for 20 years?
Unless of course, owners are waiting for the market to reinflate and the market to come back, but they shouldn’t hold their breath waiting for that to happen.
The dam will break and everything will crash in the prime area, and we’re already seeing the early signs that the foundation of the ‘prime’ areas is starting to crumble. Look out below.
” I mean really, are all these underwater owners going to hold out for years and years and continue paying on an underwater home until it’s finally paid off? Will Lincoln Park and Lakeview be filled with families of four living in 2/2’s for 20 years”
Everyone seems to forget that a LOT of these people, though underwater have great earning potential and have money in the bank. Not everyone (and I would dare to say, very few) homebuyers live paycheck to paycheck. Yes, of course there are irresponsible people out there who bought more than they could afford, but I would bet any amount of money that there are a significantly more people who are NOT underwater and if they are, DO have the income/assets to hold on. You guys don’t have to believe me, but please revisit these posts in 2 years when you are complaining that all the “foreclosures/short sales” have dried up and you guys have to live in Iowa to find anything affordable!!!
The 6% drop in national home prices is from Clear Capital’s index- which is similar to the Case/Shiller home price index.
They actually put this month’s data out early because the price plunge was so dramatic.
You can see the results and their methodology here:
http://www.marketwire.com/press-release/Market-Alert-Clear-Capital-Reports-Sudden-and-Dramatic-Drop-in-US-Home-Prices-1339566.htm
They are predicting another nationwide 10% decline in the next few months.
“U of C professor type”
As I keep on saying, he is fine. They have secure well paid jobs and he has significant additional earning power.
I casually predict another 20 to 25% price drop in the ‘prime’ areas over the next 24-36 months. Your $500k condo just got a hair cut to $375k in 2013; and the $800k house bought in 2003 is selling in the $600’s two springs from now.
” I mean really, are all these underwater owners going to hold out for years and years and continue paying on an underwater home until it’s finally paid off? Will Lincoln Park and Lakeview be filled with families of four living in 2/2’s for 20 years”
I agree with this assessment. Far too many people bought the 2/2 thinking they’d only have to live there for 3 to 5 years. 10 years or more? Not going to happen (due to kids and job changes.) What do they do now?
Due to the funny financing of the last few years (and continuing now with the 3.5% FHA down loan)- very few have anything in the property and most don’t have $50k or $100k to pay the bank to get out of the property.
It inevitably means a flood of short sales still to come in these neighborhoods when it becomes clear that the price is no longer the 2005 or 2006 price but more likely the 2001-2002 price- even in Lincoln Park.
I can’t tell you the number of people I know in this situation.
“what is a 1/1 without parking going for in the south loop. I know this is vague but l am looking for a ballpark idea of what my wifes condo might be worth in today’s market.”
Got a real chuckle over the typo.
Yeah, it all depends on many, many factors. Defining the south loop as Congress to 18th and looking at the last 3 months there were 52 closings. I’d say half were distressed and sold below 206K, though not all of the ones in the bottom half were distressed but most of them were. You get better pricing as you go east obviously and there are certain pockets like museum park that do better. Troubled areas are like that dead zone in the northwest corner. Of course, there are many, many exceptions. There were 7 units that closed between 320K and 420K. Oh…and most of the units have parking.
You’re doing pretty well if you can cover your out of pocket with rent.
From Clear Capital’s press release:
“Clear Capital’s latest data through October 22 shows even more pronounced price declines than our most recent HDI market report released two weeks ago,” said Dr. Alex Villacorta, senior statistician, Clear Capital. “At the national level, home prices are clearly experiencing a dramatic drop from the tax credit-induced highs, effectively wiping out all of the gains obtained during the flurry of activity just preceding the tax credit expiration.”
“The 6% drop in national home prices is from Clear Capital’s index- which is similar to the Case/Shiller home price index.”
Yeah, OK – so all this says is that investors snapped up foreclosures (which, as we all know are priced below “real” value). Nobody else is buying. What these idiots need to do is take the foreclosures and investors out and figure out what the prices are doing – is anyone else out there sick and tired of all of these “numbers” guys spewing out their idiotic calculations without accounting in other intangible factors? These morons clearly can’t see the forest through the trees.
“I casually predict another 20 to 25% price drop in the ‘prime’ areas over the next 24-36 months.”
Just to be clear, you’re predicting a drop from current selling prices? So this house for example would sell for $600-650K in two to three years?
http://www.redfin.com/IL/Chicago/2219-W-Shakespeare-Ave-60647/home/13356504
meh I could give two craps about how many forclosures there are, that’s a good thing as it means that finally all the non homeowners will be flushed out of their homes that they haven’t been paying for and the market will turn back to reality sooner than later.
Although it does annoy me that i still probably overpaid buying in march 2009, I don’t really care as i’ll probably be stuck in my condo for 7+ years and I can live with that since by then our dollars will be worth less than toilet paper and i’ll be able to sell my place for a million bucks
DZ: the u of c type guy has hundreds of thousands of dollars, maybe close to a million dollars in debt, with a flimsy repayment plan that takes 30 years of making the mininum payment. He sacrificed current consumption for future earnings. He’s just fine in the sense that he can just barely make his monthly payments.
“”“Has anyone else noticed that it’s like the holidays came early to the real estate market in 2010? New listings have slowed to a trickle. And I don’t mean just foreclosures either.”
Yes- homedelete- it is DEAD out there. Much slower for this time of the year than it should be (for new listings and sales.)
From what I’m hearing- many sellers are convinced that by next spring the market will be “better” so many are waiting until then to list.
I just saw that nationally- prices have fallen 6% in the last 2 months- basically wiping out all the gains from the tax credit.
Housing is double dipping. I’m still seeing strong downward pressure on Chicago prices.””
I repeat. Chicago sales down 29% in September. That is a 10 YEAR LOW!! And if you look at the Case Shiller for Chicago we’re about to go into a triple dip. We’ve already had the double dip.
“I can’t tell you the number of people I know in this situation”
Sabrina, we obviously live on opposite side of the universe!! I also can’t tell you the number of people I know who have a LOT of money and are waiting like vultures to snap up foreclosures/short sales and any deals out there (in fact, I actually don’t know anyone who is in any financial trouble – and this includes all of my secretaries, support staff, etc.). None of these people are underwater and none have any financial problems whatsoever – so does this make MY opinion fact? Obviously not – the truth is obviously somewhere inbetween.
“What these idiots need to do is take the foreclosures and investors out and figure out what the prices are doing – is anyone else out there sick and tired of all of these “numbers” guys spewing out their idiotic calculations without accounting in other intangible factors?”
In Chicago, short sales and foreclosures are about 40% of all the sales. How do you “take them out”?
They ARE the market.
“u of c type guy has hundreds of thousands of dollars, maybe close to a million dollars in debt, with a flimsy repayment plan that takes 30 years of making the mininum payment. He sacrificed current consumption for future earnings. He’s just fine in the sense that he can just barely make his monthly payments.”
He’s just fine in that he can afford his (very nice) lifestyle and still have some money for savings. He’s just fine in the sense that a tenured U of C law prof can make an extra $50K a year without putting out too much effort too much. He’s just fine in that his wife’s income will increase significantly over time. He’s just fine in the sense that he really has a lot of discretionary spending he could cut back on if he really had to (not that he wants to or needs to at the moment).
“Chicago sales down 29% in September. That is a 10 YEAR LOW!! And if you look at the Case Shiller for Chicago we’re about to go into a triple dip. We’ve already had the double dip.”
Thanks for the data Gary. Sales are dead. And this was with fantastic weather and record low mortgage rates.
We’ll get the “official” IAR numbers on Monday.
DZ: yes.
Its preposterous, I know. Yet in 2005 when I said prices would not just permanently plateau, but in fact, fall, I was laughed into an obscure corner of the internet visited by other fellow bubble watchers.
“In Chicago, short sales and foreclosures are about 40% of all the sales. How do you “take them out”?
They ARE the market.”
Exactly my point – these sales are falsely bringing down the average prices. What is the standard deviation? All you need is to factor in someone buying that 7 million dollar financial guys house (featured here a few weeks ago) and that will likely change numbers for the next quarter headlines – I can see it now: “Gold Coast comes back with an increase in average sales price: is real estate rebounding?” Idiotic idiotic idiotic misinterpretation of data. Whatever…. spew your misguided facts and inappropriate conclusions – time will tell who is right and who is wrong. Again, the people who probably know the best are the older people who have gone through this. Don’t listen to me – talk to these people. ALL of them will tell you not to panic and that prices WILL come back. Just buy in a good area… it is really not that hard!!
“He’s just fine in the sense that a tenured U of C law prof can make an extra $50K a year without putting out too much effort too much.”
I read his original blog post. If he could easily go out and make an extra $50k tomorrow- why isn’t he doing so so he could keep the gardner etc. that he all said he had to cut if the income taxes rise for those making over $250k?
He literally said he had just a few hundred dollars discretionary spending available at the end of the month.
If it was so easy to pick up another $50k grand to maintain his lifestyle, wouldn’t he just do it?
DZ, your assumption is that his tenured job is safe and that his income will only rise, which, at its core, is dependent on college students contining to borrow 40k a year to attend college indefinitely. And, the endowment will continue to grow through donations and interest
I don’t want to make either of those bets. Nothing is safe or sacred in this economy. Mr professor nay someday have to get a ‘real’ job away from the ivory tower.
“what is a 1/1 without parking going for in the south loop.”
There’s 3216 in 1720 S Michigan, short sale at 155k and that’s with the parking. The unit next to it 3217 was sold a month ago for 167k and has a much more awkward floorplan and no balcony. On the low end there’s definitely some deals out there… now the high end is a different story. People are very scared of losing money there it seems and hold on no matter what…
“He’s just fine in that he can afford his (very nice) lifestyle and still have some money for savings. He’s just fine in the sense that a tenured U of C law prof can make an extra $50K a year without putting out too much effort too much. He’s just fine in that his wife’s income will increase significantly over time.”
Thank you DZ – totally agree. These people’s income will be well over 400k in a couple of years. They are going to be just fine. I understand everyone not believing that people have money out there. I though the same thing until a few years ago when I really got a good look at what people say and what they have. People notoriously downplay their income/wealth/assets for whatever reason – maybe secondary gain from sympathy elicited from listeners? The majority of people are OK. Seriously, ask yourself, how many people do you personally know that lost their job or took a big pay cut. Then calculate that as a percentage of people that you personally know. I bet the percentage is much less than 10%. The majority of people are truly doing OK – psychologically, they don’t feel it because of the fear mongering, but financially they are OK. I, myself, have “felt” panicky and poor over the past year or two – but when I analyzed my financial portfolio, I realized I was actually a little better off than in 2006!!! Why the feelings of terror and hopelessness? – fear mongering by the media!!!
“ALL of them will tell you not to panic and that prices WILL come back. Just buy in a good area… it is really not that hard!!”
Prices always “come back”- just like with the NASDAQ- but how many years do you have?
I really wish I could find the link to a story in the Sun-Times I saw 3 or 4 years ago. It was an article by Terry Savage, the finance writer there (or at least she used to be there.)
She talked about a property on Lake Shore Drive in the Gold Coast that sold in 1928 for $1 million. We know what happened to the real estate market in the decade after that.
By the early 1970s the same apartment sold for the low $200,000s. Of course, if you bought it then- you were fine. Prices continued to slowly rise over the next 30 years so that it finally again sold for $1 million in 2000.
But if you were the original owner- well- the price finally DID “come back”.
At normal Chicago appreciation rates of 1% to 3% a year- it will take quite a long time for all of these current homeowners to see their prices “come back” and that’s once we actually start to appreciate again.
Heck, with realtor fees and the transfer tax- owners will need at least 3 years of 3% appreciation just to pay for those fees.
“I read his original blog post. If he could easily go out and make an extra $50k tomorrow- why isn’t he doing so so he could keep the gardner etc. that he all said he had to cut if the income taxes rise for those making over $250k?
He literally said he had just a few hundred dollars discretionary spending available at the end of the month.
If it was so easy to pick up another $50k grand to maintain his lifestyle, wouldn’t he just do it?”
He was trying to make an argument about tax policy. Remember he didn’t actually say he had to cut back, just that he would have to if taxes increased. Note that he also said he put money in the stock market toward savings, although he was vague about how much and didn’t say anything about kids college funds. Also, I am not fully familiar with the tenure process at U of C law and how it’s reflected in titles, but I think he may just have become tenured this year. That is the big asset he has now and one he rightly would have been fully focused on attaining. It wouldn’t have made much sense to take on significant outside work up to now. And, as I said, he didn’t have to in that he could afford his very nice lifestyle as is.
“DZ, your assumption is that his tenured job is safe and that his income will only rise, which, at its core, is dependent on college students contining to borrow 40k a year to attend college indefinitely.”
HD – you have got to be kidding!!! All you have to do is look at how hard it is to get a spot in the exclusive private preschool, k-8 and high schools all over the country (which charge 40k/year) and you will realize that there is an OVERABUNDANCE of people willing and able to pay 40k to fill these exlusive colleges. Seriously, that is one of the most ridiculous statements I have ever heard!!
“your assumption is that his tenured job is safe and that his income will only rise, which, at its core, is dependent on college students contining to borrow 40k a year to attend college indefinitely. And, the endowment will continue to grow through donations and interest.”
He has tenure (or at least I’m pretty sure he does) at U of C law school!
Clio,
in relation to the UofC professor, you richy rich folk will be ok if tough time hit you you have way more cushion and cut back to make before it get rough.
but as the trend is going there are less and less middle class to tax so the the tax burden will be on YOU and the UofC professor.
and it looks like its already causing him trouble
Oh clio, you are so far behind the 8-ball. I might start calling you Marie Antoinette.
well i’m sure we will all feel poor when we get our new tax bills after the elections 🙁
“but as the trend is going there are less and less middle class to tax so the the tax burden will be on YOU and the UofC professor. ”
Not exactly. The middle class, especially younger generations got hoodwinked with this latest healthcare bill.
Nary a word from the MSM on it:
http://www.bloomberg.com/news/2010-10-22/u-s-debt-is-child-abuse-laurence-j-kotlikoff-richard-munroe.html
The middle class IS going to pay more for their larger government of the future, they just don’t know it yet.
He’s a law professor??? That’s even worse because that bubble hasn’t yet popped. Oh boy! Mark my words!
“HD – you have got to be kidding!!! All you have to do is look at how hard it is to get a spot in the exclusive private preschool, k-8 and high schools all over the country (which charge 40k/year) and you will realize that there is an OVERABUNDANCE of people willing and able to pay 40k to fill these exlusive colleges. Seriously, that is one of the most ridiculous statements I have ever heard!!”
I agree with HD. The college education “bubble” will be the next one to pop and it’s going to be ugly. The middle class is totally tapped out and people are waking up to the fact that it’s stupid to take out $100k in loans (or more) to get a degree in history or photography from many of these private schools (or even the public ones).
This used to be “good debt” but even Suze Orman has been telling people on her show for over a year to not go to the high priced “dream school” if it means taking on the debt as it’s just not worth it.
HD- applications to law schools are actually already declining and just wait until undergrad students figure out that law students are not getting jobs.
“but as the trend is going there are less and less middle class to tax so the the tax burden will be on YOU and the UofC professor.
and it looks like its already causing him trouble”
Groove, I get it – but remember that the income tax rate is at one of the lowest levels EVER in its history. In the 60s, the highest tax bracket was in the high 60%-70% range!!! It was in the 50% range in the 70s. Rich people did FINE back then. We are NOT in uncharted territory -maybe for our generation, but not an a historic sense.
“HD- applications to law schools are actually already declining and just wait until undergrad students figure out that law students are not getting jobs”
uhhh – not eveyone who goes to college wants to be a lawyer.
i’ve been saying for years that the education bubble is unsustainable, i think we’re getting close to people saying “the heck with that, i’ll just go to technical school or community college instead for 2 years”
Applications are now falling at business schools as well (though they did spike in the last 3 years.) At Duke, they are actually reducing the $250 application fee to $50 if you go to a information session just to get people to apply.
Sonies- I think some parents will just say, “why don’t we send him/her to Brazil/China for a few years?” Heck, you could start a business in Costa Rica or Belize with the money you’d spend on an undergraduate degree.
Bob, debts that cannt be repaid will not be repaid. It doesn’t matter if its student loans, credit cards, mortgages or government debt. You’re crazy if you think that my generation is actually going to repay our dead parents and grandparents debt. You just wait and see how this issue will arise when we’re old.
“He literally said he had just a few hundred dollars discretionary spending available at the end of the month.”
I thik the point being made upthread was that a lot of the sepnding ie gardener etc is discretionary. Nobody’s going to die if the roses are a little mangy next summer. Simalarly, private school tuition. And lest I get a “PLEASE THINK OF THE CHILDREN” response, private school does not equal perfect children.
A lot of people are living paycheck to paycheck, how can these people afford to move out of a house/condo they overpaid for?
“Nearly eight-in-ten (77 percent) workers report that they live paycheck to paycheck to make ends meet. ”
http://www.careerbuilder.com/share/aboutus/pressreleasesdetail.aspx?id=pr584&sd=9%2f1%2f2010&ed=12%2f31%2f2010&siteid=cbpr&sc_cmp1=cb_pr584_
clio:
“Not everyone (and I would dare to say, very few) homebuyers live paycheck to paycheck.”
If the professor doesn’t hire the gardener then who will? How much discretionary needs to be cut collectively from the upper-middle class before it drags on the economy? The u of c professor is Stanley Johnson, just waiting to refi his note or consolidate his student loans to save a couple of bucks a month.
“The middle class IS going to pay more for their larger government of the future, they just don’t know it yet.”
Clio and Bob,
What middle class? its almost gone already (exaggeration)
“Groove, I get it – but remember that the income tax rate is at one of the lowest levels EVER in its history.”
great point the diff back then was there WAS a middle class an its proportion/population was a lot greater.
anyone have a link to the chicago map showing the shrinking middle cals hoods from the 70’s to 2000?
I’m on the razors edge of middle age (41), and have memories of the various recessions since the first oil embargo.
This current economic situation is vastly different than previous recessions in my lifetime. The S&L crisis of the late 80s also dealt with bad real-estate loans, including many large projects (highrises, etc.). But today, the number of financial devices that are directly correlated to mortgages have increased. These layers of leverage are going to drag us all down in ways most of us have never felt.
Do people really think that even if there is an education bubble and even if there is a law school bubble (and depending on what those claims mean, I don’t entirely disagree), tenured professors at U of C law school are in jeopardy?
He was just trying to make a political argument, using a very poorly chosen example.
” i think we’re getting close to people saying “the heck with that, i’ll just go to technical school or community college instead for 2 years”
This is such awful fear mongering that I am afraid some impressionable young people might read this and take this terrible terrible advice!! Believe me, big business/lawfirms/banks are NOT going to all of a sudden start hiring people from community colleges/trade schools. The absolute BEST thing you could do is go to the best school that “fits you” and for the profession you want to pursue. Period – to all the younger people out there, don’t listen to the idiotic advice about not going to school. It may not “make you” but is absolutely NECESSARY for the majority of jobs out there!!
“… that’s a good thing as it means that finally all the non homeowners will be flushed out of their homes that they haven’t been paying for and the market will turn back to reality sooner than later.”
The problem with this is that the buildings where these investors are being foreclosed, the owner occupancy rates aren’t high enough for banks to write mortgages. So unless that first-time buyer is paying cash, which is not likely, the property is going to sit.
And it seems that the underwater owners and their banks haven’t gotten the message in the cash-only buildings, and are still expecting prices that are near what’s owed.
Ahhh…The cost of higher education is one of my favorite topics. I have maintained for quite some time that the rising cost of college is unsustainable. There are only 2 areas of the economy that have not only not experienced any productivity gains but are actually rising at more than the rate of inflation. One is college and the other is health care. Neither are sustainable at these rates because eventually they would become the entire economy. Colleges are pissing away money and clinging to outmoded educational models. I am convinced that there is way more facility square footage per student today than there was 30 years ago. I’d love to see the data. In addition, in this day and age you don’t need all these resources to teach someone. Let’s face it…after you’ve been out of school for 20 years 95% of what you know was not learned in a classroom. How did you learn it?
And to Clio’s point about people still forking over $40K/year for private education. I don’t know what world you live in but I happen to be familiar with a sub-segment of boarding schools that people HAVE to send their kids to and those places are shutting down.
““Nearly eight-in-ten (77 percent) workers report that they live paycheck to paycheck to make ends meet.”
This, again, is such idiotic “data”.
First of all, it is self-reporting – which is not good data.
Second of all, there is a selection bias – do you think high earners/ceos/cfos/doctors/highendlawyser are going to take the time out and take this type of survey – I know that I sure wouldn’t!!!
Thirdly, not everyone out there is a home buyer – what is the percent of workers that rent? these people should be separated when applying this to home owners and the future of real estate.
“Let’s face it…after you’ve been out of school for 20 years 95% of what you know was not learned in a classroom. How did you learn it?”
Absolutely 100% true – but you NEED that education to get a job – that, my friend is also 100% true. Believe me, I wouldn’t have gotten my current job had I not trained at Harvard and Stanford – period – no question about it. Are there people at U. of I. that are smarter than me – absolutely – but those people didn’t get the job. I didn’t make the rules – I just played by them and won!!
“I happen to be familiar with a sub-segment of boarding schools that people HAVE to send their kids to and those places are shutting down.”
Phillips Exeter, Phillips Andover, Sidwell Friends, the Chadwick school (where my daughter goes) along with many many many others will NEVER ever close. Maybe the lesser performance private schools which are smaller and never achieved anything close to what a public school could provide, may close, but not the good ones.
clio:
“I didn’t make the rules – I just played by them and won!!”
Please define what winning means, won what exactly?
“Sonies- I think some parents will just say, “why don’t we send him/her to Brazil/China for a few years?””
LOL well that might happen if the parents really hate their kids, I know I wouldn’t want my kinds going off to china or brazil! But its funny and sad that it costs probably less to start a business there than a useless liberal arts degree from a tier 1 school here in the states
You say you’re divorced and your daughter goes to school out in LA, so I assume you rarely see her. Yeah sounds like you’ve won alright.
“You say you’re divorced and your daughter goes to school out in LA, so I assume you rarely see her. Yeah sounds like you’ve won alright.”
Low blow brother, too low
“Please define what winning means, won what exactly?”
Let’s see, I guess winning means:
1 – working 80 hours a week in a highly stressful environment
2 – being available every other night at a moments notice
3 – being chained to a residence in the suburbs
4 – losing my wife, girlfriend b/c of the job
Boy, I sure AM a lucky guy!!! Maybe I should consider going to a technical/trade school!! – actually, all kidding aside, i really do love my job and couldn’t have gotten it without the education that I had!!
Natuonally, Student loan debt is larger than credit cards. Is that a bubble?
clio you’re a moron, you will be way better off not taking on any student loan debt and going to a technical school than going to some crappy liberal arts college and assuming 150k+ of debt. no contest. and you’ll probably have a much easier time finding a job that isn’t completely soul crushing (like sales)
Nope no bubble to be seen:
http://www.nytimes.com/imagepages/2008/12/03/education/03college.web.html
thanks groove for the support – but, probably like you, I am extremely confident and secure in my relationships with my kids!!! I am not affected by what others say (with regard to my kids – I just block it out)!!
also FYI clio, intelligent people typically don’t use the word “gotten” when writing
“clio you’re a moron, you will be way better off not taking on any student loan debt and going to a technical school than going to some crappy liberal arts college and assuming 150k+ of debt.”
True – but I am not talking about a “crappy liberal arts college” – we were discussing elite boarding and private schools and motivated young people pursuing “high-paying” careers. You are right, if you are a “C” student with no aspirations to go into one of these careers (and there is NOTHING WRONG WITH THAT) then you are right – a technical school or 2-year college or other training might be a much better way to go.
“also FYI clio, intelligent people typically don’t use the word “gotten” when writing”
Intelligence has nothing to do with grammar – that is education – further emphasizing the importance of obtaining one!!!
“Intelligence has nothing to do with grammar”
i sekond dat!
“i sekond dat!”
Spelling and capitalization, on the other hand,….
There is bubble in education. However, that bubble is going to affect lower tier schools more so than the upper tier. Way too many schools are trying to charge Ivy League tuition for community college degrees. Parents and students are wising up to that game.
Certain schools do offer more opportunities than others. Just a fact of life. The doors opened with a degree from HBS, Stanford, Kellogg, UofChicago, Wharton, and the like are quite different from say Depaul. This is at the undergraduate level as well as the graduate level. The initial career opportunities that you get are what really put you on certain paths and careers.
This country really does need to focus on getting more people into vocational schools as well. Everyone isn’t cut out for college just like everyone isn’t cut out for home ownership.
The foreclosure numbers don’t mean jack without knowing the total housing units in those areas. the number of foreclosures is still relatively small part of the housing universe. the problem is that they have an inordinate impact on their surrounding communities, particularly if they are concentrated in a condo building or neighborhood. People also forget that the number of housing units increased quite a bit as well so it only makes sense that the raw numbers of foreclosures would increase too.
People aren’t nearly as bad off as some on here like to make it. I look at a ton of folks incomes daily (90% of which are in the Greenzone) and most I see are doing ok. In fact, I would say 15% of the refinances I am working on have people putting equity into their places.
Things aren’t great, but the sky isn’t falling imho.
jeez, Russ, you basically summed up this whole thread with one post!! I am really impressed!! You should write for “cliff notes” –
“big business/lawfirms/banks are NOT going to all of a sudden start hiring people from community colleges/trade schools.”
True, but maybe the guy (or girl, hey inclusive!) that works on my car, builds my house, or whatever dosen’t need a pricey 4 yr degree…
There are opportunities for those who don’t go the 4 yr college route some do 2 yr and don’t work in a high powered career, some go 4 year and get a mid level white collar job, some get a cert after that and still others go on to more education and some of those will become fabulously wealthy (like yourself). Here’s a secret, there is no one path to success. Sometimes your personal definition of success limits you to the number of viable paths. There is a correlation to levels of education and wealth but remember that the education did not, in anyone’s case (even yours) CAUSE that person to be wealthy. The level of dedication and committment you have to whatever it is causes the wealth.
This misplaced idea of causality has driven many into getting more education. While it opens doors, it seems to also breed a sense of entitlement that may represent the “bubble” people have pointed out.
Housing and higher education are part of the same credit bubble. Pricing for both have been disproportionately driven by credit availability rather than underlying value.
Here are the historical September closings of condos/townhomes in Lincoln Park. Remember that these numbers are to be considered in the context of the explosion of total units over time.
1988 104
1989 111
1990 72
1991 93
1992 109
1993 128
1994 140
1995 141
1996 132
1997 149
1998 119
1999 116
2000 130
2001 111
2002 136
2003 170
2004 182
2005 213
2006 104
2007 124
2008 73
2009 82
2010 45
Further price declines will occur. That is all that will clear the pent-up inventory. Of course, many will choose to continue to feed the alligator if they are financially able. That is certainly what the banks and govt (redundant, I know) desire. They will continue to lower rates while only slowing price declines in order to keep the delusional paying on an overloaned “asset.” Meanwhile, those who are smart and wealthy enough to get out, along with the dead, divorced and debt-ridden who always are sellers, will continue to set the market prices on the way down.
Dr. Funkenstein,
Thanks for the link. That’s exactly what I’m talking about. Always wanted to see the data. Unsustainable.
“also FYI clio, intelligent people typically don’t use the word “gotten” when writing”
Unless they’re using the past participle of the word “got,” perhaps?
Joe T. – beautiful
“Meanwhile, those who are smart and wealthy enough to get out, along with the dead, divorced and debt-ridden who always are sellers, will continue to set the market prices on the way down.”
uhhh G – where are these “smart” people going to live? Do you really think that the “smart and wealthy” people are going to rent? come on, give me a break!!!
You should never use “get, got, and alot” when writing
you never took english 2 in high school? 😉
I’m still pretty bearish on RE, but I am under contract to buy. It is a condo in a great location, has pretty much everything I wanted, doesn’t have a bunch of distressed sales in the building, has good reserves, hasn’t been taken over by renters, wasn’t a short sale or foreclosure that could pose closing risks – it was just someone who bought a few years ago during a short job transfer to Chicago bought thinking it would go up while they lived in it and is moving on after taking a massive haircut and moving out of Chicago. I’m buying under the pre-construction price from 2001 (well below on nominal terms) and it is way under rent parity. If a buyer’s wish list is as picky as mine in terms of location, building perks, reserves, no renters, no distressed sales or pending foreclosures in the building, etc., there’s actually not that much out there. But the 2/2 McCrap boxes in the South Loop and West Loop that have a ton of foreclosures, no reserves and are full of renters are going to continue dropping because no one other than specuvestors want those things and a lot of them have new lease restrictions (to qualify future buyers for financing) that actually push the specuvestors out of the market.
The problem I ran into is that I have too much cash and I can’t find anywhere to park it that doesn’t pose darn near as many risks as RE at today’s prices (I think I got a decent price), so buying a place finally made sense for me. As bearish as I am on RE, I think with rates this low and with a good likelihood the Fed is going to do something really stupid, I don’t want to hold too much cash and I don’t want to go too heavy on stocks and I am not touching long maturity bonds with a 10 foot pole right now.
“uhhh G – where are these “smart” people going to live? Do you really think that the “smart and wealthy” people are going to rent? come on, give me a break!!!”
clio, whoever said they will rent? Quit making things up. They will cut their losses on their condos and start moving up again just like always. They will see the futility in waiting for a recovery that can only occur with lower prices. They will help set the prices on the way down.
You really cannot comprehend this eventuality?
I think part of the issue here is the income inequality in this country. This may be contributing to people like myself having a differing viewpoint from people like clio. I’m assuming clio and his friends are in the top 1 percent of income(AGI over $380,354).
“During the last period of economic expansion, 2002 to 2007, the top 1 percent enjoyed 10.1 percent annual income growth, adjusted for inflation. For the other 99 percent, the growth rate was just 1.3 percent, Saez found. That meant the top 1 percent received 65 cents of every dollar in income growth.”
http://news.yahoo.com/s/nm/20101022/ts_nm/us_usa_economy_inequality?huhyoumeantherichgettingricherisntalwaysagoodthingshocking
AGI Source:
http://www.taxfoundation.org/news/show/250.html
“They will cut their losses on their condos and start moving up again just like always.”
So, are you predicting prices rebounding in the high end market?
Does anyone have the stats for Uptown?
No. Why would that be the case with so few who are wealthy and smart currently holding the bag on a condo and a massive oversupply of high end properties?
But, there are enough (like in PermaBear’s case) who will sell and establish comps on the way down.
What stats, Jason?
Sabrina – You are supposed to be on vacation this week. Are you back already or is it raining where you are at today? Or are you just one of those people that is hanging at the pool with the Blackberry going full speed ahead?
Relax….enjoy…..have another drink….take a nap! Let CC run itself for a day or two you have earned the time away!
“From what I’m hearing- many sellers are convinced that by next spring the market will be “better” so many are waiting until then to list.”
coming to this very late and haven’t read through all comments but another reason for removing listings until spring might be to let enough time lag so it isn’t so obvious that the owner has been trying to unload the property for a long time.
I know we’ve said it shouldn’t matter, but apparently it does.
“Exactly my point – these sales are falsely bringing down the average prices. What is the standard deviation? All you need is to factor in someone buying that 7 million dollar financial guys house (featured here a few weeks ago) and that will likely change numbers for the next quarter headlines – I can see it now: “Gold Coast comes back with an increase in average sales price: is real estate rebounding?” Idiotic idiotic idiotic misinterpretation of data. Whatever…. spew your misguided facts and inappropriate conclusions – time will tell who is right and who is wrong. Again, the people who probably know the best are the older people who have gone through this. Don’t listen to me – talk to these people. ALL of them will tell you not to panic and that prices WILL come back. Just buy in a good area… it is really not that hard!!”
Actually, Clio, both the Case Shiller and the HDI methodologies are based on a repeat sales perspective (i.e. they look at price changes in like for like propoerties that have sold). They are not calculations of average sales prices. As such, the $7mm house will have no impact on the average price unless it was sold at a significant gain or loss. Any competent, seasoned real estate investor should know that.
“Do people really think that even if there is an education bubble and even if there is a law school bubble (and depending on what those claims mean, I don’t entirely disagree), tenured professors at U of C law school are in jeopardy?
He was just trying to make a political argument, using a very poorly chosen example.”
Trying to make sense to the people who are disagreeing on this point is pointless.
Uptown September Closed Condo/TH History
Year Closed Median
1988 41 $80,000
1989 24 $62,200
1990 33 $89,000
1991 37 $88,250
1992 25 $90,000
1993 33 $97,500
1994 53 $93,500
1995 66 $90,250
1996 72 $113,950
1997 78 $127,750
1998 87 $133,500
1999 63 $163,000
2000 60 $193,000
2001 87 $219,900
2002 100 $196,600
2003 124 $225,000
2004 157 $231,000
2005 105 $250,000
2006 108 $236,750
2007 80 $275,000
2008 63 $287,500
2009 66 $243,250
2010 34 $157,500
“Any competent, seasoned real estate investor should know that.”
uhhh, as a competent, seasoned real estate investor, I don’t rely on number-crunchers sitting in an office in Toledo Ohio (or wherever) telling me about what is happening in the real estate market. Most “competent and seasoned real estate investors” rely on their experience, common sense and specific data regarding the investments they want to purchase.
“Most “competent and seasoned real estate investors” rely on their experience, common sense and specific data regarding the investments they want to purchase”
Is that what went into your earlier comment below?
“I tell you, wait until next year (or perhaps the year after) – once the economy gets better and all the sidelined players are back on the field, it will be a buying/renting frenzy.”
Did you mean that price declines will be great enough by then to get the market moving again?
Sabrina:
Any firm based in Truckee, CA is automatically suspect. You think because someone puts out a press release their data is good?
Clear Capital? Really? Give me a break.
Wait until next Tuesday. CS will be flat, again. Next…
Things in Uptown are pretty ugly: http://lucidrealty.com/uptown_market.htm
“If a buyer’s wish list is as picky as mine in terms of location, building perks, reserves, no renters, no distressed sales or pending foreclosures in the building, etc., there’s actually not that much out there.”
Perma — how can you be sure there won’t be renters in the future? Did you check the bylaws for rental restrictions?
What are reserves per unit? Above 3k? A 2001 building is about to experience a lot of repairs because it’s 10 years old now. New roof might only be 5 years away.
Uptown is the worst neighborhood on the north side, with the exception of maybe Rogers Park but its neck and neck.
No stretch with that call, JMM. That is because CS is a 3 month moving average and next week’s release will be June-July-Aug numbers. BTW, what do you consider “flat”?
“You think because someone puts out a press release their data is good?”
I meant to ask you how good the rent price data you mentioned the other day were.
“Did you mean that price declines will be great enough by then to get the market moving again?”
uhh no – I meant that people are getting restless and are tired of waiting for the market to “crash”. Unlike the stock market, the real estate market affects our everyday life. Even “permabear” has gotten off the couch and bought. More and more people will start buying… (even investors are really eager to buy). Of course real estate prices are going to go up in the next 5 years. Anyone who thinks otherwise is seriously living in “fantasyland”.
DZ — get a realtor. Remember, “every market is different”
G – Flat = where we have been since March 2009 (120-125). And thanks, I am well aware of how CS is calculated.
Clio, how is permabear entering the market proof of your “reality”?
Per permabear: “I’m buying under the pre-construction price from 2001 (well below on nominal terms) and it is way under rent parity. If a buyer’s wish list is as picky as mine in terms of location, building perks, reserves, no renters, no distressed sales or pending foreclosures in the building, etc., there’s actually not that much out there.”
I do sincerely hope you keep betting your hunches, though.
“Nearly eight-in-ten (77 percent) workers report that they live paycheck to paycheck to make ends meet. ”
Funkstein, how many of those workers are also homeowners? That is the subset you need to focus on. Since 60% of Chicago is a renter, I think you need to recut the data.
“Further price declines will occur. That is all that will clear the pent-up inventory. Of course, many will choose to continue to feed the alligator if they are financially able. That is certainly what the banks and govt (redundant, I know) desire.”
Price declines have to occur, at least in the short-term and in the buildings where no lending is happening. Unfortunately, sellers, and the note-holders for short sellers, haven’t seem to have gotten the message yet.
And until that happens, the previously first-time buyers who are now sellers, who want to move up and can afford to move up, will be stuck.
I’ve placed fair cash offers on several short-sale condos in cash-only buildings for an in-town, but either the seller or the bank in every case thinks that the property is worth more than my offer, even as these properties have been languishing for months with no other offers. They seem think that buyers will soon be lining up for these properties. However, first-time buyers can’t finance them, flippers can’t paint, carpet and flip them, and investors don’t want to tie up that much cash for a bit of rental income with no hope for liquidity for at least the next couple of years and maybe more.
Eventually, Econ 101, supply sans demand will drive the prices down, but right now, they still seem to be artificially inflated.
“G – Flat = where we have been since March 2009 (120-125). And thanks, I am well aware of how CS is calculated.”
It wasn’t meant to inform you.
BTW, when do you see it breaking that range, and which way?
“Clio, how is permabear entering the market proof of your “reality”?”
Just using an example to which people on this site can relate. If you buy in a good area/good building (as permabear states he/she has), you will be fine and actually will probably end up making money. While it is true that some areas will continue to flounder and flop, there are MANY MANY MANY MANY MANY areas out there that are ripe for the picking.
clio, there are not just “areas” ripe for the picking…
“The reason I get so frickin angry at this data is that I just don’t see any bargains out there!!! I absolutely 100% am itching and chomping at the bit to buy something else but can’t find ANYTHING ANYWHERE that is a deal.”
“there are MANY MANY MANY MANY MANY areas out there that are ripe for the picking.”
“It wasn’t meant to inform you.”
Good. It didn’t.
“BTW, when do you see it breaking that range, and which way?”
I don’t.
“G – Flat = where we have been since March 2009 (120-125). And thanks, I am well aware of how CS is calculated.”
It already has broken that range since March 2009.
“clio, there are not just “areas” ripe for the picking…”
G- are you an ostrich or are you being sarcastic? Great buildings in the gold coast, streeterville, l.p. and houses in great suburban areas (kenilworth, oak brook, hinsdale, winnetka) are absolutely 100% ripe for the picking. Buy smartly in these areas/buildings and you will not only likely be OK – but you will likely make money from your purchase in 10 years.
“Eventually, Econ 101, supply sans demand will drive the prices down, but right now, they still seem to be artificially inflated.”
Joe, you seem frustrated that your offers haven’t been accepted. But remember, market price is where a seller and buyer meet. So, you might not be at market. Who wouldn’t like to buy a home 20% below market? Problem is finding sellers who will take you up on that.
“It already has broken that range since March 2009.”
You asked a prospective question, not a historical question. And I do not consider 130 breaking the range. The fact is you have had 18 months of CS data that have been flat.
DZ – yeah, I know that those two statements are seemingly contradictory, but if you read closely, they are not – there ARE many areas that are ripe for the picking, there just isn’t much “fruit” on the trees.
“…It is like going into a great bar – you tend to only notice the gorgeous people – all the others blend into the background – but if you actually compare the number of gorgeous people to average/ugle people, the percentage is very small. …”
I picture you as a slightly older version of Ryan Seacrest 🙂
“G – Flat = where we have been since March 2009 (120-125). And thanks, I am well aware of how CS is calculated.”
So, you meant to say (120-130) above? I mean, you said you know how it was calculated when your call made it obvious that you did. But now I am concerned that you know how to read it.
“The fact is you have had 18 months of CS data that have been flat.”
The fact is the housing market has been sustained since mid 2007 with an unprecedented amount of government intervention. Which I believe to be unsustainable and finally coming to an end. Next Tuesday will give us the first glimpse of what our future has in store.
I do agree with you that if the CSI is flat next Tuesday, that does indeed say good things about the stability of Chicagoland real estate, as CalculatedRisk was saying its going to be a bloodbath.
I don’t expect the CSI index released next Tuesday to be flat, however and I think there are significant declines in store for the winter.
“and finally coming to an end. ”
Beginning to come to an end. The Federal Reserve has embarked on a new six month, $600B program to artificially suppress interest rates. But that intervention is minor compared to what was done over the past 38 months.
clio – I am bad anecdotal evidence – I bought for right at 1:1 purchase price to income and I am over 2:1 assets to purchase price and I don’t have any material debts. Though in pure numbers there are a fair number of people who could probably say the same, as a percentage of the population who are currently renting or not underwater and looking to buy another place it is probably very small. I’m just really uncomfortable going too heavy on stocks, will not touch long bonds and am getting sick of holding cash at around 1% interest – I found it was a good opportunity to move into a much nicer place and actually cut my monthly expenses barring a material problem with the building or my unit. I agree there is a lot of cash sitting on the sidelines, A LOT, but it is not held by entities or individuals that are going into the market for the condos or single family homes currently on the market and it will take a miracle for that sidelined capital to be poured back into mortgage backed securities other than those backed by Uncle Sugar, meaning stabilization of prices is probably still a ways off. If I live in my place for 10 years and end up taking a 20% haircut plus closing costs, I’m a big boy and can handle, but the vast majority of Americans cannot.
G —
Strike “where have been”, substitute with “where we were”. Then, remove head from heiny.
Rinse, lather, repeat.
“So, you meant to say (120-130) above?”
And, of course, that isn’t even the actual range since Mar-09, during which period it’s been as high as 132.13 and as low as 119.71.
“as CalculatedRisk was saying its going to be a bloodbath.”
Bob, please post where it called the CSI index being a bloodbath when August is included?
“I do agree with you that if the CSI is flat next Tuesday”
Are you talking about the original CSI, CSI Miami, or CSI NY? – and how does this relate to real estate in chicago?
JMM- a bit frustrated, but more slightly amused. You’re exactly right about market price, but if the prices being asked were at market, there’d be buyers. And from what I’m seeing, where my offers are, I’m it.
I’m lucky in that I don’t have to buy- I just want to buy. I don’t need an in-town, I just want one. Eventually, someone will break down and accept an offer. It’s not like a short-seller is going to be walking away with more money if I suddenly up my offer.
“And, of course, that isn’t even the actual range since Mar-09, during which period it’s been as high as 132.13 and as low as 119.71.”
Ever heard of seasonally adjusted data? Do you think Chicago doesn’t have a seasonal RE market?
Thanks for checking though.
Sure thing, there, JMM. You obviously know what you are talking about.
Last year it was Gary Lucido stating all over the local websites that the March 2009 CS was the bottom. Of course, that call was a loser by March 2010. That 120 call by JMM will be a loser, too.
” Eventually, someone will break down and accept an offer.”
uhhh- don’t hold your breath.
“Ever heard of seasonally adjusted data? Do you think Chicago doesn’t have a seasonal RE market?”
You mean the SA data that shows 12 of the 17 monthly indices since March 2009 that were above your stated range of 120-125?
Joe,
In all seriousness – if you are looking for an in-town, don’t just look at the bargains. I made that mistake and end up buying 5 in-towns (because they were bargains) before biting the bullet and spending “fullprice” for an in-town that suited my lifestyle. Bottom line is that your life is waaaaay more important than saving a few bucks. Buy what you WANT and not because it is cheap and DON’T fool yourself, rationalize and compromise. Within a few months/years, you will find yourself looking again!!!
“Bob, please post where it called the CSI index being a bloodbath when August is included?”
On Case-Shiller House Prices: October is the “Witching Hour”
http://www.calculatedriskblog.com/2010/08/on-case-shiller-house-prices-october-is.html
Okay maybe not a “blood bath” but rather “witching hour”, same thing implied. October is going to be a key test if you read this article as well as the two articles referenced within.
If the CSI stays constant that says very, very good things about the strength of the Chicagoland housing market and even I’d be taken aback a bit.
Wait a sec – I made a mistake. Only 11 of the 17 months were above 125. June was right at 125.00.
See how easy that is?
clio – someone will accept an offer. Taking a 6 figure loss makes one gulp hard, but playing extend and pretend like banks and many sellers are doing right now assumes that someday down the road an offer will come along that exceeds the carrying costs of leaving a place on the market until that offer comes along. The place I bought had been on the market for over a year, but the sellers wouldn’t cut the price. They moved out of Chicago and my guess is they got finally sick of carrying the place for over a year and realized what was happening out there and wanted to just get out and sever their carrying costs even though they took a 6 figure loss. If QE2 starts some inflation and the banks’ capital costs rise, they will wise up to this new reality as well.
clio- I have the patience of the Buddha.
“Any firm based in Truckee, CA is automatically suspect. You think because someone puts out a press release their data is good?
Clear Capital? Really? Give me a break.”
Keep drinking the kool-aid.
By the way- California’s September numbers were out today (ours are out on Monday.) Brutal there as well. One housing expert calling it “paralysis” as sales plunged. In the bay area- second worst September for sales in 19 years.
who cares about all of these numbers when we are talking about individual condos/houses in a specific area. Does it really matter that house prices are low in Las Vegas or Uptown when you are looking at a million dollar condo in the gold coast? Come one, you guys have to realize that these numbers are idiotic and have little meaning to individual home buyers/investors. If this discussion is about intellectual sparring, then that is great – but I really hope you guys don’t think that any individual is basing their decision to buy a house on these numbers – because they are not!!
Joe T., patience is the key and lowering your next bid when someone calls you back from months prior will be very satisfying.
“I am not touching long maturity bonds with a 10 foot pole right now.”
Permabear:
Check out RYJAX to play the next bout of sovereign concerns and bond vigilantism.
“If QE2 starts some inflation and the banks’ capital costs rise, they will wise up to this new reality as well”
am I really stupid or something? – what does the Queen Elizabeth II have to do with real estate?
“Joe T., patience is the key and lowering your next bid when someone calls you back from months prior will be very satisfying”
Yeah- and so will marrying a super model – but neither are likely to happen. So keep dreaming….
please tell me you’re joking
“am I really stupid or something? – what does the Queen Elizabeth II have to do with real estate?”
“but I really hope you guys don’t think that any individual is basing their decision to buy a house on these numbers – because they are not!!”
You are correct, they most certainly are not. But, those who are not buying might just be. And given sales volume, they appear to be in the vast majority.
“If this discussion is about intellectual sparring, then that is great – but I really hope you guys don’t think that any individual is basing their decision to buy a house on these numbers – because they are not!!”
Clio- weren’t you just arguing a week or two ago that it is all psychological? If that is true- don’t you think homebuyers are reading articles about home prices dropping (again) in the Hamptons and how the $10 million house in LA is now $5 million (so they are selling again because the prices have come down so much)? The gold coast buyer isn’t reading those things?
clio- You’re right about buying what I want. And in the end, I may pay more than what I’m currently offering if it means getting a deal done, but on the other hand, being a bargain isn’t my only criteria. My offers are on places where the only compromise is price. I’ll only buy if it’s priced right, and I’m still seeing banks trying to prop up prices artificially. I won’t let emotion overrule my wallet.
“Last year it was Gary Lucido stating all over the local websites that the March 2009 CS was the bottom. Of course, that call was a loser by March 2010.”
Yeah, I’ve been waiting for you to bring that up. Fact is though that the CSI has not materially breached that low since and it’s above that currently (for SFH at least). Now, all bets are off going forward because there needs to be some serious adjustment to clear the inventory. On the other hand homeowners may all get bailed out when the dollar is worth half as much as it is today.
” The gold coast buyer isn’t reading those things?”
Sabrina, to be really honest with you, i am not sure if they ARE reading anything at all. Most people buy places for other reasons and are not as concerned about getting a “great deal”. Most buyers are looking because of school, space, and location issues. To them, as long as they can afford the house/condo, they really don’t care about the rest of the world (and they shouldn’t).
“Stock prices have reached what looks like a permanently high plateau.”
– Irving Fisher, Ph.D. in economics, Oct. 17, 1929
“Home sales are coming down from the mountain peak, but they will level out at a high plateau — a plateau that is higher than previous peaks in the housing cycle.”
– David Lereah, Chief Economist, National Association of Realtors
“You asked a prospective question, not a historical question. And I do not consider 130 breaking the range. The fact is you have had 18 months of CS data that have been flat.”
– JMM on October 22nd, 2010 at 11:26 am
Is JMM calling a ‘low plateau’?
Recently I have seen some deals in Lakeview. I’m talking about relatively newer condos (12yrs old) on Melrose for 125k. Doesn’t include parking but that one is basically a compkiller for every other 1/1 around.
Its properties like these and that townhouse on Wood St that will set the comps on the way down. All the other sellers are either stuck or royally scr_wed.
permabear – congrats on going under contract. I’ve always said that 1999 prices are where we’re headed generally and 2001 pre-construction pricing is a huge step in that direction. sounds like you found a deal.
I wish no harm on realtors or brokers or anyone involved in real estate – but as we all know (or at least admit privately) – significantly lower prices are a necessary element to increase sales volume so that the real estate market can return to health.
hd – I ran the numbers through the CPI calculator and in real terms, the price I am paying is over 25% under the 2001 price. Your 1999 call is getting close right now, at least in real terms, let’s just see if it goes there in nominal terms.
“am I really stupid or something? – what does the Queen Elizabeth II have to do with real estate?”
yes, it is the commoner reference to the Fed’s second round of Quantitative Easing…
GOD SAVE THE FED!
Oh it will. I have no doubts.
“let’s just see if it goes there in nominal terms.”
The other interesting thing from the Woodstock report is that the filings of things coming into foreclosure are still much higher than the completed auctions. For instance, in the city of Chicago the foreclosure filings in Q3 were 5.7k while the completed auctions were 3.2k, indicating that the shadow inventory is likely continuing to build at a rapid pace. You can see the report at http://www.woodstockinst.org/.
Clio, I hope you’re joking on the QE2 comment. Most people I know that spent a lot of time at the schools you claim to have attended are aware of the current meaning of the acronym.
“Wait a sec – I made a mistake. Only 11 of the 17 months were above 125. June was right at 125.00.
See how easy that is?”
You can use Excel, sort of. You are apparently too stupid to use the >= operator instead of >, but yet anal enough to correct it and waste my time with yet another post. Most of all, you are dumb enough to believe 125.13 is materially different than 125. Or 125.01, or 125.48, or 125.99.
Jackass.
“Fact is though that the CSI has not materially breached that low since and it’s above that currently (for SFH at least).”
Really, Gary? The fact is that you blew that call. You made the Mar 09 bottom call when CS peaked in Sept 09 at 130. Funny thing is, over the numerous comments over several months here and elsewhere when you reasserted your call, you never once mentioned that actually reestablishing a low would be immaterial, anyway. Now, you raise it as a fact?
“Now, all bets are off going forward because there needs to be some serious adjustment to clear the inventory.”
Fact is though, that has always been the CC response to the bottom calling here.
JMM,
How about 127.35 or 128.46 or 130.00 or 128.61 or 127.63 or 126.38? They appear to be out of your range as well.
Why must you reply with ad hominems when being corrected? A simple “thanks” will suffice.
blah blah blah if you’re so smart G, why don’t you go out on a limb and make a prediction… being a douche and calling him out even though you haven’t made a prediction of your own is pretty weak.
I did make my prediction in reponse to Gary: http://cribchatter.com/?p=8000#comment-59396
What prediction did JMM make? That the CS SA index will stay range bound at 120-125? I’ll take the don’t.
Did anyone else notice that the woodstock report quoted in the Trib article claims that 96% homes entering the foreclosure process were eventually repossessed by lenders, as opposed to coming current, short-sale or loan modding?
The article doesn’t articulate that ponit very well but at least that’s the way I read it:
“Woodstock also found a rapidly increasing flow of properties exiting the foreclosure process and becoming bank-owned. For the region as a whole, the number of completed foreclosure actions rose to 9,539 properties in the six-county area, a 44.9 percent increase over 2009’s third quarter. More than 96 percent of those homes were repossessed by lenders.”
CS SA Index
124.52 March 2009
125.01 April 2009
125.48 May 2009
125.13 June 2009
127.35 July 2009
128.46 August 2009
130.00 September 2009
128.61 October 2009
127.63 November 2009
126.38 December 2009
125.99 January 2010
124.70 February 2010
121.77 March 2010
123.17 April 2010
123.70 May 2010
125.00 June 2010
125.13 July 2010
“Did anyone else notice that the woodstock report quoted in the Trib article claims that 96% homes entering the foreclosure process were eventually repossessed by lenders, as opposed to coming current, short-sale or loan modding?…”
I noticed that and think it’s pretty interesting when you look at the large gap between the foreclosure filings and foreclosure auctions (filings are much higher).
JMM should have changed his ‘permanently low plateau’ prediction to 120-130 rather than 120-125.
I think we’ll break below the 120 barrier this winter. I’ll have egg on my face if I’m wrong, but I’m willing to go out on a limb here (which in reality i don’t think is much of a risk at all!)
LVSFH: Shadow inventory is huge.
Loan mods aren’t helping either. Most, and by most I mean nearly all of them, will eventually end up in foreclosure at some point in the next 40 years (40 years because many of them have terms that were extended to 40 years to lower the monthly payment!).
holding back properties has clearly failed miserably. now the market is practically frozen, nothing is selling, and the backlog grows larger every month. how are they going to get out of this predicament?
“You made the Mar 09 bottom call when CS peaked in Sept 09 at 130.”
So, what is your point exactly? I felt at that time that it wouldn’t go below the March 09 number, that that was a pretty low number and the fact that it had recovered quite a bit from that indicated that the March number might be a comfortable floor.
“Funny thing is, over the numerous comments over several months here and elsewhere when you reasserted your call, you never once mentioned that actually reestablishing a low would be immaterial, anyway.”
And why would I?
“Now, you raise it as a fact?”
Am I raising something as a fact that isn’t a fact? Please clarify.
As for where the bottom will be going forward…I do expect it to go down from here but it’s entirely possible that it won’t go below the lows of March 2010. If we see the index turn at a time when sales volume is going up I will believe that we’ve seen the bottom. However, the gloom and doomers will not see the bottom until a year or two after the fact.
But let me clarify one more matter. For someone looking for a place to live for several years calling the exact bottom shouldn’t matter anyway.
is that because it’s always a great time to buy?
“But let me clarify one more matter. For someone looking for a place to live for several years calling the exact bottom shouldn’t matter anyway.”
“For someone looking for a place to live for several years calling the exact bottom shouldn’t matter anyway.”
Question is whether the risk is of a 5 percent or a 25 percent additional decline. And really should be in (some sort of) real terms. If it’s 5 percent, not that big a deal. If it’s 25 percent, as I think Bob/HD predict, now would not be time to buy.
“Woodstock also found a rapidly increasing flow of properties exiting the foreclosure process and becoming bank-owned. For the region as a whole, the number of completed foreclosure actions rose to 9,539 properties in the six-county area, a 44.9 percent increase over 2009’s third quarter. More than 96 percent of those homes were repossessed by lenders.”
hd, I believe they mean only 4% went to investors “on the court house steps” and 96% became REO.
“For instance, in the city of Chicago the foreclosure filings in Q3 were 5.7k while the completed auctions were 3.2k, indicating that the shadow inventory is likely continuing to build at a rapid pace.”
LVSFH, consider that in the context of only 1,321 forclosure sales in Chicago on the MLS in the 3rd quarter. That was 29% of all sales. It sure looks like the % will go much higher.
“So, what is your point exactly?”
That you blew that call.
It’s a beautiful day outside – everyone should take a break and go enjoy the weather – you will appreciate it in the coming months. (more importantly, it will clear your head and give you a better perspective on real estate: for 99.9999999999% of people it isn’t about the numbers/CSI/QE2 – it is about individual properties and needs. Nobody cares (or should care) about these ridiculous numbers. (oh, and that QE2 comment about the queen elizabeth was a joke =- trying to lighten the mood on this beautiful FRIDAY!!!).
I too had too much cash and no place I wanted to put it. We like Chicago. It”s reasonably near our Wisconsin home. Like Sonies we bought in March 2009 in the same neighborhood and probably overpaid. The ability to buy an in town was based on having retirement jobs on top of our pensions. Eventually we’ll retire from those jobs and have to get rid of the place. I fully expect to lose a large portion of the 20% I put down. I have already recovered some of it though through tax deductions. I figure that given what I pay in mortgage expenses and condo fees on the condo I wouldn’t have to pay I’ll recover the lost money in no more than a couple of years. Meanwhile, we are enjoying ourselves to no end. Chicago is a great city especially for weekenders.
it’s hard to tell from that quote whether the 96% refers to “properties exiting the foreclosure process and becoming bank-owned” or in the next sentence, “completed foreclosure actions.” A completed foreclosure action generally means judicial sale; while exiting the foreclosure process can mean many things, including reinstatement, redemption, dismissal, loan mod, short sale, or judicial sale. Typical trib writing.
“Woodstock also found a rapidly increasing flow of properties exiting the foreclosure process and becoming bank-owned. For the region as a whole, the number of completed foreclosure actions rose to 9,539 properties in the six-county area, a 44.9 percent increase over 2009’s third quarter. More than 96 percent of those homes were repossessed by lenders.”
““So, what is your point exactly?”
That you blew that call.”
Yeah, by 2% – so far. If I could call the stock market that well I’d be filthy rich.
“Question is whether the risk is of a 5 percent or a 25 percent additional decline.”
Exactly. I could see prices easily dropping 5% from the July reported number. 10% is a possibility but I don’t think it’s likely. But I don’t see 25% happening. As I’ve always said, the one thing that’s putting a floor on prices is the inability of many sellers to sell at lower prices.
And no, Homedelete, it’s not always a good time to buy but it’s good enough now that I’m chomping at the bit to buy something for myself.
“Meanwhile, we are enjoying ourselves to no end. Chicago is a great city especially for weekenders.
THIS is what it is all about. Seriously, who cares if you lose a little money in real estate – LIFE is short, you HAVE to enjoy it while you can. In the end, it doesn’t matter how much money you have, everyone ends up dead!!!
I agree with clio, it’s Friday and we all need to lighten up. For those of you may not have seen this, I think it’s rather appropriate:
http://imgs.xkcd.com/comics/duty_calls.png
Oh…one other positive factor is that Chicago area employment has actually risen in the last few months – and I’m not talking about a decline in the unemployment rate but an actual increase in the number of people employed.
And for those looking for a place to put some cash I suggest checking out the opportunities on CEFconnect.com – look at the distribution rates and discounts to NAV. They’re not as attractive as they were a year ago but there are still some interesting opportunities out there – but you have to look at the underlying assets.
“LIFE is short, you HAVE to enjoy it while you can. ”
Especially for those of us in our late 60s. Why should my kid get all our money?
“Meanwhile, we are enjoying ourselves to no end. Chicago is a great city especially for weekenders.”
“THIS is what it is all about. Seriously, who cares if you lose a little money in real estate – LIFE is short, you HAVE to enjoy it while you can. In the end, it doesn’t matter how much money you have, everyone ends up dead!!!”
Careful, you guys are going to cause emotion to override my wallet.
“Careful, you guys are going to cause emotion to override my wallet.”
….which is the way it SHOULD be (well, ok, not completely, but you have to splurge a little here and there otherwise your will turn into…. well, let’s just say, some of the people on this site).
clio – speaking of splurging – I saw a Lambo cruising down Oak Street last night – were you hitting the Triangle?
“I saw a Lambo cruising down Oak Street last night”
charcoal with over-tinted windows? spotting in the loop yesterday as well.
if it wasn’t osso bucco (or somesuch color) and there weren’t people bursting into song as it drove past, it wasn’t clio.
“were you hitting the Triangle?”
He definitely hits up the Triangle often. He fits that stereotype to a tee!
“clio – speaking of splurging – I saw a Lambo cruising down Oak Street last night – were you hitting the Triangle”
No, I was stuck in the suburbs last night. Also, the color is “Rosso Vik” (or candy apple red to more down-to-earth folk). Also, mine is a “spyder” (or convertible to normal people).
In terms of the “Triangle”, you are correct – a GREAT place to be. Seriously, it is like Disneyland for adults. Most people that go there and looking to have fun and let loose – you can meet SO many people and a good time is ALWAYS had. It really is one of Chicago’s treasures!!!!
“CS SA Index
124.52 March 2009
125.01 April 2009
125.48 May 2009
125.13 June 2009
127.35 July 2009
128.46 August 2009
130.00 September 2009
128.61 October 2009
127.63 November 2009
126.38 December 2009
125.99 January 2010
124.70 February 2010
121.77 March 2010
123.17 April 2010
123.70 May 2010
125.00 June 2010
125.13 July 2010”
N = 17, starting with nadir of fin. mkt meltdown
Average = 125.7664706
STD DEV = 2.112418463
As Sonies has said, make a call and stop being such a jackass.
“But let me clarify one more matter. For someone looking for a place to live for several years calling the exact bottom shouldn’t matter anyway.”
Of course it should, G doesn’t understand anything that doesn’t fit into his Excel operators.
CEF’s suck, I know, I own a few
/thread
merry weekend all, my fin du monde is cold and ready to be consumed…. btw anon I tried that Aventinus… YUM
“btw anon I tried that Aventinus… YUM”
Regular or eisbock?
That was someone else’s recommendation, but it’s hard to go wrong with Schneider Weisse anything (same with unibroue, tho the stylistic variety is much greater.)
“if it wasn’t osso bucco (or somesuch color) and there weren’t people bursting into song as it drove past, it wasn’t clio.”
nice imagery!
Oh by the way, here is the Illinois unemployment rate:
May-09 10.1%
Jun-09 10.3%
Jul-09 10.4%
Aug-09 10.0%
Sep-09 10.5%
Oct-09 11.0%
Nov-09 10.9%
Dec-09 11.1%
Jan-10 11.3%
Feb-10 11.4%
Mar-10 11.5%
Apr-10 11.2%
May-10 10.8%
Jun-10 10.4%
Jul-10 10.3%
Aug-10 10.1%
Sep-10 9.9%
Here is the average rate on a 30 yr fixed mortgage:
June 2009 5.42
July 2009 5.22
August 2009 5.19
September 2009 5.06
October 2009 4.95
November 2009 4.88
December 2009 4.93
January 2010 5.03
February 2010 4.99
March 2010 4.97
April 2010 5.10
May 2010 4.89
June 2010 4.74
July 2010 4.56
August 2010 4.43
September 2010 4.35
Where is the doomsday? Best unemployment rate in 17 months and interest rates that are 100bps lower.
So let me understand, employment i) lags and ii) is better than it was 17 months ago. Interest rates are 100 bps cheaper.
Seems to me the only issue we have in the housing market is fear mongering at this point. And some technical overhang from foreclosures. In time, the fundamentals prevail over technical factors. That is just the way it works. Sorry folks, but you bears are being bunch of pantywaists. I’m no bull, but I am calling BS on the fear mongers. Your credibility is drying up.
“But let me clarify one more matter. For someone looking for a place to live for several years calling the exact bottom shouldn’t matter anyway.”
Wow, first ad hominems, now pushing Gary’s straw men.
You dismiss the inventory problems. I don’t. We’ll see.
“You dismiss the inventory problems. I don’t. We’ll see”
If you are going to talk about inventory, then you have to talk about sidelined buyers.
If you haven’t been involved with corporations as they have worked through inventory issues, as they did circa 2009, or circa 2002, then it seems a little ominous to the casual observer. But liquidation of excess inventory is a classic challenge of a down cycle that is well understood and managed.
The banks will get through it just fine. They can hold where they need to hold. Buyers looking to steal properties will probably end up frustrated. At the end of the day, the carrying costs are not that high with zero interest rates and inventory maintenance practices that are dramatically improved from the start of the crisis. Buyers think there is a mythical gun to the head, but they are wrong.
Clio makes a rare good point. Confidence is everything. There is nothing fundamental keeping buyers out of the market.
Jobs, no unemployment is decreasing.
Layoffs, no first time claims are down.
Interest rates, no they are at record lows.
Personal incomes, not really, they are up albeit slightly.
Investment wealth, nope, S&P is up over 10% in the last year, not to mention the circa 2% dividend return.
All you have is the fear mongering. And even the bears are turning now.
The fear mongering comes from the fact that the entire U.S. mortgage system is suspect, especially concerning the proper chain of custody for mortgage documents. The fraud surrounding M.E.R.S. and the creation of CDOs, MBSs, etc. cannot be ignored.
This is not your basic economic downturn that will correct any time soon.
I do not get this chain of custody business. How can there be any real problem there when every day for the past umpteen years homes are sold and mortgage investors paid off? There have been millions of homes sold under these systems. Now I’m supposed to believe the system is unreliable?
Everything is going to be OK – everyone should stop worrying and carry on as before. In a couple of years, we all will be laughing at how “scared” and “terrified” people were about buying in 2010.
There was a great article in economist about our failing education system which is similar to what happened to the car industry in this country. There is a bubble brewing in the higher education. We charge more and more tuition for providing shallower and shallower education. It is truly reminiscent of what happened in the housing market where houses were being sold at astronomical prices while using cheapest material possible. I for one as a faculty member worry about the state of education in this country. That being said, I agree that for the same reason prime locations for the time being (emphasis on for the time being) have hold on to their value, top schools will have no problem attracting students in near future. But even these schools will start losing their niche as they are forced to lower their admission bar. Then the graduating class with less skills will reduce the value of their education. In year 2000, my ex who was a finance prof at university of Chicago told me that MBA is going to lose its value in a decade or so. He said this as he thought most of his students were arrogant pricks with no true expertise. It took a while but man he was right. Bubbles (in education, real estate etc…) only go so far. There is only once way of sustaining value in the long run, it is by actually having some tangible value to start with!
“I do not get this chain of custody business. How can there be any real problem there when every day for the past umpteen years homes are sold and mortgage investors paid off? There have been millions of homes sold under these systems. Now I’m supposed to believe the system is unreliable?”
Standard is different when seeking foreclosure. Also, judges frown on false (even if only technically so) affidavits, especially when seeking a default judgment. The banks had been stating as fact that they were the true holder of the note and mortgage as of the date of the filing, when that was not actually true.
1 – working 80 hours a week in a highly stressful environment
Clio- I know you love your job but I’d bet you could get it done in 60 hours a week if your boss just blocked you from posting on Crib Chatter!
My boss ( the wife) just laughs when she sees the cc thread open on my computer!
#”The banks will get through it just fine. They can hold where they need to hold. Buyers looking to steal properties will probably end up frustrated. At the end of the day, the carrying costs are not that high with zero interest rates and inventory maintenance practices that are dramatically improved from the start of the crisis. Buyers think there is a mythical gun to the head, but they are wrong.”
I’m looking at the house next door right now (in lovely St. Charles) that was foreclosed upon this summer. The former owners moved out in March or so. My boyfriend is mowing the lawn to keep it from becoming an overgrown eyesore. Someone was in the house, and reports it’s destroyed, the basement is wet, there’s crap all over. We don’t believe the water’s been turned off, there’s a window stuck open, and winter is coming! Just waiting for all these places to suffer a round of frozen pipes, further diminishing the value of the shadow inventory…
now, what are these improved “inventory maintenance practices” you refer to again?
The banks may be able to manage these properties on their books, but the PHYSICAL management of these properties is next to nil. Next spring will see more winter- and neglect-damaged properties, further reducing any intrinsic value the properties had, IMO.
“Clio- I know you love your job but I’d bet you could get it done in 60 hours a week if your boss just blocked you from posting on Crib Chatter”
That is funny!! Actually, I AM the boss – the times that I post (yeah, I know 24 hours a day) are the times I am waiting on my support staff for something – but you are right, if there was improved efficiency in my workplace, I probably would only need to work 40 hours a week!!!
“I do not get this chain of custody business. How can there be any real problem there when every day for the past umpteen years homes are sold and mortgage investors paid off? There have been millions of homes sold under these systems. Now I’m supposed to believe the system is unreliable?”
Gary: they literally don’t know who “owns” the mortgage now (or who actually has it.) There have been stories of law firms working for Citigroup literally throwing away the documentation that shows who owns the mortgage and, under Florida law, they’ll go before the judge later and don’t have the proper documentation.
There could be instances where no one actually knows who “owns” the mortgage so how can a bank foreclose when the actual documentation has been put out into cyberspace? In the states where the judges have to sign off on the foreclosure- lawyers are getting aggressive at forcing the banks to “prove” they have all the proper paperwork. It’s a delaying tactic, of course, but it is working in many instances.
Also- yes they’ve been doing foreclosures for forever- but the selling of the underlying mortgages (the “securitization” of it) is a new phenomena that started occuring only in the last decade.
logansquarean – I agree with your assessment of foreclosure maintenance. I’ve been inside a lot of foreclosed properties and they’re usually falling apart and in need of extensive repair…and they just get worse the longer the banks hold them. Also, with winter on its way, expect more burst pipes (can happen even in a “winterized” property) and more mold.
The thing about this market is that ALLLLL of this info really doesn’t apply right now. See all the stats and comps etc…etc. are only truly important to investors or other ‘selective’ home buyers/sellers. For investors, just determine what you want and circle. Sooner or later it will show up. Someone in the area and/or building will be foreclosed on and you can swoop in and grab it. But beware, just because ‘you’re all that’ and have a Million cash at your disposal, doesn’t mean the bank will kiss your feet and sell you a home that was listed at $2.6 but is really worth $2.1M in today’s market. They will sell it to you for $2M or mayyybe $1.9 if you’re really lucky. Same goes for the condo listed at $200 that the back takes over and puts on for $135k. You’re not getting it for $100k. Are these prices a good deal. Today, hell ya. A good deal is only good for TODAY. So if you buy these homes and and the amount you paid is fairly well under the amount the home is worth today… you got a good deal.
Here’s the kicker folks…. If in a year from now the homes are selling lower than they are today.. no deal for you.
Real Estate is not only about buying at the lowest price… it’s so much more than that. If I bought at fair market value and love my neighborhood and my house makes me happy. And a year from now my house is worth a little more than that, then I got a good deal.
If I buy 20% below market value and hate my house and my hood. I dread going home and although I could sell right away for more than I paid, do I care? Doubt it. I got screwed. This place sucks.
“You’re not getting it for $100k. ”
I am seeing some 1bdrm condos previously priced at the 200k mark now going for 125k. And not in foreclosure ridden buildings either. This would’ve been unheard of even a few months ago.
Sabrina – I recommend reading Liar’s Poker and the Big short. it’s something that has been prevalent since the 80’s the huge risk taking is what was exacerbated the bad market conditions over the last decade.
“Also- yes they’ve been doing foreclosures for forever- but the selling of the underlying mortgages (the “securitization” of it) is a new phenomena that started occuring only in the last decade.”
Great point roscoevillager – I was going to recommend Liar’s Poker as well. This same scenario played out in ’90-’91 when Chase and Citi were loaded up with a ton of crap paper, but I think this is that recession x10.
“I recommend reading Liar’s Poker and the Big short. it’s something that has been prevalent since the 80’s the huge risk taking is what was exacerbated the bad market conditions over the last decade.”
I’ve read both of those books (and also The Greatest Trade- which covers the same ground and some of the same players as the Big Short and is equally as fascinating.)
Wall Street created the CDOs in 1987 but the ones that caused the crisis weren’t created until around 2000- i.e. packaging the mortgages in with the other junk. Also- they created a faster way to process them in 2001 which put everything on the fast track and made it easier for Wall Street to issue and sell them.
I recommend people see the movie the Inside Job – currently playing at the Music Box or up in Evanston. It explains what went on in the last decade very easily.
It is NOT the same scenario as 1990-91. Not even close.
“It is NOT the same scenario as 1990-91. Not even close.”
Plus the State of Illinois’ $15B debt is looming in our path like a brick wall. I don’t see any way that we get by this fact without serious pain. I can’t even wrap my mind around $5B, let alone $15B.
Purchasing a house in the Chicago area makes one a “shareholder” in this big mess. I’d rather wait for everything to shake out before even considering to buy into real estate in this town.
At the same time, I really love this town and couldn’t imagine living anywhere else. I’ll probably always have some type of presence here, even if only a rental.
Sabrina – excellent point I very quickly overlooked that there were no Credit Card CDOs in the 90s nor were there the many, many other iterations of debt that was securitized.
The incredible level of risk that the market took on in ways that hid the true risk potential of these securities was what sewed what we have today. It is also the reason it will be a slow rise from the ashes, we simply cannot leverage the way we had before.
Things are pretty dire regardless of what anyone tells you.
Is there anyway to put a positive spin on this news from Friday?
“Home > Lead Story > JPMorgan, Wells Fargo and BofA each hold more than $20 billion in foreclosures
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JPMorgan, Wells Fargo and BofA each hold more than $20 billion in foreclosures
by KERRY CURRY
Friday, October 22nd, 2010, 4:05 pm
JPMorgan Chase (JPM: 37.70 0.00%), Wells Fargo Bank (WFC: 26.11 +0.31%) and Bank of America (BAC: 11.44 +0.70%) each reported more than $20 billion in single-family mortgages currently foreclosed or in the process of foreclosure as of midyear, according to Weiss Ratings.
In addition, for each dollar these banks held of mortgages in ?foreclosure, they had additional exposure to more than $2 in mortgages that are 30 days or more past due.
“Although only some portion of the past-due loans will ultimately go into foreclosure, these figures tell us that the biggest players are not only in deep, but could sink even deeper into the mortgage mayhem,” said Martin D. Weiss, chairman of Weiss Ratings.”
http://www.housingwire.com/2010/10/22/jpmorgan-wells-fargo-and-bofa-each-hold-more-than-20-billion-in-foreclosures
“Is there anyway to put a positive spin on this news from Friday?”
As someone who is HEAVILY invested in real estate, I am not worried at all. There are far more houses/condos (collectively worth ridiculously more than 60 billion dollars) that are not underwater or in risk of being foreclosed – and while foreclosures make a sizeable segment of the properties for sale (even bigger segment of recently sold homes), they do NOT make a up a sizeable segment/component of properties in existence.
You can make your own decisions. Read the article: Chase has $43,400,000,000 in mortgages 30 days or more late IN ADDITION TO $21,700,000,000 in mortgages currently in foreclosure… Bank of America has $54,000,000,000 in mortgages 30+ plus days late and not in foreclosure.
How many 30+ days late are in exclusive neighborhoods?
We’ll find out soon enough, maybe in a few years.
I appreciate that you are trying to say that there is a larger portion of housing units not in foreclosure that in foreclosure. I think that in a world where foreclosures sit for a long time and are in horrible condition the pricing gap will widen between foreclosures and non-distressed sales with Short sales somewhere in between, likely at a discount because of the sheer headache to buy it.
The problem is that although there is a 2 class dichotomy the horrible houses will pull down or at least act as a headwind against the entire market. There could be a short term window for “investors” who can make a home market ready and front the cash but it will close because of the tight lending standards and rising interest rates. Like all arbitrage opportunities, they close.
I am not trying to say all doom and gloom but there is a lot of inventory to absorb, move-up buyers who don’t need to won’t, and this is showing up because there is such crap on the market right now. When something does come up and is priced well it does sell because there is a market. It’s not large but the prices by and large are not clearing the market, if they were you’d see a lot shorter list times.
“they do NOT make a up a sizeable segment/component of properties in existence.”
Wait a minute – let’s look at the numbers. Right now there are about 82000 homes for sale in the greater chicagoland area. About 13000 are short sales (16%). Sounds like a lot, right? How many houses/condos are there in chicago. Nobody really knows but let’s say that 5% of all houses/condos are for sale (which would mean that there are 16400000 houses/condos in existence). OK – so 13000 of 1640000 are short sales. This percentage is 0.8%. That means that 99.2% of homes out there are NOT short sales. Even if you said that there were 10 times that number (13000) “in the pipeline”, in foreclosure or at RISK of going into short sales, that still would only comprise 7.9% of all houses/condos out there (92% would still be OK). You can see that the VAST MAJORITY of homes/condos ARE safe.
“they literally don’t know who “owns” the mortgage now (or who actually has it.)”
Sabrina, this is the overstatement that I think the media is getting wrong. I think anon explained the issue: “Standard is different when seeking foreclosure.” I think some smart lawyers are getting these banks on a technicality which will be addressed. The fact that the banks have gone back into the foreclosure business so quickly tells us something about their confidence in being able to address the issues.
Clio, it’s not just about foreclosures as a % of the total inventory of houses but about the % of the market of for sale properties. Remember, 44% of September sales were distressed. That’s huge.
“Clio, it’s not just about foreclosures as a % of the total inventory of houses but about the % of the market of for sale properties. Remember, 44% of September sales were distressed. That’s huge”
Gary, I agree that foreclosures/short sales make up a lot of the “for sale inventory” but you cannot argue that they DO NOT make up a significant percentage of properties in general. They just don’t – no argument about it. To put it another way (because obviously the message isn’t getting through) – it is like looking at the people on “Jersey Shore” and thinking that everyone is a slut/immoral because that is who is being showcased- but the fact is that the vast majority of people out there DO not behave in this manner. Hope this analogy helps….
Oh -my point was that, when you are making broad generalizations about real estate housing, you have to look at the whole picture – not just what is out there for sale at the moment.
“The fact that the banks have gone back into the foreclosure business so quickly tells us something about their confidence in being able to address the issues.”
Ha! ha!
In some states, the judges won’t take affidavits from MERS (which is a bank created entity.) MERS literally destroyed the actual paperwork for some of the mortgages but in some states, like Florida, the judges will only accept the actual paper. What happens now? NO ONE KNOWS. Many judges will also not accept MERS as being the mortgage holder under the law (since, again, it was a big bank created entity to speed up mortgage processing.)
But prices are not determined by the houses that are off the market but by the ones that are on the market and by what buyers are interested in. Clearly distressed properties are hugely determining prices right now. They ARE the market.
“Sabrina, this is the overstatement that I think the media is getting wrong. I think anon explained the issue: “Standard is different when seeking foreclosure.” I think some smart lawyers are getting these banks on a technicality which will be addressed. The fact that the banks have gone back into the foreclosure business so quickly tells us something about their confidence in being able to address the issues.”
Correct, especially about the media misunderstanding, but I disagree on the confidence thing–they fixed the most major error (the false affidavits in default proceedings) and did some risk assessment and that’s about it (no real inside info in that).
“Many judges will also not accept MERS as being the mortgage holder under the law (since, again, it was a big bank created entity to speed up mortgage processing.)”
Three things about this:
1. Some knucklehead commentators were (maybe still are) holding up MERS as an example of how land record recording should be handled. Just a sick joke.
2. MERS *never* does the foreclosure–it is *never* conducted with MERS as the plaintiff. Never ever.
3. If MERS actually destroyed docs, then they really, really f’d up their business purpose.
@Clio – just because you’re not seeing deals does not invalidate Sabrina’s observations or, more importantly, mean that no deals exist. From personal experience I can tell you that deals exist….I bought a 2 bdr condo is a very good high rise near Addison for the price of a 1-bdr listed in that same building….why & how. Cos the owner of that unit got sick and tired of being told what the “value” of his unit was and was not able to get any buyers. Finally when we came on the scene we gave a him a number we thought was fair and he took it.
This isn’t BS – the sale price is public record and anyone can check it…..I’m actually motivated to look for more properties because I do think there are opportunity.
So, seek and you shall find………….:)