Market Conditions: January Case/Shiller Has Chicagoland Falling 4.6% Month Over Month
The January Case/Shiller numbers are out (as some of you have noted.)
The Chicagoland area saw prices drop 4.6% from December to January, the third highest in the nation’s largest metro areas. Only Minneapolis, at 4.7%, and Phoenix, at 5.5%, were worse.
Year-over-year decline was 16.4%.
Are price declines accelerating in the Chicago area?
See data on the 20 metro areas at the Wall Street Journal Blog “Real Time Economics“.
No its just those negatoids. In fact even the data itself is just negatoid. If you ignore the negatoids everything will be fine, afterall they exude nothing but negativity and who needs that? Everything is fine here.
Nothing to see here…….
Interestingly, the futures market currently has a May 2010 125.4 price level as the bottom. With the Jan ’09 price set at 130, we may be close to the expected bottom in the real estate market. If the economy stabilizes, we could be in good shape.
At the same time, long-dated futures have been moving downward for quite a long time.
Sales volume is still at the lowest numbers in decades. Prices will continue to decline until sales numbers increase and stabilize.
People need to get over their fear!
It’s not fear it’s pricing.
Aw shucks looks like I was a knifecatcher (if the numbers continue to get worse in March)… but at least I plan on living in my place for a while 8)
Don’t use the trendline as your guide, rather, use the last two decades in Japan:
http://www.sentientmoney.com/wp-content/uploads/2008/05/60-year-real-estate-chart.gif
Still going to bleed numbers until the retards lower the fucking price. But that’s why they’re retards, they don’t get it.
“Still going to bleed numbers until the retards lower the fucking price.”
They can’t. I’m starting to see that this dual market theory has some merit. The banks and people that lived there forever are the only ones that realistically can, and the people that lived there forever generally generally continue to do so they don’t come on the market that often. So the REOs and short sales sell and the other properties linger on the MLS and collect dust.
These blanket reports help justify ‘buyers’ pipe dreams that somehow they’re going to bag a vintage LP townhouse with a 2 car garage for $300 a sq ft. Not much different from a few idiots pulling down the GPA for the rest of the class. If I remember correctly, the area that this report covers even includes Gary (?).
RE is a street by street / house by house thing. So the 70’s condo building across the street with it’s Home Depot cabinets falls just as fast in price as the vintage townhouse with the Smallbone kitchen and walnut library? (let’s say both have 2 car parking, same sq ft, baths, etc). Dream on, enjoy the CS porn.
Gary rocks!
You my friend are hilarious.
“#Jay on March 31st, 2009 at 9:34 am
These blanket reports help justify ‘buyers’ pipe dreams that somehow they’re going to bag a vintage LP townhouse with a 2 car garage for $300 a sq ft. Not much different from a few idiots pulling down the GPA for the rest of the class. If I remember correctly, the area that this report covers even includes Gary (?).
RE is a street by street / house by house thing. So the 70’s condo building across the street with it’s Home Depot cabinets falls just as fast in price as the vintage townhouse with the Smallbone kitchen and walnut library? (let’s say both have 2 car parking, same sq ft, baths, etc). Dream on, enjoy the CS porn.”
How do you get accurate prices when there are so few transactions?
And why are there so few transactions, because there are inaccurate prices.
“Not much different from a few idiots pulling down the GPA for the rest of the class. ”
Thanks for the laugh, Jay. But I didn’t know there was a class in financial irresponsibility where those who acted the most reckless with their money got great grades. Yeah you aced the class alright and your gift for being such an A student in this class is financial distress.
If the Olympics say no, the bottom will be whenever we get back to 2004 price levels.
There is just way too much inventory on the market right now. The stimulus package has not jump-started any of the HUNDREDS of 2-12 unit abandoned construction starts that pepper the city.
ps. My friends visiting from London over the weekend say they are TOTALLY against their Olympic hosting, as it is costing them a ton more than when the idea was sold.
just saying
There are inaccurate prices because homes are priced more than the current crop of buyers is willing to pay. Sorry, but there are no more bag holders to purchase your $400k+ 2/2’s. you got caught holding the hot potato.
If the class was ‘buy real estate’ then grade inflation made it easy to get an ‘A’. Buy a $300+ psqf townhome in LP and sell 3 years later to a guy who was willing borrow 100% of the purchase price; lather rinse repeat
‘”But I didn’t know there was a class in financial irresponsibility where those who acted the most reckless with their money got great grades.”
I totally agree with Jay. Some areas and propety types will fare better than others.
you want a huge discount? go to Englewood. but you’re not gonna find a similar discount in Lincoln Park.
I sold a two-flat on the west for 205K in 2004 – it just resold for $31k.
“These blanket reports help justify ‘buyers’ pipe dreams that somehow they’re going to bag a vintage LP townhouse with a 2 car garage for $300 a sq ft. Not much different from a few idiots pulling down the GPA for the rest of the class. If I remember correctly, the area that this report covers even includes Gary (?).”
umm…yes this idiot just closed on a vintage LP townhome with 2 car garage for $250/sq foot. I must be smoking some good stuff, cause I really thought I went to closing and signed all those docs…but …but…
Bubbleboi’s property is why CS is going down, other are too scarred, and for good reason.
does CS use data from the county recorder of deeds, so when was this data from (the houses that sold that comprise the Jan data), is it delayed by a month?
“Don’t use the trendline as your guide, rather, use the last two decades in Japan:”
Those charts show real prices. You keep harping on *nominal* 99 prices.
That’s my major disagreement with you–1999 *real* prices are quite possible, in my view (heck, if you were suggesting 1995 real prices (about 7.5% less than 1999 nominal as the starting point), I’d have less argument). The difference is *very* meaningful–the $170k median price in 1999 is equal to $216,529 in 2009 dollars (using CPI).
Mixing indexes (not quite rigorous), CS 01-1995 adjusted by CPI to 2009 gives 113.31; CS 01-1999 * CPI = 117.71.
Oh, without question Bob, the class idiots pulled the smart ones down with them. But, class is over (in the housing class, it’s REALLY over), and the smart ones manage to get into Harvard, and the idiots cry over their Hooters spicy wings.
You know, I saw this before in the early 90’s when the same thing happened. Everybody, I mean everybody, lost money when the dust settled, but the real houses/neighborhoods/people inched their way back to full prosperity. Sure, a few class idiots got some deals on some great property when prices were at their lowest, but even that didn’t last as property taxes and insurance (yeah, you actually have to p-a-y them), upkeep (that brick doesn’t tuckpoint itself), and well their overall core financial stupidity, blew them back to their 1/1’s west of Cicero. Just because you bag the trophy wife, doesn’t mean you can actually afford to keep her.
“How do you get accurate prices when there are so few transactions?”
2703 was the paired-sale count for Chicago. Lowest number since March 2000. Lots of lowere Ns in 87-94.
Remember, CS only counts single-family homes. From S&P: “The S&P/Case-Shiller indices do not sample sale prices associated with new construction, condominiums, co-ops/apartments, multi-family dwellings, or other properties that cannot be identified as single-family.”
There is a separate Condo Index, which was at 142.15 in Jan, down from 155.52 in Jan-08 (-8.6%) and 160.98 at peak in Sep-07 (-11.7%). Presumably also excluding new construction, etc. No idea where townhomes fit, but prob depends on whether fee simple or not and, if not clear, they get ignored.
“Just because you bag the trophy wife, doesn’t mean you can actually afford to keep her.”
ummm…wrong again…unlike the class idiots who bought in the last few years we paid cash. So we will be here for a while, like it or not. Maybe its time for you to go gentrify some run down neighborhood with your smarts.
“does CS use data from the county recorder of deeds, so when was this data from (the houses that sold that comprise the Jan data), is it delayed by a month?”
Again, from S&P: “To calculate the indices, data are collected on transactions of all residential properties during the months in question. The main variable used for index calculation is the price change between two arms-length sales of the same single-family home. Home price data are gathered after that information becomes publicly available at local recording offices across the country. Available data usually consist of the address for a particular property, the sale date, the sale price, the type of property, and in some cases, the name of the seller, the name of the purchaser, and the mortgage amount.”
“Bubbleboi’s property is why CS is going down, other are too scarred, and for good reason.”
Completely excluded from the CS index, as it is a multi-family.
“Some areas and propety types will fare better than others.”
Has anyone ever disputed this here?
anon tfo – thanks for the clarifications.
two things stand out – it seems the S & P index doesn’t account for renovatiions. So someone might have dumped $50k into a property, only to see its value still fall by 10%. So the “real” value decline (assumed the $50k was for needed renovations that paid off) might actually be greater in some cases. Of course, there are plenty of foreclosures (which i read that case shiller considers arm’s length sales) that have water damage, vandalism, etc, that might counteract this.
Also, i’m surprised the condo index reflects a smaller decline than the sfr index. who knew? maybe it’s the bias of living in the city, with all of the distressed condo developments. more people actually live in the burbs and most construction there is sfr.
“Also, i’m surprised the condo index reflects a smaller decline than the sfr index. who knew? maybe it’s the bias of living in the city, with all of the distressed condo developments. more people actually live in the burbs and most construction there is sfr.”
From the condo figures as well as the properties shown here and the areas on the MLS I follow, I suspect Chicago isn’t nearly as hard hit as the ‘burbs. Remember the CS index is for SFHs in all of Chicagoland, so there are probably a lot of burbs feeling alot of pain to counteract the city holding up comparatively better.
I wonder what the CS Chicago would look like in the “green zone”
The outskirts of the city are just getting destroyed, I’ve seen a crapton of places that have sold for 75+% off their 2006 price in less desirable hoods, due to the insane amount of forclosures and people just walking away.
“it seems the S & P index doesn’t account for renovatiions.”
They try to, but (a) it’s proprietary and (b) imperfect. Again, from S&P: “If there is a large change in the prices of a sales pair relative to the statistical distribution of all price changes in the area, then it is possible that the home was remodeled, rebuilt or neglected in some manner during the period from the first sale to the second sale. Or, if there were no physical changes to the property, there may have been a recording error in one of the sale prices, or an excessive price change caused by idiosyncratic, non-market factors. Since the indices seek to measure homes of constant quality, the methodology will apply smaller weights to homes that appear to have changed in quality or sales that are otherwise not representative of market price trends.”
The only one who was ‘smoking some really good stuff’ was sartre’s broker who said his/her $250 per sq ft vintage with a 2 car garage was actually in LP. All of 60610 is the GS, all of 60614 is LP, all of 60657 is LV…. sweet.
I wonder what the CS Chicago would look like in the “green zone”.
Sonies, it always moves inwards, weakest hands fall first etc…but its not done yet. By the time we are done, very few will be talking about equity etc.
“All of 60610 is the GS, all of 60614 is LP, all of 60657 is LV…. sweet.”
Yes silly me….I should have taken advice from this clown as to what constitutes LP. After all I just landed here from moon last night…
Thanks anon (tfo), I guess I should have been more specific, will a transaction that happened in Jan but recorded in Feb be in feb CS numbers or in Jan’s.
I dunno how accurate CS numbers are if in does not include multi-families and there are many 2-4 units out there in Chi proper.
“I dunno how accurate CS numbers are if in does not include multi-families and there are many 2-4 units out there in Chi proper”
Friends with a two-flat, in one of the prime, non-LP hoods, had an appraisal done recently for a potential re-fi. Value down ~25%, for what that’s worth.
I would imagine that two and three flats are going to be hit the hardest; they’ll need to return to a price where they will cash flow; gone are the days of the $850k two flat in Roscoe Village.
“will a transaction that happened in Jan but recorded in Feb be in feb CS numbers or in Jan’s”
Should be in January, hence the delay, to capture Feb recordings. Of course, it isn’t rare in Cook for the deed to be dated in January and recorded in April, so there will bw some bleed.
Hey everyone remember that fool Steven Heitman? The one that disappeared when nothing supported his bullshit?
Good times.
“gone are the days of the $850k two flat in Roscoe Village.”
It was still a $200k two-flat; the land was just “worth” $650k.
“Hey everyone remember that fool Steven Heitman?”
I’m making the third reference to Stevo, in hopes that he’s like the Candyman.
Maybe this will work?
I took a peak at March sales numbers in the prime hoods and the cliff diving is reaching new heights. Those 40% YOY volume declines are increasing to 60+%.
The remaining commissions are disappearing fast. It’s a good thing realtors are known to live within their means and saved a great deal of their easy money from the “order-taking” years. I sure hope they didn’t fall for what they were selling or this lack of income could spell problems. The renters among them should do okay, though.
“Hey everyone remember that fool Steven Heitman? The one that disappeared when nothing supported his bullshit?”
Oh c’mon..facts never stopped him. He disappeared well after nothing supported his bullshit. I miss both him and his 8 yr old daughters economic and finance classes.
Chicago pricing is FUBAR. You know that when new construction is relatively the same price as a 40 yr old building. When a property is priced accurately, it goes under contract within one day.
“Drew on March 31st, 2009 at 12:18 pm
Chicago pricing is FUBAR. You know that when new construction is relatively the same price as a 40 yr old building. When a property is priced accurately, it goes under contract within one day.”
There are a lot of buyers watching the market like a hawk and are ready to jump in if the price is right, so reasonably-priced units will move fast, and will indeed be under contract very quickly. A day’s probably a bit of an exaggeration, but if a place hasn’t had any offers in a month, I doubt it’ll be selling without another price cut.
“Reasonably-priced units will move fast,” which will only lead to more reasonably priced units on the market.
There are many more sellers waiting to get out than qualified buyers waiting to get in.
Capitulation is inevitable….just be patient folks.
I miss Stevo…… pleeeease come back.
He must be very busy with all the closings in LP.
Just wait till the weather turns and the Cook County sheriff actually starts doing more foreclosures because the weather isn’t cold (really, I never got that whole plan, but whatever).
Only thing moving is still foreclosures and some shorts. Comps are coming way down but sellers still not accepting reality.
I agree it is inevitable JPS but I have no idea when it happens.
Sellers can’t bring money to the table so nothing moves. Buyers won’t buy anything at crazy prices. The only liquidity is in the distressed market. I just wonder how we break the logjam.
“I just wonder how we break the logjam.”
Double digit inflation.
Bob, this is where I disagree with you. Inflation won’t save the day; we’re looking at Japanese style inflation, a slow death by a ten thousand cuts. FB’s aka debt zombies will slowly bleed themselves to financial death and the downward spiral continues for years.
sorry japanese style Deflation I meant to say.
Doesn’t “Japanese style inflation” mean “deflation?”
HD is still convinced that there is going to be some sort of US dollar carry trade with all this money we are printing up… no. The US is still the world’s reserve currency and as financially sucky as things are here, they are a hell of a lot worse elsewhere in the world.
The carry trade was just an idea; I’m more concerned that the money will disappear just quickly as they were created. It’s all just bits and bytes. They money is being flushed down the toilet into the car companies, into AIG, into green technology, etc. I’ve also heard arguments that the fed printing money is just legitimizing past inflation…which is an interesting argument in and of itself. In the end, Japan was a textbook example of how printing money and keyesian government expenditures does not solve deflation and I expect the same to happen here.
maybe if we say Steve’s name three times, like Beatleguse he will re-appear
“Japan was a textbook example of how printing money and keyesian government expenditures does not solve deflation ”
If the whole world borrows in dollars to lend in AUD, YEN, EUR or whatever, it’s good for us; we *want* the rest of the world to keep buying dollars. It’s when they decide to stop that we’ll have a serious problem.
“maybe if we say Steve’s name three times, like Beatleguse he will re-appear”
I amde the joke 4 hours ago; we’re at about 8 mentions now; still no Stevo.
I miss Steven Heitman and Turd Ferguson too, but at least Jay is here to entertain us. I guess we will never run out of morons.
It is kind of funny that the few consistent RE bulls around here post less and less as the months go by …. 🙂
HC wrote — “There are a lot of buyers watching the market like a hawk and are ready to jump in if the price is right, so reasonably-priced units will move fast, and will indeed be under contract very quickly.”
I couldn’t agree more. I know at least a few friends that have large cash down payments (20%+), solid jobs with high incomes just _waiting_ for bargains. I’d be in the same boat myself, instead I just signed a rental lease on an LP townhouse where the seller is desperate and getting killed with carrying costs. The asking rent is no where near being cash flow positive.
hey I am here, not RE bull, but not as pessimistic, there are properties worth buying in Chi; as are pointed out, there are many that need to come down a notch
“I amde the joke 4 hours ago; we’re at about 8 mentions now; still no Stevo.”
He’s been in back to back meetings negotiating a workout plan/prepack with his various creditors. They’re trying to determine order of priority and which creditors are going to take the biggest haircuts.
http://interestrateroundup.blogspot.com/
Tuesday, March 31, 2009
All I can say is “Amen”
Here’s a good read over at The Daily Beast on the Obama banking recovery plan (my emphasis added). An excerpt:
“Timothy Geithner, Larry Summers, and a host of other economists—myself among them—spent the late 1990s yelling at Japanese and other Asian officials to clean up their banking crises. A typical conversation would end with the American adviser bursting with frustration: “Don’t you understand? The money is gone. If you just wish for the banks’ asset values to come back, any recovery will be short-lived and you will only get more losses in the end. We all know this from long experience.”
“Then we would go to conferences and discuss what it was about Japanese (or Korean or Indonesian) political economy that prevented resolute action.
“So it is with some irony if not humility that we should approach Treasury Secretary Geithner’s Public Private Investment Plan presented on March 23. A number of major American banks have lost huge amounts of money, and clearly have insufficient capital if they are not literally insolvent. Why else would they be pushing so hard to change the accounting rules to avoid showing what they really have on their books instead of raising private capital? Why else is the U.S. government taking so long to perform “stress tests” and trying to get expectations of overpayment for some of the bad assets on the banks’ books before the test results are out? In short, the U.S. government is looking to shovel capital into the banks without sufficient conditions, hiding rather than confronting the actual situation.
“That is just like the Japanese government in their lost decade, or the U.S. officials during the 1980s before they really tackled the savings-and-loan crisis. In those cases, the delay simply made the problem worse over time and in the end the government had to put more money into the troubled banks directly, taking over or shutting down the weakest of them. Whatever the political culture, it would seem we have not learned from experience. Or perhaps we cannot act on our learning. The universal barrier would appear to be the political difficulty of recapitalizing banks. That seems obvious, but the constraint it puts on good policy is enormous.”
Meanwhile, I hope you didn’t miss the just-completed foreclosure auction of the John Hancock Tower in Boston. The premier, trophy piece of commercial real estate sold for $660.6 million. Its purchase price? $1.3 billion in late 2006. Total decline in value? 49.2% in less than three years.
Policymakers claim that all the paper that’s tied to the performance of the underlying housing and CRE markets is being “mispriced.” Bankers say that the vulture buyers are being unrealistic and that the prices of these securities are “artificially” low and signs the market is “broken.”
But maybe — just maybe — the “false” value of these securities is really the true value after all … and we should all stop pretending that isn’t the case. It sure as heck looks like the value of the assets underlying all this toxic paper are plunging in value (See S&P/Case-Shiller post earlier for details on the residential side of the ledger).
Jay – you said above that you saw the same thing in the 90’s.
Actually, you didn’t – prices rose so high so fast in this bubble that the only way we will see 2006 prices anytime in the near future (i.e., five years) is another bubble.
2004 prices? We’re already past that: try May 2003. The graph from Redfin would be sickening if it were a roller coaster (although yeow, lookit those California lines!)
http://blog.redfin.com/chicago/2009/03/31/case-shiller_chicago_home_price_declines_rapidly_accelerating/
http://online.wsj.com/article/SB123853857749575441.html
Sweet! We’re going back to 1987 pricing!
“#Zejas on April 1st, 2009 at 8:21 am
http://online.wsj.com/article/SB123853857749575441.html“
1987 pricing, relative to earnings that is.
“#Zejas on April 1st, 2009 at 8:21 am
http://online.wsj.com/article/SB123853857749575441.html“
I highly doubt that unless unemployment hits 25%. Rates are so low, that people can afford homes at at least 1999 levels 8)
“1987 pricing, relative to earnings that is.”
Did you bother to look at the chart, HD? 1987 pricing, relative to earnings, is actually higher than 1999 pricing, relative to earning. Feb-87 = Mar-99 = 100.0; but Dec-87 = 109.00 and Dec-99 = 105.00. And while real incomes have been flat, nominal incomes have gone up since 87 and since 99, so “relative to income”, if we hit 87/99 pricing, it will still be well above 1999 *nominal* pricing. So, based on this cahrt, you think it’s “Sweet!” that pricing will reach a level *higher* than what you regularly predict.
Come on anon(tfo), you’re supposed to laugh; it’s not supposed to be taken too seriously.
Sonies, unemployment in IL is at 8.6%; if you look at the U-6 number (part-time employed looking for full-time, stopped looking, etc) it’s probably more like 13% or 14%. I’m not saying were going to hit 25% and I don’t think anybody is saying that but I wouldn’t be surprised if U-6 hits 17% or 18% by 2010 or mid-2011.
“Come on anon(tfo), you’re supposed to laugh”
Make no mistake, I’m laughing. You should be, too.
But you have to know that I’ll take every (fair) opportunity you give me to beat you up on the real v. nominal question. Bottom of the last trough for P:I was .91 (Feb-97) of Feb-87/Mar-99 ratio. That’s genuinely possible.
I wish I knew if we’re getting the Olympics or not, because if we are I’m dumping my place this summer to a true believer. No way am I paying for the Olympic slow bleed like they are in Vancouver and London.
Joe –
I should have said similar, not same. My experiences in Chicago RE are Sheffield and east LP (no such neighborhood, but that’s another post), as that’s where I’ve lived for 27 years.
In ’89 I bought at peak, an ELP vintage single family (2200 sq ft, not including the raw basement, 2 car garage) for $470K @ 11%. It took $200K to bring it back nicely (take out the radiators, add HVAC and air, add another bath, replace 60’s kitchen, etc). Very typical purchase price and renovation for this area at that time. In about ’92, similar houses w/2 car, and not renovated (I can think of a few on Belden between Clark & Halsted, and a couple of Geneva), all sold in the upper $300K’s; everyone in the area knew the selling prices (per the Cook County Assessors office), as we all desperately looked for the lowest closing price in order to appeal our now out of control property taxes. Clearly I, and most of my neighbors who bought in the 80’s were under water; the house across the street (same sq ft but no parking) sold in ’93 for $300K flat, and they purchased in ’88 for $390K. The first brand new McMansions on Lakewood off Webster, were listed in ’88 for around $650/700K, and I remember 2 reselling in the early 90’s for $500k and change.
The point here isn’t memory lane, I’m just saying that from personal experience in this area, lots of people were burned and the pain was just as real as it is today – maybe more, as you lost your 20% down payment (standard then) if you bolted; a lot ‘easier’ today to walk away from your $1MM house when you put nothing down. Make your own conclusions, just some facts.
It is that “ease” of walking away today that will alter the result.
Besides, the currently bursting credit bubble has been around approx 30 years with various ebbs and flows along the way. This time it has burst. There will be no new and improved easy money available to reinflate this time.
I just got the employment numbers for Chicago. The rate is now 9.2% and check out the plunge in employment itself:
http://blog.lucidrealty.com/chicago_real_estate_statistics/
Last graph on the page. That’s a loss of about 400,000 jobs.
I miss Steve Heitman – or whoever he was.
Home Prices in U.S. to Decline Through 2010, PMI Says
“April 1 (Bloomberg) — Home prices will fall in more than half of the largest U.S. cities through 2010 as the recession slashes jobs and reduces buying power, according to PMI Mortgage Insurance Co.
PMI, the second largest U.S. mortgage insurer, said 21 of the 50 biggest U.S. metropolitan areas have more than a 75 percent chance of lower home prices in two years. Six others have more than a 50 percent chance, the Walnut Creek, California-based insurer said in a report today…”
http://www.bloomberg.com/apps/news?pid=20601213&sid=aK4h9XyRCj84&refer=home
The article only mentions 21 of the 27 areas by name from both categories. Chicagoland is not mentioned in the article but could be one of the other six areas with a greater than 75% chance of lower prices two years from now the article does not name.
I looked up the source data for the article due to my curiosity about Chicagoland. It is NOT one of the other six.
In fact, according to PMI’s risk index, there is only a 13.7% chance prices in Chicagoland will be LOWER two years from now than today.
http://www.pmi-us.com/media/pdf/products_services/eret/pmi_eret09v2.pdf
Its on page 6. Go to town RE bulls there’s a green shoot for you.
I’m guessing from the Chicagoland CS chart that PMI must be looking at either totally different data or a V-shaped bottom. Not sure about their methodology but it is what it is.
Thanks Bob, yeah bulls, go bulls go. Plus the real Bulls will probably make the playoffs too.
It make intuitive sense, find your deals now while people feel real pessimistic.
-This town’s prices did not rise as much as others
-Speculative building did happen, but in a shorter period of time
-economy is diverse, but is feeling pain, so that’s why you can get a deal, otherwise we might have been more like boston.
-CS and other indexes use more exurban area(b/c of Chicago’s geography, as compare to an LA sprawl) include in the data points which won’t recover because of other fix costs plus demographic shift towards productive city centers. (Jobs) (One error is the Chi MSD is not including Lake county which is really apart of Chi area, they should use the MSA) A lot of wealthy people reside up in Lake County and is within commuting distance of Chicago.
Many parts of Lake county are the Lincoln Park’s of the Chi area.
-For many foreclosures (SF, small multi), even the ones in terrible condition, are being had for less than replacement cost.
With this being said, it will be a tough slog, I am not blind as to discount the enormity of where the economy was and how the lost of a lot of wealth, paper or otherwise, would do to a large economic system. As there was ramifications of ‘easy’ money there will be a consequences to the recovery as well. Housing has show over the ‘long’ term to be an excellent holder of wealth, not a creator.
People are becoming more confident, possibly the Obama magic?
http://www.pollingreport.com/right.htm
CME housing futures predict Chicago will continue to fall and bottom out in Nov 2009 – 12-15% more from the Jan number, which would probably be
cribchatter ate part of my prev post:
CME housing futures predict Chicago will continue to fall and bottom out in Nov 2009 – 12-15% more from the Jan number, which would probably be
ahhh, didn’t like the lt sign…
CME housing futures predict Chicago will continue to fall and bottom out in Nov 2009 – 12-15% more from the Jan number, which would probably be less than 10% from current, then it predicts a bounce back. But as anon tfo points out, condo prices haven’t fallen nearly as much as SFH – right now, they have an avg appreciation of 4% since 2000, and SFH are at 3%, which would indicate condos have 10% more to fall than SFHs.
fullhouse,
The CME housing futures are pretty meaningless. I tried to trade them for about a month to no avail. This market is non-existent – no liquidity. The settlement prices that are quoted are contrived when there is no activity. They’re set by committee based upon the latest bids or asks. If you went in and bid above the numbers shown the prices would rise even without any trade occurring.
“One error is the Chi MSD is not including Lake county which is really apart of Chi area, they should use the MSA”
Who excludes Lake County? The CS index most assuredly includes Lake County.
anon (tfo), from what I read they use the Metropolitan Statistical Division/District which excludes Lake.
*[Case-Shiller defines Chicago as the entire Chicago-Naperville-Joliet, IL Metropolitan Division, which includes all of the following counties: Cook IL, DeKalb IL, Du Page IL, Grundy IL, Kane IL, Kendal IL, McHenry IL, and Will IL.]
http://blog.redfin.com/chicago/2009/02/24/case-shiller_chicago_price_drops_set_back-to-back_records/
somebody posted this link earlier, on the bottom it has this definition.
THEN on some case-shiller documents they talk about an expanded MSA
Chicago Metro: Cook County, IL; DeKalb
County, IL; DuPage County, IL; Grundy
County, IL; Kane County, IL; Kendall
County, IL; McHenry County, IL; Will
County, IL; Jasper County, IN; Lake
County, IN; Newton County, IN; Porter
County, IN; Lake County, IL; Kenosha
County, WI
They really should have a definitions page…
either way there are pro and cons to both definitions, for the expanded CHI-MSA, it includes many more rural/exurban counties than for example and expanded NYC MSA has.
revassal –
‘Housing has show over the ‘long’ term to be an excellent holder of wealth, not a creator’. Well said.
Buy a place, fix it up if needed, maintain it, enjoy it. After years of having a nice roof over your head, if you get your money out when you sell, you’re doing just fine.
The Census bureau defines MSAs. They have a text file mapping MSA to ZIP code on their website if you really care. Chicago metro includes Lake county and parts of WI and IN.
Changing subjects, if anybody wants to read musings on housing from people with Ph.Ds:
http://www.cfapubs.org/doi/pdfplus/10.2469/faj.v65.n2.2
I love how everyone here that is a real estate bear on this site is ripping on specuvestors and bagholders and how anyone that expects a profit in this environment should be tarred and feathered. While the bears are watching real estate indexes and trying to “time” the market at the absolute bottom.
What ever happened to buying a place you like and living in it, and if you make a profit, great, and if not well big deal you had a place to live in? I just bought a place and could give two shits what the value is, because I enjoy living there and not worrying about my landlord jacking my rent up, and I can do improvements to the place without worry. The only time I care about what the value is, is when I need to sell it in 5-10 years from now.
Its ironic that the bears are trying to make money by buying at the bottom, and then ripping on the people that are trying to make profits in real estate.
The bears on this site aren’t trying to make money at the bottom; we’re waiting to buy a decent home at a fair and reasonable price.
vassel:
Yep, I misread before. That’s crazy, really. I understand excluding IN and WI counties, but excluding Lake, IL makes no sense.
Sonies,
I think your second and last paragraph contradict each other. I am bearish and do want to buy at the bottom. Not to gamble on any potential appreciation but rather to make the place as my own and live in it for a long time. Most of us who want to buy at the bottom, I would guess, aren’t doing it for speculative purposes or financial gain but rather to get the biggest/best house for our buck.
I do like to rip on many of those who bought at the peak as they were paying inflated prices via using non-conventional financing themselves, or got lured into a bidding war with a yahoo that was.
“The bears on this site aren’t trying to make money at the bottom; we’re waiting to buy a decent home at a fair and reasonable price.”
Which is what? IMO a fair and reasonable price would be 2-3x gross income and that can be found all over the city now thanks to price drops. Chicago isn’t like the coasts where properties were selling at 15-20x income levels, at the peak in Chicago the sales were at 6-7x income levels. Thank god Chicago isn’t as bad. And if you’re expecting doom and gloom 70% price drops, well those will probably only exist in the really bad hoods where forclosures and REO’s are everywhere.
“IMO a fair and reasonable price would be 2-3x gross income and that can be found all over the city now thanks to price drops.”
HD and Bob both are more interested in SFHs (right, gus?). They are also not so interested in “premium” ‘hoods (HD=OIP; Bob=McKP). Both of their prefered ‘hoods have been pricing based off the (mostly land, plus many of the houses are “over-luxury” for the areas, to help justify the pricing) prices in the premium ‘hoods, which is unfair in both directions.
I don’t think either of them object to paying ~$125/foot for the house, they object to the $400k standard chicago lot it sits on (which is less than half the LP lot peak price, but that’s the unfair part). OIP and McKP lots should be–maybe–$100k. Would they *like* to buy a 4000 sqft, pimped out monster house for $250k? Sure, who wouldn’t (assuming you want an SFH in the city)? Is that what they expect? I don’t think so.
Also, median gross income is ~$50k. I know I regularly point out that the median Chicagoan is a renter, but even scaling up to the median likely-buyer, you’re not going much over $75k– and then 2x = $150k. Should the median Chicago home buyer need to choose betweeen being an urban pioneer and a studio dweller?
Real estate prices in Chicago are heading towards obscene and unfathomable lows.
West Bridgeport but close enough 8)
Theres actually a dearth of nice (or any) inventory in McKP from my observations. I would consider McKP with the right house but theres much more inventory in Bridgeport.
$125/sf? I’d jump on that. Right now I’m seeing the occasional foreclosure go down to $150/sf. And these neighborhoods aren’t the kind that attract transplants from the rest of the midwest/country, they only appreciated to crazy levels riding the coat-tails of the ‘hoods that do.
3x 75k is $225k Even if you financed 100% the monthly nut is $1500 with today’s rates. If you make 75k a year (which a household with two working members is a joke) you’re grossing $6250 a month and lets just say with taxes and insurance and other crap you have about $4375 a month to spend… $1500 isn’t shit!
Are you saying that people that make $35-40k a year should be living in 2/2’s in LP or RN? Because that ain’t gonna happen. There’s plenty of 2/2’s in Logan square and other outer neighborhoods that are priced around 225k. And you guys are really underestimating how much people make in the city. Pretty much everyone I know makes over 100k combined household income.
no problem anon (tfo), i believe you (and others) might agree that the numbers we (and CS) talk about needs a constant definition or what we reference and discuss has less definitive meaning.
Moreover I believe CS numbers if using the MSD area has a somewhat less impact because it doesn’t include an important collar county.
I just don’t know for sure what is happening up there in Lake (RE prices), mine is all speculation from being a former resident.
I believe that Lake county esp. the parts close to cook, has an effect on Chi proper, and that those areas might retain housing values as people find it desirable.
Bob I have seen SF/small multi’s foreclosure(some shortsales) that are around $125 sq/ft including basement(northside, along the blueline), but I haven’t been looking in the hood you want.
All good points and I agree with you Sonies.
Having spent most every waking moment touring properties from one end of the city to the other for the past seven months, there are hundreds of houses out there that are priced VERY fairly and should have no problem finding an owner.
I emphasize ‘should’, as during my touring, esp on weekends, the people who are looking think they are buying circa 1980 in regards to prices. They are also the ones who are complaining, and rather loudly I might add, that they are going to HAVE to tear out wallpaper, patch holes or god forbid, repaint over an undesirable shade of green in a living room.
No one seems to be looking at homes with open minds and past the minor cosmetic changes even a High Schooler could do. It is absolutely unbelievable the things I hear coming from people who expect a ‘Trumpesque’…a new REism I have been hearing lately…style house for mere dollars.
And regarding people who live in this city not having enough money to make the downpayment and the mortgage every month….Bullshit!! There is more money in this city than others, it is just that people have it stuffed in their mattresses and refuse to part with any of it.
CRAZY world here!!
Sonies, with all due respect, your ignorance is bliss. Must be nice. Just try to keep your mouth shut when around the lower classes, you know, because you’ll probably get your ass kicked.
“If you make 75k a year (which a household with two working members is a joke)” and “Pretty much everyone I know makes over 100k combined household income.”
You going to make a point HD or skirt around the issue. I realize that you deal with idiots on a daily basis that have minimum Credit card payments of over 2k a month, and don’t typically have very good incomes but that doesn’t mean that most of the households in the city are responsible and the households that should be buying homes doesn’t make over 75k. It could be a home where the wife is a receptionist and the husband is an electrician, they would easily be making 75k if not more. Two city workers? Hell they’re pulling in 100k as a family easily. And those types aren’t looking to live in lakeview or LP or the gold coast or RN. They are in affordable homes on the fringe north or the south side.
Gary –
Yes, they are quite illiquid, but I was looking at actual trade prices, not quotes. There also are a number of maturities, and they seemed to form a clear pattern. I was just trying to find an explanation for why it was only 13.7% – I, like Bob, thought that seemed too low.
“The CME housing futures are pretty meaningless. I tried to trade them for about a month to no avail. This market is non-existent – no liquidity. The settlement prices that are quoted are contrived when there is no activity. They’re set by committee based upon the latest bids or asks. If you went in and bid above the numbers shown the prices would rise even without any trade occurring.”
“Pretty much everyone I know makes over 100k combined household income.”
“Just try to keep your mouth shut when around the lower classes, you know, because you’ll probably get your ass kicked.”
HD- because $50k salaries are rare?!?
going over the data G gave, does indicate an inflection point around ’99, but to have any real way of explaining the appreciation rate more thoroughly (whether they are out of line or acceptable), I would need more data around, rehabs (%), and the average amount of money put into these projects (conversely if new construction is apart of the data, how much more $ does these project take compared to new construction way back in time), but given the info I know about the cost of rehabs, the amount of appreciation for current selling units is not out of line if a majority(65%-75%) (does not need to be 100%) are units that have been upgraded. adjusted for inflation appreciation is 73K, in ’09.
“‘Housing has show over the ‘long’ term to be an excellent holder of wealth, not a creator’. Well said.
Buy a place, fix it up if needed, maintain it, enjoy it. After years of having a nice roof over your head, if you get your money out when you sell, you’re doing just fine.”
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Jay, I know it’s been a few days, but I can’t help throwing my two cents into the mix. First, your original comment was a bit hypocritical, don’t you think? You were more than willing to say Gary should be looked at as a whole city (presumably because you think it is all crap) yet Lincoln Park/Chicago must be looked at block by block. Clearly your experience with Gary is limited to the view from the Indiana Toll Road, or you would know that the million dollar lakefront homes (surrounded by National Park) in the Miller Beach neighborhood bear zero resemblance to the bombed-out downtown area. But I digress…
You say that if you get your money out when you sell, you did just fine. But you don’t get all your money back. You have to pay for maintenance, taxes, interest on the loan, maybe even assessments. That money doesn’t come back. Add up all the costs you don’t get back and then rent a place for the same amount. Take the amount that goes to paying down principal and instead invest it. If the rate of appreciation of the home is the same as the return on your investment, you come out exactly the same (except that the transaction cost to get your money from a home could exceed $10,000 while some other investment might be $10). Historically, home prices and other investment returns mirror each other pretty well. During the 2000s, housing was a bit better except for the very savvy investors.
Anyway, owning a home, monetarily, is nothing more than forced savings/investing. A renter that is disciplined enough to save/invest on his own is at no disadvantage. You talk about people that lost a lot of money while owning, but then at the same time denigrate people that are sitting on the sidelines waiting until prices drop. I don’t get it. I have my sizable down payment sitting in a relatively safe investment that is currently returning 3.5-4%. Why would I switch that to a different investment (house) until it can beat my 3.5-4%? I am smart enough to know (and I’m sure that most people here also know) that it’s not necessarily a bottoming of prices because rental costs don’t always exactly equal the “throwaway” costs of owning. What I know right now is that I have seen no evidence of it being better to own rather than rent, and prices need to drop faster than rents before it becomes better to own rather than rent.
First day of class in Stats 101 I remember the teacher saying “you can make the numbers tell whatever story you want them too”
chi is not as bad, near bottom
http://marketoracle.co.uk/Article9873.html
We’re still a long way from the bottom.
Four years ago housing housing went up 10% a year, practically guaranteed.
Two years ago it was heresy to suggest that prices would ever fall below a permanent plateau.
Today prices have fallen 22% in Chicago and we’re near the bottom.
Two years from now and another 25-30% off the peak and you’ll be screaming ‘uncle’.
Three years years from now housing is off 50% or more from the peak in Chicago and maybe, just maybe, we’ll be rounding the bottom.
Twenty years from now the only mortgage your children will be able to get are 30 year fixed mortgages at no more than 30% DTI with verifiable income, 20% down payment, and significant cash reserves.
Keep dreaming HD. Are you suggesting incomes will come down 50% as well? Chicago is now considered “affordable” when comparing housing costs to incomes. I guess you want to make it super affordable:)
Oh, I forgot to call you an idiot 🙂
40 years from now – Steve Heitman will be retiring from a successful career – as a dog groomer.
That’s nonsense. Cribchatter is devoted to overpriced properties that languish on the market. If Chicago were affordable, then volume would be up, not down; If Chicago were affordable, then average homes would be selling for 3x incomes – not 3x income for the crappiest home in a neighborhood; if Chicago were affordable, the $400k+ newer construction 2/2 would be a relic of the past, like Option Arms and NINJA loans. Face it Steve, your profession had it’s peak and it will not return to previous levels in your lifetime. It’s time to find a new career.
“Steve Heitman on April 5th, 2009 at 8:38 pm
Keep dreaming HD. Are you suggesting incomes will come down 50% as well? Chicago is now considered “affordable” when comparing housing costs to incomes. I guess you want to make it super affordable:)”
HD: While I believe we as a society would be better off if what you are prognasticating came true (that housing will return to 3x average salary in the good areas), I have trouble reconciling that against historical demand. Not just in the boom years in Chicago. What about Europe? Larger Asian cities (Hong Kong, Tokyo, Beijing)?
I’m with you overall, that housing will go down. It has. I have no formed opinion if we are going up or down from here which is part of the reason I read this site along with others. Of course the overall job strength will play into housing, and Chicago is strong on an international scale from a knowledge workers standpoint: lawyers, scientists, education, trading, software, medicine. Similar statements can be made for other larger cities.
WIth that type of latent demand, I can’t reconcile that everyone has the same view that they should spend
Hm, the Intertubes stole a part of my post.
that they should spend
I give up. HD, my final point was that demand and the market don’t look to be getting rid of option arms, nor do I feel that they are inappropriate in all cases. Mine was one of them.
I’m interested to hear your thoughts, due to your vantage point in the economy, why you feel that if demand, jobs, and access to capital remain the same as today the more desired areas of the city will revert to much lower valuations.
“demand and the market don’t look to be getting rid of option arms”
Actually the market did indeed get rid of them. The top five originators of these toxic mortgages are no longer in business. Sure the demand is there for them–there will always be idiots without access to capital who want to play in the RE speculation game.
“Mine was one of them”
I read somewhere that 86% of all option ARMs have negative amortization. I’m curious if yours falls into this category and why you went this route. I suspect its people like you that waded into the adults sandbox and bid up the price of properties without regard for fundamentals. And since RE prices are determined at the margins it affected the entire market.
Option ARMs no longer exist and it will take years to unwind the irresponsible investment decisions made by people during peak bubble years.
Wicker, Congress is setting the stage to fundamentally reform the home mortgage industry:
http://www.latimes.com/classified/realestate/news/la-fi-harney5-2009apr05,0,2295101.story
It would:
* Ban all fees paid to loan officers that are tied to the interest rate of the mortgage or the type of the loan. …
* Create mandatory minimum national quality standards for all mortgages. The rules would encourage lenders to make fully documented 30-year, fixed-rate loans with prevailing market rates, as opposed to loans with higher-risk features such as adjustable payments and negative amortization. The bill would also impose a federal “duty of care” standard requiring loan officers to offer applicants terms and rates that are “appropriate” to their income and ability to repay. …
* Allow borrowers who are put into mortgages that violate the new law to seek legal redress through cancellation of the loan contract, refund of all payments and fees and compensation for legal costs.
(paraphrased from Calculated Risk)
Option ARM loans were a tragedy for the vast majority of borrowers. You cannot extrapolate your responsibility in handling an option arm to rest of the population given the devastation it’s created in the housing market.
Wicker, one more point, it’s called supply and demand. Chicago is on a flat prairie that extends west, south and north. The lake to the east creates some difficult to build but it’s not like it hasn’t been done before. There are plenty of vacant homes and condo in every neighborhood and every city between here and DeKalb. I just don’t see how housing will stay artificially high with so many housing units available.
nice link, HD, thanks.
but I think you aren’t accounting for the fact that we aren’t simply on a prairie – we’re (well, not Chicago) on flood plains.
I’ve gotten into extended arguments with ninnies on yoChicago explaining how flooding won’t be a problem, as the houses are “built on slabs” with “landfill raising the grade” and so on, and so on – but that’s crazy. Nobody can predict what the weather/rainfall will be doing next week with accuracy, much less next month, in a few years, etc.
So I’d encourage people to rethink this idea that Chicago can simply spread out as far as the eye can see – ain’t gonna happen. Flooding issues (combined with a need for water that doesn’t make a Chicagoan sick on sight), gridlock, utility costs, no infrastructure, etc. are significant hurdles.
Real infrastructure means something, and it’s why Chicago is what it is. I’m on the blue line & expressway – no matter what happens I can get to work downtown, I can get to the airport, and it doesn’t take me 20 minutes just to get *to* the highway on a weekend like it did when I lived one whole whopping mile away.
Bob:
No, my ARM was simply an Interest Only. Negative Amortization didn’t make any sense to me (actually downright scary), and I was documented rather than no-doc. With that statistic I can see why ARMs get the bad rap. I haven’t had any friends with issues with theirs (all rolling out of an ARM into a 30 yr or a longer ARM, say 7 yr) but 86% negatively amortizing! wow.
HD:
I am definitely trying not to extrapolate my use of the financial product out to everyone, but absent governmental change I wouldn’t like to see it removed. They existed for a long time with higher requirements, sounds like that is where ARMs will go back to.
I guess we disagree on the supply & demand portion. I think there’s plenty of demand for certain areas of the city which can’t be satisfied with housing in the suburbs. I obviously like Wicker Park, but I’d be fine with other neighborhoods that have similar characteristics (lots of walkable restaruants, bars, shops, and fixed rail public transportation that takes me to work). With only a few exceptions, that’s only found in the city at this point.
I think it’s a bit easier to find what someone was looking for in Naperville nearby (say outer edges of Aurora along route 59) than it would be to find some of the walkable neighborhoods in the city out in the suburbs. Like you said, plenty of places in the burbs to move all the way out to DeKalb.
Thanks for the information on the updates to mortgages.
Wicker, for every twenty/thirty something who wants to live in a walkable area there are 3 or 4 other people who don’t mind driving, maybe even prefer it. The Chicagoland area is around 9,000,000 people; yet only 2,800,000 live within the city limits; and probably more than half of them live a suburban lifestyle on the NW and SW sides. This isn’t going to change anytime soon. Our lifestyle living near the el and in the big city is a niche product for a select group of people.
I had to drive to DuPage County yesterday and I never realized how many office buildings there are along the I-88 corridor; large companies with recognizable names. Unless our region abandons the suburbanization on a wholesale basis, I don’t see that region going anywhere. Gas is $2.00 a gallon in Woodridge right now; it costs $2.25 to get on the el.
HD did you see the space for lease signs in front of those buildings, the outward growth of the boom years is imploding
(the region is shrinking), more so than the 3x income levels you argue about, jobs will be more available in city centers. Therefore an existing demand in the cities will help to support higher price valuations for properties that are close to these job supporting areas. Dekalb (except for NIU) just can’t support that many jobs but they can support more than a town 30 miles from Dekalb.