Market Conditions: Lincoln Park Sales Volume is Down
The Chicago Tribune profiles Lincoln Park this week in its “Community Intelligence” article in the Real Estate section. It includes some information on the market conditions in the neighborhood.
While sales volume is down and property sits on the market longer, values are still rising, said Jim Kinney, president of Rubloff Residential Properties.
Units on the market are priced from $149,500 for a studio to about $15 million for a 5-bedroom condominium at Lincoln Park 2520, a 40-story high rise overlooking Lincoln Park and Lake Michigan that’s in development.
“More rentals are being put on the market by owners who can’t sell, but demand is high among people who aren’t buying now,” said Robin Miner, a Lincoln Park broker for @properties. The average two-bedroom, two-bath leases for about $2,600 a month, up about 15 percent from two years ago, she estimated.
The article also addresses some stresses in the neighborhood from the horrible traffic in the Clybourn Corridor to the building of McMansions.
Though Lincoln Park may be a trendy destination for some, long-time resident Rebecca Schewe, 54, finds the abundance of new retail development a bit much. It “has brought a lot more traffic that makes weekends nightmarish,” said Schewe, who lives near the North and Clybourn Avenues shopping district. “There was no urban planning here.”
“Twenty years ago, no one foresaw this as an area of major retail development,” said Chuck Eastwood, chief of staff for Ald. Vi Daley (43rd). “Stores came in; they drew other retailers. For people who live in the Near North, it’s very convenient, yet they complain about the traffic.”
With many small houses torn down for the construction of McMansions in this land-constrained neighborhood, Schewe said, “You have one house on five lots, but they come right up to the sidewalk and have no side yards.”
Since she moved in 31 years ago, the cost of a standard 3,125-square-foot lot has jumped to about $1 million from $100,000. The old neighborhood has lost some of its camaraderie, she said.
The article lists the estimated family income in Lincoln Park at $205,041. The Illinois estimated family income is listed as $74,622.
Lincoln Park’s wild kingdom [Chicago Tribune, Sep 5, 2008]
If you are interested I recently did an inventory trend analysis of a few communities including Lincoln Park, Lakeview, and Near South Side. Go to the bottom of the pages:
http://lucidrealty.com/lincoln_park.htm
http://lucidrealty.com/lakeview.htm
http://lucidrealty.com/near_south_side.thm
I was prompted to do this by comments made by Steve Heitman (I think) who was claiming that prices in hot neighborhoods would never go down. I think this proves he was wrong. Prices must come down to clear the inventory. However, notice that Lakeview is still doing pretty well. And no, I’m not claiming that the near south side is hot but I picked that one to contrast it.
BTW, I’m thinking of doing one more community. Any suggestions?
Anyone want to say your sorry? Did you think I was lying when I told you exactly what this acrticle is saying. I think I have been saying it for the past 10 months. Having said that, I am seeing a slowdown for the 1st time in LP. You heard it here first.
If you are interested I recently did an inventory trend analysis of a few communities including Lincoln Park, Lakeview, and Near South Side. Go to the bottom of the pages. Apparently, I can only put one link in without this going to Sabrina’s spam folder. You can swap out the extension with lakeview or near_south_side.
http://lucidrealty.com/lincoln_park.htm
I was prompted to do this by comments made by Steve Heitman (I think) who was claiming that prices in hot neighborhoods would never go down. I think this proves he was wrong. Prices must come down to clear the inventory. However, notice that Lakeview is still doing pretty well. And no, I’m not claiming that the near south side is hot but I picked that one to contrast it.
BTW, I’m thinking of doing one more community. Any suggestions?
The article lists the estimated family income in Lincoln Park at $205,041. The Illinois estimated family income is listed as $74,622.
This income avg includes low income housing residents. Imagine how high that # is if you take out the college students and the low-come residents. HomeDelete is going to be really upset 🙂
Hah! Steve, our comments crossed paths. Obviously, I have a different take. I think the cracks are starting to form. It’s inevitable.
Gary Lucido – I keep the same stats and as I pointed out in my above post I do think August showed the first signs of ratios being out of line.
Congrats on being late to the party…
Gary – Do keep in mind that August is historically a slow month where inventories build. I think I will hold my judgement until I see how much of the invesntory is cleared through Sept – Nov.
Based on the statistical information to date, prices in Lincoln Park have not dropped and have actually appreciated slightly. This is a factual information supported by all the data released in the past 12 months. What comes in the next 12 months is yet to be determined.
Starting with Sabrina, please all line up and tell the board you are sorry for being wrong.
Gary – do Bucktown and Wicker Park. I think you will see stats similar to LP.
Since when have college kids and other young transients been counted as a ‘family’? Of course if you discount households of poor people and college kids one can formulate a higher ‘family’ income. What’s your point? Cracks are starting to form and prices will come crashing down. This article is the handwriting on the wall.
“The article lists the estimated family income in Lincoln Park at $205,041. The Illinois estimated family income is listed as $74,622.
This income avg includes low income housing residents. Imagine how high that # is if you take out the college students and the low-come residents. HomeDelete is going to be really upset”
Gary – I would be interested in seeing a fringe neighborhood like Logan Square. It would be interesting to see how it compares to LP or Lakeview.
HomeLess – Just admit you were wrong. It’s quite obvious and it may help you face your general negativity problems.
Where are the pricing data on Lincoln Park? I must have missed them. Keep in mind that reliable pricing data are difficult to come by. We’ve discussed plenty the issues with medians and means.
Stevo:
1. Okay, I’ll say it: “You’re sorry”.
2. C’mon steve, people here aren’t ignorant enough to fall for the “family income includes college students” line–it doesn’t as the DePaul students don’t count as “families”. Yes, it is more in line with what you have said than not, but you’re overselling it with an intentional (I hope) misrepresentation.
“…demand is high among people who aren’t buying…”
What?!
By the time it’s news, it’s old news. We didn’t “hear it here first”. McMansions are still being built; these are probably helping to prop up prices, since fewer families can live in these atrocities than the buildings demolished to build them.
Also, the constant insults directed toward renters are very informative. Keep up the quality writing!
“…demand is high among people who aren’t buying…”
I thought it was crazy the first time I read it. To be fair, I think she’s talking about demand for rentals being high among people who are out of the buying market. I don’t know if it’s true but it’s at least not completely illogical. Badly written though, I’ll agree.
Honestly, the traffic around there isn’t that dreadful. It’s not the end of the world if you miss a light cycle or 2 to clear an intersection.
Steve,
Go back and look at the data again. August 2008 inventory is way up relative to 2007. This is not a seasonal effect.
As for prices, we’ve argued this before, I don’t think you can look at median prices. I believe they are skewed by more higher end property in the mix as the lower end gets squeezed.
Gary – Prices are not scewed. I have sold 20 properties in Lincoln Park in 2008. Having gone through the research and analysis on each transaction, I have probably reviewed 100 properties that have sold int he past 12 months. Very few were sold at lower levels lower than 2007 or 2006. I again back up what I say with actual real data. If you have data supporting declines please provide it. If you have worked in Lincoln Park and witnessed the majority of properties selling at lower prices please say so. Otherwise you are simply spinning data to support your assumptions.
Gary – I do not have august 2007 actual # of listings on the market in LP. Do you? I would bet the # is higher than what is ont he market right now. I could be wrong and will wait until the data is provided.
Steve, what properties have you researched that sold in both 2007 and 2008? And what were their selling prices in each year? Many thanks.
Do your own research. I am not going to sit here and prove what I and every news article says. Prove it wrong with your own research.
I didn’t actually see any data in the news article, just quotes from realtors, who I can only assume are not entirely unbiased. And I take it when you say “I again back up what I say with actual real data” you are not actually willing to report data, just make assertions about what you claim the data show.
Look, I don’t begrudge your desire to keep your research proprietary (or even your desire, if any, to present a rosy picture), but it’s a little much to say you are proving things when you don’t actually report any data. Many thanks.
“The average two-bedroom, two-bath leases for about $2,600 a month, up about 15 percent from two years ago, she estimated.”
Does the above comment support higher or lower prices for LP. It is generic but from an investors perspective, what does a 15% increase in rental income mean in the calculation of how much you can spend on the purchase price?
“The average two-bedroom, two-bath leases for about $2,600 a month, up about 15 percent from two years ago, she estimated.”
First, I have no idea of the reliability of this. More fundamentally, a rising rental market is entirely consistent with a falling real estate market. Your point about rents is certainly valid. But as is noted even by the realtors in the article, the reason they believe rents are rising is that people are wary of buying.
As everyone has noted, there is a huge disparity between the cost of owning and renting. I can well believe that part of the equilibration will come about through increases in rental prices as well as decreases in ownership costs. I think more the latter than former, but I would not preclude the former. Again, many thanks for your time.
DZ – Every piece of data released on LP has supported stable pricing. I have work in LP and follow pricing on a daily basis. I am sharing what I see with the board and have been right on for the past 10 months. I have no reason to paint a rosey picture as I am not trying to gain an new clients from this board. I do however take it personal when the majority on this board point to how much money we are all losing owning real estate. It is simply not true and you are probably better off owning a property in LP than any other investment right now. Take a look at equities, bonds, comm, ect.
SH,
I have not seen any data that truly reports comparables. If you have looked at sales of the same property with sales in e.g. 2007 and 2008 and without significant improvements to the property etc., so that you have true comparables, that would actually be very interesting a la Case-Shiller.
I haven’t seen anything like that. As I say, if you have done that I don’t begrudge you keeping it proprietary, because it is information not otherwise available. At the same time, I’m a little surprised you would claim you’ve proven things with data when you don’t report the data. Many thanks.
But just a few months ago Steve was saying everything is under contract and supplies are down, like in areas such as LP.
“Steve Heitman on September 5th, 2008 at 8:08 am
Anyone want to say your sorry? Did you think I was lying when I told you exactly what this acrticle is saying. I think I have been saying it for the past 10 months. Having said that, I am seeing a slowdown for the 1st time in LP. You heard it here first.”
“Steve Heitman on June 22nd, 2008 at 8:55 am
G thinks the sky is falling. I see the everyday activity and the supply vs demand. I will send you the data at the end of June for the 2nd qrt. You will then understand that in the desirable areas supplies are down and EVERYTHING is under contract. Months suuply was running at around 6 months in LP in Q1. I bet it is down to 4 months for condos. We will let the data speak for itself.”
I think its possible that the general Chicago market can still take lumps but some areas can get by relative unscathed pricing-wise. LP is such a small ‘premiere’ area of Chicagoland its possible.
But it will be revealed in the transaction volume. If you don’t mind holding your unit for x years then you’ll be okay.
No maybe Steven isn’t losing money and noone on this board can claim he or any specific investor is without details, but on the whole many investors are taking a hit and that much is obvious.
Here’s some data for YOY comparison for August for attached single family sales in Lincoln Park:
Aug-08 YOY Aug-07 Aug-06 Aug-05
Closings 113 -27.6% 156 151 198
Median $423,600 -3.7% $440,000 $410,000 $369,000
Average $475,804 2.9% $462,539 $433,973 $424,644
With SF 39% 37% 48% 48%
Median PSF$292.89 -8.0% $318.33 $298.10 $301.59
Ave PSF $303.13 -4.2% $316.57 $300.96 $317.61
High PSF $467.95 4.1% $449.38 $437.50 $477.33
Low PSF $233.23 8.7% $214.58 $194.15 $176.47
Today there are 676 active listings for attached single family in Lincoln Park. There were 709 closings from 1/1/08-8/31/08. That looks like about 8 months of supply as long as you don’t count all those that have been taken off the market “until conditions improve.”
“The average two-bedroom, two-bath leases for about $2,600 a month, up about 15 percent from two years ago, she estimated.”
For the period of 1/1/08-8/31/08 the MLS shows 57 rented 2BR/2BA apts as follows:
median $2,300 +7.1% increase over 2006
average $2,367 +5.8% increase over 2006
min $1,575
max $3,850
For the period of 1/1/06-8/31/06 the MLS shows 48 rented 2BR/2BA apts as follows:
median $2,148
average $2,237
min $1,400
max $3,850
Maybe she used different data?
Those apartment numbers are for Lincoln Park if it wasn’t clear.
would like to see analysis on Streeterville
wren, what kind of analysis and what boundaries, zip, etc?
G – thank you for taking the time to include actual figures! (are they from MLS?)
I personally don’t care much about what’s already happened in the market, i’m more concerned with what’s coming in the future. For my money, i would avoid an area like Lincoln Park that has held up better than the marginal neighborhoods. I think the declines are still to come in Lincoln Park and that’s where the opportunities will arise. I don’t think buying into Lincoln Park is like buying a treasury. It’s poised to fall – of course, i’ve been wrong before and will be wrong again, but that’s what im doing with my money.
i’m hearing some really dreadful stuff from the commercial side of things – people unable to get money, including some big, well known companies that you wouldn’t think would run into this situation.
Rents are still negotiable. There are many people dying to find renters right now, especially in LP.
A close friend works at DePaul and he was just telling me how bad the rental situation is over there. Something like 75% vacancies in some of the nearby buildings that used to be full come Sept 1st. Why? There are just THAT many new places to go.
And rent is going up in LP?
Nobody has yet given examples of specific Lincoln Park units increasing in price during this period. Its the old median price trick. Anyone following real estate for more than a few weeks knows how that works. What is happening with lower and middle priced Lincoln Park units, like all those hideous condo conversions that had been sold with 100% financing? I somehow doubt they are holding their value.
Real estate may be local, but credit is global. The credit tightening is happening everywhere and will affect all local real estate markets.
Steve,
“I do not have august 2007 actual # of listings on the market in LP. Do you? I would bet the # is higher than what is on the market right now. I could be wrong and will wait until the data is provided.”
Go back to the chart I referenced above for 2 – 3 bedrooms (bottom of the page):
http://lucidrealty.com/lincoln_park.htm
In the text I mentioned that August of 2007 was at 4.6 months, while August 2008 was 7.8 months. That’s a big increase.
On a separate note, you mentioned selling 20 properties. I’m relatively new to this blog so I missed what you do for a living. Are you a realtor? Couldn’t find you in the MLS. Just curious.
Gary – I am asking where your data i coming from. Do you know how many units were ont he market last year vs this? I think this is less.
Steve,
It’s Agent Metrics data, which pulls from the MLS. August 08 has 547 for sale with August 07 at 621 but that doesn’t matter. The sales rate is down even more, which is why months of supply is up. Sellers are holding properties off the market “until things turn around”. People on the market now are more anxious to sell.
Here’s a little mls info on zip 60611 which contains Streeterville:
1,129 currently active attached single family listings
810 closed attached single family 1/1/08-8/31/08
That’s a little over 11 months of supply.
BREAKING: headline wall st journal says treasury about to formalize a Fannie/Freddie backstop.
Really? DO you have a link?
http://www.wsj.com 🙂
I read the “news,” though, and the only “news” in there is that Treasury will be injecting cash for sure.
“Steve,
It’s Agent Metrics data, which pulls from the MLS. August 08 has 547 for sale with August 07 at 621 but that doesn’t matter. The sales rate is down even more, which is why months of supply is up. Sellers are holding properties off the market “until things turn around”. People on the market now are more anxious to sell.”
Gary – all I said was inventory was down which it is.
Inventory is down but there is a slowdown?
Sales have fallen faster than inventory so months of supply is up.
On a separate note, I just saw the Chicago area unemployment numbers. Up to 7.3% now and jobs are down by 53,600 over last year. That’s the biggest decrease in a while. Unemployed people don’t buy homes – at least not any more.
What happened to the NINJA loan? No income, no job or assets?
Thanks G….since you asked:) I was wondering specifically about rents in Streeterville for one bedrooms….
You guys make me laugh. Six months ago it was those adjustable ARMS. Last month it was interest rates going to 8%. This month is unemployment will kill Lincoln Park. Give it up. The market is stable and will only be affected by normal economic conditions. Sure unemployment will soften the market but THE CRASH IS NOT COMING.
HomeDelete better get comfortable in Rogers Park because that is the only area he can afford…
How does everyone like today’s 6.0% 30-year fixed? Things are getting more affordable for those of us that still have jobs…
“How does everyone like today’s 6.0% 30-year fixed?”
Useless to me, as I don’t want to live anywhere that I could buy with a CONFORMING loan. Stevo, you’re treating everyone like idiots again. What’s the prevailing JUMBO rate today, hmm? Those of us who have jobs wanna know.
Anon – 5/1 Jumbo at 6.0%. 30 year you have 2 split into 2 loans. 1st at 6% and the 2nd at 7.25%.
fannie and freddie under federal conservatorship…
Well Steve was one of the proponents who said that the gov’t wouldn’t let them go under. However detestable you may find him or his bets, you have to admire that so far he’s been pretty right. He saw the moral hazard and is profiting off of it.
I really wish Fannie and Freddie would get out of investor properties, hopefully with this bailout that will become a reality.
Or just leave real estate investment to those with some skin in the game.
While the prevailing view on CC is that foreclosures equal crash in prices an independent research group has different opinion:
Full article http://www.nber.org/tmp/37608-w14294.pdf
Abstract:
Despite housing’s importance to the economy and worries about recent financial and economic turmoil
traceable to housing market difficulties, little has been written on how distress in the housing market,
measured by foreclosures, affects home prices, or how these variables interact with other macroeconomic
or housing variables such as employment, housing permits or sales. Employing a panel VAR model
to examine quarterly state-level data, our paper is the first to systematically analyze these interactions.
There is substantial regional variation across states, which facilitates our ability to identify linkages
among variables. Importantly, price-foreclosure linkages work in both directions; foreclosures have
a significant, negative effect on home prices, while an increase in prices alleviates distress by lowering
foreclosures. Similarly, employment and foreclosures have mutually negative effects on each other.
The impact of foreclosures on prices, while negative and significant, is quite small in magnitude. We
demonstrate this by simulating house price changes in response to extreme foreclosure shocks. Even
under extremely pessimistic scenarios for foreclosure shocks, average U.S. house prices, as measured
by the comprehensive OFHEO house price index (which we argue is the most reliable and useful measure
of house prices to use for our purposes), likely would decline only slightly or remain essentially flat
in response to foreclosures like those predicted for the 2008-2009 period. This suggests that home
prices are quite sticky, and that fears of a major fall in house prices, with all of its attendant negative
macroeconomic consequences, typically are not warranted even in extreme foreclosure circumstances
A few Lincoln Park winners:
1851 Maud – purchased 4/98 for $725,000; currently on market for $779,000.
2452 Burling – purchased 8/02 for $874,000; under contract asking $874,980.
925 Fullerton – purchased 6/06 for $1,195,000; on market for $996,000.
gotta split now – may find more later. Totally anecdotal i know. Maybe the pain isn’t widespread yet, but there are some definite signs of serious weakness in the market.
Bubbleboi–ouch! Having purchased myself (in Hyde Park) in 1997, those sting…
Stevo:
“30 year you have 2 split into 2 loans. 1st at 6% and the 2nd at 7.25%.”
So for my $900k mortgage, what’s that make the effective interest rate? Is it 6.0% fixed for 30 years *as you stated*??? No?
K–but 1851 Maud and 2452 Burling sold for more than last time, so prices are still going up. That’s one loser and two winners–and the loser is on a major street, so it doesn’t count!
You guys again make me laugh. There will be 500 closing in LP in 2008 and you guys pick a couple losers and call it a trend. There is a reason you are not successful in real estate investment. I am serious when I say this, open your eyes and learn what is really going on and you will find so much opportunity.
2231 N Seminary unit 3 purchased in late ’02 for $445K and sold in July for $525K
1940 Cleveland – purchase 2005 for $505k and sold in July 0f 2008 for $540k
626 Wrightwood – puchased in 2001 for $430k and sold in 2008 for $548
This was 100% randon selection and properties that closed int he past 2 months. It reall sucks to own a property.Homedelete rented since 2001 and has nothing. This guy on Wrightwood purchased in 2001 and now has $118K in his pocket tax free. He now can turn around and buy a $800k property and put down 20% with only having to come up with $40K of his own money.
You guys make me laugh with your renting crap. Buy smart and you will be ahead. Sit with Homedelete and you will be left out.
Anon – You have your choice of a 6% 5.1 arm or a blended 6.625% 30 yr fixed. What is your point. Rates are not bad and should get better in the next 12 months (for jumbo products – watch for the old gov’t to back jumbo in the near future. They will step in…)
“This guy on Wrightwood purchased in 2001 and now has $118K in his pocket tax free. He now can turn around and buy a $800k property and put down 20% with only having to come up with $40K of his own money.”
Typical nonsense from the shill.
“You guys make me laugh with your renting crap. Buy smart and you will be ahead. Sit with Homedelete and you will be left out.”
– 9/6/2008 Quote from a Realtor® during the collapse of the largest real estate bubble in U.S. history.
You have no credibility Steve Heitman unless you start working for no commission. What a joke. Left out of being stuck with an illiquid debt trap maybe. There is no reason to rush into this real estate market, none whatsoever.
Steve, you can no longer ridicule anyone for being “just” a renter, since as of this weekend, we are now all home owners. The federal government will be taking 5 trillion dollars worth of Fannie/Freddie debt onto its books. To put it in perspective, that’s like putting an additional five Iraq wars onto our balance sheets.
God bless capitalism!
Runner, that report seems to say that values will only fall 5 percent. Funny, that, since anywhere with significant numbers of foreclosures have already decreased 10 to 40 percent.
G, the report is saying the correlation doesn’t equal causation here.
I don’t buy the report either (it bases it’s conclusion on backwards-looking analysis only), but the picture *is* more complicated that just looking at areas with high rates of foreclosures, and seeing what the prices have done in those areas.
A few people requested market data on Bucktown (part of Logan Square), Logan Square, and Wicker Park (part of West Town). I’ve added that data to my community profiles (see bottom of pages) here:
http://lucidrealty.com/logan_square.htm
ttp://lucidrealty.com/west_town.htm (intentionally dropped the h so as to avoid the spam filter)
Looking pretty ugly. It only stands to reason that the problems have to migrate inward as the “premium” for the “desirable” neighborhoods rises.
A few people requested market data on Bucktown (part of Logan Square), Logan Square, and Wicker Park (part of West Town). I’ve added that data to my community profiles (see bottom of pages) here:
http://lucidrealty.com/logan_square.htm or west_town.htm (can’t include two links without triggering the spam filter)
Looking pretty ugly. It only stands to reason that the problems have to migrate inward as the “premium” for the “desirable” neighborhoods rises.
Steven, what you fail to understand, is that my rent is significantly less than a comparable mortgage payment. I put the difference into the bank. Over time my bank balance has grown larger. My bank account balance is larger than any capital gain I could have realized since I seriously considered buying in 2004.
In a few years from now, when prices have fallen across the board even more significantly, I will purchase a home with a very large down payment. I fail to see how this makes me a loser. In fact, I think its great financial planning. You know, the living within your means, saving for a rainy day, living on a budget sort of thing. I’m going to save myself hundreds of thousands of dollars in interest.
I know this is in complete contrast to your school of financial planning, i.e. 100% leverage on as many properties as possible and make then hope for a sale with capital gains before the ARM resets….but I’m a bit more conservative than you are.
The losers are those that are losing their homes to foreclosure and short sales. Renters aren’t losers in this market, they are the smart ones. There is a time to own certain assets and residential real estate has been a big bust with $1 Trillion or so in lost equity so far… It is like calling those that didn’t buy Pets.com a loser. The losers are those stuck with a declining illiquid asset in one of the worst housing busts in history. Even if you don’t plan on moving anytime soon (but might because of circumstances beyond your control) it is causing stress and anxiety. I wonder how many people Steve Heitman sold homes to that are in foreclosure, short sales, suicide, who knows??? Many realtors are in it for a buck and only are nice to get referrals. I love the rare realtor that truly is there to help the buyer make a wise purchase decision, even if that means telling them to rent until the market settles out.
Kenworthey:
Thanks for keeping us up to date on Freddie and Fannie. The nationalization of Freddie and Fannie is THE big story of the housing collapse and certainly of 2008.
What the government will do as of Monday is unprecedented and its ramifications on our economy and future are unknown. But I’ll take a guess and think it’s not going to amount to something good.
Steve – you are joking, right ? 2231 N Seminary unit 3 purchased in late ‘02 for $445K and sold in July for $525K
1940 Cleveland – purchase 2005 for $505k and sold in July 0f 2008 for $540k
626 Wrightwood – puchased in 2001 for $430k and sold in 2008 for $548
I don’t even have to calculate what rate of return this is compared with no risk munis ? obviously, tax, maintenance, repairs, after-tax mortgage interest, realtor fees have eaten much of the tax-free CG on those examples – Cleveland 35k in three years ? seminary 80k in 6 years ? wwodd 118k in 7 years ? GOOD FOR REALTORS I AGREE
That’s a shocker Sabrina! I thought you would have something positive to say.
Fannie/Freddie tits up, unemployment 6.1% but no recession…yep yep yep…no recession until Nov 5th.
Homedelete is completely correct here. As I’ve pointed out in the past, on average, renting in Chicago is 60% of the cost of owning. In addition, before the bubble Chicago real estate appreciated at 3.7% per year. This is consistent with Robert Shiller’s analysis going back to 1890. However, figure that you’re going to spend 3% per year on maintenance and remodeling. So after inflation you are losing. Homeownership as the American dream is a concept promoted by the government so that people have a stake in the country and behave themselves.
As for Fannie and Freddie, a government takeover will be good news for the banking industry and the housing market. Let’s just hope it’s not good news for the stockholders, who should not benefit from this. Besides, I own Fannie puts.
Thank you Gary.
I know for a fact that my rent is cheaper than owning because there are condo units in my building for sale and languishing on the market. The monthly mortgage payment for a unit exactly like mine on the other side of the building is roughly 2.5x the cost of my rent, including assessments. I have a somewhat extreme example because the comparable units have been recently updated whereas mine has not. And there are tax benefits to owning which I do not enjoy. But at the end of the day I can save more money by renting my apartment than buying the comparable condo. The condos in my building are listed at $30k less than ’06 purchase price. I’m not aware of any units in foreclosure at the moment but I suppose it’s just a matter of time.
Sabrina,
Nationalization would be better news than what is being reported so far (none of which is official–report to come Sunday night before the Asian markets open). What is being reported so far is “conservatorship,” which apparently just means a (nominal?) housecleaning of the Board, an injection of cash (def. bad news for the common stockholders, probably ok for preferred though they might get a haircut, almost certainly no probs at all for bondholders), and continued operations, as a FOR PROFIT institution. That is, for private profit (though the losses will be public). Ain’t it grand?
So my take is that this def. isn’t good news: like Obama has said, the GSEs should either a) be kept as public corporation and allowed to fail, or b) nationalized with any profits going to the government. This in-between land–the problem all along–is bad news. HOW bad, as you point out, remains to be seen. Probably, this just kicks the problem out for, oh gee, I dunno, two months. You know, until say, after the first week of November? Just a guess.
“I know for a fact that my rent is cheaper than owning because there are condo units in my building for sale and languishing on the market.”
So renting is cheaper than owning in your building right? Not the entire market. Try not to generalize Homedelete, it makes you sound dumb!
Yes, Heitman — homedelete’s landlord is a raving moron who doesn’t have the slightest clue how to charge market rent (which is apparently above the cost of ownership in your world).
Maybe i missed this earlier… “Steve Heitman” was asked what he does for a living and I did not see a response. Considering he stated he sold 20 homes in Lincoln park in a short time period recently, I’m frankly, surprised i have not ever heard of him outside this site, assuming of course Steve Heitman is not a pseudonym. In addition to the other poster who noted that Steve could not be found in the MLS, no one with that name is a licensed broker or salesperson in Illinois. (check the state of illinois website online license lookup)
I lurk here often and love the site and its concept, find it a valuable source of information on specific properties i may have overlooked, and enjoy reading most people’s posts, but given the personally insulting and distasteful nature of (dare i say most of) Steven Heitmans posts, and his boastful claims, i have to question his truthfulness and usefulness to the site.
Care to provide a license number?
Kenworthey,
One flaw in your logic: neither Obama nor McCain will directly implement the reform. Instead it will lie with their treasury secretary and the fed. The treasury secretary sure as hell won’t be Paulson and he knows this. Bernake is basically a lethargic deadbeat. Also you reveal your political persuasions by not noting that McCain has a similar outlook.
The Fannie-Freddie form of corporate governance is absolutely the worst I have ever heard or read about: for their management its basically a mantra of: I win v the taxpayer loses.
The government should have never really gotten into homeownership as one of its goals IMO. There are a LOT of people who aren’t qualified to own property, especially these days when there is far less job security than the past and our society is increasingly mobile.
Bob, I agree with everything you said. Not sure, though, the implications of at least one part of it: neither Obama nor McCain will implement the reform directly; that will be the job of the conservator (who is currently the same guy who told Fannie and Freddie to lower their capital buffer back in early Spring). But the next president will appoint a new treasury secretary, and hopefully, a new conservator. (Bernanke will still be around–and maybe I’m too doe-eyed but he actually doesn’t seem like a hack like his predecessor so I don’t mind.)
I’ve never tried to obscure my political leanings! And I take it as obvious that we wouldn’t want one of the members of the Keating 5 to be the one to hire people to handle this latest bailout. (We’re still paying for McCain and his ilk’s last massive bailout mess–and I mean that literally, to the tune of at least 10 billion a year in financing.)
Also, Bob, maybe I’m being paranoid and I hope I’m wrong, but here’s where I think this “bailout” could be the worst of all possible worlds. The conservator begins to sell off Fannie and Freddie’s debts. This is consistent with McCain’s rhetoric about how the GSEs should be shrunk down–and with that base proposition, I have no quarrel. The question is, how to break it up, and to whom do you sell it? My guess is McCain would sell off the highest quality debt to the JP Morgans and Goldman Sachses of the country. The worst, crappiest loans are bundled, and when no one buys those, or only buys them at a loss, guess who makes up the difference? This would certainly be consistent with the Bush administration/Paulson’s handing of Bear Stearns. And I have no reason to believe a McCain administration would handle things any differently–do you? (I guess that leaves open the question of whether an Obama administration would, either… but given his newcomer status, I think he’s less in bed with the big banks. Again, see the S&L scandal.)
Paulson to hold press conference at 10 am central…
“It is like calling those that didn’t buy Pets.com a loser.
So you’re telling me that my investments in this stock and drkoop.com are worthless?
Well I guess that’s ok because I’ve hedged those possible losses by investing in residential real estate starting in late 2006 and I know that decision will pay off big really soon!!
“And I have no reason to believe a McCain administration would handle things any differently–do you? ”
No, no I don’t. However I have no reason to believe an Obama administration will handle anything differently as well.
Also the term Keating Five I find is a little misleading: with history as a guide only three of them were found at fault. McCain and Glenn were only found guilty of poor judgement. I find the situation similar to Obama in his dealings with Tony Resko.
And you are right about one thing: with this taxpayer bailout of ‘Phoney & Fraudie’ the taxpayers are definitely going to foot the bill. A bill that could easily be $100-$300B over time. They’ll just keep injecting taxpayer money into them ad infinitum.
Well, Paulson just spoke, and I cant make heads or tails of it. Sounds like common and preferred are wiped out, though. I guess we’ll know more when we see how the markets react tomorrow. I kind of expect a pop, but then a crash either as early as tomorrow, or as late as November 6. But I’m getting a bit pessimistic, I know.
The difference between Obama’s bad judgment and McCain’s, is that McCain’s cost the taxpayer $100+ billion.
Lincoln Savings and Loan only had $5.4 billion in assets at its peak, so it is quite impossible its bailout cost the taxpayers $100B.
Don’t obfuscate figures from broader S&L bailout with Keating/Lincoln.
Kenworthey,
That’s just because, thankfully, Obama’s bad judgment has never been tested. At least today he admitted the surge worked beyond our wildest imaginations. Had he withdrawn from Iraq, as he proposed, who knows where we’d be now – and how much we would have spent to send troops back in to quell the disaster that would surely have ensued.
My bet is on an equities rally tomorrow, although call it a suckers rally. Basically the journalists are saying now that the ‘uncertainty’ has passed there could be a rally. But a government takeover of these two doesn’t really do anything to fix the market’s troubles. In fact look for the government to get out of many of the riskier areas Fannie and Freddie moved into over the past few years, further constricting availability of financing.
Alt-A loan issuance should join option-ARMs and subprime in the graveyard pretty soon.
Kentworthy – How about McCain’s bad judgement of supporting the war in the first place? Look how much money we have spent to destroy a country and then try to put it back together.
Bad job!
What rescue means for mortgage rates
Bailout of mortgage giants should result in lower mortgage costs and make credit more available. But lending standards will stay tight and risky borrowers will still pay extra fees.
http://money.cnn.com/2008/09/07/news/economy/fannie_homeowners/index.htm?cnn=yes
What will happen to mortgage rates with Fannie’s new owner?
http://money.cnn.com/2008/09/07/news/economy/fannie_homeowners/index.htm?cnn=yes
Bob – My bet is your not one of the experts as sited in the below article.
“Sunday’s federal takeover of Fannie Mae and Freddie Mac will likely translate into lower mortgage rates and greater availability of credit, experts said. Rates could drop by 1 percentage point from the stubbornly-high 6.39% for a 30-year fixed rate mortgage.”
Hey Bob – Great prediction on Fannie’s takeover. Seems those on wall street disagree.
Sunday’s federal takeover of Fannie Mae and Freddie Mac will likely translate into lower mortgage rates and greater availability of credit, experts said. Rates could drop by 1 percentage point from the stubbornly-high 6.39% for a 30-year fixed rate mortgage.
Yep.. all that bank held preferred now going to zero further eroding their capital base. Throw in the fed gov’t now adding trillions in liabilities to it’s balance sheets and the only thing keeping rates from exploding is that the market knows we are in a bad recession and inflation is not the problem.
Steve,
If rates drop down to 5.4% for a 30yr fixed then there might be some hope for the market. We’ll see.
Maybe the government allows them to throw good money after bad the next 16 months or so, but remember the plan is in 2010 for them to reduce their portfolio’s by 10% and each year thereafter.
Bob… 2010 reductions… just like the troop reductions is my bet.
Homedelete I don’t know about your building but the numbers do not work like that everywhere. I bought a 2 bedroom condo in Lincoln Park two years ago with only 3% down, no pmi, one mortgage at 5.75% (B of A). With HOA, Taxes, and Mortgage I pay 2300 a month. Because of the low percent down and the fact that its early in the loan I get to deduct almost 1800 a month for mort/tax not to mention now that I itemize I also can deduct a couple thousand in charitable deductions (being single with no kids is a tax killer). The two rental units in the building (there is a cap at two) are both smaller, on the back of the building, and have not been rehabbed. They rent for 1800 for the one bedroom and 2200 for the two bedroom. A two bedroom similar to mine in the building sold in last six month for 20,000 more than I paid in 06. Although its unlikely to be able to get that mortage now (which is probably a good thing) even with a 6.5% mortgage like today I still think that in certain situations and areas buying is a good way to go.
You paid about $300,000 for a 2 bedroom in Lincoln Park. Your income is probably $90k or $100k a year, maybe even more. It sounds to me like you bought (as Steven Heitman likes to say) “smart”. For whatever reasons the rent in your apartment is comparable to a mortgage. Unfortunately, this city is full of 2 bedroom condos for $300,000 sprouting out of the ground like weeds and most of them are not in the LP.
I’m looking forward to the day most neighborhoods in Chicago are good buys like the deal you got. Not everyone has the desire or resources to live in the LP. The only unfortunate side effect is that you might soon become a knife catcher if prices continue to fall. But that topic, and whether the LP will fall, has been discussed on this board ad nauseum and I’ll save that topic for the next Case-Shiller thread.
I agree LP may fall for purchase prices. However as long as there are DePaul kids who want to live right on campus and their parents who are willing to pay for it I am not too worried that I wouldn’t be able to rent the unit at my cost or close to if I had to move. LP wasn’t my first choice however in 06 I knew there was a good chance the market could drop or become stagnant for while. Although the purchase price was high the rent to buy ratio in the area with a constant stream of new renters and twenty-something homebuyers made sense. Do I sometimes want to pull my hair out with the neighborhood,traffic, college kids, babystrollers (worth more than my car)? Yes. Do I at this poing think it was a bad investment, no (see numbers above), it probably would take a HUGE downturn for me to think but then everyone would be hurting. However if I would of bought the place I originally looked at in Edgewater/Rogers Park and was trying to move now I would be getting killed.
“with only 3% down, no pmi, one mortgage at 5.75% (B of A).”
How did you get this with No PMI at such a low rate?
Accidental landlords only make money…accidentally.
The assumption that an owner-occupant with no landlord experience can just “rent it out and break even” is fantasy.
“The assumption that an owner-occupant with no landlord experience can just “rent it out and break even” is fantasy.”
Being a landlord isn’t rocket science – you just have to learn how to do it correctly. Most people learn through trial and error which unfortunately can be quite expensive and frustrating.
Newbie,
$1800 for a 1br and $2200 for a 2br in LP is still quite high. You can rent in LP for a lot less than that.
Hey Homedelete – With the latest move to save the economy you re now a homeowner. Congratultions Homedelete!
SH, at least it’s not the same as the illiquid, depreciating assets you are (alledgedly) stuck with while your (supposed) commissions disappear.
It was a special program through bank of america sponsored by a national not for profit for first time homebuyers. No PMI was the biggest benefit of the program. It was also 2005/2006. They still have programs although I do not know the current terms.
There are definately lower and higher rental numbers in LP. The rental numbers may be high for some (including myself if I was renting) but obviously the market is supporting the price (the units are never empty) based probably on the prime location, condo features (w/d etc) and the fact the building being by far majority owner occupied is a lot nicer than your average LP “vintage” rental. You have to compare apples to apples. Just because you can rent a unit for 1 bedroom for 1000 doesn’t mean the two units are equivalent. Some people are willing to pay for the ac, w/d in unit, parking, location, etc.
Renting is not my preferred course but if life throws an unexpected turn causing me to move (and the market doesn’t favor selling) I still stand by that the numbers are currently alot better than other areas I had looked at in the city.
I also disagree with the general blanket statement that:
“The assumption that an owner-occupant with no landlord experience can just “rent it out and break even” is fantasy.”
Every landlord was a first time landlord with no experience at some point either on purpose or by accident. Every situation is different and you have to look at the facts/numbers that way. The two current rental units in the building were both former live in owners who have moved on and became first time landlords and are both doing very well (especially since both bought in the late 90s).
Although I do not own rental properties my family does and I was there when they bought their first building. Admittedly I am an attorney with some real estate exeperience (which helps a little with some areas) however if the numbers work, you do your background work in screening tenants, have some basic repairs skills (or have a reliable contractor who does), and a well run condo association renting a condo in LP is not rocket science. Whether I am living in the unit or a tenant the mangagement company is the one out meeting the roofer to do scheduled maintenance or fixing the building front door if something breaks. You can get a bad tenant but that can happen to even the most experienced landlord.
I understand playing the devil’s advocate on some issues can start a healthy discussion however I am sensing a certain hostility to Lincoln Park and newbies to the real estate investment game. Even if you don’t like the neighborhood sometimes time you just have to admit with information and numbers currently available (no one can predict the future) something is just a “smart” investment at that time. Maybe i just haven’t read enough neighborhood threads but if I took all the advice i have seen so far it seems like I should be hiding my heading in a rented bomb shelter (heat included) somewhere in Berwyn hoping the sky doesn’t fall.
I appreciate other people’s insight, if LP is not the place to be is there somewhere all the LP nay sayers can agree on is a good place in the city to live AND to get into investments? Somewhere that the has a great rent/purchase ratio? Things will probably go down more but if you are looking to get in to investments for the long haul there may be a silver lining in a down market.
“SH, at least it’s not the same as the illiquid, depreciating assets you are (alledgedly) stuck with while your (supposed) commissions disappear.”
G – What are you talking about? Do you think the 700 Billion the tax payers just backed is good debt?
Newbie – In real dollar terms, the real estate is a dog. Most of the floplords (failed flippers forced to become landlords) don’t want to be in that position and stuck with a depreciating, declining in value, illiquid, high maintenance asset.
Do you know how much opportunity there is picking up the pieces from this mess? A lot more than an investment on equities of bonds. Any side bets that equities sell off 20% from where they currently are? I will throw out 6 month timeline.
SH – What are you talking about? A “sale” on overpriced assets is not a sale nor an opportunity. If you’re talking 50% off then maybe it would be worth getting into an illiquid assets like a condo. Bottom line, don’t count on condo “asset appreciation” as your hope. ONLY look to rental incomes like we all usually did pre-bubble time. Anyone that tells you are going to make money based on asset appreciation of these condos doesn’t understand the difference between real dollars and nominal dollars and don’t listen to the non-sense about the “possibility” of the Olympics being a reason to buy. Silly realtors, homes are for living in, not investments.
Newbie,
I think your background in knowing family in the landlord game makes all the difference. You certainly weren’t a complete newbie when it came to being a landlord. Many people are.
All of the requisites you listed, including being an attorney, having previous RE experience, having a good HOA board, having good repair skills or a good contractor, etc I think are the minority of situations.
Also while bad tenants are everywhere, there are economies of scale to running a 50 unit building vs. owning 1 or 3 investment properties. A bad tenant or two can be expected and dealt with easily in a 50-unit property, when its your only rental you’re in for some rough times.
With your background perhaps being a landlord makes sense. However I see far too many people without your background and experience who assume they can be a successful landlord just like you. I doubt its so easy to the inexperienced.
What nonprofit organization was dedicated in 2005/2006 to helping young attorneys buy 2 BR condos in Lincoln Park on the cheap?
I’m almost as disgusted by this as I am by Paulson’s proposed legislation.
Hopefully Paulsen’s legislation will never become a reality. He is asking for WAY TOO much power. He doesn’t seem to understand that you can’t craft legislation that specifically prohibits judicial review.
The legislation is worded so as to give him kinglike powers. He is stomping all over the constitution and separation of powers with this and a court will throw it out in current form.
“Hopefully Paulsen’s legislation will never become a reality. He is asking for WAY TOO much power. He doesn’t seem to understand that you can’t craft legislation that specifically prohibits judicial review.”
Plenty of precedent for that sort of law so far this decade…
Newbie stated “The two rental units in the building (there is a cap at two).”
Newbie also stated “Renting is not my preferred course but if life throws an unexpected turn causing me to move (and the market doesn’t favor selling) I still stand by that the numbers are currently alot better than other areas I had looked at in the city.”
How are the “numbers” “alot better” if you can’t rent it?
Kenworthy, I share your disgust with both. Buyer assistance programs contribute to inflated prices and often benefit the unintended. Another scam that got out of hand during the bubble.
SH asked “Do you know how much opportunity there is picking up the pieces from this mess?”
LMAO. Some of us have been shorting the entire FIRE economy for a couple of years now. That has been the “opportunity,” no?
There will be an “opportunity” in RE again. The best way to time it will be to start looking when shills like SH are long gone.
“Do you know how much opportunity there is picking up the pieces from this mess? A lot more than an investment on equities of bonds. Any side bets that equities sell off 20% from where they currently are? I will throw out 6 month timeline.”
Steve, there will certainly be opportunities for those who have cash. There always is when a bubble bursts. But when will that be? I hazard to guess that we’re in about the 3rd inning, so it seems too early to be buying. The foreclosure rate continues to pick up.
Also- we have chattered about equities before. It’s a mistake to compare the two because equities have FAR outperformed housing over the last 100 years. By FAR.
If you want to get rich, you buy stock.
During the Great Depression, when housing prices fell as much as 80% in some areas, at least if you owned a dividend paying stock you were getting something for your money even as the stock market declined. With housing, you got nothing for decades (except a place to live.)
We’ll know the bottom of this housing market when NO ONE is buying for investment anymore. And people tell you you’re crazy for doing so.
I still see “investors” all over the place. And they continue to close on new construction condos and continue to think they’re going to flip them for profit.
I also still see 20-somethings buying 1 or 2 bedroom condos they KNOW they’re only going to live in for 2 or 3 years (due to having a baby etc.). Yet- they’re buying anyway. There isn’t enough fear in the market for it to be a bottom.
I have to agree with Sabrina on when the bottom will occur, you have to look at the hard numbers, not some gut feeling or emotion. One phenomenon and tell tell sign of this bubble was the short term ownerships. Transaction costs, holding periods, etc. are very very very high in real estate. To own a condo/home/townhome for only 1 year or 2 years makes NO economic sense in non-bubble markets. We saw this with flippers and also with people who knew in advance that they would only live there for a year or two. The two year tax free capital gain primary residency requirement probably contributed a bit to it too. But, whether they be flippers or premeditated short term owners, the thought was the asset appreciation (i.e. housing bubble) would eclipse these costs. I think the mentality of having to own versus rent is quickly fading. Bubbles are built on group think paradigms and the sooner this one gets eliminated the better it will be for everyone.
Wow are people judgemental on this board especially without knowing anything about the situation…..
“What nonprofit organization was dedicated in 2005/2006 to helping young attorneys buy 2 BR condos in Lincoln Park on the cheap?
I’m almost as disgusted by this as I am by Paulson’s proposed legislation.”
I found out about the program by taking a home ownership course through Acorn housing however the program was B of A’s. The interest rate was market like everyone else was getting at that time there was just no PMI. I worked in public service providing legal services for those who could not otherwise afford them and had a second job waitressing. I was also meticulous about keeping my credit score high if while I was dirt poor in school. Even though I qualified for the terms and there were no limits on the number of applicants or loans they would give I take it from your analysis I was undeserving of a good mortage rate because I am an attorney? and bought in Lincoln Park? I guess I should have offered to pay PMI so that all those public service lawyers out there don’t drive up the cost of housing.
“The two rental units in the building (there is a cap at two).”
There is a cap on the number of years each landlord can rent if there is wait list. The two landlords are over the time but have continued to rent bc no one else has wanted to. I am next on the list and one of the landords is moving out the country and selling their unit at the end of the lease to the renter leaving only 1 rental.
Sorry, Newbie, you didn’t get “a good mortgage rate,” you got a deal that was *better* than what you would have received on the open market–and yep, programs like the one you participated in absolutely helped inflate the price of housing, and contributed to the financial armageddon (no idea how to spell that) that has been playing out for the last several years, and has been reaching its denouement for the last four days.
I can see why B of A would be involved in lending more to people than they should (cf. current and entirely predictable bailout), but why *ACORN* of all places would be involved, is utterly beyond me. Isn’t ACORN supposed to be about helping low and moderate income communities thrive? Lincoln Park hardly qualifies.
I don’t judge you for taking advantage of it; hell, when the government gives me tax breaks I find politically appalling I still take them (though that doesn’t stop me from voting to reverse them). But I surely do judge ACORN for being involved in something like that.
Unfortunately ACORN isn’t going away any time soon and will only strengthen in this. The bill passed this year provided a ton of cash for partisan organizations like ACORN as the democrats insisted on grants to “community development organizations” like ACORN to be included in the bill.
What bill?
And I don’t oppose community development organizations, or nonprofits, or faith-based NGOs, etc., just for the record. I just oppose BAD ones. (There is also a strong correlation between “bad” and “big”–see United Way, and perhaps ACORN, though this is the first I’ve heard of their being involved in something like this.)
Bush likes to spend money so much, he doesn’t even care if it benefits the other party, just so long as he gets to spend…from WSJ in early July:
http://online.wsj.com/article/SB121745181676698197.html?mod=hpp_us_whats_news
The housing bill signed Wednesday by President George W. Bush will provide a stream of billions of dollars for distressed homeowners and communities and the nonprofit groups that serve them.
One of the biggest likely beneficiaries, despite Republican objections: Acorn, a housing advocacy group that also helps lead ambitious voter-registration efforts benefiting Democrats.
A big part of the reason we are in this mess falls on 9/11 and the actions by the government to stimulate the economy through low interest rates,and a construction boom not predicated on demand. Wall street packaging all the bad mortgages and pretending they were good, and hedge funds short selling the banks. Whoever is president is going to have a lot of work to do- Im sure all the bush bashing may make some feel better but solves little. – just like thinking obama is somehow a saviour and someone with no track record of actually accomplishing anything can fix the economy.
Democrats to the rescue! Looks like the Democrat congress is pushing back on the plan!
Wow these times of crisis make strange bedfellows. Never thought I’d be lauding them as saving the day. STOP the mother of all bailouts!
If you’re Goldman Sachs or Morgan Stanley and leveraged 25 to 1 and your mortgage backed securities decline by even 4% you’re insolvent. Its time to let the chips fall where they may and step aside. Take the rest of Wall Street off life support and let them die.
Bob – Although I hve no hard feelings seeing these wall street firms fail, you’re wrong to suggest tht we should not bail them out. We were hours away from a complete market breakdown tht would have led to a full depression. We sved these companies to avoid this disaster and not to sve the companies themselves. It is pathetic but it ws necessary.
BRING BACK FULL REGULATION AND STAY AWAY FROM PHIL GRAHM! HE HELPED CREATE THIS MESS AND HE ND HIS BUDDIES SHOULD BE DISMISSED…
Steven Heitman,
While I agree with the substance of what you say, not all bailouts are alike. I will agree to hold my nose while the Treasury bails those bastards out, but the way it is structured now, it comes with NO strings attached. No protection for the taxpayers, certainly no repercussions for Wall Street.
I also question your use of the past tense for avoiding a full depression–even WITH this “mother of all bailouts.”
Oh, and don’t even get me STARTED on the lack of oversight or even transparency. Paulson’s actions will be unreviewable by either courts or agencies. (For you legal geeks–so much for the resurrection of the nondelegation doctrine!)
Even in a time of desperation–and I fully admit this is one–we can do better than this.
Have you read it? It is one page long. It is not technical. It is clear. It is appalling. http://dealbreaker.com/2008/09/bailout-proposal.php
I sold EVERY equity position I had on Friday and will wait for at least a 10% – 15% pull back to even consider getting back in.
So the treasury will get to hold a portfolio at any one time of 700 billion. Not be able to buy 700 billion in total, the total the current act authorizes is not specified–its unlimited. Also aside from their being zero oversight as noted above, there is zero visibility to the public of what exactly they’re buying from which institution.
Its an unlimited blank check and black box. The treasury can keep buying hundreds of billions of dollars of sour (subprime/AltA/now prime) MBS debt at face value then marking it down to pennies on the dollar. So long as their total portfolio doesn’t exceed 700 billion at any one time is the only stipulation. Given they value it this is luducris!
Oh and who will the treasury buy these soured MBS securities from: US investment banks (the two remaining), US megabanks, as well as the investment bank subsidiaries of FOREIGN BANKS!
Yes you read that correctly, as of today the act authorizes the treasury to transfer losses, via buying bad mortgage backed debt securities from foreign banks such as Barclays, UBS, CSFB and Deutsche Bank.
Does Deutsche Bank ring a bell? They are the most common foreign investment bank who services these 450k 2/2 condos in Rogers park when they default. While they might not know a thing about Chicago real estate apparently they knew that our government would rush in to bail them out if sanity ever reappeared and the world didn’t want to pay 450k for a 2/2 condo in Andersonville/Edgewater/Rogers Park.
And you guys blamed the poor realtors… Try Washington DC and the investment banks. These are the ones with Harvard educations that actually understood this scam from the top down.
Nice try, SHill. All of the players are at fault.
The realtors set the stage for the Ponzi scheme with their decades-long mantras of “it’s always a great time to buy” and “it’s the American Dream.” I’ll certainly admit that realtors were incapable of being the brains behind the scam. It was easy to make those simpletons believe their fantasy that “real estate only goes up.” Hell, realtors (along with their friends and families,) acted on the fantasy more than anyone. Our SHill even claims to be buying still.
I’ll give you all one thing, it’s amusing to hear the responsible parties blame one another for the mess that will even impact those with enough sense to just say no.
Let ’em fail. The moral hazard of a bailout for all of the scumbags responsible is too great.