Market Conditions: Sales Fall 24.4% in September But Inventory Also Falls 18.3%
The September numbers are in from the Illinois Association of Realtors. We already know from Gary’s blog preview, that it was another month of falling sales as higher mortgage rates hit the market hard.
It was the slowest September since 2019.
From the Illinois Association of Realtors:
In Chicago, home sales (single-family and condominiums) in September 2022 totaled 2,030 homes sold, a 24.4 percent decrease from September 2021 sales of 2,684 homes.
The median price of a home in the city of Chicago in September 2022 was $320,000, the same as in September 2021.
September sales for the last 16 years:
- 2007: 2172 sales
- 2008: 1816 sales
- 2009: 1918 sales
- 2010: 1403 sales
- 2011: 1498 sales
- 2012: 1845 sales
- 2013: 2395 sales
- 2014: 2242 sales
- 2015: 2414 sales
- 2016: 2398 sales
- 2017: 2355 sales
- 2018: 2040 sales
- 2019: 2006 sales
- 2020: 2635 sales
- 2021: 2684 sales
- 2022: 2030 sales
Median prices for the last 16 years:
- 2007: $267,750
- 2008: $268,600
- 2009: $225,000
- 2010: $180,000
- 2011: $190,000
- 2012: $188,900
- 2013: $230,000
- 2014: $249,000
- 2015: $250,000
- 2016: $260,000
- 2017: $275,000
- 2018: $285,000
- 2019: $292,250
- 2020: $322,350
- 2021: $320,000
- 2022: $320,000
“The housing market in Illinois is showing signs of slowing,” said Dr. Daniel McMillen, head of the Stuart Handler Department of Real Estate (SHDRE) at the University of Illinois at Chicago College of Business Administration. “Prices and the number of sales have both continued to decline since their peak in June, while foreclosures are increasing. Although median sales prices are higher than at this time last year, the rate of increase has been lower than the inflation rate. Our prediction is that house prices and sales will change only modestly over the next few months.”
Statewide, inventory fell 17.9% to 27,654 from 33,676 properties last year. The average property sold in 25 days, which was the same as in 2021.
In Chicago, inventory also tumbled, falling 18.3% to 7,748 from 9,478. The average home sold in 30, down 9.1% from 33 last year.
“In September, seasonality combined with inflation and inventory shortages caused a decrease in closed sales, although homes were still moving, with a decrease in days on the market and median sales price holding steady,” said Sarah Ware, president of the Chicago Association of REALTORS® and principal and designated managing broker for Ware Realty Group in Chicago. “To successfully accomplish their goals, homebuyers and sellers should determine their needs and set a budget or selling price at the beginning of their buying or selling journey, with the help of a REALTOR®.”
The mix of Chicago sales continued to favor single family homes. While sales of condos and SFHs were both down, condos fell 26.5% to 1240 year-over-year while SFHs fell 20.8% to 790.
The 30-year average fixed mortgage rate continued to rise in September, jumping to 6.11% from 5.22% in August. Rates averaged just 2.9% in September 2021.
But, remember, the rates will have a delayed impact on the market as buyers can lock in rates up to 90 days prior to closing.
Mortgage rates hit as high as 7.37% today. Look for further slowing in the market towards the end of the year.
We are entering into the slower winter market shortly.
Are buyers going to move to the sidelines and wait for rates to come down? Or will some look for “deals” on properties that are making price reductions?
Available housing continued to sell quickly in Illinois during September despite mortgage rate increases, talk of inflation [Illinois Association of Realtors, by Bill Kozar, Press Release, October 20, 2022]
“But, remember, the rates will have a delayed impact on the market as buyers can lock in rates up to 90 days prior to closing.”
This isn’t free.
Russ – whats a 90 day lock cost today?
Also curious if appraisals are being affected by higher rates
“Also curious if appraisals are being affected by higher rates”
They shouldn’t be, until the comps start sliding, right?
It’s not like residential appraisals are done based on equivalent rent and a cap rate based on prevailing mortgage rates–tho that isn’t unreasonable in our HMAM world.
“It’s not like residential appraisals are done based on equivalent rent and a cap rate based on prevailing mortgage rates–tho that isn’t unreasonable in our HMAM world.”
Can’t they comp to contingent/under contract? If so, that could be resulting in a lower appraisal than the comp that actually closed 30 days ago which would be based on mortgage rates from 90+ days ago.
“Can’t they comp to contingent/under contract?”
Didn’t that get put outside the standard after ’08, because it had been used as a circular thing to justify bubble prices?
“Also curious if appraisals are being affected by higher rates”
We just sold a family home in the NW burbs, closed a few days ago. The bank waived the appraisal which was somewhat surprising.
“They shouldn’t be, until the comps start sliding, right?
I posted before that cancelation rates are at 18%, and was guessing that appraisals were driving a substantial portion of this (assuming that buyers have locked their rates)
“We just sold a family home in the NW burbs, closed a few days ago. The bank waived the appraisal which was somewhat surprising.”
Thats interesting w/o getting too personal are we talking Barrington or Elgin?
Longtime Cribchatter reader and lurker—just want to say that’s it really refreshing to see a reasoned and interesting discussion about what’s happening in the market in this threat—vs. starting off with slagging the Chicago market as a whole, saying Sabrina’s drunk, vaguely racist rhetoric about crime in the Loop, etc..
Would love for this to continue. I learn a lot from discussions like this.
“This isn’t free.”
I had a free 90 day lock but it was a few years ago. But things are changing quickly right now with the sharply rate increases in 50 years.
Cost of a 90 day lock is minimal. Maybe adds .125% to prevailing rate. Just really depends on pricing at the time of rate lock.
I’m sure we will start seeing “declining market” in appraisals soon. Depending on loan guidelines, that could require buyers increase down payments. Appraisals coming up short of contract price happens when market is rapidly increasing, but also when the market is declining.
Interesting times indeed. Market is dead. It wasn’t this bad in 2008.
I think the issue will be if we start seeing significant layoffs across a variety of industries. Foreclosures / short sales are a result of loss of income combined with lack of equity. If values start tanking because of high rates AND we start seeing significant layoffs, a lot of the people who bought over the past 3 years could be in big trouble….
Wife and I rent a house in a high-end country community outside of Atlanta for the summer. We watch the prices thinking of a retirement/second home and they exploded during the pandemic. A house closed at $630k in December of 2019. Sold at $925k summer of ’21. Now back on market for $1.35 million…. A lot of AirBNB investors going to get caught holding the bag.
“Thats interesting w/o getting too personal are we talking Barrington or Elgin?”
much closer to Barrington than Elgin.
Marco, conventional loans sometimes don’t require appraisals. The automated underwriting system looks at the address and tells us if an appraisal is required. It looks at the typical home sales in the area, combined with borrower credit and loan to value and comes up with a statistical measure of the value accuracy.
I suspect that will be going away within 6 mos to a year as values continue to plummet and the agencies get burned on loan performance.
“Interesting times indeed. Market is dead. It wasn’t this bad in 2008.”
True this. But 2008 was at the end when everyone still “believed” in real estate. Even on this very blog, there were people arguing that Lincoln Park prices would never decline blah, blah, blah.
If you look at the September sales it took several years for the bubble to be wiped out and for the investors to be flushed from the market.
But I agree that it’s pretty dead out there and is going to get worse over the next few months. November and December are always historically slow but this year? Dead.
“Wife and I rent a house in a high-end country community outside of Atlanta for the summer. We watch the prices thinking of a retirement/second home and they exploded during the pandemic. A house closed at $630k in December of 2019. Sold at $925k summer of ’21. Now back on market for $1.35 million…. A lot of AirBNB investors going to get caught holding the bag.”
Lots of Airbnb buyers in some cities like Nashville and Austin. What happens when travel declines? They will be doubly caught with an asset that is declining in price AND lower nightly rates or NO nightly rates to pay the costs.
Yikes.
“Cost of a 90 day lock is minimal. Maybe adds .125% to prevailing rate. Just really depends on pricing at the time of rate lock.”
So when I bought my house a few months ago we got a lock – a little more than 60 days out. The mortgage banker ate the cost.
Interested in people’s insights on the following. Supposedly the mortgage market is screwed up. Liquidity problems. Hard to find buyers of MBS. So prices are falling. Yet, I can’t buy MBS. I called Fidelity and they don’t have any in inventory. WTF? I’m no authority on the fixed income market but it seems to me that my only choice for buying something like that shouldn’t be to buy it out of inventory. In this day and age? Really?
And, yeah, I realize that these are complex instruments with hidden risks that I would have to research.
“Cost of a 90 day lock is minimal. Maybe adds .125% to prevailing rate. Just really depends on pricing at the time of rate lock.”
Thanks – surprised that it’s that low. Doesn’t seem to make any sense, you’ve been losing $ lately (unless they’re offsetting w/fees)
“I’m sure we will start seeing “declining market” in appraisals soon. Depending on loan guidelines, that could require buyers increase down payments. Appraisals coming up short of contract price happens when market is rapidly increasing, but also when the market is declining.
Interesting times indeed. Market is dead. It wasn’t this bad in 2008.
I think the issue will be if we start seeing significant layoffs across a variety of industries. Foreclosures / short sales are a result of loss of income combined with lack of equity. If values start tanking because of high rates AND we start seeing significant layoffs, a lot of the people who bought over the past 3 years could be in big trouble….
Wife and I rent a house in a high-end country community outside of Atlanta for the summer. We watch the prices thinking of a retirement/second home and they exploded during the pandemic. A house closed at $630k in December of 2019. Sold at $925k summer of ’21. Now back on market for $1.35 million…. A lot of AirBNB investors going to get caught holding the bag”
Construction, tech and email jobs are going to get crushed
AirBnB is a problem, this the bigger risk is opendoor (and their ilk) and the mini developers building $750k 3 flats in bronzeville.
“Lots of Airbnb buyers in some cities like Nashville and Austin.”
I’ve always paid particular attention to these two cities because in our age of political polarization these are the two cities in the south where a critical mass of leftists congregate.
The white leftist couple is one where the female takes the lead and keeps her male on a very short leash doling out the bedroom fun only if her little servant is complaint. But in these couples that seek to challenge traditional gender roles (the female actively, the male with his submission) they know they cannot survive around regular people they have to congregate among like minded individuals. This means deep blue areas where their dis-assocation from reality will not be challenged.
The liberal can only survive in their lie if their values, ideology and belief system is not challenged from those around them. In the south these are the only two areas that are known for being quite blue. Another leading indicator is popular music festivals for young people that they all flock to from other cities. These people aren’t active members of any community and the only parades they have likely been to are gay pride parades.
So, unsurprisingly, these two cities became focal points for those all around the country to flock to of this mindset. Having not yet been ruined by Democrat/leftist policies that make it ever harder to raise a family but still appealing to the “hip” nature and hive mind collectivist mindset of these people they all congregated here and paid ever more obscene amounts speculating on real estate there.
This is why these two markets in particular will be entertaining to watch as these people are financially ruined. Having gone through life like an NPC thus far they are finally about to encounter some real consequences and financial adversity for their preferences and choices in life. I have my popcorn ready. Hopefully Republicans will hold congress in perpetuity to prevent any more bailouts for these terrible life decisions.
Adulting means actions and choices have to have consequences. Even if “everyone else was doing it too” that is not a valid excuse.
I’m also so glad the conforming loan limit from FHFA increased from $417,000 in 2016 to $715,000 in 2023. Because as us taxpayers are subsidizing those loans it’s definitely a great bet as surely incomes have increased 71.4% in that time period to support those new valuations, right? Surging incomes and student loan debt amounts dropping precipitously have surely raised the affordability level for all of those on the property ladder, right?
All of those museums & cultural amenities, what could possible go wrong, right?
After all, Sabrina researched this.
“This is why these two markets in particular will be entertaining to watch as these people are financially ruined.”
I’m not as confident as Bob and Sabrina are that Austin and Nashville are going down the tubes.
“Having not yet been ruined by Democrat/leftist policies”
I believe Austin a generation ago was *more* progressive/hip than it is now, no?
“Because as us taxpayers are subsidizing those loans”
*We* taxpayers in liberal cities are indeed subsidizing those loans, just like we subsidize red areas of blue states and the entirety of red states for everything else.
“I believe Austin a generation ago was *more* progressive/hip than it is now, no?”
Back around 1981 I lived in Austin for a year. I thought it leaned pretty far left back then. Very anti-growth (how did that turn out?) and bus drivers with PhDs in philosophy complaining about how they couldn’t get a job they deserved.
“The liberal can only survive in their lie if their values, ideology and belief system is not challenged from those around them.”
I’ve found this to be more true of people on the right. I’ve been unfriended by many of them after I expose the fake news they spread.
“The white leftist couple is one where the female takes the lead and keeps her male on a very short leash doling out the bedroom fun only if her little servant is complaint. But in these couples that seek to challenge traditional gender roles (the female actively, the male with his submission) they know they cannot survive around regular people they have to congregate among like minded individuals. This means deep blue areas where their dis-assocation from reality will not be challenged.”
Well this comment thread was fun while it lasted. Still trying to figure out if this “Bob” is helmethofer under another username. Commentary has the same heady fumes… an intriguing bouquet of incel resentment with hints of racist.
OK JohnnyU, time to call Sabrina a drunk and crap on the Chicago market.
“Well this comment thread was fun while it lasted. Still trying to figure out if this “Bob” is helmethofer under another username. Commentary has the same heady fumes… an intriguing bouquet of incel resentment with hints of racist.”
You aren’t a new poster here & long time lurker. I doubt you would just suddenly start posting. As for “thinly veiled” I know the color of crime and I know the urban rebellion being bred by the “Great Society” handouts with the de-emphasis on the traditional nuclear family with a father present to provide and so as to make the mother make better decisions with which whom she procreates with.
You have little understanding that we are going to destroy the world you think will last forever and hold so dearly. We are going to gut the status quo because your status quo depends on…other people’s money.
So please go back to lurking and no longer make your presence here known. Be gone you aren’t wanted here.
CCL – Sabrina’s recent comments have been reasonable and measured and dare I say sober. Therefore no reason to confirm that she was drunk
For negative, illinois has the worst unemployment rate in the nation. Looking forward, one or both houses flipping to Red is going create a less favorable climate for Chicago & Illinois. At least it should end the Lori’s singing & “dancing” tiktok videos
“You aren’t a new poster here & long time lurker. I doubt you would just suddenly start posting.”
Oh do tell me what I am then. I do suddenly start posting when I see bullshit. Sorry. And assuming I’ve been a long-time poster using a different name… Hi helmethofer!
“As for “thinly veiled” I know the color of crime and I know the urban rebellion being bred by the “Great Society” handouts with the de-emphasis on the traditional nuclear family with a father present to provide and so as to make the mother make better decisions with which whom she procreates with.”
Glad you removed the veil. And again, this odd focus on women and who they choose to sleep with. You seriously need some companionship. Start by leaving your basement.
“…no longer make your presence known here. Be gone you aren’t wanted here.”
Ha ha ha says who? And what voice was in your head when you typed that?? “Be gone!” Are you trying to banish me like a wizard?
CC Lurker you have nothing. Assuming you even have any assets at all they are likely tied up in RE. And with this downturn you’re done.
Chase Private Client, Citigold & Banking Rewards for Wealth Management are nice, but perhaps not enough to get me out of my basement.
You sure are a tough guy on the internet, but in reality don’t amount to much off it. Group thinkers like you never do–unless its inherited and if it is its squandered in short order.
You’re just a low T guy likely from a “non-traditional” family, no? You can always tell the boys pretending to be men who are still boys and never had a father figure in the home. There will be no big government savior for you and your ilk: instead it will be financial oblivion and irrelevance.
Just look at the color of those committing the crime in the city and everyone knows what you so try to deny with a straight face: certain groups are highly impulsive and prone to criminality. No amount of apologizing will ever change that.
“Chase Private Client, Citigold & Banking Rewards for Wealth Management are nice, but perhaps not enough to get me out of my basement.”
This is nonsensical. Or maybe you’re saying your banks are your source of companionship?? Weird flex but you do you.
As for all the rest—you have no idea who I am, what my assets looks like, my family or even my political affiliation. On the other hand, you tell all of us plenty about you as you double down on racist rhetoric and your odd fixations on testosterone levels and women’s bedroom habits. It’s sad.
So my dad was so disappointed in me that he gave our traditional nuclear family a shot but then couldn’t take it and ran off? I thought he was chained to my overly assertive leftist mother who keeps him on a short leash by metering out sex.
You’re hilarious.
“CC Lurker you have nothing. Assuming you even have any assets at all they are likely tied up in RE. And with this downturn you’re done.”
Don’t worry CC Lurker. I doubt Bob the Bear has any assets whatsoever either. He is just projecting when he attacks someone else.
Bob has been on this site since 2008 being bearish and telling everyone how doomed Chicago real estate was. Heck, even when it WAS doomed in 2010-2012, Bob remained bearish. Still thought it was going to collapse further.
He leaves this site for years when the market isn’t doomed enough for his theories. Came back when the pandemic happened but, then, whoops, the foreclosure crisis never happened. Left again the last 12 months.
Apparently is back on here because he thinks Chicago is going to collapse again soon with rates over 7%.
Meanwhile, during that entire 15 years he never bought real estate. He is still on the sidelines, fearful. Waiting.
What I’m saying is, don’t listen to any insults he’s slinging at you. It’s not worth your time.
“For negative, illinois has the worst unemployment rate in the nation. Looking forward, one or both houses flipping to Red is going create a less favorable climate for Chicago & Illinois. At least it should end the Lori’s singing & “dancing” tiktok videos”
This is hilarious from the guy who says he lives in Indiana. My god. And he hasn’t even lived in Chicago in 30+ years. Doesn’t even come to the city. I could see if you’re commuting in and working in Chicago- but no.
LMFAO.
And how is the House going red going to create a “less favorable environment for Illinois.” Because Secretary Pete isn’t going to funnel all that Amtrak money to Chicago/Union Station and the regional rails? Give me a break.
Why are people rooting against America’s great cities? We are 2/3rds of GDP and most of the jobs. Cities are our innovators and producers.
I had to look to see the unemployment rate. Nationally, it’s so low that, yeah, 4.5% in the state of Illinois is the highest. Damn. No wonder the Fed is raising at will. The economy is still just red hot.
Yes indeed CC Lurker. Bob has the same tinge of hatred as Helmethofer. Are they the same or just cut from the same racist and sexist cloth?
I’ll start removing Bob’s comments the same way as HH. Because I am not tolerating that nonsense.
I hope you stick around CC Lurker. Sorry for Bob’s abusive comments.
“I’ve always paid particular attention to these two cities because in our age of political polarization these are the two cities in the south where a critical mass of leftists congregate.”
Almost every major city is blue Bob. Atlanta, Birmingham, Memphis, Charlotte are all blue.
“This is why these two markets in particular will be entertaining to watch as these people are financially ruined. Having gone through life like an NPC thus far they are finally about to encounter some real consequences and financial adversity for their preferences and choices in life. I have my popcorn ready. Hopefully Republicans will hold congress in perpetuity to prevent any more bailouts for these terrible life decisions.”
Reminder: Bob was on this blog 18 months ago telling us about the nationwide housing apocalypse because all of those not paying their mortgages were going to go into foreclosure as soon as the foreclosure freeze was lifted. That happened over a year ago. No housing crash.
I wouldn’t put any money into anything Bob says. He’s been wrong on this blog, about everything, for 15 years.
“Lots of Airbnb buyers in some cities like Nashville and Austin. What happens when travel declines? They will be doubly caught with an asset that is declining in price AND lower nightly rates or NO nightly rates to pay the costs.”
my airbnb has definitely slowed down quite a bit, but people are still booking, dropping prices about 10% helped fill up the calendar for another few months though
The thing with hotels is that their prices and overhead are skyrocketing while airbnb hosts are less susceptible to those sorts of things
“Don’t worry CC Lurker. I doubt Bob the Bear has any assets whatsoever either. He is just projecting when he attacks someone else.”
It’s okay. My assets don’t depend on your acknowledging them or not. But if most of your net worth is tied up in Illinois real estate I’d say be prepared for it to shrink in the months and years ahead. Pension debt isn’t getting any smaller and there is that pesky workers rights amendment on the ballot. It’s curious we are only allowed to vote on constitutional amendments to raise taxes it seems never to reduce them.
If you have a large amount of equity build up from real estate just know that you didn’t get your money from thrift or prudence, you didn’t get your money from entrepreneurship, and you didn’t get your money from wise investing. You just defaulted into it by happening to own real estate and profited immensely off of its outsized appreciation subsidized by government loans.
But the thing about real estate appreciation is you actually have to get out to realize it. Given you are so much of a RE cheerleader I doubt you got out.
And as far as your children are concerned they likely aren’t staying around Chicagoland if they’re looking to move up the property ladder without parent help: all across the country young couples are fleeing expensive real estate markets because its impossible to purchase a home on local wages because…its been bid up with speculation and government subsidies.
Actual real interest rates and a carrying cost of capital are kryptonite to speculators however so that’s all over now. 7% rates will destroy every housing market that got bubblicious the past 15 years.
You don’t own your house until that mortgage is paid off and even then you owe the taxman for the privilege of living there (and HOA too where applicable). What you do when you buy RE is you immediately allocate a significant portion of your net worth into one single property with a debt contract. Your financial future is now heavily tied to that one asset.
Good luck Sabrina: you are going to need it.
“If you have a large amount of equity build up from real estate just know that you didn’t get your money from thrift or prudence, you didn’t get your money from entrepreneurship, and you didn’t get your money from wise investing. You just defaulted into it by happening to own real estate and profited immensely off of its outsized appreciation subsidized by government loans.”
How does one just “happen to own” real estate aside from inheriting it? Surely not from reallocating any money earned from thrift, prudence, entrepreneurship and / or wise investing?
You are one odd, angry little man Bob.
“It’s okay. My assets don’t depend on your acknowledging them or not. But if most of your net worth is tied up in Illinois real estate I’d say be prepared for it to shrink in the months and years ahead. Pension debt isn’t getting any smaller and there is that pesky workers rights amendment on the ballot. It’s curious we are only allowed to vote on constitutional amendments to raise taxes it seems never to reduce them.”
You’ve said this for 15 years Bob and have been wrong the entire time. It’s just so tiring now. You keep saying Chicago, and Illinois are doomed, when businesses keep moving here and developers continue to build 70+ story towers and huge housing/office developments like Lincoln Yards.
You DO know that no surrounding state is building anything even close to Lincoln Yards. Heck, no city in Florida is either.
The great thing about Chicago and Chicagoland real estate, that Bob refuses to acknowledge all these years, is that we’re actually affordable. You can actually buy a home or a condo here as a middle class person. You can build equity. You can grow your family here.
I was just reading an article in the LA Times about how some Los Angeles neighborhoods are denser than parts of Manhattan but it’s not designed to be like that. There are 6 people living in a 1-bedroom apartment, for instance.
I’m not saying Chicago doesn’t have some density issues like that in its housing either. And that apartment rents haven’t soared here, putting pressure on many families. But we are a much better alternative to many other cities.
“Actual real interest rates and a carrying cost of capital are kryptonite to speculators however so that’s all over now. 7% rates will destroy every housing market that got bubblicious the past 15 years.”
Somehow the world survived the last time we had 7% rates which was in 2001. Yeah, I know that prices were much lower so this time around it’s going to bite more. But 95% of people have mortgages at 5% or under. And 40% have no mortgage at all.
No one should take advice from Bob, who told people not to buy in 2008-2012 and every other year he was actually on this blog. During the actual housing bust, there was a reason to be bearish, although those who bought during those tough times made out like bandits.
But there isn’t enough inventory for Chicago real estate to crash. Heck, there isn’t enough inventory for Nashville or Austin to do so either, but doesn’t mean more won’t come on in the next year or two. Depends on the job market in those two cities. Austin is heavily tech now so it could get hit hard. Nashville is healthcare jobs so probably not as many risks there, other than Amazon HQ2. But both had a lot of airbnb buyers and speculation so that all has to get shaken out.
Chicago will likely be among the more stable markets during high mortgage rates. No big boom, no big bust.
“The thing with hotels is that their prices and overhead are skyrocketing while airbnb hosts are less susceptible to those sorts of things”
It’s the complete opposite now actually. It’s airbnb costs that are soaring. Here’s some of the things they are charging customers now:
1. Booking fees
2. Resort fees
3. Wifi fees
4. Cleaning fees (sometimes up to $250)
The short term airbnb is all but dead now just due to the fees. The hotels will be cheaper, by far, every single time. And you get loyalty points for returning to the hotels.
I really think that the cities where airbnbs got too prevalent are just in a world of hurt due to, literally, not even being able to find enough cleaning crews to do the work. Hotels can parse out the cleaning crews among a big building. Don’t have to bring in a crew after someone stays just 2 days at big cost like an airbnb. Of course, that cost is being passed onto the customer who is pissed about it. Hence, they are now returning to the hotels.
Airbnb reminds me of Peloton. Both were pandemic winners but people are returning to their old patterns. Going back to gyms and back to hotels.
“Somehow the world survived the last time we had 7% rates which was in 2001.”
Rates are at 7% now and going higher–we have several more Fed increases yet. We didn’t have double digit inflation in 2001 and in 2001 hadn’t been preceded by years of the Federal Reserve pulling demand forward by printing trillions of dollars to keep interest rates artificially low.
Know the number of years it has historically taken developed economies to get inflation rates from where they are around now back under 2%? I think I recently read ten years.
The market rallies are laughable that maybe the Fed will only raise .5% in December vs .75%. It won’t matter in the end: rates are going substantially higher and staying there and that will collapse everything.
“You are one odd, angry little man Bob.”
Yep. I never understood the anger and bitterness among the bears. If they hated real estate that much, no reason to buy it. Could have owned stocks all these years and gotten rich. Could have bought crypto in 2017.
But why spend 15 years telling people on a housing blog that they are doomed? And why would you get your popcorn ready to watch your fellow Americans in Nashville and Austin face financial ruin because they made the wrong investing decisions?
Sad.
“But the thing about real estate appreciation is you actually have to get out to realize it. Given you are so much of a RE cheerleader I doubt you got out.”
Your house is not a stock. You gotta live somewhere. Real estate investors are a different story. That’s their business. But for the vast majority of us, we own our house, and maybe a vacation place in Lake Geneva, and that’s it.
They are there to protect us when there are polar vortexes and enjoy on a lovely fall weekend like today. We raise our kids there. We laugh and love there. That’s it.
So angry.
My grandparents owned their house for 50 years. They didn’t care if there was a recession, high interest rates, low interest rates or whatever else was going on. It was a roof over their heads.
“Rates are at 7% now and going higher–we have several more Fed increases yet. We didn’t have double digit inflation in 2001 and in 2001 hadn’t been preceded by years of the Federal Reserve pulling demand forward by printing trillions of dollars to keep interest rates artificially low.”
Huh? Rates were at 9% in 1999, I think. When they went down to 7% just before 9/11, that was considered “low” by all historical notions.
Again, everyone survived. Heck, my parents survived the 18% mortgage rates in 1980. That was a fun time.
We are lucky that the second largest generation in US history, the Baby Boomers, mostly have paid off their homes and are sitting without a mortgage on an asset at, or near, record highs. GenX also should have a ton of equity in their homes as well, if not have it already paid off too.
All that equity is really going to stabilize this market, even if some Millennial airbnb investors go belly up.
“The market rallies are laughable that maybe the Fed will only raise .5% in December vs .75%. It won’t matter in the end: rates are going substantially higher and staying there and that will collapse everything.”
You mean like how all those people in forbearance were going to go into foreclosure causing millions upon millions of homes to come on the market, causing the housing market to collapse?
Okay, Bob.
“Your house is not a stock. You gotta live somewhere. Real estate investors are a different story. That’s their business. But for the vast majority of us, we own our house, and maybe a vacation place in Lake Geneva, and that’s it.”
You don’t seem to understand. Your house IS a financial asset, your mortgage is a financial liability. You do have to live somewhere indeed, and many rent–from the physical aspect it is a perfect substitute. When you do “buy” your house, or take out a loan to make payments on for a number of decades, your personal financial ledger is now tied very closely to that one asset.
“They are there to protect us when there are polar vortexes and enjoy on a lovely fall weekend like today. We raise our kids there. We laugh and love there. That’s it.”
You can hang up all the Oprah Live, Laugh, Love! signs you want around your house and talk about all of the other aspects of daily living as if they are exclusive to owning vs not owning real estate. But the reality is they aren’t. It’s more of you trying to change the subject that somehow the numbers don’t matter.
It will be very entertaining going forward when you try to do everything you can to pretend that people aren’t losing a ton of equity in real estate or if they are it doesn’t matter.
“
This is hilarious from the guy who says he lives in Indiana. My god. And he hasn’t even lived in Chicago in 30+ years. Doesn’t even come to the city. I could see if you’re commuting in and working in Chicago- but no.
LMFAO.
And how is the House going red going to create a “less favorable environment for Illinois.” Because Secretary Pete isn’t going to funnel all that Amtrak money to Chicago/Union Station and the regional rails? Give me a break.
Why are people rooting against America’s great cities? We are 2/3rds of GDP and most of the jobs. Cities are our innovators and producers.
I had to look to see the unemployment rate. Nationally, it’s so low that, yeah, 4.5% in the state of Illinois is the highest. Damn. No wonder the Fed is raising at will. The economy is still just red hot”
Just when I give you credit for not being drunk
You state that I live in Indiana. Obviously being drunk isn’t good for your short term memory
What is McKinsey Pete going to do when congress cuts or redirects DOT funding? Do you think a GOP controlled congress is going to want to funnel money to bettlejuice?
Yeah illinois is low, only a drunk could spin the state being the highest as a positive
Hope your liquid brunch was enjoyable
“illinois has the worst unemployment rate in the nation”
State by state U-6 lags a bit, but the latest release had Illinois slightly worse than national average, and at the same rate as… Texas.
“happening to own real estate and profited immensely off of its outsized appreciation”
Bobbo–if that’s really you:
1. That had to have been a mean hangover on Saturday morning. Take better care of yourself–you aren’t so young any more.
2. What fucking outsized appreciation? We’re in Chicago–housing has basically matched inflation over any longer period fr 150 years, and a lot (I’d argue “most”) of it has lagged *badly* over the past decade. From a pure assets perspective, the home I’ve owned since before the bubble is worth +/- 5% of the capital cost I have in it–ie, *zero* appreciation, just partial capitalization of equivalent rent.
“State by state U-6 lags a bit, but the latest release had Illinois slightly worse than national average, and at the same rate as… Texas.”
But according to some IL is the Elysian Fields. Therefor TX is not the correct comp
“What is McKinsey Pete going to do when congress cuts or redirects DOT funding?”
It’s in the infrastructure bill that has passed, signed, and is now law you idiot. It’s not part of the DOT funding.
That’s the bill that 5 American presidents tried to get passed, but couldn’t, but Biden, with a 50-50 Senate, did.
Show some respect. The money isn’t going anywhere. Regional rail will be increased from Union Station to Minneapolis, Cincinnati, Rockford and other locations. Hooray.
My god.
“You don’t seem to understand. Your house IS a financial asset, your mortgage is a financial liability.”
Yep. Most people either pay the bank or the landlord. Rather pay the bank.
And, thankfully, 40% of all homeowners have NO mortgage. Given your age Bob, you should be one that has paid off the loan and are free and clear. It’s a great feeling, isn’t it? Even here in Chicago, which hasn’t had the crazy appreciation, you can just sell and walk away when you want – which is what many Silent Generation are doing now downtown. They are moving on.
That’s where you can get some deals. They own free and clear and don’t care what they sell for as long as they sell.
“You can hang up all the Oprah Live, Laugh, Love! signs you want around your house and talk about all of the other aspects of daily living as if they are exclusive to owning vs not owning real estate. But the reality is they aren’t. It’s more of you trying to change the subject that somehow the numbers don’t matter.”
99.9% of people are simply living. Buying a home is a huge accomplishment. Over 30% of Americans cannot do so. They don’t go on Zillow and look at the Zestimate every day. They are too busy mowing the lawn and sitting outside on their deck.
“It will be very entertaining going forward when you try to do everything you can to pretend that people aren’t losing a ton of equity in real estate or if they are it doesn’t matter.”
Thank goodness I write a blog about Chicago real estate where people aren’t going to “lose” a ton of equity in real estate like they are in all those popular states people on here say are so fantastic. Imagine if you bought last year in Florida and the prices there drop 40% or 50%? Yikes. Lots of people going to be trapped.
Chicago prices aren’t going to decline like that. Not enough inventory on the market, job market is still strong and we never saw big price increases.
This is what is going to get interesting. Are the buyers going to trade down like the 1970s and early 1980s? They will get pre-approved for only that certain monthly payment. Instead of buying the $1 million condo, do they still buy the $750,000 condo? I am guessing the answer is “yes.”
Chicagoland market is lucky that we have properties at all price points. We won’t have the problems of affordability like California or Austin.
This won’t shake out until 2023, however, because buyers will be on the sidelines the rest of this year waiting to see if mortgage rates will drop. If they don’t, eventually, you want to move and just buy something.
On Tik Tok, the trending advice is “date the rate, marry the house” meaning you can always refi later if you find your dream house (as long as you are still qualifying.) We will see what happens.
None of us have lived through these kind of market conditions. But given how stable Chicago has been the last decade, I like our chances in a dead housing market.
Good luck to the sunbelt though. Could get rough.
“Given your age Bob, you should be one that has paid off the loan and are free and clear”
Real Bobbo is about 20 years out of Kellogg or Booth or similar.
That’s not necessarily “paid off mortgage” age.
“It’s the complete opposite now actually. It’s airbnb costs that are soaring. Here’s some of the things they are charging customers now:
1. Booking fees
2. Resort fees
3. Wifi fees
4. Cleaning fees (sometimes up to $250)”
Anyone doing airbnb rental arbitrage deserves to lose their ass…
1) booking fees are absorbed by the host (taken out of net proceeds)
2) resort fees & local taxes are paid by the guest no matter if they are in a hotel or airbnb
3) wifi fees – have never seen a place charge this, if they do that is just gouging
4) cleaning fees are determined by hosts, if its a huge house yeah $250 isn’t that unreasonable but anyone charging that for a small apartment is just gouging… for example my cleaning fee about a quarter of that for a small apartment
“Show some respect. The money isn’t going anywhere. Regional rail will be increased from Union Station to Minneapolis, Cincinnati, Rockford and other locations. Hooray.
My god.”
What pray tell should I show respect to/for
Tell me you’ve never taken the train from Chicago to Mpls without telling me you have never taken the train from Chicago to Mpls
Great so we’ll have more crap options to get from point A to B
Hooray?
“Not enough inventory on the market, job market is still strong and we never saw big price increases.”
IL has the highest unemployment rate
Someone drunkenly rambled about 20% appreciation in 2 years
“On Tik Tok, the trending advice is “date the rate, marry the house” meaning you can always refi later if you find your dream house (as long as you are still qualifying.) We will see what happens.”
Nice job updating the old messaging – bUY NoW oR Be PriCeD OUt fOReVer
Hopefully they’re also trying to push them into 4X income
“None of us have lived through these kind of market conditions.”
Didn’t old boomers like yourself live thru high teens and rapid rate hikes?
“booking fees are absorbed by the host”
I have *always* seen a separate “service fee” on AirBNB reservations.
“cleaning fees”
I have *always* paid a cleaning fee in North America. Not always, but most times, in Europe.
I dunno what sorts of places the people complaining about this stayed at in the past.
“Regional rail will be increased from Union Station to … Rockford”
Isn’t the “rail service” to Rockford a bus? Isn’t the “Amtrak depot” in Rockford the Van Galder bus office?
“Anyone doing airbnb rental arbitrage deserves to lose their ass…
1) booking fees are absorbed by the host (taken out of net proceeds)
2) resort fees & local taxes are paid by the guest no matter if they are in a hotel or airbnb
3) wifi fees – have never seen a place charge this, if they do that is just gouging
4) cleaning fees are determined by hosts, if its a huge house yeah $250 isn’t that unreasonable but anyone charging that for a small apartment is just gouging… for example my cleaning fee about a quarter of that for a small apartment”
I’ll actually agree with Sabrina (Either had a ghost writer or was sober)
1- Booking fees are ridiculous and seemed to have gone up dramatically in the last few years
2 – Yeah they’re a cost of doing business. They were able to skirt this in the past and made it a much better deal
3 – Havent seen this either
4 – This is getting to be a major issue especially with short term stays. $250 if staying for a week is much easier to justify. Additionally, some owners are expecting you to do most of the cleaning – Wash dishes and put back, Start laundry, sweep/Vac the space, take out all the garbage, etc, etc. We are pretty clean and generally tidy the place up before we leave, but if you’re going to demand it you can f off with that
House rules are getting burdensome as well.
ah sorry my apologies, I forgot there is a “guest service fee” of 13%
and a “host service fee” 3% (taken out of proceeds)
Re: airbnb and vrbo, it really seems like there’s an opportunity for another player to enter the market and charge lower fees. Can’t do much about the cleaning fees, but the fees incurred by guests and hosts have gotten excessive.
anonny, you really think someone new is going to come into that space when it has taken them 10 years to build trust with users, and even that is precarious in terms of people who show up at an airbnb and it’s dirty or doesn’t look like the pictures etc.
“Isn’t the “rail service” to Rockford a bus? Isn’t the “Amtrak depot” in Rockford the Van Galder bus office?”
Nope. Going to add rail service to Rockford with the new money. So much faster and more efficient. I have friends who take the metra to the end of the line and then have parents/friends come get them. Takes like 2 hours or something absurd. The bus is actually a better deal, and quicker.
But Amtrak will be glorious. Huge opportunity for Rockford.
“Didn’t old boomers like yourself live thru high teens and rapid rate hikes?”
I told you, I’m a Silent Generation member JohnnyU. We already owned our homes for a decade by the time of the higher rates.
We simply did what most are going to do this year and next. Absolutely nothing.
“IL has the highest unemployment rate”
Oh no JohnnyU. The Illinois unemployment rate is…4.5%. The horror! The shame of it all. Things are going SO terribly bad.
“Someone drunkenly rambled about 20% appreciation in 2 years”
Yep- we did have that. Try and keep up. It’s so hard from your basement in Indiana, I know.
“Tell me you’ve never taken the train from Chicago to Mpls without telling me you have never taken the train from Chicago to Mpls”
I take the regional trains all the time. It’s the only way to travel regionally. Could be so much better if Amtrak had its own tracks, of course, especially to Michigan. It’s hell through Indiana. But it’s not going to be fixed any time soon. I will settle for regional service to Cincinnati though.
Minneapolis is so busy they are going to add a second regional trip. Lots of people get off along the way, by the way. They don’t go end to end. That’s the whole point of “commuter” service.
“That’s not necessarily “paid off mortgage” age.”
It isn’t? Should be making the big bucks and should have paid off that mortgage a LONG time ago.
But he didn’t because he doesn’t HAVE a mortgage. He doesn’t own anything. He has been sitting on the sidelines, literally, for 15 years waiting for Chicago to collapse.
What a waste of time and a life. No wonder he’s angry.
“anonny, you really think someone new is going to come into that space when it has taken them 10 years to build trust with users, and even that is precarious in terms of people who show up at an airbnb and it’s dirty or doesn’t look like the pictures etc.”
Don’t know if someone will, just saying that someone should. This may not readily relate to folks with, say, units in places like Chicago (as far as a desire to rent them short term goes), but there was a time before airbnb and vrbo in, say, ski towns, that if you wanted to rent a condo or house for a visit, you’d visit one of the local property management company’s websites. There would be a few crude pictures, basic info, and you could rent it off of there (the big resorts eventually had pages linking to units in a similar way). Might be a lockbox on the door, or you’d go to some front desk in town to get the key. And there would be a cleaning fee, but that’s about it (i.e., not two fees the size of a cleaning fee). The idea that unit owners would abandon that system in favor of a couple of tech startups was not immediately embraced. And then it was. And now, guests and users are feeling the fee pinch (sometimes the fees are as much as the base rental), and they’re also increasingly disgruntled with the ever-increasing demands and inconveniences being placed on guests, so yes, I’d say that whatever goodwill and “trust” that airbnb and vrbo built over the years is in a very tenuous place right now. If a new player came out and said: “Hey owners and guests, those other guys, yeah, they may have paved the way, but they’ve gotten greedy with the fees, and lazy with the user experience. We’re here to provide the same service, only better, and cheaper.” I think that’s sort of what business inovation has been about?
Sometimes you are so close to making an intelligent comment but your pride and inebriation forces you to post drivel
So you’ve never taken Amtrak from Mpls to Chicago, yet feel Inclined to grace us with your expertise. It’s sucks ass for the reason you noted – Amtrak doesn’t own the track. You get stopped for freight service constantly turning a 7hr trip to 10+. For an added bonus they shut down the bathrooms.
But other than that it’s great
“what if you wanted to rent a condo or house for a visit, you’d visit one of the local property management company’s websites.”
This still exists in every resort town. They are all simply on vrbo or airbnb now. Still controlled by a management company but much easier to rent out now.
This model has been around a LONG time.
New players won’t get into this game because there’s no money in it. Why do you think airbnb is charging all the fees now?
I was going to crib on this unit in Lincoln Park as it’s been on the market since August. We’ve chattered about this building in the past.
Listed at $785,000.
Reduced to $699,999 and now under contract.
Properties still selling.
https://www.redfin.com/IL/Chicago/1307-W-Wrightwood-Ave-60614/unit-104/home/45510813
Bought in 18 for $657k. Best case this closes for $700k
Started at $785k – ouch. Looks like the ask started at the much vaunted 20% price increase I’ve heard so much about.
Too bad reality stepped it
“Bought in 18 for $657k”
+ CPI = $781k
+ C-S condos (SA) = $752k
204 sold in Jul-21 for $785: https://www.redfin.com/IL/Chicago/1307-W-Wrightwood-Ave-60614/unit-204/home/45510817 Based on pix, only, I like most things in 104 better.
205 (corner 3/2) sold for $875k in Jul-22
““Bought in 18 for $657k”
+ CPI = $781k
+ C-S condos (SA) = $752k”
Unpossible!
sonies on October 23rd, 2022 at 6:18 pm
my airbnb has definitely slowed down quite a bit, but people are still booking, dropping prices about 10% helped fill up the calendar for another few months though
The thing with hotels is that their prices and overhead are skyrocketing while airbnb hosts are less susceptible to those sorts of things
Sonies – whereabouts is your Bnb? Ours is in Chicago (NW side) – bookings slowed down a bit for us after August but inflation and travel demand this year boosted our aggregate nightly rates to offset the decrease in occupancy. Doing pretty well now for offseason bookings. We shut down in Jan/Feb to do repairs/deep cleaning, and also because guests have been historically awful in those months. We try avoid cutting prices too steep since we live in the building and have learned the tough way that guest quality is directly proportional to nightly rate.
I agree that rising overhead costs (particularly rising employee wages) is a bigger threat to hotels than Airbnb hosts. Though smaller mom&pop hosts who don’t have the power of scale have struggled to deal with rising cleaning costs, something we’ve seen increase 60-80% since pandemic. And not to mention higher repair/maintenance costs. Our neighbor paid $700 for a toilet replacement. Ridiculous.
I’m glad Chicago BACP is tightening the registration process which is cutting down on Airbnb arbitraging, but I know many are lying about being primary occupants to get faster approval. I hope those doing arbitrage get crushed; Covid 2020 lockdowns flushed down a lot of them and really decreased competition.
Sabrina on October 23rd, 2022 at 6:56 pm
“The thing with hotels is that their prices and overhead are skyrocketing while airbnb hosts are less susceptible to those sorts of things”
It’s the complete opposite now actually. It’s airbnb costs that are soaring. Here’s some of the things they are charging customers now:
1. Booking fees?2. Resort fees?3. Wifi fees?4. Cleaning fees (sometimes up to $250)
The short term airbnb is all but dead now just due to the fees. The hotels will be cheaper, by far, every single time. And you get loyalty points for returning to the hotels.
I really think that the cities where airbnbs got too prevalent are just in a world of hurt due to, literally, not even being able to find enough cleaning crews to do the work. Hotels can parse out the cleaning crews among a big building. Don’t have to bring in a crew after someone stays just 2 days at big cost like an airbnb. Of course, that cost is being passed onto the customer who is pissed about it. Hence, they are now returning to the hotels.
Airbnb reminds me of Peloton. Both were pandemic winners but people are returning to their old patterns. Going back to gyms and back to hotels.
Airbnb is hardly dead. It’s like ridesharing, it has shifted the paradigm of travel and isn’t going to go away any time soon now that it’s buried itself in the concrete of urban policy. I do agree that the unregulated markets with a surplus of STRs will be in for some pain. And I’d be very reluctant to purchase an investment property for the sole purpose of short-term renting in this economic environment. Interest rate increases are killing the post-debt stabilized cash flow & DSCR rates in a lot of markets I’m looking to expand into. Though honestly now that crazy Bob is back and posting his usual bearish/retrograde rants, it may be a good buy-indicator 😉
Booking fees & occupancy taxes have always existed with Airbnb, you can’t escape that as a host or guest. Fees like occupancy taxes are controlled by the city in which you host.
WiFi Fees / Resort fees? Never seen it in any listing I’ve ever booked and I’ve stayed in quite a few. Though there have been times I wanted to charge guests for sucking up data (streaming all night long or playing video games) and going over my 1.2TB monthly data limit – I easily fixed this with a bandwidth limiter on my router for those rare data-hog guests.
Cleaning fees – For big luxury properties a $200/$250 charge is normal. You can’t get that type of an experience in a hotel. We charge in the low $100s for our 3 bedroom. It used to be $70 when we first started pre-covid. Cleaners and cleaning services have really juiced their rates since. You’re right in that finding quality cleaners is tough, it’s been our biggest logistical challenge.
Posted my monthly update yesterday. https://lucidrealty.com/chicago-real-estate-market-update-october-home-sales-crater/
No surprise that sales were down 29.3% (IAR will report 30.8%). Worst sales in 11 years by a lot. This is going to continue for a while.
But inventory is really low still so homes are selling fast.