Market Conditions: July Chicago Home Sales Rise 4.2% Year Over Year; Median Price UP 6.9%
As Gary and G have already pointed out in other threads, the July sales data did not see much of a rebound from 2010’s dismal number which was bad because the tax credit had expired.
Basically, everyone who wanted to buy in the spring/summer of 2010 did so before July so sales fell off a cliff afterwards.
What was the excuse this year?
There are still record low mortgage rates.
From the Illinois Association of Realtors:
In the city of Chicago, July home sales (single family and condominiums) totaled 1,655, up 4.2 percent from 1,588 homes sold in July 2010. The city of Chicago median home sale price for single family and condominiums in July 2011 was $210,000 up 6.9 percent compared to July 2010 when it was $196,500.
Here is some data from the last few years (taken from the IAR’s prior press releases):
- 2007: 2738 sales
- 2008: 2226 sales
- 2009: 1975 sales
- 2010: 1588 sales
- 2011: 1655 sales
Here is the median price data since 2007:
- 2007: $300,000
- 2008: $299,999
- 2009: $245,000
- 2010: $196,500
- 2011: $210,000
“This is the first month, year-over-year, where we are without a federal tax credit and are encouraged by July’s sales, hopefully a positive outlook for the remainder of 2011,” said Mabel Guzman, president of the Chicago Association of REALTORS® and a REALTOR® with Envision Real Estate LLC, Chicago. “There is an ongoing absorption of units throughout the city, specifically in the performance of the condo market over 2010, as well as compared to 2009. We will continue to monitor inventory, FHA changes to loan limits and accessible and affordable mortgages for qualified buyers.”
“The market, like the economy, continues to struggle even though interest rates and prices would appear to suggest favorable conditions for housing purchases,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois. “It would seem that until the economy signals a clear rebound—with sustained employment growth of the order of 200,000 jobs added per month—can we expect to see a sustained uptick in housing sales and some modest recovery in prices. Since April, the unemployment rate has not shown any definitive movement.”
Adds Hewings: “The forecast over the next three months indicates good news for the total number of sales, which will be positive year-over-year in August, September and October for Illinois and the Chicagoland region.”
Illinois Association of Realtors [Press Release, Aug 18, 2011]- this links to the press release on the Sacramento Bee’s page because the IAR’s own link isn’t working on its web site.
MAybe my reading comprehension is bad, but doesn’t the article and data show that there was an increase in sales and prices from last year? Yet the fist paragraph of Sabrina’s blurb states that things are much worse – I don’t get it….Sabrina, are you that insistent on encouraging the downfall of the housing market that you are now misinterpreting data?
learn to read:
“the July sales data did not see much of a rebound from 2010’s dismal number”
notice the word rebound there?
OK Clio, we went over this yesterday. 2010 was abysmal and is a trivial comparison. Throwing out 2010, 2011’s sales rate is a 14 year low. And contract activity is indicating more of the same lousy results.
Oh…and I find Mabel Guzman’s quote mystifyingly funny: “are encouraged by July’s sales, hopefully a positive outlook for the remainder of 2011” There is no way it’s a positive outlook for the remainder of the year.
Gary, you can’t “throw out” data just to make a point. The truth is that we have hit the bottom and are only slowly going to start seeing increases in price/volume. That slow increase is the new “norm” until the next boom (which will likely be in the late 2010s, early 2020s). History ALWAYS repeats itself – human nature doesn’t change – this real estate downturn will be forgotten in a few years.
Clio what have we hit the bottom in? Dow down 500 but we know equities are a suckers game. But the 10yr govt bond fell below 2% today. First time in my lifetime & possibly ever. This means hundreds of billions of “smart money” are betting on a lost decade. Deflation is winning the inflation vs deflation debate quite handily. Policy makers are too stupid to realize a bank won’t lend at legal rates if they’re worried about repayment of principal. All that fed money sits locked up safe in electronic accounts.
Blah blah blah.
One story will say the numbers are improving and the next will say they’re not. And everybody has an opinion as to which is more accurate.
Ya gotta live somewhere, and life goes on. Should knowing whether prices and activity are higher or lower, or will continue to improve or worsen, really influence one’s decision whether or not to buy a particular property? It shouldn’t.
I’m still waiting for any of the numbers-obsessed folks to point me to some fully Unicorn Criteria-compliant listings (ideally for sale, but also for rent). Perhaps all of the would be sellers of such properties are all sitting tight, mindful of these numbers regarding “Chicago” properties…
I predict good things for this thread, screw the dow, at least shit posting is at an all time high
This thread is a non-starter, perhaps its time for a redo.
I don’t think there is any mystery why sales are low:
1) Most move up buyers are stuck since a large chunk of their equity has evaporated. Believe me, I have a ton of clients who want to move up out of condos to single family homes either in the city or burbs but can’t unless they are willing to part with a significant chunk of cash. Most are not willing to at this time or are putting off buying until they can significantly make a dent in their current mortgage.
2) Lack of confidence in economy. Many buyers are putting off buying until they feel more secure. Employment in corporate america has become mercenary like so being able to quickly relocate to better opportunities is paramount for young employees. Unemployment remains high because many of the unemployed also can’t relocate due to an underwater home unless they are willing to just say “F’ck it” and send back the keys which I suspect is happening more than we hear about.
3) Changing attitudes about home ownership. The condo as a starter home experiment has largely failed. Many rather just rent now until they can buy a larger place in better school districts that they can stay in for a longer period of time. Yuppies have figured out they can still enjoy the city as a renter but not be weighed down by a mortgage and the risk associated with trying to get out of a 2/2 or 1/1 condo. See the demand for higher end luxury rentals. I suspect we will see a shift in the perception of renting as being OK instead of being viewed as a social/career failure if you still rent after 35 years of age without a good excuse.
I do agree with Clio though that we are likely at/near the bottom but sales/appreciation will remain stagnant for a couple of years. There will be another boom. It is human nature. Many buyers today may look like geniuses in 10 years; but who knows? It is always easier to play armchair quarter back after the game is over.
One caveat Russ: in certain neighborhoods townhomes or SFHs simply aren’t in enough supply nor will be to become attainable for 90%+. Will townhomes or SFHs become the new normal in Gold Coast or Old Town? I think not.
@Bob
Regarding:
“Clio what have we hit the bottom in? Dow down 500 but we know equities are a suckers game. But the 10yr govt bond fell below 2% today. First time in my lifetime & possibly ever….”
Some poster already called the bottom last year:
December 17th, 2010 at 12:59 pm
clio on December 17th, 2010 at 12:59 pm
Bob – first of all, I am talking about buying now, in 2010 when we are at or near the bottom and when rates of low.
chichow – uhhh – what is your point? The bottom was december 2010 – look at the data or the title of this thread – sales and prices in chicago RISE since last July.
I would say though that “extend and pretend” is not limited to the Fed
In this post, emphasis is on 2015-2016
clio on August 18th, 2011 at 8:15 am
Bob2 – shut the f up – it still is a rebound – everyone knows that there isn’t going to be a huge immediate spike in sales/prices – it is going to be a slow but DEFINITE rise over the next several years (which is still good bc by 2015-2016, you will be surprised at the 5 year increase).
In this post 9 months ago, emphasis is on 2012-2013
December 1st, 2010 at 1:46 pm
clio on December 1st, 2010 at 1:46 pm
G- I actually would LOVE to see the bottom fall out of real estate. I would sell all my places at a loss (take the tax deduction) and buy even nicer places at a very low price. There is opportunity in every down turn. I just don’t see this big downturn happening. Real estate prices are definitely going to go up in some areas by next spring (sure, in some places they will go down) – but, by 2012-2013, you will see a positive turn in almost all areas.
Clio his point is that you are a parroting cheerleader who is already been proven wrong. You keep talking up real estate because you are significantly invested in it both financially and emotionally in it. You are like the wife of an alcoholic who constantly rationalizes and defends her husband even if he hits her.
The things people say on anon blogs…..
chichow – again , what is your point? Everything I posted was true – prices and sales will stabilize and slowly start going up (not at boom levels). Appreciation of 1-3% is probably for the next 5-7 years. After that, a boom will likely occur. I am betting on late 2010s, early 2020s. You don’t have to believe me – I don’t really care – reality is reality and it is all around you. Just open your eyes.
Worst. Start. Ever.
Clio once again kicks us off with a foul attitude and a skewed viewpoint of the market. Keep on cheering! All, all, all the way down!
I think Bob 2 got the language right…
Clio for it to increase 1-2%/yr it has to stop falling by 7%/yr first.
clio: “Appreciation of 1-3% is probably for the next 5-7 years.”
What’s it called when appreciation of an asset doesn’t keep pace with inflation? Let’s just call it a bad investment…
“I don’t think there is any mystery why sales are low:
1) Most move up buyers are stuck since a large chunk of their equity has evaporated.
2) Lack of confidence in economy.
3) Changing attitudes about home ownership.”
So true. I’ve got a 2/2 that I paid 17k less in 2007 than the 2004 price . I thought it was a deal back then, I knew prices were going down but didn’t know they would go this low.
Essentialy, if I’m able to sell, I’ll be lucky if all I lose is my entire 20% down payment. Luckily, I’ve been able to save/earn in this economy for a new and larger downpayment. I don’t mind renting the place out, however, I won’t qualify for a large enough mortgage that I would need for a newer place since I still have a substantial amount owed on my condo. So am I stuck……I would need 2yrs of rental income to show so I can count that as income. If I do that, where am I supposed to live in the meantime?? Ha.
Yes, I could rent….but I’m just explaining what hassle all of this is for prospective move up buyers.
TftInChi – haven’t you learned anything – real estate for the vast majority should not be viewed as an “investment” but rather a necessity. Also, it’s not a bad investment when it serves a dual purpose. I’m so sick of explaining these simple concepts to people who refuse or are unable to understand. Please just skip my posts. You are exhausting.
Looking to buy: why exactly did you buy a 2/2? How big is your household size? And wouldn’t a better moniker be ‘Looking to sell first then buy (again).
I just ask because the talking heads on here say 1/1s are a terrible investment and a fools game. But I don’t see it that way and instead consider 2/2s just doubling down on owning real estate.
“Ya gotta live somewhere, and life goes on. Should knowing whether prices and activity are higher or lower, or will continue to improve or worsen, really influence one’s decision whether or not to buy a particular property? It shouldn’t.”
It’s gonna be hard to top this side splitter, lol. Then again, if you’re gonna believe in unicorns…
Bob, there will always be a market for condos; particularly luxury condos. However, there are only so many empty nesters, divorced Doctors, perpetual singles, etc. In fact, that is what the condo market used to be mostly. A luxury, not a starter home.
It is just becoming obvious to me that condo living isn’t practical for the average professional couple looking for a starter home in Chicago. The required time horizon of ownership is just not long enough for a lot of couples now given the market. See the ubiquitous cribs in 2nd bedrooms in 95% of condo listings. You really have to think about where you life is going to be in 10 years when making a buy decision these days.
G – huh? There is a lot of truth to that statement. While you and others let life slide by as you spend countless hours searching for your property, there are smarter people out there who are biting the bullet, buying and enjoying their lives. You cannot put a price on peace of mind, stability and, most important, quality time. Honestly, if you count the hours HD has put in searching/scouring the MLS for the right property, and then multiply that by 10dollar and hour, I bet he would have enough money to buy his dream property!!!
“The bottom was december 2010 – look at the data or the title of this thread – sales and prices in chicago RISE since last July.”
Median prices rose and as we have discussed ad nausea that means nothing. As for volume…the contract activity is indicating continuing declines and if the government hadn’t interfered in 2010 we would be having a much tougher comparison right now – i.e. sales would have been lower than July 2010.
“Believe me, I have a ton of clients who want to move up out of condos to single family homes either in the city or burbs but can’t unless they are willing to part with a significant chunk of cash. ”
Don’t worry, Russ, we believe you.
“One of the excuses I often hear as to why someone is paying rent as opposed to owning their own home is “I am saving for a down payment and closing costs.” Well, that is no longer a valid excuse!” – Dec 21, 2006 by Russ
Gary, again, you can’t “throw out data” and you can’t say “if the government hadn’t interfered in 2010….” etc. just to make things fit your opinion. Things are what they are. Take everything as it is and then make an analysis. I am tired of people making excuses and only looking at parts of data to support their opinions.
Gary if you’re going to continue to work in the real estate industry might I suggest some thicker skin. Sure I might get banned from here one day but will it be before or after you stop posting graphs on your website letting buyers know that the trend is definitely not their friend?
Double down though Gary and buy thar house in west town. My guess is even in this real estate depression you’ll be in the top quartile of earners there.
“Take everything as it is and then make an analysis. I am tired of people making excuses and only looking at parts of data to support their opinions.”
What is your excuse for blowing the most obvious call of 2011, that June sales would not exceed the June 2010 sales that were inflated by the D4D deadline, if it wasn’t your inability to understand the data?
Okay, to cheer everyone up, take a break for a second and look at these listing pics:
http://www.urbanrealestate.com/property/1657-W-Pratt-Unit-BG-CHICAGO-IL-60626-Q7ISMMVIQOW2G.html
Just scroll through them all. You’ll see what I mean. Kinda makes you want to buy this place now!
It’s a 2/1 in Rogers Park for just 69K with low taxes and assessments, btw.
G, in 2006 there were plenty of lower down payment programs available at pretty much the same rates as putting 20% down. At that point in time, needing to have a large down payment was not necessary if you really wanted to buy. So yes, it wasn’t a valid excuse other than a personal decision.
Obviously, the pool of lower down payment mortgage options is a lot smaller TODAY. But of course you knew that…
Current owners now are stuck because they 1) are underwater on the existing property and 2) would also need a larger down payment for the new place. They have to fork over large amounts both coming and going. Many can do one or the other, but not both.
milkster-
It’s a basement. In Roger’s Park.
So gary how’s that TBT Working out for you… right, terrible
“At that point in time, needing to have a large down payment was not necessary if you really wanted to buy.”
Obviously, your pool of stuck clients is a lot larger TODAY due to this fact. But of course you knew that…
I know TB, but pets welcome! They’re saying “please buy our apartment. Meow! Arf!”
It has a nice patio, it’s in move-in condition and it’s cheap.
…”we love you! Meow, ruff!”…
G, G, G. It’s not a matter of unicorns – it’s a matter of priorties.
Take HD, for instance. He wants a house, and he wants it to be located in a particular region of the city. Or tomm, who has expressed and aversion to over-gentrification/yuppification and, similarly, Groove, who hates the traffic and d-baggery of LP. Me, I have no interest in living more than a block or two away from the park/lakefront. All of us have priorities that guide our housing decisions. And the more selective our priorities are, the more our housing search becomes highly property specific (whereas less selective priorities would broaden one’s housing options, such that statistics, including those of which G is so fond, become more meaningful guides).
anonny the 10yr broke the 2% threshold today. your unicorns are starting to become exposed as the jackasses with a glued on cone that they are.
This stock market is rough. With today’s plunge, my overall savings are now back to exactly where they were in the spring of 2008, before the first crash that year. I’m glad I’ve taken a conservative position and only have 1/3 of my $ in stocks. It could have been much worse. Still, it’s disheartening that I can’t make my money grow. Obviously, what I have in cash is losing buying power thanks to inflation. And my home’s value is going nowhere.
Seems like investors are just spooked. Today it’s the European banks they’re worried about. Tomorrow it will be something else.
LOL Milkster.
My dogs would say “ruff, please get me above grade”!
Bob, please explain to me how the 10 yr affects the availability of Unicorn Criteria-compliant properties.
“Looking to buy: why exactly did you buy a 2/2? How big is your household size? And wouldn’t a better moniker be ‘Looking to sell first then buy (again).”
Ha, yes looking to sell would be better. My household went from 1 to 2 to 3 in 4 years, ha.
I sold a 1BR 1/1 700sft in LP in 2007 and bought a 2/2 1650sft place in OT. Main reason I bought the 2/2 was more space, closer to the train and closer to the loop.
Looking back, I wish I still had the 1/1, that way I could keep it and have an in-town or rent it out. Ha, but paying a highrise asm stinks and not being able to control my own AC is even worse!
“the last time you actually kissed a girl, let alone talked to one”
Hate this. The latter is supposed to be the less likely (but still likely for a person who isn’t being ridiculed) thing. Thus:
“when was the last time you so much as *talked* to a girl, let alone (or nevermind) kissed one”
is the right way to phrase it, unless one believes that the object of ridicule is *more* likely to have kissed a girl in the recent past than he is to have talked to a girl in the same time period.
snobby its be aide you are too stupid to see real estate as a spectrum governed by the laws of economics and monetary constraints. its like the P&G exec believing he has pricing power and can set Cheerios at 6$ a box and the Jewel brand next to it for 3$ has no impact on sales. I will say it again: your unicorns are jackasses with cones glued to their heads. only you and little girls are dumb enough to believe it though.
@anon(TFO)
Do illogical phrases annoy you as much as weak google-fu?
err anonny its too bad
wow anon, that is what irked you in this thread? the grammar?
“So gary how’s that TBT Working out for you… right, terrible”
Yes, it is terrible, but not because it’s a 2x (I knew that going into it and put in half the money) but because who would have thought that with a debt problem and a credit downgrade and inflationary expectations that interest rates would go DOWN? WTF!
“Gary, again, you can’t “throw out data” and you can’t say “if the government hadn’t interfered in 2010….” etc. just to make things fit your opinion.”
2010 was massively distorted. If you don’t adjust for that distortion then you end up with ridiculous comparisons. So you need to look at a longer period of time than a single month. For instance, by your logic the market didn’t bottom in December as you claim. It bottomed just last month which was 27% below last year. OMG! The sky fell last month but now the picture is rosy again.
like they say here, when the markets crappin, go to the beach…
Well actually only i say that, and i don’t happen to be near a beach at the moment. Damn!
@Gary
Its ok. Others also felt that rates would go up
clio on November 24th, 2010 at 9:59 am
HD – it is NOT true that prices will continue to decline in every area. Also, you really are taking a chance by waiting – prices are going to be steady and start increasing (at a very low rate) – but MORE importantly, rates (which make a HUGE difference) WILL ABSOLUTELY start going up in 2011-2012. Now is the time to start aggressively looking and, if you see something you like, jump on it. There is NO point in waiting.
But as we know now, the FED is going to hold the line till 2013
WASHINGTON — The Federal Reserve made a rare promise on Tuesday to hold short-term interest rates near zero through at least the middle of 2013
http://www.nytimes.com/2011/08/10/business/economy/fed-to-hold-rates-exceptionally-low-through-mid-2013.html?pagewanted=all
I do understand that there could be a separate side discussion on how the Fed Fund Rate relates to the MBS market but that’s a whole other can of worms…
Gary putting in only half the money into a 2x levered ETF does not…ahh fvck it
moo moo… I think i have made it pretty clear, my affinity for cafe au lait.
Bob says some smart, and sometimes funny shit. But he knows he is an idiot as well, just as he knows he’s his own worst enemy.
“who would have thought that with a debt problem and a credit downgrade and inflationary expectations that interest rates would go DOWN? WTF!”
and thats why I don’t listen to the clowns on TV and their fear mongering nonsense
bond pro’s can’t even predict interest rates so what makes you think you can?
To be perfectly honest, I wouldn’t be surprised to see mortgage rates in the 2% range at the bottom (around 2015) as crazy as that sounds
Ze, you are married to a Brazilian chick so your coolness is already proven beyond reasonable doubt : )
“wow anon, that is what irked you in this thread? the grammar?”
Well, I’m actively avoiding participation in one part of the discussion, and try to pick my spots with Bob (this is one where nothing much need be added, imo).
But that misuse (and the “try and [do something]” in lieu of the correct “try to [do something]”) are major irritants.
And, chichow, poor google-fu doesn’t annoy me, but claims of “googling the hell out of it” when the answer is on the first page of a half-decent search amuse both me and DZ.
http://en.wikipedia.org/wiki/Cash_and_Curry
*whistling dixie*
6 on one hand
November 30th, 2010 at 11:09 am
clio on November 30th, 2010 at 11:09 am
Bob2 – you really need to have a little more respect for people. Maybe people “feed the troll” because I probably own more real estate than anyone on this site – also I own a small real estate company. I have bought, renovated and sold scores of houses over the past 15 years. All of these experiences…
*tra la la la la*
half a dozen on the other
clio on December 21st, 2010 at 12:15 pm
TftinChi,
I have no financial stakes in this site/game, etc. I just think that people who WILLINGLY stop paying their mortgage are criminals – no different than robbers/burglars and thieves. …
If we get 2% mortgage rates pencil me in for at least a half million dollar home in a place. I could live in until the old folks home. Maybe more than 500k too.
Gary, stay out of owning the leveraged etfs unless you are in and out in a day they will suck you dry. short them all
bob.. We get to 0 percent and i’m buying the NYJets. You will be invited to my box sunday morning for pre game ruggalach and challah french toast.
“Gary, stay out of owning the leveraged etfs unless you are in and out in a day they will suck you dry. short them all”
This is 100% correct and can not be said often enough.
but Gary, an otherwise smart & insightful fellow believes if he only invests half the amount he’ll be fine. big wonder the push to ban them. some people (like me & Gary) have to lose $ to learn a lesson. luckily I’ve already taken my lumps with those things.
Weird thing is, mortgage rates have barely ticked down on the massive move down in the 10 year. I priced a bunch of loans when the ten year was at 3.10 and a 5/1 was 3% and a 10 year fixed was 3.25-3.5%. The ten year is now down to 2.0, and they are quoting 2.75-3% on a 5/1 and 3.25 on a 10 year fixed. Mortgage rates are not tracking the 10 year as well as they used to. We may see a floor in mortgage rates here, even if the 10 year goes to 0.
With massive losses in the stock market, real estate seems a relatively “safe” place to invest money. I lost more money (on paper) in the stock market in the past two weeks than I have in real estate (on paper) in the past 4 years.
well chuk, your prediction is worth about as much as mine 🙂
@Chuk
another site that gives a feel is
http://www.mortgagenewsdaily.com/consumer_rates/
Well, I didn’t even mean it to be a prediction, more of an observation. For the life of me, I can’t see why mortgage rates aren’t down more. Maybe it is just a lag effect, and mortgage rates will catch up to the downside.
Yeah chichow, I read that site a lot. Some good insight there if you can get past all the disclaimers to the advice.
@TftInChi
So you think we’ll double dip?
There is definitely a floor on rates. Par rate on a 30 year fixed is 3.875% right now. Par means you are paying full costs (typically a point (1% of loan amount), lender fees, and title fees). Par on a 5/1 ARM is at 2.75%.
I don’t think rates will get much lower. Maybe .125% at best. They would probably be .25-.375% lower than where they are right now but the govt screwed up the pricing moels (made it more expensive) with some new compensation laws for loan officers that went into effect in April of this year.
The next big wave of refinancing is going to be some type of streamline program – no appraisal, income, asset, or any over lays for anything. They tried it with HARP but it didn’t work too well because all the banks/fannie/freddie put so many overlays on LTV, credit, appraisals, etc.
Basically, the govt is going to say if you have been in your place for more than five years with good credit and the only reason you can’t refinance is the appraisal, they are going to force a refinance to lower rates. I think Pelosi already introduced a bill.
Even though rates are low, there are still a ton of people who have not refinanced as all the credit overlays, PMI, subordination of 2nd mortgages, appraisals, stricter condo guidelines, etc have basically eroded any value of the lower rate or made it impossible to refinance.
@chuk
rates can only go so low – even still
for myself, i wouldn’t buy down points for the long haul. instead i would just go for a no cost ARM (pick your length). I’ll take the gamble that rates will drop another 50 basis points at which point I’ll just refi again.
And if things really start swinging up and one wants to stay put for the longer term, those 15 and 30 years are awfully nice in the 3 – 4 range. now will nookies still be there 15 years from now…
chichow,
I’m looking to pay cash, but I might rather spend their money than mine. I can do better than 3% (tax deductible as well, so almost 2% effectively) by keeping my money. Plus, it’s always more fun to use OPM. I think a 10 year fixed at 3% with 0 closing costs would be my sweet spot now to mortgage instead of pay cash.
btw, since the gov is writing all of these mortgages anyway (via fannie), why don’t they just cut out the middle man (BAC), and write them directly? Gov can offer a 30 year 3% mortgage for all (which they are essentially doing by selling 30 year treasuries). Our losses there will be less than taking on all the risk anyway, and letting the banks make billions in the middle.
Time for a USA Mortgage!
@chuk
I’m with you. Put my money into something liquid – some bond fund, some boring utility with a dividend during the crazy VIX hour.
or just let it sit on the sideline for a bit.
no point locking it all up in equity if OPM comes so cheap.
and yes we are not talking about opportunity costs or tax implications et. al.
“So you think we’ll double dip?”
That what the market sell-off today was all about. The traders around me are all pretty convinced we are headed to a second recession. I’m giving it slightly better than even odds.
“The traders around me are all pretty convinced we are headed to a second recession.”
Headed? We are in it already. It has just been masked by QE1 and QE2 funds.
“Headed? We are in it already. It has just been masked by QE1 and QE2 funds.”
Is there any reasonable basis for beliving that, w/o QE1 and QE2, we ever emerged from recession? Can you double dip without ever getting above water?
“you are too stupid to see real estate as a spectrum governed by the laws of economics and monetary constraints. its like the P&G exec believing he has pricing power and can set Cheerios at 6$ a box and the Jewel brand next to it for 3$ has no impact on sales. I will say it again: your unicorns are jackasses with cones glued to their heads.”
Bob, let me ask it again: How does that affect the availability of Unicorn Criteria-compliant properties?
Are you saying that a UC-compliant property on the market at, say, $500k, will be impacted by a property (that’s not compliant, but offers some of the UC) that’s listed for $250k? Because that’s what your cereal example indicates. Or are you saying that, because current buyers (who seek a UC-compliant property, at a minimum) – due to the record low rates – can afford more property for their money, such buyers will pass on the UC-compliant property currently listed at $500k and instead buy a…well, I’m not even sure how to complete that absurd question.
In any event, it matters not, for at least a few reasons. First, there was, is and will always be a LIMITED SUPPLY of truly UC-compliant properties. Second, while you might not mind consumming Jewel brand cereal over Cheerios, I do (actually, I haven’t purchased cereal in a conventional – i.e., non-Whole Foods/Wild Oats – grocery store for about 15 years now), which is to say that I’m not going an extra 4 blocks west, or forgoing a garage, or whatever, just to save 50% (to me, criteria are requirements, not guidelines). Lastly, if rates continue to go down, doesn’t that mean that the price of a UC-compliant property should go up? And if rates go up, doesn’t that mean that, amid flat to diminished pricing, more prospective sellers of UC-compliant properties will hold tight for better days to come, thereby perpetuating the limited availability of such properties?
I’d also like to get my piece of the next “great mortgage bailout” in whatever form it takes that I’m sure the gov will throw trillions at. Allow me to mark my house to market, and take the loss on my taxes this year. Have them pay the mortgage for me for 2 years if I lose my job. Whatever. Doing the right thing and being responsible has always been punished, and I’m sure that will continue. I’d like to have my time at the government tit one day too.
“Is there any reasonable basis for beliving that, w/o QE1 and QE2, we ever emerged from recession?”
No, not in the slightest. And the truth is, this really goes back to 1998. We never got out of that, and the .com bubble, housing bubble, etc. were all just a result of artificial intervention.
“Can you double dip without ever getting above water?”
Mostly semantics, but it depends on if you count the “growth” we had as real or not. It was most definitely not real, but it shows up on the gov reports, so it is considered real.
So, maybe QE3 can “prevent” another recession. But all it really does is kick the can down the road and make the depression of 2015 (or whatever year) even worse.
We are so far past the point of just taking our medicine, that it is no longer a possibility. The only “solution” is to keep blowing bubbles till you run out of them. Then it’s mutants in the streets.
Didn’t we already establish that is was all zombies past Western already?
chuk is right. just as a drunk can start drinking at 9am to get did of this mornings hangover from last night’s bender. its effective so long as the liver & kidneys are..
“Allow me to mark my house to market, and take the loss on my taxes this year”
Congress (Durbin in particular) tried to pass a ‘cram down’ law and it never passed, never even made it out of subcommittee.
just imagine the havoc that would cause.
Banks hated it too, which is why it will never pass.
rates have already been an eigth lower: very briefly last November & again last week. waiting to see if we ever see a 30yr for 3.625% tho
“Didn’t we already establish that is was all zombies past Western already?”
Depends on your latitude. Zombies, Thunderdome, dragons and sea monsters all reside west of Western, based on reports from reliable sources.
‘course, any of them are preferable to the flash mobs and serial rapists running amok at all hours thru out areas east of Western, if you ask me.
“‘course, any of them are preferable to the flash mobs and serial rapists running amok at all hours thru out areas east of Western, if you ask me.”
When everything officially goes to hell, the flash mobs and serial rapists will be too busy hiding from the mutants. See, the glass is half full after all.
yeah whatever russ, thats what your people in your circle are telling you to say to people because why would people get a mortgage today if rates will continue to go lower, am i right?
All about the urgency factor in sales, I know.
The way things are going it wouldn’t surprise me to see sub 1% 10 year treasuries with sub 3% mortgages, how long you think 0% rates will last if we fall into another recession? QE-infinity if that happens, although I think recessionary fears at the moment might be overblown. The rest of the world is struggling but I don’t know if that will make things worse or better for the US. I;ll have to think about it a bit more than during a quick lunch break
no worries about the flash mobs
I AM THE LAW *snigger*
http://en.wikipedia.org/wiki/Judge_Dredd
Also, as absurd as it sounds, these are the kinda things that can lead to Housing Bubble II. Believe me, after the .com burst, it seemed impossible that we’d ever have another stock bubble. Well, we had one within a few years and it popped in 2008 (and then we created another one that is in the process of popping now). Even though the housing bubble still seems fresh in everyone’s mind, it is amazing how bad some peoples short term memory are. Force enough $ into housing one way or another, and you have no choice but higher prices. Of course that is a recipe for disaster, but some people never learn…
@Sonies
aww lay off.
just like making on the vig, he makes his money on the transaction. Re-fi now. Ka-ching. Re-fi later. Ka-ching.
There will not be another housing bubble because the banks will lend the money to unqualified buyers to make another housing bubble. if you want to give my degenerate BIL a loan for $400k to buy a house, he will take it, and never make any payments, but until that day again arrives, it ain’t going to happen.
will NOT lend…
HD – the thing is that it IS going to happen. People are greedy – people have short term memories. This is a lethal combination and you will see their effect on the housing market in about 10 years…. (about the time it takes for people to forget and about the time the govt loosens its grip on the mortgage industry). Don’t be naiive or idealistic – that is not reality.
“There will not be another housing bubble because the banks will (not) lend the money to unqualified buyers to make another housing bubble”
No, but the government will…
the banks won’t be lending money to degenerates as long as the tea party is around…
exactly, the government can’t help themselves, its such a huge money pot that they want to get their hands on
There will be cries to relax credit again. Credit is the only thing keeping what were once middle classed people from realizing they are no longer.
Never underestimate the stupidity of the government. Maybe we will have negative mortgage rates. You buy a house, and you collect 3% a year on it from the gov in the form of a tax credit. Just like a CD. After all, a house is an investment right? WTF aren’t I getting paid!?!?!
the lines of people stopping into my personal office on a daily basis are unable obtain credit and are looking to discharge hundreds of thousand of dollars in debt. i highly doubt they are going to relax credit these people again. even if they did, i doubt they want to restart the game all over again; now student loans, there seem to be a lot of those being borrowed lately…
The problem is, some of you people just aren’t jaded enough.
Everyone is corrupt.
Everyone is stupid.
Learn to accept that, and you’ll find that anything is possible!
now you guys are just talking nonsense. good bye.
no really HD its true
Everyone is corrupt.
and Everyone is stupid.
you of all people should see it on a daily basis
The two big bubbles that people should really be wary of right now are treasuries and education. Stay far away from the former and be very sensible when approaching the latter. Who knows how much air is left in the real estate bubble, but it’s quite clear the government is trying to blow it back up…and it’s not working.
Good article posted today on the horrible “investment” that most business schools have become: http://management.fortune.cnn.com/2011/08/18/have-b-schools-become-debtors-prisons/?iid=HP_River
“Never underestimate the stupidity of the government. Maybe we will have negative mortgage rates. You buy a house, and you collect 3% a year on it from the gov in the form of a tax credit. Just like a CD. After all, a house is an investment right? WTF aren’t I getting paid!?!?!”
Isn’t that similar to what the mortgage interest dedcuction is about……
“Isn’t that similar to what the mortgage interest dedcuction is about……”
Yes, think of it as a 200% mortgage deduction.
” You buy a house, and you collect 3% a year on it from the gov in the form of a tax credit.”
“Isn’t that similar to what the mortgage interest dedcuction is about……”
I read someone (here?) suggesting income tax dedcutions for paying down mortgage principal; just one step further to make it a refundable credit.
That is one idiotic tax proposal. Then again everything in the tax code is.
How about govt provided housing and govt jobs for everyone….oh, is that communism??
“That is one idiotic tax proposal.”
In that case, it should be law before the end of the year.
I proposed it… the thought was instead of rewarding people for taking on more debt (interest deduction), why not reward them for getting rid of debt instead. Encourage people to go from 30 to 15 year loans and make large principal reductions.
Everyone wants to dispose of mortgage debt (banks, government, consumers, etc) so why not just use the tax code to encourage people to pay mortgages down since everyone seems to feel that outstanding mortgages are the cause of our economic woes.
I am sure someone can find some reason to poo poo it, but just throwing an idea out there. Obviously, there would have to be limits, etc.
Consumers are already running away from debt. read an encouraging stat that 37% of all refi’s were for 15yre fixed.
the US never came out of the recession, it was a lie.
The banks have never not been insolvent, thats been a joke, and the bonuses a disgrace.
Rates can only come in to a certain point because they need a premium for vig, and once again, they are writing a god damn put on an asset and that has value.
and sorry russ.. I love throwing shit against a wall too and letting people go at it. I didn’t poo poo it, if i remember correctly, i completely dismantled it.
will rates go lower? maybe. substantially lower enough to make a refinance in the future worth it? nope. also it seems rates shoot up a lot faster than they fall
Yeah Bob, when the 10 year went from 2.80 to 3.2, the 5/1 arm tracked it pretty well to the upside. Then the 10 year fell to 2.0 and some people are quoting me HIGHER prices than when it was 2.8. However, I do realize that is not the only input variable.
“the lines of people stopping into my personal office on a daily basis are unable obtain credit and are looking to discharge hundreds of thousand of dollars in debt.”
well then you should be rich enough to afford a house – your business is booming!!!!
honestly, HD – you are jaded by your profession. It is totally getting to you – you would be much happier if you found another job. The bottom line is that there WILL be another housing/real estate boom. Greed is and always will be out there – and businesses know that the way to make money is through credit. Now they just have to figure out a way to get around the government.
Just got this amusing mail from The Columbian, for those who wonder how they are planning on getting rid of all that downtown condo inventory:
“Already the best value for a luxury condo on Michigan Avenue, The Columbian is sweetening the deal for the season. From now through Labor Day, purchase a home at The Columbian and receive a free parking space and up to $20,000* toward window treatments, closet organizers, furniture or anything else to decorate your new home.”
(the included parking has been around for a while though)
clio: “The bottom line is that there WILL be another housing/real estate boom. Greed is and always will be out there – and businesses know that the way to make money is through credit. Now they just have to figure out a way to get around the government.”
I really don’t disagree with that. Even if the absurd government encouragements for homeownership don’t return, there will eventually be another building boom.
I just disagree about the time frame and whether the average joe will benefit from that boom or should be waiting for it to happen. I really think people need to start looking at buying/renting as an investment decision and stop listening to the RE “professionals” whose only motivation is to make transactions. If you aren’t certain about what your living situation/job situation is going to be in 5 years and most non-RE-agents are saying 1-2% appreciation over the next 5-10 years, does it really make sense to buy?
If people put just a modicum of thought into the decision instead of treating it like an obviously good investment because their dad and RE agent said so, the bubble and bust would both have been far less severe.
“and most non-RE-agents are saying 1-2% appreciation over the next 5-10 years, does it really make sense to buy?”
What you are forgetting is that the 1-2% is a LEVERAGED return. If you only have 10% down, that is like getting 10-20%.
House is 100k
Put down 10k
House goes to 101k
Your “investment” is up 10%, not 1%.
chukdotcom: “What you are forgetting is that the 1-2% is a LEVERAGED return. If you only have 10% down, that is like getting 10-20%.”
Of course. But like every leveraged investment, there are carrying costs and like all investments, there are opportunity costs. My point being: people should really be running the math to figure out whether it is worth it. There are spreadsheets floating in the wild that do it, not to mention more crude tools like the NYTimes rent vs. own calculator.
Personally, I wouldn’t bet on any appreciation in RE over the next 5 years. I know that isn’t necessarily the popular consensus, but it is my belief.
And my big problem with RE is really liquidity: in this market, there just isn’t any. Uncertain returns and almost non-existent liquidity? Better have a good hedge on…
Yup, agree with everything you said.
To expand a bit on my last point…
Some of the best options traders I’ve worked with over the years have made their money in markets where liquidity was an issue. Usually, the market they are in has liquidity in the options around ATM, but that liquidity drops off considerably as you go deep in or out of the money. Similarly, the underlying futures can be non-existent or have very little liquidity.
These traders make their money by providing liquidity to others in the market and using complicated hedging methods to capture their profits and prevent losses. That last bit is key: because other strikes/months are illiquid and there isn’t a good underlying product to hedge with, the trades they put on get very complicated very quickly. This also means that unsophisticated traders don’t really have a chance trading these products: without a good hedging product, they would get killed.
I liken all of this to a real estate investment. If you are in it for delivery (the really long haul), you probably don’t care about these short-term fluctuations and your day-to-day account balance. But what percent of the market is really looking 15-30 years down the line? 40%? 50? 60? Even if you assume a large number, there is still a sizable portion of the market that is hoping to get out of their trade in the shorter term. And when liquidity is low, you have the majority of your account tied up in a single trade and you want out now, you are going to end up taking a big loss.
Don’t forget: the downside to this trade is cutting directly into your account. Ps – Pb + payment equity ~= PnL. If the sell price (Ps) is bigger than the buy price (Pb), everything looks sunny. But if you are in the early years of your mortgage and the market is moving against you, that price difference is coming right out of your downpayment.
And neither of us has even mentioned transaction costs yet…
This is exactly why I find the idea of people using RE as a short term investment vehicle that “always makes money” so utterly laughable. It makes sense in some circumstances, but people really need to think it through…
“And HD – YOU, my friend, are still living in a crappy rental with an unhappy wife – wasting your time scouring the mls to find a crapshack that you can renovate to live the rest of your miserable life while I, on the other hand, can live wherever the f I choose. Who is the idiot now?”
Guys , seriously. are we going to play these characters forever. This shit gets old. There isn’t a need for name calling and bragging about money. it’s the F***ng internet. we could all be 70 year old sweaty creeps stroking our pet hamsters in our mother’s basements. There is no god D*mn point in talking about who is an idiot/smart/has shitloads of money/is poor. Unless you guys are willing to post your first and last name and contact info here and right now, stop the ‘i have X amount of money” BS.
And seriously, not personal – i like both of you guys. the fighting just makes it so bogus around here sometimes.
Huge housing bubbles occur once every 70-80 years when the people that lived through the last one are no longer around and are replaced by idiots who think this time it’s different.
Everything is deflating except gold. This cannot continue–when will they diverage and in what direction?
When and how is hyperinflation supposed to occur? People are saying that Bernanke doesn’t have the support for a QE3 after the first two did jack shit for anyone other than Wall St. (which was thrilled to sell mortgages worth pennies on the dollar for par value to Uncle Sam). Rosenberg says the Bernanke put is dead. Seriously, who cares if the stock market falls, why does that affect government policy. The Banks don’t own GOOG or AAPL.
Stock market is headed down, down, down. Real estate will follow. Buying opportunity in both coming next 6 to 12 months. Buying opporunity will come when most people just want to crap their pants just thinking about buying a stock or a condo.
“Huge housing bubbles occur once every 70-80 years when the people that lived through the last one are no longer around and are replaced by idiots who think this time it’s different.”
EB – first, read Riz’s comments = don’t call people “idiots”
second, the world today is MUCH different than the past. People’s attention span and memoreis are much much shorter. In addition, most people are not “suffering” through this recession/housing downturn (COMPARED WITH THE PAST – meaning, people still have shelter and still are able to eat). This combination will lead to them “forgetting” much sooner. Shit, ask an old person specific things about the 1940s and they can tell you everything. Ask a young person about something from last year, and they have no clue!!!
riz… Your mom lets you keep a hamster! I am so jealous.
“second, the world today is MUCH different than the past.”
It’s NEVER “different this time.”
EB is right that we don’t have housing bubbles very often because they are credit bubbles. And credit bubbles, when they burst, aren’t allowed to grow back again for decades because of all the damage it does. Heck, it took about 60 years before the banks started lending with anything other than 20% down because of the lessons learned from the Great Depression.
I don’t know why some people are so eager to have bubbles come back. Or why anyone would WANT easy credit. Bubbles are destabilizing. Is there anyone out there who thinks that what is going on in the housing market right now is GOOD for our country? (other than it is bringing prices back to affordability)
The scenario I hope for is that prices bottom out somewhere where the middle class can afford a nice home without spending 40% or more of their income on their housing payment. So they can otherwise live their lives buying/doing other things. And then that prices simply go up 1% to 3% as they always have in Chicago.
“Good article posted today on the horrible “investment” that most business schools have become”
Thanks for posting this article Chris. $178,000 for two years at Wharton? Wow. How many years will it take you to “make it back”? 10 to 15?
I’ve met a lot of people with MBAs and most don’t have nearly the jobs they thought they would get with one- even from “good” schools.
“Believe me, after the .com burst, it seemed impossible that we’d ever have another stock bubble. Well, we had one within a few years and it popped in 2008”
We did?
I think most people don’t know the definition of “bubble.” You know- it’s when an asset class gets removed from all sense of reality and EVERYONE must buy it. I had friends in normal jobs in Michigan buying 5 condos in various cities in Florida just 5 years ago. THAT’S a bubble. In 1999, I had friends day trading stocks and watching the latest tech IPO go from $30 to $165 in one day. THAT’S a bubble.
Who was buying stocks in a mania after 2000? No one I knew.
A bull is NOT a bubble.
And an asset class that has a real bubble- does NOT repeat that bubble for decades (or in the case of tulips- EVER.)
“The way things are going it wouldn’t surprise me to see sub 1% 10 year treasuries with sub 3% mortgages, how long you think 0% rates will last if we fall into another recession? QE-infinity if that happens, although I think recessionary fears at the moment might be overblown.”
Haven’t the Japanese had like 2% mortgage rates for 10 or 15 years now? It hasn’t helped their economy or housing market.
“In any event, it matters not, for at least a few reasons. First, there was, is and will always be a LIMITED SUPPLY of truly UC-compliant properties.”
But anonny- isn’t this true right now (and for the past 4 years)?
Then why did prices fall (and continue to do so) in Lincoln Park? If the supply has always been limited- wouldn’t that have contained the losses? And I’m talking about East Lincoln Park- which has seen price declines just like everywhere else.
The housing market I think is akin to the way the stock market has been acting lately. Erratic and volatile.
Both markets basically went from being reflective of the economic success of our society to being one of the key drivers of it. You can’t have sustainable economic growth over the long-run based on asset bubbles.
Yet noone gave a crap when housing was rising to crazy levels as most people in a position to do anything about it were both personally financially vested in rising valuations (homeowners) or worried that they would draw disfavor among voters (politicians).
you know what i like about being an owner. If i am renting, and the door opens, i have to make certain that you are not the landlord before i shoot you.
As an owner, just shoot.
“Thanks for posting this article Chris. $178,000 for two years at Wharton? Wow. How many years will it take you to “make it back”? 10 to 15?”
ARE YOU INSANE?!!! WTF are you talking about – wharton grads make quite a bit of money – probably could make that up in a couple of years. More importantly, they will be making several times that in a few years. Also remember that an MBA from Wharton is different than an MBA from the University of Phoenix. As a renter, I am sure you are more familiar with people from the latter institution!!
“Thanks for posting this article Chris. $178,000 for two years at Wharton? Wow. How many years will it take you to “make it back”? 10 to 15?”
Ha. You didn’t really just post that, did you?
“We did?”
Yes, we did. When stocks double for no reason, it is a bubble. Stocks doubled since 2009, while the economy did nothing but get worse. Asset prices not even remotely supported by underlying fundamentals are a bubble. And please, spare me the nonsense about the “S&P 500 PE”
“A bull is not a bubble”
And a market that doubles based on government intervention is not a bull. It is a bubble. You should have learned that in 2009. Maybe you will this time.
“When stocks double for no reason, it is a bubble. Stocks doubled since 2009, while the economy did nothing but get worse. Asset prices not even remotely supported by underlying fundamentals are a bubble.”
Please Chuk. Read some financial books before it’s too late. Educate yourself. I beg you.
Stocks were off 50% from their highs. They’re going to rebound. That’s what happened in 1929. That’s what happened in 2009-2010. No big mystery. A “bubble” happens when everyone including my nanny wants to buy the asset. My nanny wouldn’t touch stocks in the last 2 years. And won’t touch them now.
Gosh- companies that have been in business for 125 years having the best quarters EVER (just last quarter in fact)- that’s NOT fundamentals???
The economy didn’t get worse. We went from losing 700,000 jobs a month to gaining 100,000. Yes, it didn’t get us the growth we wanted. But gaining jobs every month isn’t a recession.
US companies are lean, mean fighting machines. Those that have overseas business are KILLING IT. They are holding record cash. They are increasing dividends. This is all “real” money. Paid out to “real” people. Our companies aren’t the problem. Debt is. Our companies are best run they’ve ever been.
Did you read the article Chris posted Clio?
No- I didn’t think so.
“At Wharton, where the average debt was nearly $110,000, graduates earned a range of annual base salaries that stretched from $350,000 to $25,000.
MBA graduates who land a six-figure job loaded with extra compensation are not likely to be kept awake at night worrying about such debt. Columbia Business School sent 48% of its graduating class to the financial services industry in 2010, where the median salaries ranged from $95,000 in commercial banking to $115,000 in hedge funds. So when some 65% of your MBAs borrow money through the financial aid office, according to Marilena Botoulas, director of financial aid, and their debt “hovers” around $100,000, it may not be quite so scary.”
And the article says that many students who got jobs in, say, 2008, have seen only 1 pay raise in that time (if they’re lucky.) So they started at $95,000 at P&G or wherever and they’re still making, basically, $95,000. (They gave an example of a grad working at L’oreal.)
When you take away the opportunity cost of giving up 2 years of salary- PLUS- the now $110,000 costs at Wharton- you’re probably somewhere in the $250,000 total expenses.
If you were making $75,000 a year before and now make $100,000 a year- it’s going to take you well over 10 years to “make up” what you spent just to get the degree.
“ARE YOU INSANE?!!! WTF are you talking about – wharton grads make quite a bit of money – probably could make that up in a couple of years. More importantly, they will be making several times that in a few years.”
Yeah like the ones on Wall Street.
http://online.wsj.com/article/SB10001424053111904070604576516813395283964.html?mod=WSJ_hp_LEFTTopStories
Wall St. was big in the 80s due to LBOs/junk bond emergance/S&L crisis. It was big in the 90s due to the tech bubble. It was big in the 2000s due to the housing bubble.
But rewind a bit–was Wall St big in the 70s? That’s the future of Wall Street where an investment banker was a not-so-glamorous job and not sought out by top grads. And they’ve still got several years of bleeding jobs ahead as they never really adjusted their business model post-2008 quickly. The government intervention basically just extended the structural problems with the economy.
“That’s the future of Wall Street where an investment banker was a not-so-glamorous job and not sought out by top grads.”
Bob- that’s exactly what Michael Lewis and others have said will happen. It’s what happened in the 1930s- after the big crash earlier in the decade. Being a “banker” was considered so boring (and the pay not very good) that NO ONE wanted to do it.
I look forward to the day when 50% of Columbia’s MBA graduating class ISN’T going to work on Wall Street. A more normal rate would be something like 10%. What a waste of talent.
That actually wasn’t my original idea I got that opinion from reading Michael Lewis, so I suppose should credit him.
Hamster? Minsc loves Boo!
/geek off
“When you take away the opportunity cost of giving up 2 years of salary- PLUS- the now $110,000 costs at Wharton- you’re probably somewhere in the $250,000 total expenses.”
People would have *saved* $140K in the two years if they hadn’t gone to b school?
“Hamster? Minsc loves Boo!”
Had to look this up (I swear), but I love crazy D&D HD.
“you know what i like about being an owner. If i am renting, and the door opens, i have to make certain that you are not the landlord before i shoot you.”
Landlord’s not supposed to enter without notice. Go ahead and shoot!
“People would have *saved* $140K in the two years if they hadn’t gone to b school?”
No- of course not. But they are now taking on that extra debt (which if they had just stayed in their jobs and gone along on their merry little career paths- they would have avoided altogether.)
One of the magazines used to list out how many years it would take to “make it back” for the top 20 schools (of course, it was quicker at the cheaper state schools) but the last time I looked at it was a few years ago when it was much cheaper than what it is now to go to these schools. Even back then- the fastest was one of the public universities- where you could “make it back” in like 11.3 years. The worst were the private schools like the ivies that charge more.
I don’t think you can count the opportunity costs as much. Maybe from a purely financial angle but going FT to b-school even with recruiting is not nearly as time consuming as working full time. I wouldn’t go so far as to call it a two year vacation but courses can be as demanding or not if you want them to be.
Nobody really cares about grades as much either but people do care about the content of their courses, so they’re not outcome focused which is good.
B-school is a lot of fun vs. the working world. Unless you work in a sales office for a beer distributor there’s few places in corporate America where the whole office has weekly beer busts and other events.
Smartest and most hardworking people were those in the evening or weekend program who had their companies paying for it. These people were career “marines”. Many would fly in from NY or other cities, were managing a demanding FT job and a family and were able to schedule and prioritize like CEOs-to-be.
There was even a group that would drive up from Cincinnati. Imagine carpooling from Cincy leaving your house at 3am on a Saturday morning to get to class by 9 and then making the drive back as well, week in and week out. I could never do that.
Here’s what some of the grads conclude at the end of the article.
“Some MBA alumni suggest that people avoid the costly degree altogether, unless an employer is footing the bill. “I guarantee you dollars to doughnuts that I can find you a cheaper option than an MBA,” says Christian Schraga, a member of Wharton’s MBA class of 2002, and now a vice president at Columbia Records. He graduated in a year when MBA jobs were scarce. His debt was a frightening $112,875 — 10 years ago.
“Instead of thinking about signing the promissory note and taking two years at B-school, just do what you want,” he says. “If you want to be in the music business, find someone who sings well and book them gigs. If you want to sell toothpaste, sell it. You’ll learn a hell of a lot more that way and it will be a hell of a lot less expensive.””
“No- of course not. But they are now taking on that extra debt (which if they had just stayed in their jobs and gone along on their merry little career paths- they would have avoided altogether.)”
But the extra debt *is* the $110K. How do you get the extra $140K on top of that?
“Christian Schraga, a member of Wharton’s MBA class of 2002, and now a vice president at Columbia Records.”
Is an mba important in the music business?
RE: MBAs
Sabrina, you are totally wrong.
First of all, MBAs from big name schools make a lot of money when they graduate.
Second of all, the fact that some didn’t get raises in 3 years is not that big of a deal -hardly ANYONE got raises. In addition, they still have their jobs and didn’t get pay cuts!!!
Third of all, that salary range from wharton is misleading. Many MBAs from wharton actually already have a lot of money and have come from a lot of money – those lower paying jobs are “experience jobs” to build up their resume/experience before taking over daddy’s company.
Fourth of all, many people out there have an intellectual curiosity and desire to LEARN and realize their potential – that is why they go to graduate school (including business school) – not just to make more money
Fifth – and most importantly, if you took your idiotic example of two people making 70k while one goes to b-school and the other keeps working- sure the b-school person will be in debt 250k (actually less) after the 2nd year – but the opportunities down the road that are open to that person are far greater than the non-mba. The non-mba will continue to work his 70k job while the mba will become his boss in a few years and be bringing in 10 times that amount.
Your argument for not going to school is ignorant and is the reason many poor people stay poor – just ask them they will tell you it is because of their education. You don’t see many unemployed doctors or harvard lawyers, wharton mbas, do you? No
So googling BAC led me to this gem–BAC is insolvent, and is basically doomed due to a paperwork snafu on their end! LMFAO! A 300k person company and they didn’t go through the proper required legal procedures to transfer the mortgages.
http://traderscrucible.com/2011/06/13/bank-of-america-will-be-recognized-as-insolvent-very-soon/
“Your argument for not going to school is ignorant and is the reason many poor people stay poor – just ask them they will tell you it is because of their education. You don’t see many unemployed doctors or harvard lawyers, wharton mbas, do you? No”
Clio an MBA is not like being a lawyer or a doctor. Barriers to entry in the business world (aside from public accounting) largely don’t exist, whereas they do for those other professions. Similarly MBA’s fortunes and job prospects rise and fall with the economic times. Much moreso than doctors and moreso than lawyers.
“But the extra debt *is* the $110K. How do you get the extra $140K on top of that?”
They were earning $75,000 a year. They no longer will earn $150k while they’re in school.
So not only are they “out” $150k but they have taken on an additional $110k. It takes a decade or more for most of them to even break even with where they would have been before they went to get the degree.
That’s the point of the article. Not everyone graduating from Wharton goes to work on Wall Street and make $250k with a bonus of a million. At least half the class doesn’t take financial services jobs. The starting salaries- and even bonuses- aren’t that great when you get out of school.
Then you’re stuck in the job for years without pay raises.
What they’re saying (and the same can now be said of most people getting law degrees) is that the degree is no longer worth going into debt of that magnitude for.
Actually, that is good advice Sabrina – keep the masses uneducated and ignorant. Makes it that much easier for those w/advanced degrees to get ahead and manipulate control these idiots. So everyone out there listen – DON’T go to graduate school, keep paying your rent to your landlords and everything will be just fine!
My hamster’s getting antsy. If we be adventurers, let us adventure!
“You don’t see many unemployed doctors or harvard lawyers, wharton mbas, do you? No”
I haven’t looked at the placement stats recently- but for Harvard’s class of 2009 – only 55% of their graduating lawyers had jobs (ANY jobs) – let alone ones that will help them pay off massive law school debt.
I’d like to see what the percentages are now. Probably slightly better but who knows where the class of 2009 grads actually ended up (if anywhere.) I bet a lot of them never even practice law- sadly. There are laid off Ivy League lawyers all over the place. You don’t know what you’re talking about Clio.
I know someone starting an MBA program (a non-top 20 program) and he said about 40% of the entering class is right out of college. They couldn’t get jobs so they just continued along to get the MBA even though they have NO experience in the work world whatsoever.
They had undergrad debt and now they’ll have $50k a year debt for grad school (plus living expenses.) Most of it comes in the form of government loans- which starting next July, thanks to the debt ceiling compromise- means the interest starts accumulating right away instead of when you graduate. Right on!
By the way- none of these people will be able to buy real estate in the GZ without significant parental or spousal help because of the debt.
Sabrina–love your ‘nanny test’ for a bubble. I use the ‘cabbie test’. When the cabbie starts talking about it, the time to bail is soon. According to that measure, gold is the next bubble to burst.
“They were earning $75,000 a year. They no longer will earn $150k while they’re in school.
So not only are they “out” $150k but they have taken on an additional $110k.”
Right, the gross is $150K. And you’re saying they would save $140K of that $150K if they were not in b school? I think taxes, living expenses, and such would prob take out more than $10K of the $150K.
You are only “out” the amount you would have saved (plus any differential between living more luxuriously with job than in school). You are not “out” e.g. the amount you would have paid in taxes.
Boo says leave Sabrina alone. She runs the sight and she is right!Boo thinks you are being disrespectful to the host.
This behaviour must not continue. Feel the burning stare of my hamster and change your ways.
“Harvard’s class of 2009 – only 55% of their graduating lawyers had jobs (ANY jobs)”
Really hard to believe.
Sabrina, don’t be ignorant – only 55% of harvard law graduating class had jobs?!!! OK you DO understand it is because the other 45% were either holding out for better jobs, wanted to take a break, wanted to intern somewhere (political aspirations) or were starting something on their own. Believe me, i can guarantee you that each and every harvard law school graduate was given several job offers – they just weren’t offers that the graduate wanted to pursue. To think anything otherwise shows your lack of understanding of the educational system (esp graduate schools – and esp. harvard). Please, you are definitely showing your ignorance in this area. Stick to real estate.
“According to that measure, gold is the next bubble to burst.”
You have cabbies asking about gold? My nanny doesn’t even know what gold is or what it is doing. And if she did- she would be selling it NOT buying it.
How many cabbies you know BUYING it? Just curious.
“Harvard’s class of 2009 – only 55% of their graduating lawyers had jobs (ANY jobs)”
Really hard to believe.”
I only remembered the 55% statistic so I just looked this up. I stand corrected. The stat was for those who got jobs in BIGLAW (which means they can actually pay off their loans.)
For the class of 2009- Northwestern had the best placement at 55.9% of its graduates. So 142 out of 254 got jobs at the 250 largest law firms in the country (but a percentage of those were “deferred” at lower salaries and might never have ended up working there anyway.)
For Harvard- it was much worse. They came in at just 47.6% or 270 out of 567 graduates.
The year before, by comparison, Columbia topped the list- sending 70.5% of its grads to BigLaw.
Where did everyone else go? Who the heck knows. Somewhere paying them $50k or whatever. Probably less than what they would have made if they never went to law school. Yes- from Harvard, Yale, Columbia, Stanford etc. The story was the same at all of them. And the jobs haven’t come back for the class of 2009 (or the class of 2010- although it has, apparently, improved.)
BTW HD if your “TBTF” bank you have a construction loan from is Bank of America, your bank is not TBTF and is going to fail.
http://dailybail.com/home/chris-whalen-we-understand-bank-of-americas-problem-they-are.html
Just looked up 2010’s stats. Harvard sent just 49% to BigLaw last year.
“I only remembered the 55% statistic so I just looked this up. I stand corrected. The stat was for those who got jobs in BIGLAW (which means they can actually pay off their loans.)”
Many may go to clerkships, and go to biglaw after. There’s also a pretty generous loan forgiveness program at Harvard for graduates with low paying jobs.
Sabrina, again – speaking as someone who HAS gone to those schools and speaking as someone who knows and understands how statistics are mis-stated and misinterpreted, I can honestly say that you are completely wrong.
Many of the people that go to these big name graduate schools are incredibly well-connected and very wealthy. Many don’t go to “biglaw” firms bc they go back to their family run businesses or go into academics, intern for political purposes, join the peace corp (b/c daddy already paid for graduate school, etc.). Honestly, how many people do you personally know who graduated from HArvard, stanford, yale, graduate schools? Normal people don’t get in to these places. The people going to these places are going to do just fine. Don’t waste your breath warning them. The last person they would take advice from is some anonymous internet blogger who rents.
“Many may go to clerkships, and go to biglaw after. There’s also a pretty generous loan forgiveness program at Harvard for graduates with low paying jobs.”
297 went into clerkships?
Nope. Just 8% of the 2009 graduating class or 45 students. That leaves another 252 grads to fend for themselves.
Wow! Can’t wait to go to Harvard Law School.
Typically those income forgiveness programs require you to work in low paying sector (like public) for 10+ years and it’s an all or nothing whether its forgiven or not.
So if things get better five years down the road and you want to spring for more $ you can forget about it.
“Nope. Just 8% of the 2009 graduating class or 45 students. That leaves another 252 grads to fend for themselves.”
Seems low, thought it would be more like 15-20 percent. Would be interested in source for the 8 percent (may be right but seems low).
“Typically those income forgiveness programs require you to work in low paying sector (like public) for 10+ years and it’s an all or nothing whether its forgiven or not.”
Looked it up. Can be either public or private. Not all or nothing. Based on income (and requirement you’re doing something lawyerly). If you make less than $45K (amount increases over time with greater allowances for kid), you pay zero.
http://www.law.harvard.edu/current/sfs/basics/publicservice/lipp.html
That data might have been just the appellate clerks.
I found this data that shows that they had 18% in 2009 for ALL federal clerks.
http://www.top-law-schools.com/forums/viewtopic.php?f=1&t=75513
Here’s the list of what the schools placed for the class of 2009 in both the 250 largest law firms (i.e. the only jobs that pay any real money) and clerkships.
1. Stanford – 77.1%
2. Yale – 72.1%
3. Harvard – 65.7%
4. Michigan – 64.6%
5. Virginia – 64.0%
6. Columbia – 63.3%
7. Northwestern – 62.3%
8. Chicago – 62.2%
9. Duke – 61.0%
10. NYU – 57.0%
11. Berkeley – 55.9%
12. Vanderbilt – 55.0%
13. Penn – 52.8%
14. Cornell – 52.4%
15. Georgetown – 48.4%
16. USC – 47.2%
17. Texas – 47.1%
18. UCLA – 41.7%
19. Boston College – 38.0%
20. Notre Dame – 37.8%
Apparently- they also place about 10% a year in public interest and government jobs (both relatively low paying.)
That puts Harvard up to 75% with jobs. The other 25%? Who knows. Small law. No law. Working some other kind of job.
And that’s at Harvard. What happens to the people who went to Boston College or Notre Dame? Or U of Illinois?
Going to top graduate schools is NO guarantee of a job- let alone a good paying one.
http://www.top-law-schools.com/forums/viewtopic.php?f=1&t=108528
@bob
BAC i suppose is going to be in that too big to fail category
http://www.themreport.com/articles/bofa-sells-mortgage-portfolio-to-fannie-mae-2011-08-12
Government will pick up the mortgage mess
The article states that perhaps only Top-10 schools are a good investment, like the Pepperdine guy said. So, Clio and Sabrina are both right. how’s that?
Gold is different than the dot.bomb and RE/subprime bubbles in the sense that buyers now include hundreds of millions, if not billions, of Chinese and Indian people in addition to the US buyers. Add in Europeans too and demand will outstrip supply. Unlike, 1980 the Fed cannot jack interest rates. saw this comment on zerohedge:
“In the early 1980’s, Volcker had successfully ended the gold run by raising rates, thereby creating a viable alternative for savings. This is not a policy option today as it would bankrupt the US government. There is little else that can terminate a gold run as denominated in fiat under the current circumstances.”
Peter Schiff: Gold only has one way to go and that is higher because the only way that you are going to stop the price of gold from rising would be to do what Paul Volker did in 1980. We need to get a huge increase in interest rates, where interest rates are way ahead of the real rate of inflation.
But the problem is you can’t do that without completely destroying the phony US economy, so you’ve got to be willing to do that. To break the run in gold, you have to be willing to collapse the economy, to bankrupt the US government, to crash the housing market, to bankrupt the banks. You have to be willing to take a recession or depression, one that’s much worse than the one in 2008/2009 time frame. I just don’t see any political will to do that. As I said, they are going to keep on printing so it’s just a one way trip for gold.”
Gold is not in a bubble, nobody here even owns it yet. Dow/Gold ratio at 6 to 1, going to 2:1 or even 1:1. Buy.
my morning investment advice… Rosetta Stone and leave!
Bri.. One thing actually has changed… The world really is flat and everyone is catching up quick. 3yrs ago, when i got here, fahions were way off, i felt out of place using my ipod. Now it’s smartphones and ralph lauren everywhere. The competition is fierce and the citizens of the US are not prepared. Companies yes, but all of them are focusing on external markets, and for good reason. As for my citizen coment, case in point. The photo in the NYT article roma posted. 1 man in suit, 1 man in orange cleaning street. In the states he would be Union making 70 + benefits… Here maybe 10k. And you guys are paying in borrowed funds. This has to break, it has been, and will continue. But yet too many want to borrow to pay debt. I have seen that movie before. The end is sad.
As for blah blah living wage, blah blah.. .Well markets just don’t care.
As for grad scool. Soooo happy i avoided that one. But it is true that not having one will exclude you from certain jobs.
fairly regularly on the new here they show how many jobs each region of the country is short. Yes, short. There is plenty of work to be done but you guys don’t like the price the rest of the world functions at. So, large sucking sound of capital shifting away. So you try and borrow to make everyone happy. But the private sector can’t handle gym teachers at 135k or guys waving your car to the right lane for 70… So the whole thing falls apart.
It’s crazy that people think ‘this is america we are special’… That shine is long gone now… Money don’t care!! Money goes where it’s treated best and can find a return.
As for gold..funny product… In times of trouble – run to gold – if things get horrendous, its only real value is to grab a bar and beat someone over the head with it.
“we could all be 70 year old sweaty creeps stroking our pet hamsters in our mother’s basements”
You’re close: I’m a hamster stroking my creepy 70 year old mother in my pet’s sweaty basement.
don’t mind riz. He was just venting from being in a bad mood because his dad wouldn’t let him take out the enzo to cruise butterfield.
nice to start the room off with a bit of sunshine and happiness… Enjoy the day!
“don’t mind riz. He was just venting from being in a bad mood because his dad wouldn’t let him take out the enzo to cruise butterfield.”
RIz is probably also in a bad mood b/c he realizes he will never be able to afford an enzo on his own. Physician salaries (esp. anesthesiology) are being slashed – he’ll be lucky to find a job – and if he does, LUCKY to be making 200k.
I thought “stroking the hamster” was some kind of gross euphemism.
“RIz is probably also in a bad mood b/c he realizes….”
Please don’t bait him, we don’t need another estrogen-fueled thread btw Riz and miumiu about purses, LV, and luxury goods.
“My hamster’s getting antsy. If we be adventurers, let us adventure!”
LOLOL, HD!!!
“Feel the burning stare of my hamster and change your ways.”
🙂
yes, because we hate purses, estrogen and women. you never hear the women on the thread complain about the car and gadget talk. Deal with your misogyny or buy yourself a purse come out of the closet.
As the grad school stats, you realize that some of theses folks are foreigners and leave the country after they get their degrees? Also I have at least 2 female friends with stanford MBAs who are stay at home moms, I know another one that decided she likes to teach CPS and make a difference. I know another that took a non glamorous job in a small town to accompany her husband and. They chose these jobs. They could have chosen higher paying jobs if they wanted.
“250 largest law firms in the country”
This is a (different) tangent, but what do people have in mind when they say biglaw? I was thinking there was some element of prestige or something, so more like the top 20 or 30 firms or whatever? How far down do you go before e.g. associate pay is off the top tier? Genuine question.
http://en.wikipedia.org/wiki/List_of_100_largest_law_firms_globally
In the USA, I think about first years @ 140+
biglaw and boutiques pay market ie $160k a year. anything below that is midlaw, small law, etc. The prestige of the client is also important. If you are advising google/motorola in an M&A that’s big law. If you are handling any type of insurance defense, you are mid law. however if you worked high level coverage issues involving billions of dollars, you may be big law, but if it is only millions, it’s just mid law. If you represent BofA defending class actions, you probaby work in biglaw; if you do their foreclosures, you’re probably mid or small law. etc.
Sabrina is right, there is a huge education bubble. Not enough jobs to cover the graduates–in fact, many people choose to go to grad school because they can’t find a job out of undergrad. Law school is a terrible investment right now unless you are one of the elite and fortunate enough to get a good job.
We have not had a stock market bubble since 1999 or so for the tech stocks. The recent doubling of the stock market still only puts us to around 1999 or 2000 levels. I’m not saying the stock market isn’t a scam, because it is, but I don’t think you can call it a bubble. It’s just speculation.
“We have not had a stock market bubble since 1999 or so for the tech stocks. The recent doubling of the stock market still only puts us to around 1999 or 2000 levels. I’m not saying the stock market isn’t a scam, because it is, but I don’t think you can call it a bubble. It’s just speculation”
It is just a continuation of the original bubble that started in 1998. It deflated temporarily in 2000 and they have been reinflating the SAME bubble since then. It is not 3 bubbles, it is one big one that they keep trying to reflate every few years.
And posts like this is why people will never learn:
http://forums.redfin.com/t5/Chicago/Question-on-Short-Sales-FHA-Bankruptcy-Foreclosure/m-p/235096#M1983
“Please Chuk. Read some financial books before it’s too late. Educate yourself. I beg you.”
Ha, if you only knew…
Everyone thinks they’re an expert on spotting bubbles after one collapses. Gold is unique in that it has no earnings, so how can one really say it’s a bubble? It’s still well below it’s inflation adjusted high. Fact is, there’s a lot of demand for the metal worldwide and it’s going to replace Treasuries as the ultimate flight to quality asset. I’m buying gold and silver but I know very few people that are doing the same. People are talking about it left and right but everyone thinks it’s a bubble and that they’re better off in cash. Will be interesting to see how all of this plays out.
And I moved out to NYC to start grad school in a non-MBA program and dropped out after 2 weeks, before I incurred any tuition bill. So glad I did that, since I’d be making far less with that graduate degree than I am now with just my bachelor’s degree. All my peers have pursued graduate degrees and a lot can’t find work. I just paid off my student debt but know others that just started at my company making about half and have nearly 6 figures in debt…that’s just insane.
you can’t put up a link to some degenerate who wants free money and say “people never learn”. The banks learn, the law is stolid and stays the same despite people’s desire for free or low cost money. I tell the story of the best buy card I saw. Some client I had walked into a best buy and said “damn, I have no money, but i want that big screen 50″ TV”. So she applied for a credit card. she filled out the application and said that she has no job, no money, terrible credit, no assets and she was 21 years old. HSBC says “GREAT! You qualify for a loan. Here’s your TV and enough money to buy a DVD Player and some DVD’s to go along with your TV. Just pay $80 a month….”
so of course she never makes a single payment, ever. Two years later some debt collector sues her (don’t even ask ask how such a small stupid case ended up on my shelf….ergh..) and I said “let’s go to trial.” the day of the trial they dismiss the case because they have no witness.
SO she got a free tv. HSBC gave her a free TV and a dvd player and some dvd’s.
There will always be a degenerate who will take free money. But HSBC, as a result of losing so much money, shut down their entire north american Beneficial/HLC operations in Mettawa IL (http://en.wikipedia.org/wiki/HSBC_Finance) and after seeing that debacle, no lender will step into their place to lend money to degenerate subprime borrowers with no assets or job.
Moreover, this is the result of chasing yield. Money is nearly cost free to these lenders, they put the ledger in a book and borrow in the interbank market, and make the loan. there is so much free money they can chase yield down the subprime ladder, but tehy all eventually pay the price, and they learn, they do.
“#chukdotcom on August 19th, 2011 at 4:37 pm
And posts like this is why people will never learn:
http://forums.redfin.com/t5/Chicago/Question-on-Short-Sales-FHA-Bankruptcy-Foreclosure/m-p/235096#M1983“
Bankruptcy laws need to be changed and allow student loans to be restructured or discharged. Its ridiculous that our government cherry picks debts as to what can and can’t be discharged. Fvck the bondholders.
In tme when our generation takes over congress ie 25 years, the law will change. However, expect default rates of 30% and interest only zombie stories and the complete implosion od student loans to happen before then.
“It is just a continuation of the original bubble that started in 1998. It deflated temporarily in 2000 and they have been reinflating the SAME bubble since then. It is not 3 bubbles, it is one big one that they keep trying to reflate every few years.”
Bubbles don’t reflate. EVER. If it does- then it was NOT a bubble.
Please. I beg you. Go read Manias, Panics and Crashes by Charles Kindleberger (who died in his 90s just before the housing bubble burst but he was calling it as a bubble by like 2004.) This is the bible for all things bubble related.
Bubbles, manias etc. are actually quite rare. We’ve had 2 in the last 15 years which is also very unusual. But it was the ease of the credit which caused the second one- which we won’t have for a long, long time again.
And whatever conditions we are in right now is NOT a bubble- at least not in stocks and housing. So I don’t understand your argument that we’re still in it.
They can’t give stocks away. Record amounts of withdrawals from mutual funds last week. No sign of a bubble there. There hasn’t been one for a decade or more.
Assets going up (or down) are NOT a bubble. There is euphoria in bubbles. There is the sense that whatever it is you are buying will NEVER go down. That was gone a long time ago from both stocks and housing.
then gold would be in a bubble
“Assets going up (or down) are NOT a bubble. There is euphoria in bubbles. There is the sense that whatever it is you are buying will NEVER go down. That was gone a long time ago from both stocks and housing.”
Gold as well as most commodities are in a bull market right now. Whether gold is in a bubble remains to be seen. I would say not yet, but it has the potential to get there. With that said, what is going on with gold is a lack of faith in the U.S. monetary system. Thus, its hard to say that gold prices are going to lose any connection to reality. If the government continues to crap on our currency the price of gold is going to be justified. God help us if Bernanke and co. get their way.
“Fvck the bondholders.”
The bondholders have more power and influence than the debtors do.
“It’s still well below it’s inflation adjusted high. Fact is, there’s a lot of demand for the metal worldwide and it’s going to replace Treasuries as the ultimate flight to quality asset. I’m buying gold and silver but I know very few people that are doing the same.”
Right. It’s not gold that’s in a bubble, it’s USTs that are. I’m also hugely long the PMs right now (80%) also, but don’t know many others who are. Chris M: I just got done listening to the newest interviews on kingworldnews, they are just absolutely incredible, esp. Eric Sprott’s. I’m going longer on Monday in silver, may do a long term call on the miners etf.
gold in the past has bubbles in 3 year formations… guess what we are in year 3
be very, very, very careful buying precious metals at these levels
also sabrina’s right, there right now is a record amount of money held in money market funds
Look at the top 5 largest funds today
1 PTTRX PIMCO:Tot Rtn;Inst
2 FDRXX Fidelity Cash Reserves
3 VMMXX Vanguard Prime MM;Inv
4 CJPXX JPMorgan:Prime MM;Cap
5 AGTHX American Funds Gro;A
never before has 3 of the top 5 largest held funds been money market funds
regarding MBA:
In 2001, Wharton recommended that applicants budget $59,728 a year to attend, or about $120,000 in total for the two-year MBA program. Graduates from Wharton in 2001 reported median base salaries of $95,000 a year.
Ten years later, the median starting MBA salary at Wharton was just 15.8% higher, at $110,000 for the class of 2010. But the recommended budget was up 40.6% to $84,000 a year, or some $168,000 for the two years. Translation: In the past decade alone, the costs of getting a Wharton MBA has risen nearly three times as much as the initial financial rewards of having the degree in the past decade…Roughly 30% of the University of Pennsylvania’s graduates are having trouble paying back their student loans, according to government statistics
rest of article here:
http://management.fortune.cnn.com/2011/08/22/wharton-mba-2013-the-class-the-loans-fell-on/?section=magazines_fortune
in reference to:
“ARE YOU INSANE?!!! WTF are you talking about – wharton grads make quite a bit of money – probably could make that up in a couple of years. More importantly, they will be making several times that in a few years. Also remember that an MBA from Wharton is different than an MBA from the University of Phoenix. As a renter, I am sure you are more familiar with people from the latter institution!!”
What’s insane is the majority of that increase is straight tuition. It’s the universities engaging in empire building and now charging $5k/class.
That’s $166/hour for 30 hours of class time. Multiply that by ~30 students per course or so and you see what a cash cow those programs are.
Graduate programs do indeed pay as clio points out, he just has the beneficiary mixed up: they pay for the schools!
Wow- thanks for the link chichow. Maybe they were reading our discussion here at Crib Chatter and Clios argument that the Wharton grads were rolling in it.
The answer would be…nope.
I DO think it’s interesting that 25% will take on no loans at all- so that is the percentage that Clio insisted was most of the school- adult children of the elites or those whose spouse works and they can pay for it or whose employer pays for it.
75% will go into debt up to their eyeballs.
“Brought down to individual terms, a typical Wharton MBA in this class will graduate with average debt of nearly $124,000. With monthly payments of $1,477 over 10 years, the total would come to $177,256, including nearly $53,000 in interest alone. It would be the proverbial bite that would be hard to chew for most because a graduate would need an annual gross salary of $176,560 to comfortably pay down the loan, according to financial advisors. That’s not a comforting thought when the median starting pay of a Wharton grad was only $110,000 last year. And none of these numbers include the debt assumed by students during their undergraduate years.”
“What’s insane is the majority of that increase is straight tuition. It’s the universities engaging in empire building.”
True, overbuilding on PPE (property, plant & equipment has virtually bankrupted some lesser colleges.
“there right now is a record amount of money held in money market funds”
This is the “money on the sidelines” thing. But Chicago’s Mish Shedlock sort of debunks this theory. There is the same fixed amt. of cash in the world, sloshing around. For every Joe Sixpack who sold stock holding, and is now in a money market fund, somebody else’s cash left the sidelines to buy that stock that was sold. So, the same amount of cash left the sidelines, as just went onto it. Shedlock lights a lightbulb on this, but still on CNBC you hear this cash on the sidelines thing, but it’s a net/net issue, the same amount of cash exists today on the sidelines as did when the Dow was at 12,600.
Luigi: I”m glad to see that you read Mish. He’s right most of the time, and way off every once in a while. But the cash on the sidelines thing is totally true – the money just sloshes around back and forth. It’s not like its in the mattress, it’s invested in one asset or another.
Wharton MBA: It is possible to pay back that kind of debt required to get an mba, and especially on those salaries. however, it requires a kind of financial sacrifices that most MBA grads are not willing to make, because, well, they went to biz school to make the money in the first place. I too (And still do to some extent) have a lot of student loans from law school, but I’ve made sacrifices and I’d paid a large chunk of them off. It requires low overhead, delaying marriage, children; smaller regional vacations, used late model sedans, cheap rent in not so hip areas, and the externalization of all costs as much as possible (the proverbial looking for a free lunch). Quite frankly, few people do that. I know people who make $65,000 a year, and are single, but have student loan payments of $800 a month, but live in LP, drive nice newer cars, go out with friends to dinner all the time. They’re never going to pay off their loans living like that. It’s time to go back to living like a law student, or even better yet, to disavow material goods as much as possible and live in near poverty, like the teachings of ST. Augustine. ONly then will some of indebted students ever actually repay the entire balance of their student loans.
Or in the alternative, I said we’d have 30% default rates among borrowers still repaying 100% principal balances after 25 years, and then my generation, when they take over Congress, will pass some sort of jubilee for old student loans.
http://www.augnet.org/?ipageid=443
An ecclesiastical formula for paying off student loans practiced by few:
“The poverty of an Auguistinian should extend, therefore, also to the giving up on anything that leads to pride, vanity and the seeking of personal acclaim.
It is a poverty that is of little worth unless it is accompanied by humility (humilitas) in thought, word and deed.
Chapter 3 of the Rule of Augustine advises, “It is better to want a little than to have too much.” This simplicity will better equip an Augustinian to work for a more just and equitable world.
The witness to evangelical poverty is a powerful symbol in a modern world where great economic inequalities exist.
There is the sad reality of great wealth and destitution existing beside one another in some parts of the world, and examples of abundance and famine in different sections of the same society.”
Live like this like the great saints and monks of the early church and you will repay your student loans in no time, and learn something about humility and true poverty in the process.
“and then my generation, when they take over Congress, will pass some sort of jubilee for old student loans.”
Hope for a return to discharging debt in BK… closest you’re going to get. Didn’t the current generation running the country, say the same in the 60’s -70’s, about stopping senseless wars?
Everyone talks about law school and business school debt – what about medical school debt? The average medical school costs about 250k (not to mention 4 lost years of income). Then, as residents and fellows, you make about 50k for another 4-9 years. After that, in today’s world of decreased reimbursements, you are lucky to make 250k (and still will have significant expenses such as malpractice). It is ridiculous and I think what we will see in the future are more nurse practitioners, nurses, and other unqualified people making serious medical decisions.
asshat
that’s Dr. Asshat to you!!
yes yes of course dr. fibroid
“Hope for a return to discharging debt in BK”
Yeah I agree. Fvck “jubilee”. That’s a one-time handout type deal and really unfair. Instead treat all debt the same: no government backing and the lender of it, or the ultimate purchaser of it, better be damn good with their pricing of the risk for it to stay in the game. Only debts that shouldn’t be subject to restructuring are legal judgements related to bodily harm/crime & child support. Everything else should be on the table. Oh yeah and no mortgage interest deduction (phase it out slowly if necessary)–one can dream can’t they.
“Live like this like the great saints and monks of the early church and you will repay your student loans in no time, and learn something about humility and true poverty in the process.”
Paid off all my debts within five years of graduation. Skimped on living expenses and still do–but my lifestyle was comfortable and far from “true poverty”. Too many Americans mistake living below one’s means as “true poverty”. Most middle class Americans and above have no idea about true poverty. I’m only lucky enough to know due to some community service (you can guess whether voluntary or not) and some friends that fell on hard times.
Durbin is working on legislation to allow student loans to be discharged in bankruptcy. Surprised HD hasn’t heard about this.
“There is the same fixed amt. of cash in the world, sloshing around”
No with fractional reserve lending there isn’t. That 5k you have in your checking account at your local bank, that creates 50k for the bank to loan out.
And the credit supply is (as 10x the current credit can be created in the US banking system from each dollar in a deposit account) controlled by the central bankers throughout the world.
Not only can they manipulate interest rates they can also modify the reserve requirements and do other things to try to impact the supply of money.
But not even they can make a bank do things a bank that is a private institution does not want to do (in China where the govt tells the banks what to do directly/they are one and the same this is different).
Bank of America for instance is dead, as are many banks. They’re insolvent. But they’re playing the game of petering out the losses at a measured pace so they can have profits from QE1/2/3 to offset them somewhat. Bank of America is not going to engage in speculative lending any time soon so long as they are in survival mode which they are and very much should be.
I like wise bob vs angry bob…then again I like cheap Happy Hour bob too.
I think the trick IS:
when chad and trixie tie the knot – live on one income (yes yes it rarely happens)
Over 10% of all mortgages in Illinois are seriously delinquent, near an all time high:
http://cr4re.com/charts/charts.html?Delinquency#category=Delinquency&chart=MBAStateQ22011SeriousRange.jpg
Only behind Florida, Nevada and New Jersey. Yeah I don’t think things are going to turn anytime soon.
Over 10% of people with mortgages in Illinois are over 90 days delinquent on their mortgage loan or in the process of foreclosure. This statistic has not come down noticeably for our state. Extend and pretend…didn’t work.
Bob, have figured out who is right? Mish (deflationist) vs. inflationistas (hyperinflationists)?
LOL!!: RE agents buying gold:
WSJ:
Los Angeles couple Chantay and Conrad Bridges watched the price of gold rise for years but never invested, afraid they would be buying at too high a price. But recently, as gold notched new highs, they—like many investors—changed their minds. “The dollar is losing its value and if we’re going to do it we might as well do it now,” says Chantay, a real estate agent.
http://online.wsj.com/article/SB10001424053111903327904576524461492177844.html?mod=WSJ_article_Other_Markets
Mortgage Delinquencies by Loan Type
http://www.calculatedriskblog.com/2011/08/mortgage-delinquencies-by-loan-type.html
FHA stepped in for subprime to pick up the loans. FHA loans have a delinquency rate 67% higher than Prime Loans (15% vs. 9%). Not nearly as bad as subprime though which is at 40%. Even with 1/3 of subprime already gone.
Subprime loans shrunk by 33% over the period. If it takes four years to get through 1/3 of subprime loans we could be looking at 2018 until real improvement.
And so it begins….
http://finance.yahoo.com/news/US-May-Back-Refinance-Plan-nytimes-4202694975.html
Chicago sfh/condo/th closed in August:
1997 1,676
1998 2,004
1999 2,256
2000 2,285
2001 2,731
2002 2,696
2003 3,158
2004 3,407
2005 3,979
2006 3,540
2007 3,018
2008 2,081
2009 1,983
2010 1,538
2011 1,809
Lake View condo/th closed in August:
2001 207
2002 223
2003 212
2004 264
2005 345
2006 246
2007 257
2008 185
2009 124
2010 100
2011 125
Lincoln Park condo/th closed in August:
1988 89
1989 86
1990 75
1991 107
1992 94
1993 108
1994 141
1995 114
1996 128
1997 126
1998 126
1999 125
2000 132
2001 154
2002 144
2003 160
2004 159
2005 198
2006 151
2007 156
2008 113
2009 105
2010 59
2011 82
Near North condo/th closed in August:
2005 408
2006 329
2007 343
2008 208
2009 184
2010 168
2011 190
Loop condo/th closed in August:
2005 132
2006 96
2007 179
2008 58
2009 40
2010 53
2011 52
Near South condo/th closed in August:
2005 90
2006 214
2007 103
2008 113
2009 68
2010 61
2011 35
Seems like a mixed bag. Calculated risk says some economist lawler claims that Aug sales will be up double digits YOY and that seems to be the case in most areas, except the loop and near south.
That’s just an artifact from the post D4D crash last year.
Take the Chicago Aug 2010 closed and replace it with the average of Apr-Aug 2010 closed (1,991) for a better look at the trend. Instead of the 18% Aug YOY increase that the IAR is sure to be heralding in their next release, the reality is more akin to a 9% YOY decline.
Another method for normalizing the 2010 D4D influence for YOY comparison would be to take a look at August’s typical share of YTD sales, as follows:
1997 14.4%
1998 14.4%
1999 14.8%
2000 14.3%
2001 16.6%
2002 14.4%
2003 15.6%
2004 14.6%
2005 15.6%
2006 15.0%
2007 14.5%
2008 13.6%
2009 16.4%
2010 10.7%
2011 14.9%
Taking out the D4D outlier in 2010 results in an average of 14.9%. There were 14,310 closed in 2010 through Aug, so average monthly sales % would indicate Aug 2010 normalizes at about 2,132 closed. Utilizing this result in the YOY comparison indicates a 24% decline from last Aug.
It ain’t perfect, but it appears that YOY Aug 2011 volume for Chicago is down from 9% to 24% when compared to a normalized 2010. This is in line with the YOY YTD decline of 15%.
YTD Jan-Aug Chicago sfh/condo/th closings:
1997 11,659
1998 13,936
1999 15,241
2000 15,996
2001 16,432
2002 18,769
2003 20,269
2004 23,415
2005 25,582
2006 23,670
2007 20,775
2008 15,278
2009 12,120
2010 14,310
2011 12,141
FYI:
The July 2012 sales data is out today but I don’t have time to do a post about it this morning. So I will be posting on it tomorrow. Sorry for the delay.