Market Conditions: Sales of Downtown Properties Rise After Price Cuts
Crain’s reports on a report just released by the consulting firm Appraisal Research Counselors on the jump of downtown new home sales in the second quarter compared with the first quarter.
Appraisal Research Counselors notes first quarter sales were a meager 55 sales while second quarter sales tallied 313, the highest since the fourth quarter of 2007.
But before everyone gets excited about the jump in sales, the second quarter total was 35% below the year ago period, when 484 new home sales were recorded downtown.
“The developments exhibiting the strongest sales were the developers which were offering the largest price discounts,” the Chicago-based firm says in its second-quarter report. “Several buildings have undergone substantial re-pricing of all their unsold inventory in order to quicken the sellout. . . .Other buildings have opted for individual ‘loss-leaders,’ testing the effects of particularly well-priced units on sales pace.”
The price cutting was kicked off in March with an auction of 45 units at Vetro, a 232-unit condo tower at 611 S. Wells St., where prices have been cut about 35%. But many other projects have followed suit, such as the 237-unit R+D 659 project on the Near West Side, where prices have been reduced about 25%, Appraisal Research says.
If the price-cutting continues, the downtown market is likely to continue at a sales pace of about 300 units a quarter, or a more than 1,000 units for the entire year, says Gail Lissner, a vice-president with Appraisal Research.
“If we see more developers try to compete at this level, I believe the sales pace will stay up,” she says. “If they don’t, it may be tough to match this.”
CMK’s 235 W. Van Buren in the Loop seems to be bucking the trend of price cutting and units falling out of contract.
In June, the 714-unit tower at 235 W. Van Buren St. — the largest downtown condo project since the mid 1970s — began closing units.
“We’ve seen a dramatic change in the last couple months, but I assumed that was more because we were delivering product,” says Colin Kihnke, president of Chicago-based developer CMK Cos. “But in talking to other developers and real estate agents, I’ve heard across the board that it’s been a good summer.”
Closings have been held for more than 100 of the roughly 440 units under contract, he says. Just nine contracts have been canceled. And unlike some competitors that have slashed prices, Mr. Kinkhe says he has avoided price reductions because the project, first proposed in 2007, was always focused on budget-minded buyers.
“We are still the cheapest two-bedrooms in the marketplace,” he says.
There are still numerous new buildings that are nearing the completion of construction that still have to close on units in the remainder of 2009 (or go rental- as the Roosevelt Collection has done.)
The second quarter results don’t mean the downtown market for new homes is poised for a quick turnaround, Ms. Lissner cautions.
“We are not going to see a recovery overnight,” she says. A rebound will likely be “painful because of the price levels that can be required to move large number of units.”
Downtown home sales jump compared to first quarter [Crain’s Chicago Business, Thomas Corfman, Aug 17, 2009]
The reason the 235 w CMK building is priced so cheap is because the units are TINY. Couple small size with poor floor plans (one has a living room that is 21x***10***) and it makes sense….
“while second quarter sales tallied 313, the highest since the fourth quarter of 2007.”
“the second quarter total was 35% below the year ago period, when 484 new home sales were recorded downtown.”
These two statements combined don’t make sense.
You can’t put 235 W VanBuren in the same category as developments further north. The 2 BDs are a good 800-900 sq ft. 235 is more for an executive, lawyer, MD etc that has his regular home in the suburbs and needs a small place to crash during the week that’s down the street from work. I’m still not convinced to buy just yet despite the price cuts. All dvlpts are soo overpriced anyway that a 35% cut brings them down to what they should cost in a realistic market. 25% of all unemployed people will be running out of benefits sept-dec which means more short sales and prices dropping (hopefully)
Good call Bob. I noticed the same thing and had to read those sentences three times to make sure I wasn’t crazy. They completely contradict.
235 W. Van Buren is a great place to buy a first condo if you plan on working in the loop for a long time. They are really damn cheap for new construction 2/2’s. As a single or even married couple with no kids or pets, who really needs more than 900 sqft if you live a busy city life? At least these places have washer dryer, AC, and balconies 😉
“235 is more for an executive, lawyer, MD etc that has his regular home in the suburbs and needs a small place to crash during the week that’s down the street from work.”
Yeah because there are over seven hundred such individuals just waiting to buy an in towner in a starter building here.
Lets get real here: lawyers, MDs, executives, etc would rather purchase an ‘in-towner’ at a much more luxury building than here and they have the means to do so.
235 is just typical CMK build as cheaply as possible with few or cheap amenities and cram as many units in as possible.
If the foreclosures at 1620 S Michigan are a leading indicator the owners of 1720 S Michigan and 235 WVB are in for some trouble themselves. Then again I could tell that already with 235 as it has 700 units. No way those can be absorbed in this environment.
I looked into 235 VB for some of the reasons sonies mentions above. I think it’s nice new construction, but the places are definitely small. Who needs more than 900 sq ft? Pretty much any residence with a female I’d say (I could get by with a 500 sf studio and have room to spare otherwise). I think CMK is generally cheap construction and they acknowledge it: zero building amenities, tons of small units, low unfinished ceilings, no storage, etc. They reflected this in their lower initial pricing a few years ago but they don’t seem to acknowledge that the market has dropped and adjust accordingly. Maybe that’s why they are still trying to sell out 1720 s michigan which apparently was 70% under contract in jan ’07.
Kihnke seems happy with 440 units under contract. That leaves about 275 units that need to sell, and I’ll bet 75% of those are 2 or more bedrooms which are moving even slower than 1 bed. How long will it take one building to move 275 units in this market without a serious price cut?
“25% of all unemployed people will be running out of benefits sept-dec which means more short sales and prices dropping (hopefully).”
WOW…such deep compassion! Force the unfortunate individuals who lost their main source of income to suffer through unemployment payments, then hope that when their benefits do run out they will be forced into short sales or foreclosures so you can finally afford to purchase a home.
Such a rude thought.
While I do buy many units across the country to renovate and to add to the regentrification of neighborhoods, I have never nor do I plan on sitting back just waiting for someone to go broke so I can swoop in to gather the homes they worked so hard for.
Or perhaps some of those unemployed people who’s benefits are running out will actually go out and find a job?
“the homes they worked so hard for.”
Many of them just signed their John Hancock on a mortgage document, with little money down. Hardly working hard for it.
Still yet shes speculating a little. Know how much unemployment benefits are at maximum? Not much. Not enough to fund my frugal lifestyle in this city and certainly not enough to cover basic living expenses and a mortgage with no other funds.
While running out of benefits may accelerate default, it won’t be the tsunami you think. $1300/month isn’t enough to live on by any stretch of the imagination.
Westlooplo-No NO, Im not that cruel. What I’m hoping is that developers will open their eyes and start pricing units that reflect the uncertainty of our economy/job market.
Sonies- Correct me if I’m wrong but isn’t unemployment like 50-60% of your salary? I highly doubt most people are choosing to live on unemployment rather than get a job and get back to the lifestyle they once had.
“Correct me if I’m wrong but isn’t unemployment like 50-60% of your salary? ”
I dunno, I’ve never bothered collecting when I was unemployed for a month or two… too much of a hassle, its almost easier to just get another job.
100 units sold, 340 remaining under contract out of 714 available with only 9 cancelling…pretty impressive for a new construction building in this market.
That said, I saw many of these places and they really are… economical…bordering on just plain cheap. While I could overlook maybe one bedroom measuring 10′ wide, I could not accept a living room being that size.
I have been considering buying an upper level unit in a high rise for some time now and thought this building would be one in which I could combine two places into one large unit. While the developer was more than willing to accomodate my request, there was just no way any floor plans made sense.
“Sonies- Correct me if I’m wrong but isn’t unemployment like 50-60% of your salary? ”
Yeah up to a salary of like 30k. Its capped very low–good luck living on $1,300/month!
If it wasn’t capped people like me who can live on half their net take home would take six month vacations in between jobs.
well if you’re unemployed and living in 235 w vanburen, you will have easy access to Pepper’s fast food during the day. that’s a pretty nice deal right there as their french fries might be the best in town. (and the place has an ambiance that is hard to find near most new construction condo high rises). mmmm, i think i’m going there for lunch.
yep its capped, i have alot of buddies in the construction trades and hey get like $330 a week when they used to make $45 dollars an hour (average about $60 per hour with overtime and double time pay)
Sonies I would be extremely careful with your words and thoughts at this point…the unemployment mess is far from over and your job could just be the next one to go. I have a number of executive and salaried acquiantances who thought for sure their positions were secure and out of the blue they were filing for unemployment benefits.
And don’t pull that ‘go out and find a job BS…just as bob just pointed out, it is near impossible to survive for long on what many receive. Consider yourself VERY fortunate if you have never had to rely on unemployment benefits for survival. I too am fortunate to be able to carry on a rather cushy existence, but I never take anything for granted, nor do I pass judgement on those who aren’t as fortunate.
“Many of them just signed their John Hancock on a mortgage document, with little money down. Hardly working hard for it.”
It’s very easy to speculate how people bought their homes bob when you are paying $700 a month for a studio and have never owned a home before. Once you do make that move, you will realize it is a hard thing to do EVERY month to make those mortgage, tax and maintance payments. Even if they put down little or no downpayment, the cost of ownership is rather high and not to be taken lightly. You should not be so quick to judge when you have yet to experience it for yourself!
Sorry Lauren, I thought after I clicked send that you probably were not that cruel in your intentions. I realize now what you were saying…but even then, if the developers have to lower their prices to sell it means that more jobs will be lost because they will not be able to carry out more projects.
Huge vicious circle isn’t it?
I think that IN ADDITION to putting 20 percent down, lenders should require that people have 6 months worth of mortgage payments in savings at least at the time of purchase. I’m sick of hearing about people who “bought responsibly” because they put 20 percent down and then when they lose their job, they instantly miss a payment. I agree that this is a terrible market for finding a job and I do feel for people who are laid off. I just wish that more of them had a 3 to 6 months of salary saved to help cusion the blow.
A bit off point, but stay away from any CMK building. Poorly constructed with all sorts of problems that reveal themselves over time. Company does not stand by its product and passes the buck, which eventually comes out of the buyer’s pocket. Just saying …
“Sonies I would be extremely careful with your words and thoughts at this point…the unemployment mess is far from over and your job could just be the next one to go.”
No. I get recruiting calls of people offering me jobs at least once a week, I work in a family business, I’m fine and have about a snowball’s chance in hell of me losing my job. I wouldn’t have bought a property if I even had the smallest chance of losing my income stream for an extended period of time.
“And don’t pull that ‘go out and find a job BS…just as bob just pointed out, it is near impossible to survive for long on what many receive. Consider yourself VERY fortunate if you have never had to rely on unemployment benefits for survival. I too am fortunate to be able to carry on a rather cushy existence, but I never take anything for granted, nor do I pass judgement on those who aren’t as fortunate. ”
I wasn’t passing judgement, and do feel fortunate to have never collected unemployment… All I was saying was that when I was unemployed, it was easier to go find a job than it was to collect!
” if the developers have to lower their prices to sell it means that more jobs will be lost because they will not be able to carry out more projects.”
If you’ve seen a longer term trend on new housing starts over anything more than a two year period you’d see that most developers are toast anyway. It really is a foregone conclusion at this point.
As soon as new supply is stopped thats a step further to housing stabilization. Everyone else in the RE ecosystem, and perhaps even the broader economy to a lesser extent, benefits when developers go out of business.
http://phoenixsourcedistributors.com/WeBlog/wp-content/uploads/2009/06/Private-housing-starts.gif
Unfortunately people involved in construction, just as anyone involved in RE during the boom, were victims here. The bubble enable a massive misallocation of resources to phantom growth that wasn’t supported by sustainable economic fundamentals but instead by an asset bubble.
AK49, most financial advisors do tell those entering the housing market that is the very least they should have in savings just for mortgage payments in order to feel somewhat secure with their purchase. If I were in the market for my first house at this point in time. I would have at the very minimum a year’s worth of mortgage payments, a good amount of reserves for unforeseen maintenance issues, PLUS all of the other expenses of normal day to day living in savings. At this point, no one can be too careful with their finances.
According to a number of sources, it takes 6 – 12 months to find a ‘foot in the door job’ and sometimes up to a year more to find a job that pays an amount similar to what you just lost.
“I think that IN ADDITION to putting 20 percent down, lenders should require that people have 6 months worth of mortgage payments in savings at least at the time of purchase. ”
Why would they be incentivized to do so? If someone puts 20% down but doesn’t have an emergency reserve fund they are really gambling with their own money, not the banks. 20% down is a sizeable cushion to prevent the bank from sustaining capital losses in the event of a foreclosure, at least in a stable market.
Those who put little down during the boom were shrewd in that they were gambling with the bank’s money, not their own, should they choose to walk away.
That’s why I’m so puzzled about prices in our RE market. Obviously alot of homeowners are upside down on their mortgage so they can’t price their places to move. But what about developers/banks? Maybe they aren’t reading the same NYtimes, BB and WSJ that I read every morning. It seems like they would rather watch their units marinate on the market and hope for a miracle than take their losses, learn their lesson and move on.
The developers will delay the inevitable as long as possible if they can make payroll. And they are fortunate: the banks would like to delay the inevitable as long as possible–they aren’t filing the notices of default in a timely manner/initiating foreclosure proceedings and are willing to work with the developers in granting loan extensions in many cases.
Also there are many developers technically in default that the banks don’t want to be stuck trying to be developers as well holding multiple repossessed buildings. Better to work with them and hope for a turnaround.
Something about a $700B+ bailout of the financial system gave banks a lot of capital to sit on and wait it out.
Over on YoChicago they noted that CMK is in no rush to cut on 235 WVB as they have until 2011 on their construction loan with the option to extend until 2013. They have time.
Sonies – congrats for having a job in the “family business” and being born into a cushy situation. Most of us have to find jobs at arms length and prove their ability.
Banks will not sell or lower prices until they have taken write downs. They slowly take write downs to avoid terrible earnings/insolvency.
Matt is exactly right on the banks and the motivation behind their behavior. Bank insolvency is almost like the wizard of oz when he tells them to not look at the man behind the curtain (the curtain being accounting shenanigans and the wizard being many banks true financial condition–insolvency).
Furthering my theory that developers are toast, Pulte shareholders just approved buying Centex today. Its like the Titanic mooring to the Lucitania. The strategy in the developers sector these days is to merge to get economies of scale and reduce overhead (layoff backoffice overlap) in a bid to buy time. Not sure if it will ultimately work and produce some survivors after the downturn but it makes perfect sense.
Unemployment amounts are dependent on salary, with a maximum of approximately $369/week.
“Nearly 14 percent of home mortgage loans in Illinois were in foreclosure or behind on payments at the end of the second quarter, up from 9 percent a year earlier, according to a report from the Mortgage Bankers Association.
Past-due loans hit 9.2 percent, up from 6 percent a year earlier. The percent of loans in the foreclosure process stood at 4.7 percent, up from 3.1 percent.”
http://www.suntimes.com/business/currency/1727817,CST-NWS-wallet21new.article
From 9 to 14% in one year. From 14 to 19% next year?
“From 14 to 19% next year?”
No, because last year took out the “worst” 3.1%, this year the next “worst” 4.7%, etc. I’d expect it to be about flat or maybe slightly lower–>which the NAR will trumpet as a sign that things have “finally” turned around. And it will remain about the same for a couple more years, unless we get some real inflation which carries thru into wages (sort of doubly unlikely).
In other words, even if prices don’t go down much, there should be plenty of short sale/REO inventory thru 2012.
“From 14 to 19% next year?”
“No, because last year took out the “worst” 3.1%, this year the next “worst” 4.7%, etc. I’d expect it to be about flat or maybe slightly lower”
You say no, but it looks like you agree with the 19% (14% + ~4.7%.)
I agree with your “next worst” theory, but it is a moving standard in a world of declining values and rising unemployment. The pain caused by those changes will continue to create more “next worsts.”
“Next worsts” sound like a sausage, and we all know how ugly that is in the making.
I am going to be the odd man out here and say that I strongly believe that we will see some growth in the housing market over the next year (and beyond) and it will involve more than short sales and foreclosures.
What do I base this theory on? I think if those ‘spending idiots’ who have made this Cash for Clunkers program such a success could afford to go out and purchase something they did not need, what is stopping them from doing the same for the RE industry? This program did accomplish what BO had planned…it provided a crutch for and brought in much needed cash for this dead industry.
Is it a permanent cure? Well we all know it is not, but we need to take advantage of every inch we are being offered.
All that said, what would really stop people from taking the leap into the RE market and *snapping up* a new house IF the government makes a similar program available for first time home buyers? Which we all know is coming down the road after this next program…get ready… “clunky kitchen appliances for cash” that is going to be implemented in a month or so. Dangle a ‘deal’ in front of eager to spend Americans and in most cases they will bite.
I know there is already the $8000 program in effect now, but there has to be another program to help stabilize this industry. Why not go all out and push the deficit a few billion higher? If we can bail out AIG and the rest of the jackasses, why can’t we do the same for RE? Only difference being those who truly caused this RE mess are already out of business and are flipping burgers at White Castle while the true big wigs of finance are still at their desks conducting business as usual.
Speaking of jackasses, the new agreement between the US and Switzerland to unveil off shore bank account holders is a huge step towards further halting the unethical financial practices that allowed them to build their unbelievable wealth. Interesting to see what the next step will be…
I may be an exception to the rule, but I don’t mind seeing my astronomical tax bill going up another $200-$400k or slightly more IF it means some a prop up…SOME positive growth. A few others that are in my income bracket and above have been saying the same thing…if it means some stabilization or even merely a sliver of hope, we will play along with Obama & Co.
I am not thinking this growth is possible merely because I am so heavily invested in RE and gripping onto any remote chance… I really do think there is going to be a SMALL turnaround in this industry and the economy in general. The one person I have admired since I was a child, my gramps, is thinking this is what is starting to happen now. Over his/my life, his economic predictions and outlook have been spot on and I just don’t think this one is going to be any different from his past thoughts, which have all been correct. Anyway…
At the risk of being called a RE baron or whatever this week’s term is for me, and I am not bragging/exaggerating or lying about this, but over that past month and a half, three of my slightly, slightly reduced properties have made it to closing…in of all places, Florida. Although I did pledge not to reduce my asking prices one cent, I had some interest in a few SFHs and decided to play along with the game and accepted their second or third offer. I did take a bit of a hit, but just to unload a few houses, I did it. What the hell, I am down around 20% of my net worth at this point, what is a few thousand more going to bother me?
I had simply resigned myself to see NO turnover whatsoever over the next 4 or 5 years and all information pointed to that fact. Then along came these new buyers and proved me wrong. 3 houses out of, well, many but it is a bit of hope for me personally.
Now I know there is no comparison between Florida and Chicago at all, but if prop is moving there, how far behind can Chicago be? As much as many here are shooting their wad thinking this market is TOTALLY DEAD, the truth is there are still some sales going on. I won’t join this doom and gloom crowd until the market comes to a complete stand still…which with short sales, foreclosures, price reductions happening daily, is just not going to happen.
Call me the Eternal Optimist, but I am going to make a prediction that will not be accepted here by the regulars. The RE market IS recovering. It may just be drunkenly stumbling, after blowing chunks violently, but it is still weakly walking towards recovery…it still has a pulse!
Will it ever return to normal, pre bubble status? No…but like these three sales have indicated, anything is possible.
OK those are my thoughts today and I have put on my shit suit on in anticipation of the storm that will be blowing across my weekend! None the less I plan on enjoying the next week in Miami doing my part to stimulate the restaurant, bar/club and retail industries. After losing a good 20% of my worth what is another few thousand?
Keep telling yourself that WL…
Have a great weekend/week all summer is coming to a fast end!
Its very difficult to compare Florida, or even for that matter Arizona, California or Nevada to Illinois. The dynamics are totally different, as was the bubble and collapse.
Florida is moving properties because the price cuts are so deep–I’ve heard you can get what were supposed to be million dollar condos for 400k. As a retirement destination its not as dependent on jobs as Illinois either.
Here in Illinois its all about jobs–people don’t move here permanently to retire. Similarly there is less risk of a snowball effect here than those four sand states. They really are at risk of a snowball effect of collapsing values to foreclosures to more collapsing values.
Will our government continue to try some crazy crap to try to stabilize values? Of course–thats a given. However I disagree with their competence in terms of being able to implement an effective solution. Thats where we differ.
And you can’t read in summer data here due to the seasonality of the RE market. A lot of families aren’t wiling to put their lives on hold and need to move and want to buy in the summer. Come back and talk when we have year over year gains, not month over month.
we’ll start having y/o gains in jan ’10 if not sooner
“we’ll start having y/o gains in jan ‘10 if not sooner”
In sales or prices?
Bob – Your take on Florida is a bit off. Florida (and even South Florida by itself) is net losing people every day which is a big reversal. Retirees are choosing other states or staying put. Condos will continue to collapse in prices in Florida as the supply is enormous and the famed new One Bal Harbor condo-hotel went from $1,100/s.f to $63/s.f. in a bulk deal (including the purchase of the common areas of the hotel the price per s.f. was still under $200 on average). Yes, $1M properties can be found for $400K in some instances. Cheap single family homes are going since they make sense financially as rentals now. Florida prices will fall for all of 2010, esp condos. Foreclosures and delinquencies are climbing….. it will really get ugly as property taxes come due which will be a tipping point for many. I plan on buying in 2010 after a two year late.
sales for now, prices when people are jealous that others are buying cash-flow properties 😉
It won’t be hard to eventually get a jump in sales (as we’re seeing in places like California.) It was so bad in the first quarter of this year that it’s likely anything will beat those numbers (in terms of sales.)
exactly, and why it can’t get worst forever; just like RE can’t go up forever it can’t go down forever either.
Yes it is kind of non-prediction, but it seems to me that just as in the boom people weren’t adjusting to the distortion, the same is now happening in the crash. (both ways, selling and buying)
My feeling when the market operate in a more normal fashion everyone has a chance to benefit rather than what is happening now.
After 1 week in Florida I can say this.
1- Barely any traffic, I was expecting the normal crush through Miami and Lauderdale. Bit of rush hour congestion in Miami and nothing after that.
2-White is the new blonde. Saving on hairstylists. People seem to have gone to peroxide.
3-Place is trashier than ever, the rednecks are more in control or maybe more people are now economically rednecks.
4-Stores are completely empty. Entire shopping centers are w/o tenants. Actually only people shopping here seem to be South Americans who come only to shop.
5-Every white kid is now black. Waiting outside a restaurant 3 nice dressed kids come up to a friend (sideways black and gold baseball cap, tattoo on neck, gold chain) and said “waz up gangstah”… I couldn’t help but laugh so when he gave me a look I just asked. “What makes you a gangstah, grew up west of the intercoastal, here in Boca?”
6-People are fatter than ever. Only wait I had anywhere was at the Cheesecake Factory. Bar tables were open so in truth no wait.
7- More old people working everywhere. Back in the workforce to supplement their .03% t-bills I guess.
8- Darwinism is in effect here. I never needed a law to tell me to wear a motorcycle helmet. No one wears them down here anymore. WTF!!!
This is a trainwreck and it ain’t over by a longshot…..
revassal… just to note… this IS how normal (all) markets function. You are just witnessing the fat tail distribution part that people always (and almost always to their detriment) love to ignore.
I personally still think the “high-end”, non-conforming, jumbo world is still screwed here in Chicago. The low-end is putting in a bottom because you are getting to an absolute price low enough to attract buyers with access to credit, and the over-extended owners are getting washed out. I believe on the other end of the spectrum the “keeping up with Jonses”/”high-end specuvestors” world still needs to feel the pain. I think the Gold Coast crowd can weather it so sales in that neighborhood (or comps) will “stay firm” (actually few sales but prices will hold because they won’t hit bids).
Bob,
The only post that is more incorrect than your analysis of Florida is Ze’s ‘make no sense whatsoever’ post! How long has it been since either of you have been?
To start, I stated plainly that there is no comparison whatsoever. I merely brought it up to tell of the sales of three of my places which I had reduced slightly, sales I did not even expect to happen.
As much as I would like to think most people learned from this melt down, the buyers of my places clearly had not done their due dilligence at all. Had they done so, they would have realized that the homes were still overpriced compared to what they could have recieved with a bit more work. Regardless, all three families purchased very nicely renovated homes…and I even made a good profit, something I had not seen in some time.
The demographic, esp in S Fl, is totally different from what it was a few years ago when fixed income seniors and other retirees were the highest population group. Once they started to be outpriced and had their homes taken out from under them for pennies on the dollar, wealthy NYers (Wall St and hedge funders) Europeans and S Americans in huge numbers took their place. First time home buyers became rare overnight as they were replaced by uber wealthy foreigners who were snapping up properties left and right for use as vacation or seasonal homes. It was common to drop $2-15 million+ on places that were occupied for two weeks out of the year.
Sales are at a stand still now with the only prosp changing hands being short sales/foreclosures/bank owned places.
On the block where my home is located, around 2/3s of the places no longer have occupants. Had I not invested so heavily in NY the last few years there is no doubt I could have purchased nearly the entire block…at a price that was spent on a single family home back in the champagne and caviar days…with out any real effort spent seeking a ‘deal’.
It is a sad situation there and one that most likely will not correct itself for years to come. I just hope foreigners will not lose interest in the area as they are the crutch that is badly needed, both in RE and in the tourist industry.
“The low-end is putting in a bottom because you are getting to an absolute price low enough to attract buyers with access to credit, and the over-extended owners are getting washed out.”
What happens if (when!) conforming lending rates are 7.5%? What if that happens mid-next year? $400k at 5% is $2150/mo; at 7.5% it’s $2800. Of course, that doesn’t “create” distressed owners, but it sure as hell makes it harder to find a buyer and harder to move up to a move-up house.
“You say no, but it looks like you agree with the 19% (14% + ~4.7%.)”
I’m assuming (perhaps incorrectly) that the foreclosure %age is not cumulative and that in 12 months most of those currently “in foreclosure” will no longer have a mortgage to behind either behind on payments or “in foreclosure”. It’s not like an ageing population–as some fall out of the cohort (losing the house/dying) there are not *necessarily* more to replace them. My prediction relies on there being, as of 1/1/08, something like 25% (or 40%–doesn’t really matter–I’ll use 40%) of mortgagors in Illinois with potential to default in the near term. Once you flush the “worst” 3% (those in FC in 08) and the “next worst” 5% out, you’re at 32 out of 92 (instead of 40 out of 100) and it’s *less likely* that you’ll have 19 out of 32 (or whatever–>I think the number in likely trouble was less than 40%) defaulting.
anon,
Your analysis assumes the 40% is fixed and not a moving target as well.
Yeah from a high level your argument that as more and more ‘fat’ is cut eventually theres going to be some steak being cut as well, but I see nothing indicating the trend is favorable, yet.
IF it goes to only 18% are delinquent a year from now, then the 2nd derivative would be positive and that would support your theory. We aren’t there yet. It could be 18% or 20% one year out or any other conceivable number.
westloop.. you are just humorously insecure…
And you are correct.. I am way off base… things are wonderful here in So.Fla, just FABULOUS!!!!
From West:
“I don’t mind seeing my astronomical tax bill going up another $200-$400k.”
GASP.
I was thinking more along the lines of volunteering something like $200-400 increase rfor the same reasons.
Florida sucks, why anyone would live there that isn’t trailer trash or on the beach just completely blows my mind.
“We aren’t there yet. It could be 18% or 20% one year out or any other conceivable number.”
Way to state the obvious, Bob.
But 9–>14 means 14–>19 (as you suggested) is just as silly as $250k–>$400k in 2 years means $400k–>$550k in the next two. Past performance has rather little to do with future results.
Altho, wouldn’t the 2d der. be positive so long as it’s less than [13.9*(13.9/9.1)=] 21.2? b/c it’s %age, not nominal change?
Steve A… I was also like.. who the F says stuff like that. Particularly when you reverse engineer the math and it suggests he is either going to make another incremental 1 mil a year at 30ish% bracket, but since he said he is not making more income, then he is suggesting his current income is anywhere between 2 and 8 mil a year with an expectation of a 5-10% increase in tax rate… Would have been enough to just say “see my tax bill going up significantly”
Welcome to the world of westloopeos insecure fun house!!!
“Welcome to the world of westloopeos insecure fun house!!!”
Its ok he’s from NYC, manners escape him.
“Altho, wouldn’t the 2d der. be positive so long as it’s less than [13.9*(13.9/9.1)=] 21.2? b/c it’s %age, not nominal change?”
Ahh forgive me for shunning calculus this monday morning. It would take all the coffee of several S American countries to get me to investigate that.
Sonies… it has actually gotten worse… You really can not compare in multiple ways Chicago to this place. Chicago is in a completely different class than this place. People were wonderful, city was beautiful. So Fla is a trash hole!
The funniest are the older women with overly tan lizard skin dressed like trashy teenagers. It is truly something to see.
Despite it all though they don’t lose their pose for anything. No shortage of really nice cars on the road down here. Oh and by the way I realized why Americans are so damn obese. After being away so long I realized the portions of food everywhere I go, that I once thought was normal,are just ginormous!!
Well off to the airport I go… have a good monday!
“Ahh forgive me for shunning calculus this monday morning. It would take all the coffee of several S American countries to get me to investigate that.”
Dude, you brought it up. This monday morning, even.
Sonies… go F’n F yourself!!! I am from NYC too… oh wait a minute.. from my response I see that you are correct. nevermind. Have a great day!
anon,
i agree with what you are saying. i making a comment more on current status of the market. why there is bottoming in place… i’m not saying there is zero risk of getting worse. but the mindset is such that things have gone where it needs to go, for now.
” I realized the portions of food everywhere I go, that I once thought was normal,are just ginormous!!”
Americans are so obese because of the food AND the car culture. Living in the city and hating driving in the city I can say that my diet is total garbage yet I don’t gain a lot of weight. Just walk places, people!
My waistline has actually went down an inch over the past few years yet my diet has changed little or gotten worse.
Ze,
Although they are totally irrelevant, I will address your ‘issues’ with S Fl (I take it Miami, correct?)
“1- Barely any traffic, I was expecting the normal crush through Miami and Lauderdale. Bit of rush hour congestion in Miami and nothing after that.
YOU DO, OF COURSE, REALIZE THAT NO ONE…NO ONE TRAVELS TO S FL BETWEEN MAY AND OCTOBER? THE ONLY TOURISTS THERE ARE THOSE BIBLE BELT SOUTHERNERS WHO ARE TAKING ADVANTAGE OF THE GHETTO FAB, HALF PRICE CHEAP CRUISES. BTW HOW WAS YOUR CARNIVAL CRUISE?
2-White is the new blonde. Saving on hairstylists. People seem to have gone to peroxide.
TMI TMI WE HAVE NO INTEREST IN HEARING OF YOUR LATEST HAIR COLOR. PEROXIDE, YES… AND IN YOUR CASE IT SEEPED THROUGH…ALL THE WAY THROUGH.
3-Place is trashier than ever, the rednecks are more in control or maybe more people are now economically rednecks.
AGAIN, OFF SEASON IN FLORIDA AND THE ENTIRE SOUTH DESCENDS UPON THE CITY TO FLASH THEIR GHETTO GOLD JEWELRY…NOW TAKE THAT GOLD CLOCK OFF, IT IS SEVERELY CLASHING WITH YOUR BLEACHED TO DEATH CHEST HAIR.
4-Stores are completely empty. Entire shopping centers are w/o tenants. Actually only people shopping here seem to be South Americans who come only to shop.
FLORIDA IS AND ALWAYS HAS BEEN STRIP MALL CENTRAL. IT DOES AND ALWAYS HAS HAD VACANT STORES THAT EVENTUALLY ARE RECYCLED INTO EUROTRASH DANCE HALLS.
5-Every white kid is now black. Waiting outside a restaurant 3 nice dressed kids come up to a friend (sideways black and gold baseball cap, tattoo on neck, gold chain) and said “waz up gangstah”… I couldn’t help but laugh so when he gave me a look I just asked. “What makes you a gangstah, grew up west of the intercoastal, here in Boca?”
THERE IS A CHEESECAKE FACTORY IN BOCA? WITH YOUR SERIOUS LOOT YOU ARE DINING AT CHEESECALORIE FACTORY? OR WAS IT JUST YOUR WAFFLE HOUSE TOUR DAY? I HIGHLY DOUBT YOU WOULD MUTTER ANYTHING LIKE THAT TO ANY YOUNG (ALBEIT ‘NICE’ GANGSTA IN S FL.
6-People are fatter than ever. Only wait I had anywhere was at the Cheesecake Factory. Bar tables were open so in truth no wait.
REFER TO #3. BISCUITS AND GRAVY RUIN YOUR FIGURE!
7- More old people working everywhere. Back in the workforce to supplement their .03% t-bills I guess.
WELL AFTER BERNIE HAD HIS WAY WITH 3/4 OF BOCA, HOW ELSE DO YOU EXPECT THOSE OLD JEWS TO EARN A LIVING?
8- Darwinism is in effect here. I never needed a law to tell me to wear a motorcycle helmet. No one wears them down here anymore.”
IT HAS BEEN. LET’S SEE…IT HAS BEEN OVER 25 YEARS SINCE HELMET LAWS HAVE BEEN REPEALED. FUNNY EVEN TO SEE WALL STREET BANKER HELLS ANGELS ROARING OFF HELMET FREE.
So tell me, how does my post indicate that I am seriously insecure? I did say S Fl was going through some rough economic times. For the first time in a few years I turned a profit on the sale of three houses. I admit it, it is rough.
Just like Chicago, the city has it’s rough side and it has it fab side…same difference. Reread my post, but this time, rinse that bleach out of your hair first.
Seriously Ze, your comments are echoed by all first time visitors to S Fl, so don’t feel bad. Just enjoy that cruise.
Steve, what are you commenting on? I said I would gladly forfeit ‘volunteer’ an additional $400k (or whatever it takes) in taxes if it meant having some correctly administered government run assistance programs, RE or not. Although I never do so, I will admit to you both that this last year’s income will be ONLY a bit over $1mil, down signicantly from years past. I took a huge hit from not being able to produce the sales I have in the past. Oh poor me, right?
Again, I fail to see how you read insecure into my world?
Further Ze, the ratio of lizard tan old women in your adopted country is roughly the same as in Palm Beach, which is where I assume you stayed? Comparing the two places IN THE SUMMER months is not a good indicator of the real Floridian. The real Floridians are in the Adriondacks or Canada this time of year. It would be like saying only rednecks inhabit NYC when in reality they too are either at their summer retreats in the mountains or summering at their homes in the Hamptons. But then, you already knew that didn’t you?
Sonies, the Florida species of trailer trash resides only in Central Florida between Orlando and Tampa, other than the cheap tourists doing Disney in the summer, it is a pretty nice place to live, esp if you have enough money to do it the right way. ie: a Ferrari and a place in Palm Beach or Aventura.
Say what you will about S Fl, I prefer it to cowtownish Chicago anyday.
Bob, not too far off topic, but aren’t Ze’s mindless rants about obese people specific to Floridians? Or rather the cut rate summer tourists in the state? It is impossible to not have a car in Florida, it is a fact of life you must drive everywhere in the state. Other than cheap tourists, Miami is full of gorgeous, fit and healthy people…it is just the places Ze frequents, I imagine.
Ze:
I was stunned to consider what your income must be. That’s what that was about. I didn’t mention anything about insecure.
Oops. Meant to addressing west.
Do us all a favor and please don’t come back from crappy Miami. I have been a few times and its fun for about one evening. The less arrogant, hipster, metro NYC transplants here in Chicago (or cowtown as you call it) the better!
Hey biotch, who said I was in Miami? I believe it is your sister Ze who is vacationing there now, not me. Drink some more of that magical RN water.
besides, I am not a hipster or metro at all…the jury is still out on arrogant however.