Market Conditions: Sales of New Downtown Condos Plunge 54% in 2011
Crain’s is reporting that sales of new downtown condos reached a new 3 year low in 2011.
According to the Appraisal Research Counselors, sales fell 54% year over year.
- 2011: 770 sales
- 2010: 1682 sales
- 2009: 1891 sales
With new rental high rises that were either built as condo building originally (and converted to rentals) or which have the amenities and features of condo buildings, many people are choosing simply to rent instead.
Uncertainty still reigns in the minds of would-be buyers, who are opting to play it safe renting than invest in a condo, says Gail Lissner, Appraisal Research vice president. Surging downtown rents are a deterrent, but Ms. Lissner says tough mortgage requirements and dismal resale potential are keeping many on the sidelines.
“They have the burden of owning a unit and miss out on some of that flexibility — being able to move,” she says. “People talk about the cost to own being very attractive. It is attractive, but you need that down payment, you need that unblemished credit score, and those can be tough things.”
In good news for condo developers, inventories, however, continue to fall as units are sold and/or converted into rentals.
- As of the fourth quarter of 2011: 2378 units available
- As of the fourth quarter of 2010: 4293 units available
- As of the fourth quarter of 2009: 6735 units available
It shouldn’t be surprising which buildings were the top sellers.
Top sellers in the fourth quarter included the Parkside at Old Town, 511 W. Division St., with 21 closed sales; a project at 235 W. Van Buren St., with 16, and the Trump International Hotel & Tower, with 10.
Value and location still drive buyers, Ms. Lissner says. She doesn’t expect sales to pick up this year unless developers “make some dramatic changes” to their marketing.
“Properties that did reduce prices comprise most of the properties getting good sales velocity,” Ms. Lissner says. “There used to be all sorts of gimmicks, but I think we ran through them.”
Though high apartment rents may push some downtown denizens into the condo market, Ms. Delrahim doesn’t expect condos to be the preferred housing choice anytime soon.
“I’d say three to five years,” she says. “At some point supply probably won’t equal demand, and that’s when the sales are going to return.”
Will it take a whole new generation of buyers before the condo market recovers from this bust?
Downtown condo sales drop as buyers hold off [Crain’s Chicago Business, Dave Matthews, February 16, 2012]
Calling HD
Do their numbers include shadow inventory?
There’s the new condo market and then there’s the condo market. This article is about the new condo market. The picture for the condo market as a whole is much better. Inventory levels have come down to record low levels on a months of supply basis. “downtown” is not quite as pretty but it’s not that bad either – much better than a few years ago. Here is the data for The Loop: http://lucidrealty.com/loop_market.htm and I need to separately post the link for the near north side apparently.
Near North side data: http://lucidrealty.com/near_north_side_market.php
Te shadow inventory Lurks in the shadows.
I heard a story on the radio this morning announcing that this IS the bottom of the housing market. All signs are pointing to a recovery (nationwide) with construction picking up and sales coming off the bottom. Prices, however, are expected to drop over the next 10 months or so- but this is “it.” It’s not going to go any lower (according to the story.)
This is the third or fourth story I’ve heard saying this in the last week or two. Clearly the mainstream media is now calling “the bottom”.
Decline in sales isn’t that bad if there is also a decline in inventory. I think we are at bottom and bought a condo for my mom last month. It took a while to find something decent. There isn’t much inventory of great condos…lots of condos but nothing that great. This is where we need to be to hit bottom and recover.
“Clearly the mainstream media is now calling “the bottom”.”
I’ve been meaning to post on this for a while but haven’t gotten around to it. I think one of the best indicators is that XHB has hit a several year high. In addition, home builders are starting to compete to buy lots throughout the country. I’m a big believer in the stock market as the best forecasting mechanism.
And here’s the other indicator: for the first time in 12 years I’m about to become a homeowner again. I’m under contract. Of course, given my aversion to assets that are subject to entropy, I’m having trouble sleeping at night. But when interest rates are so low….I can get a 7 year ARM at 2.875%.
OK – now that sabrina has finally come over to the other side, do the rest of you acknowledge that we just passed the bottom (probably 4th quarter 2011). We might bump around for a year, but it is steady gains (not great – prob 1-5%/year) for the next several years – until the next boom (which will occur as soon as everyone forgets about this last one – which I predict will be in about 10-15 years).
” We might bump around for a year, but it is steady gains (not great – prob 1-5%/year) for the next several years ”
Change it to “we might bump around for *several* years” and it’s both squishy enough to be unfalsifiable *and* a reasonably neutral (not bullish or bearish) view. Of course, to be making predictions, we need to define the index–are we taking sales? New home sales? Total $$ volume? Median prices? Average prices? I *know* *you*, clio, aren’t talking about the Case Shiller Index.
If you’re asserting that, starting in 2013, we’ll see slow but steady increases in *both* volume and (real $$) average OR median prices, I think you’re nuts. If you’re merely predicting sales volume increases, on a nationwide basis, and *inflation*, that’s not much of a prediction.
“Will it take a whole new generation of buyers before the condo market recovers from this bust?”
I doubt the downtown condo market, especially for 1 and 2 bedrooms, will ever recover from the bust. Having a large quantity of such condos was an artefact of rapidly increasing home values that we probably won’t see again for quite a while. People are better off renting such places, and that will be the norm going forward.
As for the housing market as a whole, my prediction here at the end of 2010 was that we’d see a sharp drop in 2011 from the shadow inventory becoming available, and then see a decade or more of stagnant nominal prices. The drop was less than I expected 2011, but (like the definition of insanity) I’ll predict that prices drop again in 2012, probably a similar drop as in 2011. After that, stagnation in nominal prices all the way, with the coming recovery seeing no housing price gains in the aggregate, a recession, and then some housing price gains in the next recovery (but nothing like from 2000 to 2006). In short, I predict that the aggregate US housing markets will see a slight but steady decline in real values for a decade or more.
The bottom always comes and goes way before most will recognize it. I do think we will see this constant bouncing along with very little appreciation in many cases (there will be a few exceptions) until inventory is absorbed. What normally happens is that there winds up being a huge pentup demand for ownership and then very little inventory to satisfy it which creates the rapid appreciation we all know and love. In addition, there always seems to be a huge demographic shift to go along with the boom.
Boomers moved to the burbs causing that boom. Gen X moved to the urban cores causing that boom in condos. Not really sure what the next shift will be… What do the Gen Y/Millenials want? This is what is missing…
anon, real estate is local. as a whole we will see slow steady gains – but areas such as Gold Coast, Streeterville, Old Town, Lincoln Park, Oak Brook, Hinsdale, Winnetka, Kenilworth, Lake Forest, and a few others are going to rebound faster and harder. Other areas (Lakeview, WLP, Sloop, west town, wicker park, bucktown) will probably bounce around the bottom for a bit – but NO areas are going lower. Also, remember that the shadow inventory in the most desired areas is very low and for every foreclosure there are probably 10-100 people waiting to pounce.
” Prices, however, are expected to drop over the next 10 months or so- but this is “it.” It’s not going to go any lower (according to the story.)”
I’m typically very optimistic, but we can’t deny the fact there is a large amount of pent up demand to sell (shadow inventory or whateva). As your typical unaware home seller starts to believe the “crisis” is over, they’ll start listing, and most likely at prices that are still unrealistic for the market. A good portion of these will end up selling lower than expected, because they’ve been sitting and waiting for years to do so and want to be done with it. This will push prices down, and for longer than the 10 months your media source claims.
“anon, real estate is local.”
Then, clio, why do you keep linking to national stories, about national trends? Please, be consistent.
Also, I wil reiterate: how are you measuring the “bottom” and the “recovery”? Just based on the last list prices of properties you’re following?
I just sold a two bedroom condo for more than 30% below what I paid for it in 2005. I know that you all will say that I was stupid to have bought and “overpaid” in the first place, but I loved the place, was single when I bought it, and it was a great home until my husband and I were ready for something bigger. I’m fortunate though – I can afford to do this. I have neighbors now raising 2 kids in the two bedroom who can’t afford to sell, can’t refinance, and can’t get out.
Everyone I know who bought back during the bubble – we tell our younger colleagues (all of whom could afford to buy a place today if they wanted) not to do so. We tell them to rent until they’re married and then only to buy a place where they can see themselves raising a family.
Everyone keeps talking about shadow inventory of properties – what you don’t realize is that there is also a huge shadow inventory of buyers. Where do you think the sellers are going? They are going to buy another place – also, the population keeps increasing while housing starts have been dismal for the past few years. The bottom line is that the magic shadow inventory of housing isn’t going to be that large and will be decimated by the larger shadow inventory of buyers.
You guys have no idea/clue. HD, Bob – you really should have bought in fall 2011. You guys have no chance now. The stock market is at a 4 year high (pre-recession levels) and keeps increasing. Jobless rate is down, job opportunities are increasing. Americans are feeling much better about the economy. Spring is around the corner. All of these factors are already leading to fantastic pre-spring market housing activity/buzz. Don’t take my word for it – please ask other realtors, etc – those that post on this site to chime in (of course, they may be too busy to post).
Everyone keeps talking about shadow inventory of properties – what you don’t realize is that there is also a huge shadow inventory of buyers.
I think this is a very valid point and well received. Assuming two broad categories of buyers (excluding those living in there parent’s basements):
1.) Those that are renting have the choice to continue renting until prices fall enough to justify a purchase.
2.) Those that own need to sell or rent out their current home, which puts them in the sticky situation described above.
I have no idea which type is more prevalent. but it seems it will take many of 1.) to make a big dent in what’s out there to help 2.) move into new places.
“Americans are feeling much better about the economy.”
It’s morning in America. Until Obama wins the election and jacks taxes way up. IMHO, as an investment vehicle, mortgaged real estate is a safe bet as an inflation hedge. I’m not saying the d-spiral is over, but it might be. If it is and there is inflation, these mortgages at today’s rates will be great to be in if you stay in a property for several years, but I wouldn’t expect growth that materially exceeds inflation for a long time in the Chicago area. The boomers and folks collecting those giant public pensions are gonna flee the state (only an idiot or welfare recipient who is too poor to leave would stay in Illinois without a job holding them here) and the kids coming up are already overleveraged – this fundamental demographic shift is gonna have a big impact on prices around Chicagoland for decades.
A-man – it will be a domino effect. Think about it – one renter decides to buy freeing up seller #1. Seller #1 buys Seller #2’s place, and so on and so on. Add a few more renters in the mix and u have a full fledged buying/selling spree. My company has seen a ridiculous uptick in activity (similar to the mid 2000s) in the past month. More people than ever are looking. Contract activity is OK – but these buyers are probably going to wait until march/april to actually make a move. By May, we will see a HUGE spike in sales/contract activity. Again, because I don’t have credibility on this site, I urge any realtors/brokers to chime in with their own experiences in the past few weeks (good or bad).
@ Gary: what does this sentence even mean? ” assets that are subject to entropy”
permabear – to where are they going to flee? Have you ever lived outside of Chicago? Believe me, things are NOT better anywhere else. Go to New York , LA, SF, Boston – you won’t be able to afford to live there. Go to Detroit, Phoenix, Las Vegas, and you wont WANT to live there. People don’t move – they don’t – it is a proven fact. They stay close to their families, friends and familiar surroundings. People don’t like change. To not understand this basic concept is amazing.
“what does this sentence even mean?”
He only likes assets that he doesn’t need to maintain in some fashion.
“my prediction here at the end of 2010 was that we’d see a sharp drop in 2011 from the shadow inventory becoming available, and then see a decade or more of stagnant nominal prices. The drop was less than I expected 2011, but (like the definition of insanity) I’ll predict that prices drop again in 2012, probably a similar drop as in 2011.”
Don’t worry, you’re sane. Foreclosures were in slowdown mode around here in 2011. They will increase in 2012 to make up for it, especially after the latest bailout with immunity. The price declines will continue.
A-man – it will be a domino effect. Think about it – one renter decides to buy freeing up seller #1. Seller #1 buys Seller #2?s place, and so on and so on. Add a few more renters in the mix and u have a full fledged buying/selling spree.
I’m wholeheartedly behind this scenario, since I’m one of the sellers!!
ha? entropy has a specific meaning both in statistical mechanics and information theory. I assume he means the later which is a measure of randomness. So does he mean assets that have hard to predict values because of high inherent randomness or something entirely different?
“He only likes assets that he doesn’t need to maintain in some fashion.”
“Again, because I don’t have credibility on this site, I urge any realtors/brokers to chime in with their own experiences in the past few weeks (good or bad).”
It’s not that you don’t have credibility, it’s simply that you never get anything right.
A-man,
Also don’t forget that there are a LOT of investors with cash out there who are like vultures. I am shocked at how many properties are being bought for cash (one of my neighbors just bought a 1.96 million dollar house WITH CASH). Another unlivable teardown house a few blocks from me sold for over 700k – CASH. There is a LOT more money out there than we think
My observation is consistent with this. All the properties I like are either rented out, or languishing with slow price cuts. I am not seeing any sales. It might be noteworthy, that I am only tracking condos so things might be different for SFHs and THs.
” The price declines will continue.”
“assets that are subject to entropy”
Every once in a while I have to feel like I’m getting something useful out of my physics degree. Entropy is the tendency of nature to move from order to disorder in isolated systems – i.e. things fall apart. This is especially true of houses with basements in very cold climates with plenty of snow falling on flat roofs.
http://finance.yahoo.com/news/us-housing-among-most-attractive-152955255.html
The price declines will continue for years to come until the market and/or individual sellers deal with what essentially amount to every underwater from the 1999+ bubble era. Some sellers will foreclosure; some will short sale; some will stay put and pay off the home, some will sell and eat the loss, etc. The underwater properties and the effect they have on the market is an unintended consequence of the bubble. Keep in mind that this price setting process will inevitably create even more underwater homeowners. At some point demand will increase when prices have become so cheap to offset further price declines. We’re still 5-10 years away from that turning point. As long as, for example, there is still one owner in Portage Park who bought in 2004 and is $75,000 underwater today, price declines will continue, until that owner disposes of his property in one way or another. This is going to take YEARS.
Thanks Gary. Got it.
“The price declines will continue for years to come until the market and/or individual sellers deal with what essentially amount to every underwater from the 1999+ bubble era. ”
Nope. This is not how it works. Hint: Look at how it played out in the late 80’s/early 90’s.
“As long as, for example, there is still one owner in Portage Park who bought in 2004 and is $75,000 underwater today, price declines will continue, until that owner disposes of his property in one way or another.”
Incorrect again.
Why am I incorrect Chuk but you are correct? Merely saying that I am incorrect does not make it so.
furthermore, chunk, i am correctly. All I am doing is merely observing what has been happening for the last 5 years. I’m saying it is going to continue. why would things suddenly change? The owner in portage park is a pretty typical homeowner. Some areas will recover sooner than others (particularly as upper middle class incomes continue to rise and they further isolate themselves from the rest of society); but the rest of the areas will continue to decline until home prices meet demand meet wage declines meet supply. It’s complex.
“So does he mean assets that have hard to predict values because of high inherent randomness or something entirely different?”
I said what I meant and I meant what I said, which is *also* what Gary meant.
“Why am I incorrect Chuk but you are correct?”
You won’t understand until you see it in hindsight. There is little point in trying to convince you otherwise. But all you have to do is look at all previous bubbles. Here is a simple example that should illustrate the point.
AAPL was around 190 in 2008.
It fell to 90 in 2009.
Using your logic, everyone that owned AAPL at 190 would have had to have sold at 90 for AAPL to go back up. Certainly some did, but many did not. Your last underwater Portage Park owner does not need to ever sell for the market to bottom. This goes along with your incorrect notion that the market won’t bottom until the “last foreclosure” has been sold.
Again, look at what happened to condos in late 80’s/early 90’s for a mini example.
“It’s complex.”
Yes. And you are greatly oversimplifying it. You are missing critical parts of the equation which is causing you to draw an incorrect conclusion.
“Why am I incorrect Chuk but you are correct? Merely saying that I am incorrect does not make it so.”
No, but you positing absurdities like:
” As long as, for example, there is still one owner in Portage Park who bought in 2004 and is $75,000 underwater today, price declines will continue, until that owner disposes of his property in one way or another.”
does, indeed make it incorrect. The fact that there is *one* person holding an asset at a paper loss means every other similar asset will continue to fall in value? Really? That’s the contention you want to defend?
Really?
Really?
oh what to do. Wait it out and deal with the insane HOA and parking situation we’re in now, or buy as much as we can afford and be reluctant landlords.
commenting so that i can get these email followups while I’m in a boring meeting the next two hours…i trust you will keep me entertained
“This goes along with your incorrect notion that the market won’t bottom until the “last foreclosure” has been sold”
It’s *impossible* for the last foreclosure to sell. Even at the peak of the market, there were foreclosures. Saying the market will continue to fall untill the “last foreclosure” sells, is predicting a neverending fall.
you were right anon but your explanation was not clear to me. Guess you guys are on the same wave length : ) To me high entropy means high randomness and things that are difficult to make a prediction on.
“Guess you guys are on the same wave length : )”
It’s the retired chemist in me. Thinking of entropy as a physical phenomenon.
Where are the buyers?
“just 7 percent of those who lost jobs after the financial crisis have returned to or exceeded their previous financial position and maintained their lifestyles.
The vast majority say they have diminished lifestyles, and about 15 percent say the reduction in their incomes has been drastic and will probably be permanent. ”
http://www.nytimes.com/2011/12/02/business/for-jobless-little-hope-of-full-recovery-study-says.html?_r=1&pagewanted=all
Keep in mind that the foreclosure rates for the hardest hit areas were in decline before the filing slowdown in Chicago.
“States with big increases in scheduled auctions included Illinois and Indiana which were both up 141 percent on an annual basis, South Carolina (79 percent), Massachusetts (57 percent) and Minnesota (24 percent). REO activity jumped in Massachusetts, up 75 percent, New Hampshire (62 percent), Indiana (60 percent), and Illinois (52 percent).
… In the case of Illinois, Florida, and a few others of the states above, the increases came in states where rates were already devastating, in Illinois, for example, the rate is one filing per 369 households and in Florida one in 363.”
http://www.mortgagenewsdaily.com/02162012_foreclosures_realty_trac.asp
My argument has never been ‘ until the last foreclosure sells’ my argument has been ‘you will never know how many foreclosures have arisen until all the bubble properties have been dealt with’. It’s unlikely the sole underwater homeowner in Portage park is going to hold on long enough for him to catch a rising tide in home prices.
Apple stock is way different that home prices, primarily, because the margin is different. If the apple stock fell and you were on margin, you get a margin call. I have yet to see a ‘margin call’ for an underwater homeowner. That’s the difference. Huge difference actually. Still plenty of underwater homeowners and as they keep pumping properties in to a market with even less demand, then prices keep falling. and as prices keep falling, more homeowners go underwater. In suburbs like park ridge, i see homes priced at 1999 prices that hvae been renovated over the last decade and they still can’t sell for even the price they bought in the late 90’s. Many people are underwater in that town, and more go underwater everyday. how many of those will go into foreclosure? Who knows. BUt we’ve had a downward spiral for years now, and there seems to be no end in sight.
G – an infrequently discussed reason for teh slow down in foreclosures is quite often the bank is abandoning the property. I have clients with investment properties in lower class areas all around Chicago and the suburbs and the bank won’t foreclosure. they’ve stopped paying the taxes, they’ve written off the debt. they wno’t even waste the $30 bucks to record a releease of lien. They just give up because the cost to foreclosre on a house in maywood costs more than they could ever reasonably expect to recover. Sad what wastelands there areas have become.
“My argument has never been ‘ until the last foreclosure sells’ ”
No, it’s much more ridiculous than that:
“As long as, for example, there is still one owner in Portage Park who bought in 2004 and is $75,000 underwater today, price declines will continue, until that owner disposes of his property in one way or another”
So long as there ONE *underwater* owner, price declines will continue.
“My argument has never been ‘ until the last foreclosure sells’”
Yes it has. Do I really need to track down the link?
“It’s unlikely the sole underwater homeowner in Portage park is going to hold on long enough for him to catch a rising tide in home prices.”
It’s also unlikely that it will be a “sole underwater homeowner”. There will be lots that were underwater at one point in time, and don’t end up selling for a loss. Just like in 1990. Sure, the people that bought the absolute top will take their loss. But not everyone bought the top. Some people are underwater more than others. Not everyone that has a paper loss now will eventually have a realized loss.
“http://finance.yahoo.com/news/us-housing-among-most-attractive-152955255.html”
But, clio, I thought you just told us that all real estate is local? Why, oh why, should I care about national trends? Please to explain!! Your UC/Stanfurd/Barbara wisdon should be shared to enlighten us!
“Some people are underwater more than others. Not everyone that has a paper loss now will eventually have a realized loss.”
And, even some of those who end up realizing losses will sell at levels above the bottom, in a non-short sale, because they lived there long enough to pay down their mortgage. They’ll sell on the up-slope, but perhaps *still* for less than they paid.
everyone should stop nitpicking and making this thread about one or two individuals. Let’s get back to the subject and overall discussion on real estate. I think anyone who has an IQ of over 50 understands that we have hit the bottom in the most desirable areas and we are going to see housing stabilize over the next year (in these good areas), increase steadily for the next 5 years and then start booming. Remember, people’s memories are VERY VERY short – you guys think that people will always remember this recession. I will bet you that in five years, people will forget. I see it everyday with people who have lost loved ones – money and real estate is much less personal.
Maybe I’m not explaining myself clearly. The underwater homeowner (of which there will be many for many years) will likely his property at a loss, and usually, as a short sale or foreclosure, both of which not only lose money for teh bank, but also generally sell for less than other properties in the neighborhood. So that foreclosure/short sale will eventually create NEW underwater homeowners which didn’t exist before; hence the cycle continues until there is enough new demand for housing that prices go back up. but in my opinion that’s not going to happen for another 8-10 years. You seem to differ in that prices will stop falling for some ridiculous reason or another (despite 5 years of YOY price declines and all the other varius reasons we’ve discussed); and that will stem the slide of foreclosures because that last short sale won’t put additional homeowners underwater. therefore you don’t have to wait for the last foreclosure to sell. It’s possible,
but all i see are underwater homeowners, and new ones being created everyday. please explain how we’re going to stem the tide of these new underwater homeowners.
don’t forget – the biggest predictor of a mortgage default is i) 20% or more underwater combined with ii) a life event (job loss, child birth, divorce, reduction in income, medical issue, large expense, etc). Everyone has life events. but as more and more homeowners fall 20% underwater (even those who bought in 2000 in some NW suburbs or around teh NW side of teh city)….
I know several financially secure owners who are renting out their starter condos (2/2s in RN / GC) after having moved to larger places that would sell in a heartbeat if prices got back to the level that would make them whole (2005 pricing). I think we stay at current prices for an extended period of time and agree w/ anon that there will be sellers into any uptick in prices as they pay down their mortgages over time and don’t need to bring cash to closing.
All it is going to take to start another boom is to highlight people making money in this real estate market – everyone will jump on the bandwagon – for fuck’s sake, it is already happening. Again, where are the realtors to chime in?
“You seem to differ in that prices will stop falling for some ridiculous reason or another (despite 5 years of YOY price declines and all the other varius reasons we’ve discussed); ”
You sound *exactly* like the bulls during the bubble, but in bizarro-world. Wait ’til tomorrow or be priced in forever!!
Neither chuk nor I are arguing that the bottom is in (chuk may believe so, but that’s irrelevant to this point); we’re pointing out the absurdity of some of the points you are making about the forever nature (yes, that is the takeaway from what you keep trying to “clarify”) of the declining market.
@HD – you stem the tide of underwater homeowners over time. New homes that are purchased are subject to stricter underwriting standards meaning the homes are in more stable hands. As time goes by and people pay off their mortgages their homes become more “in the money”. We are also at a point where it makes more financial sense to buy than rent. That is significant not only because renters become buyers but also because it makes financial sense for investors to purchase rental properties.
I never said FOREVER, I said until prices become cheap enough to create demand from new buyers in the future. Which is 8-10 years from today in my opinion. god damn arguing with you people is wasting my time.
“You sound *exactly* like the bulls during the bubble, but in bizarro-world.”
Yup. There are bull market geniuses and there are bear market geniuses. There is little difference between the two other than direction.
“Neither chuk nor I are arguing that the bottom is in (chuk may believe so, but that’s irrelevant to this point)”
For the record, I am in the “close enough to bottom if you are holding 5-7 years” camp. Trying to nail THE bottom is pointless (and unnecessary).
Other than folks in obvious starter condos, who cares about being “under water”? The whole concept has really gone far beyond realm of reasonableness. If you’re living in a home that’s plenty adequate a place in which to raise the kids, i.e., you don’t need to move, it shouldn’t matter that the home is currently worth less than what you owe. It seems that underwaterness has evolved into a condition in which people suddenly lose the will to pay the mortgage. (I realize that people suddenly lose the ability to pay the mortgage, and were it not underwater, they’d quickly sell. What I’m talking about seems to be something far broader than that.)
It remains quite hard to imagine an increase in real estate prices when properties continue to sell for the same nominal prices as a decade ago. It certainly seems possible for this to be a nominal bottom but that won’t mean much if the market simply languishes at these prices. Most people who are underwater are going to stay that way for the foreseeable future.
All of this could change if there was evidence of broad-based wage inflation, but I’ve seen none of that thus far.
“If you’re living in a home that’s plenty adequate a place in which to raise the kids, i.e., you don’t need to move, it shouldn’t matter that the home is currently worth less than what you owe. ”
uhhhhh – that is exactly what I have been saying for the past 2 years and every single one of you on this site has repeatedly bashed me and criticized me and ridiculed me for stating this. Unbelievable!!!
“It remains quite hard to imagine an increase in real estate prices when properties continue to sell for the same nominal prices as a decade ago”
only in certain areas. check out good properties in good areas – prices have declined a max of 20% from their peak (if that).
Calculated Risk, a blog that has been extraordinarily perceptive about the RE bubble and the financial crisis since 2004, has called a bottom, with an important qualification.
See here:
http://www.calculatedriskblog.com/2012/02/housing-two-bottoms.html
I have a question for Russ, Gary, and anybody else who thinks about this stuff for a living. Suppose we all agree that it looks like we’re at the bottom for home prices. When interest rates start rising to normal levels, how does that not put downward pressure on prices again. As we all know, many (perhaps most) buyers are figuring out a payment they can afford. The difference between a 4 percent and a 6 percent mortgage rate is huge. I don’t have a great deal of faith in inflation coming to the rescue, as some predict. To affect house prices there would have to be wage inflation, and that ain’t in the cards.
People here seem to forget (or don’t understand) that real estate buyers are not only made up of the nuclear family with 2 kids and a 100k income, but is heavily weighted toward investors.
IF interest rates go up (without wage inflation – which is completely unlikely), what will happen is that people will just stay put (those who bought will just remain in their nice houses at their low fixed rate mortgages). Inventory will be low and only those who HAVE to sell, will do so – the buyers will be the millions of investors out there with millions in cash to invest. They will keep prices propped up (remember, rents will be high in such a scenario so investors WILL be willing to pay a premium for good rental properties). Real estate really is a very sound long term investment. Buy the right property in the right area, keep for 30 years, and you will do well. Nobody who has followed this advice has lost money.
I would say that I am in complete agreement with the Calculated Risk post. Nominal bottom now or in the next few months, real bottom in the next 4-6 years.
“Which is 8-10 years from today in my opinion.”
If that’s the case… a new home will trade flat with a Big Mac in my hood.
“When interest rates start rising to normal levels, how does that not put downward pressure on prices again.”
I don’t think about it for a livin, but, maybe you might ask yourself what would be going on to cause interest rates to be rising? How might what is causing interest rates to be rising affecting home prices?
“To affect house prices there would have to be wage inflation, and that ain’t in the cards.”
what if raw material prices soared without wage inflation?
“All of this could change if there was evidence of broad-based wage inflation, but I’ve seen none of that thus far.”
The rich are getting richer and the poor are getting poorer, its wage inflation, if you work hard and stay in school, you’ll be fine as long as you don’t overleverage yourself too much.
Its deflation if you don’t want to work and desire to be a welfare queen or a drug dealer… Or if you choose to borrow hundreds of thousands of dollars for a useless philosophy degree to be a barista at starbucks
And to G’s article about people that lost their jobs having it much worse off today… well DUH! Most of the people that lost their jobs were useless realtors, mortgage brokers and construction workers riding the boom!
@CLIO – higher interest rates generally mean lower demand (or at least a lower required price) for real estate. If rates rise to 4-5% investors will just invest in treasuries which have no maintenance costs and are much more liquid.
http://realestate.yahoo.com/promo/americas-top-turnaround-towns.html
“that would sell in a heartbeat if prices got back to the level that would make them whole (2005 pricing).”
You know, I wonder if they really would. The only reason why they say that now is because pricing is 30%+ below that. So if something is trading at 200k now, and you paid 300k for it, sure you’d love to be able to sell at 300k. But let’s pretend prices do get back to 2005 levels. If their property is trading at 300k, are they REALLY going to be eager to sell? Or are they going to say “Well, we held on through the worst, now its time to make money”? It’s easy to say that you would sell for over-market prices. But when those become real market prices, is it still so easy?
HD is spot on
“I have a question for Russ, Gary, and anybody else who thinks about this stuff for a living. Suppose we all agree that it looks like we’re at the bottom for home prices. When interest rates start rising to normal levels, how does that not put downward pressure on prices again. As we all know, many (perhaps most) buyers are figuring out a payment they can afford. The difference between a 4 percent and a 6 percent mortgage rate is huge.”
We’ve had quite lengthy debates on this topic in the past and like most debates on Cribchatter we didn’t reach any agreement (not that that is the purpose of these debates). What you are saying makes perfect sense and in my mind that should happen. However, the data just doesn’t support it. In past periods of high rates there was no pressure on prices and recently we’ve had extraordinarily low rates and prices have continued to go down. The other thing is that if high rates are accompanied by high inflation then owning a home becomes a good inflation hedge – especially if the rising living standards of 1/3 of the world’s population puts upward pressure on raw material costs.
“http://realestate.yahoo.com/promo/americas-top-turnaround-towns.html”
After being told how “all real estate is local”, I was really expecting to see someplace within commuting distance of Chicago. Instead, nothing within 1000 miles!
Which is it? Is all real estate local? Or do national trends matter most?
“Duh”
Demand has diminished while (over)supply has not.
” In past periods of high rates there was no pressure on prices”
Small correction: no pressure on **nominal** prices. If nominal price increases aren’t keeping pace with inflation, then there is pressure on *real* prices.
There are so many variables in housing over the last century or so, interest rates and pricing do not correlate!
A job that pays a living wage.
“What do the Gen Y/Millenials want?”
rates bottomed anyway…
““What do the Gen Y/Millenials want?””
Yes, but I want them poor so I don’t have to pay much for drivers and maids.
“rates bottomed anyway…”
nope!
““rates bottomed anyway…”
nope!
”
u might see 1.8 again… but I’ll bet ya 2.5 before 1.5
“u might see 1.8 again… but I’ll bet ya 2.5 before 1.5”
You talking for fed-subsidized mortgages, or something you actually care about?
tnx 10yr…
How about a gentleman’s bet 🙂 I’ll take you up on that!
“How about a gentleman’s bet I’ll take you up on that!”
Ok, loser and winner have to stay online all day and insult CLio.
Chuk is right, if i understand what he said correctly. Just look at the owners in my HOA. For simplicity sake you have two groups, those you got in at the ground floor and those who bought later in the boom (we all bought during the boom, the First Ones just got in on day 7). The First Ones could sell today and not have to make bring any money to the table, or a very small amount. But the have said that they are gonna hold on until they can make money. I don’t know if that means walk away from a sale with money for the next down payment or if they intend to hold on until they recover every last dollar they spent.
“You know, I wonder if they really would. The only reason why they say that now is because pricing is 30%+ below that. So if something is trading at 200k now, and you paid 300k for it, sure you’d love to be able to sell at 300k. But let’s pretend prices do get back to 2005 levels. If their property is trading at 300k, are they REALLY going to be eager to sell? Or are they going to say “Well, we held on through the worst, now its time to make money”? It’s easy to say that you would sell for over-market prices. But when those become real market prices, is it still so easy?”
“Ok, loser and winner have to stay online all day and insult CLio.”
its a deal! *shakes hand*
What loans are being approved right now? I am curious what is available out there. Do you need 20% for anything over 417k? What about a purchase price of 470ish, credit score over 740, own condo now–however would still be within income requirements.
Anyone?
Steve, 10% down. It would be structured as 80-10-10.
$376k 1st
$47k 2nd (HELOC)
no pmi…
You can do that same setup up to about $770k purchase price with 10% down. Some jumbo lenders will allow a 90% combined loan to value so you don’t need 20% down. So jumbo first of $616k and then $77k second .
well a 20% down payment on a place thats 470k would only result in a loan of 376k so I would imagine you would have little problem getting a loan as long as your DTI wasn’t out of wack
What kind of rates on those, russ?
T, if the 1st isn’t above $417k it would prevailing market rates on fannie/freddie loans (say 3.75-4% for a 30 year depending on the specifics of the transaction, upper 2s an low 3s for 5/1 or 7/1 arm). The HELOC is Prime (3.25%) plus 1.99% at 90% CLTV so 5.24% if CLTV is 90%.
Jumbo 1st would probably be around 3.5-3.875 for a 7/1 arm. 5/1 btw 3.1-3.5%. A lot of variables so can’t really say exact rate.
Thanks for the info.
Good talk, Russ. (I couldn’t resist!)
Hey russ, can i refinance my FHA loan if my building no longer qualifies for FHA under this new stupid settlement plan?
Just curious, my rate is already really low so I don’t really care either way but it would be nice if I can
Does the rate on a HELOC typically float? Or is it fixed at that level?
“Does the rate on a HELOC typically float? Or is it fixed at that level?”
Floats. Based on prime rate. HEL is fixed.
Sonies, yes. If you have FHA, you can do a streamline no appraisal as long as PITI is decreasing at least 5%. Since FHA already has the loan, the condo doesn’t need to be warranted.
T, Prime Rate adjust in tandem with the Fed. So when you read about the Fed lowering or raising rates, the HELOC would be affected. Prime rate is 3.25% and the margin on the loan is 1.99%. The margin is fixed, prime rate is not. if the Fed ever decides to raise the Fed Funds rate say another 25bps, then the prime rate would also increase 25bps to 3.5%. Therefore, the rate on the HELOC would go from 5.24%, to 5.49%.
Ok, so with this streamline no appraisal, will PMI get reset to new rates or not because thats where I get bent over when I do traditional refinancing
Sonies, unfortunately, you will get the new PMI rates. I’m not sure why HUD stupidly made that change as it kills streamlines for a ton of folks unless your rate is already pretty high relatively speaking. I have a feeling they are going to change this in the near future though. FHA rates are crazy low right now though. All you can do is run the numbers to see what makes sense.
Ok i may need to call you soon, thanks for the info
Wanted to share some evidence that people are moving on and up even if they are underwater in their starter home….
My younger brother closed this past Monday on the sale of his SFH in West Suburban Chicago (Cook County) He bought the home in Jan 2007 with 5% down, so it goes without saying that he lost considerable equity over the past 5 years. They also made significant improvements to the home, refinishing the basement, kitchen, and spent of 20 k in their backyard. It looks great, but it was too nice for the neighbor hood.As his career as progressed, he has started to make a decent amount of money and he and his wife decided that they no longer wanted to live in Chicago. He applied for and received an “in-kind” transfer to Denver, same job, same income, different market. At closing, he had to write a check for almost $80k. Remember that this is on top of probably $50-60k they spent on improvements over the last 5 years.
The point of this ramble is simple, despite what people want to believe, people who want to move do so. I realize not everyone is the same, but is it that unlikely that people who bought starter homes in their mid 20-30’s are not going to improve their income over their careers. My brother decided he wanted to move on and used his savings to do so. All this nonesense about everyone waiting for a rebound to sell is basically ignoring American consumer culture. Some people are stuck no doubt, but many more just don’t want to admit they “lost” or don’t feel any imperative to move.
Mike in Bucktown,
Yes, some people are moving, but if your brother used his savings to pay off the house here, I have a feeling he probably didn’t buy a home in Denver. I’d like to move from my condo to a SFH, but my options are either to use the savings I have to pay off the difference between what is owed on my place and the selling price and have no savings for a down payment, so I would then have no savings and nothing to show for it and be renting or I can wait until SOME value comes back or I pay down my mortgage so I can use my savings for a down payment in the future.
I think many people are in my situation. Yes, we COULD move, but it is hard to buy when it requires money both to sell AND buy and now that I own I don’t want to go back to renting.
Renting an apt beats renting money when the latter demands servitude.
Bloomberg had a piece on how outstanding student debt of close to a trillion bucks is hurting the first time buyer end of the market, which in turn effects the move ups. Seems to me I’ve seen speculation to this effect on this cc before.
“Palacios [of John Burns Real Estate Consultants], who published research in December on student debt and housing, says first-time buyers are key to a housing recovery because they enable current owners to move into larger, pricier homes.”
http://www.bloomberg.com/news/2012-02-16/student-loans-approaching-1-trillion-hurting-first-time-buyers-mortgages.html
This is so so funny. Everybody is calling a bottom, and the expert testimony cited is THE MAINSTREAM MEDIA !!! Hahaha, that is fall out of your office chair funny. Did they call the top of the internet bubble, call the bottom for tech/net stocks in 2002, call the start or peak of the housing bubble, or the bottom of the stock sell offs in 1933, 1987, 1998, 2002, 2008, or the peaks in ’29, ’66, ’87, 2001, 2007, of course not! The mainstream media is much more often than not a reliable indicator of what not to do. Yes, we are going to continue lower on prices and the mainstream media will be calling a bottom on and off the whole way down from here. What do you expect them to do. It is their job to SELL news/entertainment. Not to inform you of day after day of marginally lower prices like watching paint dry – bad for their ratings.
I’m still living in shadow inventory (my landlord hasn’t made a payment since ’08) and its still years away from hitting the market. All the while putting significant cash in the bank (low seven digits and climbing).
Ok, I’m going to try to stop laughing now. You guys to back to paying attention to the maisstream media.
Can enough 30’year olds move up in their careers to save housing?
My buddy stopped paying in July of 2009 and he just got a foreclosure notice today in the mail.
To further clarify, yes my brother did close on a new single family home in Denver…. $450k for a 5/4.5 with 4000sq ft, 180 degree mountain views, and propert taxes of $2500 a year. Granted I’d rather bang my head against a wall than live in suburban Denver, but the point is, he did buy a place.
HD asked if there enough 30 yr olds with growth to save housing, the answer is probably not, but job numbers suggest people are starting to gain employement, and I’m pretty sure it’s not just in the gen y set.
Depends if you’re looking at BLS or Gallop:
http://www.gallup.com/poll/152753/Unemployment-Increases-Mid-February.aspx
“job numbers suggest people are starting to gain employement”
This angle, the drop in the participation rate, got little Main Stream Media coverage:
http://dailycaller.com/2012/02/17/white-house-economic-report-hides-sharp-drop-in-number-of-working-americans/
“I’m pretty sure it’s not just in the gen y set.”
How many of these botttom callers are new? The cc’ers calling bottom appear to be the same every year.
“job numbers suggest people are starting to gain employement”
The unemployment rate for those with a college degree, nationwide, is only 4.6% and dropping. I don’t know what it is in Chicago proper- but I’m betting it’s not that different. For the purposes of Crib Chatter, and the properties we chatter about, unemployment really isn’t an issue. We’re not talking about properties in Lawndale or Englewood (for the most part.)
However, there still may be financial unease (as far as people believing they will actually KEEP the job they have etc.)
“How many of these botttom callers are new? The cc’ers calling bottom appear to be the same every year.”
G: that seems to be the case. Those of us in the bear camp remain bears. The bulls are still the bulls. The real bottom will be in when some of the people switch camps.
I think one of the biggest challenges is still the reality of this market. Let’s just say this IS the bottom (or close enough since Chuk is correct that no one ever times it completely correctly anyway). People are living in condos they bought in 2005 for $400,000 that in a best case scenario is worth $325,000 (but probably $300,000 or maybe even less.) Maybe they put down $10,000. They’ve been paying down the mortgage- but they are still underwater by $30,000.
With transaction costs of 8% built in- they’re not suddenly going to be able to sell and get out of this property. In fact, even if prices DO start rising, if they rise the normal 1% to 3% a year Chicago prices have historically risen, it will take 3 years just to cover the transaction costs alone (at a minimum).
So there’s no way most of these people can “get back” to where they need to be in order to sell. Sure, some will come with money to the table to get out of the property. But the vast majority of Americans don’t even have 6 months saved in an emergency fund let alone $50,000 or however much to get out of a mortgage.
That’s why this housing bust will stretch on for years and years even once a “bottom” is in. Most people are simply stuck in their properties- which is why there is so little inventory now (unless it’s REO/short sale.)
Underemployment and student loan debt play into ability and desire of young college educated adults to become the all important first home buyer, and will for some time, imo. Lack of first home buyers leads to lack of move-ups.
“For the purposes of Crib Chatter, and the properties we chatter about, unemployment really isn’t an issue.”
“For the purposes of Crib Chatter, and the properties we chatter about, unemployment really isn’t an issue.”
Unemployment churn is still a huge issue when only 7% find new work at the same or more pay.
Underemployment is still a huge issue when that 4.6% does not include barristas, dog walkers and bar staff with degrees.
Take a guess what happens to prices after every mainstream media influenced fool buys into this “bottom”.
Julina: You are right about underemployment and student loan debt. Both will play big roles in future housing decisions especially with the tight loan requirements. The only under 40-year olds I know buying right now are those who already don’t own (are renting) and whose baby boomer parents are giving them the downpayment.
As we’ve discussed in the past, it will take most people, conservatively, 4 to 7 years just to save up a decent downpayment (unless they go FHA.)
Also, if you strip out the foreclosures/short sales- what do sales look like? They’re ALREADY at 50 year lows.
“Take a guess what happens to prices after every mainstream media influenced fool buys into this “bottom”.’
But Brad F., the homebuilding stocks are up like 40% in the last 6 months. Those stock investors must know something. 😉
The market’s valuation is a joke and it’s disgusting the MSM articles I’m reading saying equities are cheap. Same thing with owning a house. The data doesn’t support the claim and it should be fraudulent what they are doing.
http://www.multpl.com/
No offense, Bob, but that chart you link to with a P/E of 22 for the S&P 500 is NOT the current P/E it is the 10-year one (see below). Current P/E is about 13 which is under the historical average but not as “cheap” as the 1970s when it was super low (single digits.) 2011 was record earnings for many, many companies. It’s truly amazing how great most publicly traded companies are doing (especially those with business in the emerging markets.)
“Price earnings ratio is based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio), Shiller PE Ratio, or PE 10.”
By the way- anyone else see 1249 W. Dickens? A 4-bedroom single family home in West Lincoln Park.
Last sold in 2003 for $1.45 million. Originally listed in May 2011. Was $900,000 by December 2011. Still no sale.
Just did a drama price reduction down to $650,000. Went under contract immediately.
I thought Clio said prices were down “only” 20% in Lincoln Park and Gold Coast? Apparently, someone forgot to tell that seller.
http://www.coldwellbankeronline.com/ID/2121061
The people who own the condos with cribs in them were making more money (at say 27-30 yrs. old) when they bought, than the current crop of 27-30 yr. old buyers is that are supposed to buy them out. The ladder is broken now. The condo boom started in the dotcom telecom era, when everyone was making at least $80K some with more in bonuses/more commissions, etc.. Today, people in this age bracket aren’t getting the same commissions or bonuses, or even the salary, because there are less jobs at this level.
“Current P/E is about 13Current P/E is about 13”
Some rose colored glasses. I conceded it’s not 22, but it’s not 13 either:
http://online.wsj.com/mdc/public/page/2_3021-peyield.html
It’s 15.62 today. Off of earnings that were done with cost cutting–not as good as earnings as from sales or margin growth.
Sorry I am late to the comments on this thread. Jen – I liked your comment and appreciated it but….
“we tell our younger colleagues (all of whom could afford to buy a place today if they wanted) not to do so. We tell them to rent until they’re married and then only to buy a place where they can see themselves raising a family.
I practically begged one of my employees not to buy a condo in 2009 when they were giving that first time buyer tax credit. He would not listen and is now in an underwater condo. Still thinks it was wise but is getting married soon and will likely be having kids. I hope that it ends up well but think that it is a longshot.
Juliana – We all want that when we are just starting out in the workforce….
A job that pays a living wage.
“What do the Gen Y/Millenials want?”
However I am always impressed to see them out hitting up the clubs and popping for big bottle service tabs. Where they spend that living wage?
“… but I’ll bet ya 2.5 before 1.5”
I was propped that same wager yesterday — and took the 1.5 side since I still fear we’re following the example of Japan’s last two decades.
Maybe because they see little chance of achieving the American Dream, so they live in their parents basements and spend their wages on bling?
“However I am always impressed to see them out hitting up the clubs and popping for big bottle service tabs. Where they spend that living wage?”
“As we’ve discussed in the past, it will take most people, conservatively, 4 to 7 years just to save up a decent downpayment (unless they go FHA.)”
Unless I find a steal in a GZ hood I like (unlikely I concede) I’m going to wait until this whole FHA thing gets sorted, along with the government’s involvement in Fannie/Freddie. I think we all know what will happen to valuations in high priced areas like Chicago if the FHA were reined in.
“The market’s valuation is a joke and it’s disgusting the MSM articles I’m reading saying equities are cheap.”
ROFLMAO. I guess it makes no sense to tell you in B=School, that only someone so stupid, that they don’t even know how stupid they are, would think they know what the markets valuation should be. At least the MSM guys gotta write shit or they don’t get paid. You actually paid to be taught not to be a dumbass. Walking outta school as a 30yr old that hasn’t even learned yet not to be a dumbass is like watching a modern day tragic/comedy.
And please don’t argue with me. No need. Settle it with the market. I’m just an observer, one waiting on the sidelines watching and holding the bandages that you’ll need.
Ze you need high equity values to fund your lifestyle/retirement. Your positions are hardly bandages, however if holding them gives you some comfort by making you think it’s sustainable good for you. You’re the genius who had to run off to a turd world country and your pontificating on here is a bit of a joke. I think you’re afraid you’ll have to work again in your life–and your fears might just be right. I know what I think the markets valuation should be and I place my positions accordingly.
Ze’s not really in Brazil.
Actually him being in Brazil is probably the only thing I believe about him.
It’s a lot easier to act like a rich former investment banker while one is actually living in a favela posting from a Lan house that it is to actually be a rich former investment banker who pretends to be in Brazil.
Then again, finance assistant professor at UIC would make sense, too. 😀
“Ze you need high equity values to fund your lifestyle/retirement. Your positions are hardly bandages, however if holding them gives you some comfort by making you think it’s sustainable good for you. ”
I never knew there was a difference between up or down yet alone knowing I have a personal preference for up. Although I would correctly argue that from a risk perspective there is a significant reason to always be long. You have that backwards, my risk is increasing asset values – not decreasing ones. The bandages were referring to wrapping up your wounds for as long as you believe you know where the market should be valued. Can’t be done – and no I never worked in IB, nor would.
“I think you’re afraid you’ll have to work again in your life”
The thought alone, saddens me.
“finance assistant professor at UIC ”
Maybe not UIC -that’s a super dumbass school. I could see the fringe benefits of teaching a class of 18-21 yr old girls at UFRJ though. 🙂
2 more days of Carnaval and I am already running on empty… no idea how people party so many days in a row in such heat…
funny thing Bob… I just go down to take my pups for a walk and see some guy dressed up, at 9am, in a wig, dress, and blackface. I turn to my mullatinha wife and say “you wouldn’t make it one block dressed like that in the States” .. she turns to me and says “no, it’s adorable, he’s dressed like the nega maluca (literally – crazy nigger woman)”
I think you would like it here. 2 years in a row as worlds sexiest city, as voted by the gays. Basically you could finally come out of the closet and yet continue to be a racist.
Stage 2 is about to begin. Things just warming up in this city… next 5 years will be interesting.
‘I turn to my mullatinha wife and say “you wouldn’t make it one block dressed like that in the States” .. she turns to me and says “no, it’s adorable, he’s dressed like the nega maluca (literally – crazy nigger woman)”
Omg!!! Thank you for the laugh!
So I’m with my big shot WS brother in law and family yesterday, and they invite some other WS bigger shots over to the house for lunch. After a few drinks I ask them where the market is headed. One blurts outs without missing a beat ‘if we knew that, we’d be on my Feadship and not eating here.’ Mind you a villa overlooking Anse de Cayes ain’t no second prize.
It amazes me that so many seem to ‘know’ the housing/market future, even worse are those who know without having the slightest shred of skin in the game. It’s up it’s down, meanwhile Murdoch is floating around in the harbor giving a flying fuck what you think. So you bought a 2/2 in the loop at the height of the frenzy (most likely for your own flipping greed) and now it’s under water. So what if Madison and Brianna have to share a bedroom, mommy and daddy thought they could make something for nothing but instead got their tit caught in a ringer.
One thing is for sure, you will *never* ever profit long term (financially or even spiritually) by being apart of the highly impressionable masses. By the time it reaches them, it’s too late: ie, the shoeshine boy giving Joe Kennedy stock tips. Can’t weather housing downs… don’t ever buy. Can’t imagine two kids in one bedroom… don’t have kids. Can’t imagine living in that city house with the small closets… get a wig and head down to Rio.
Exactly jay, think like clio, avoid thinking like the masses and move to oak brook instead.
Right, for the sure thing you’ve gotta get yourself a job in the legislature:
“He may be the worst, but Bachus is by no means alone in his shenanigans. The activities of Sen. Dick Durbin (D-Illinois), Sen. John Kerry (D-Massachusetts), Rep. Jim Moran (D-Virginia) have been under scrutiny as examples of legislators making possible insider trades during the financial crisis. Speaker of the House John Boehner (R-Ohio), and former Speaker Nancy Pelosi (D-California) have also been cited for questionable dealings”
.
http://www.nakedcapitalism.com/2012/02/can-rep-bachus-and-his-money-crazed-congressional-colleagues-be-stopped-from-insider-trading.html
“One thing is for sure, you will *never* ever profit long term (financially or even spiritually) by being apart of the highly impressionable masses.”
“even worse are those who know without having the slightest shred of skin in the game.”
They have skin in the game. They are short. Housing is a necessity that they will have to provide and each payment in the future is a liability at a yet to be determined floating price. Short some serious volume actually. They just think they are flat.
Ze – Have fun for a few more days. BTW thanks for the SA advice. We finally got down for a 6 night stay. Kicked it off in Montevideo for a day then the ferry to BA for fiver more days. It was pretty cool. Next time Brazil.
Our guide we hired in Buenos Aires joked about the mortgage crisis in the states and boasted that they will never have that issue as RE purchases in Argentina are cash only. After a ten minute conversation we had a come to Jesus moment. He had explained that he would be buying a home for cash when his parents died. That seemed sad but the real sadness came when I explained how he will never be able to equal his parents housing and financial success because he had two siblings and the family estate would likely be broken into three parts thereby reducing his purchasing power. I felt a bit bad as he was pretty deflated for the rest of the day.
Ze-hate to tell you, but its curtains for you and tranny “wife”.
http://online.wsj.com/article/SB10001424052970204883304577221421713744932.html?mod=WSJ_hp_LEFTTopStories
Okay maybe I don’t hate to tell you. This is hilarious. The house of cards is over. And jp3 the mere fact that your tour guide never even considered the estate will be divvied up shows how sophisticated many of these third worlders are.
China is due for a very hard landing, and Portugal hasn’t even been dealt with. This is an election year and the MSM is doing all they can to prop up their golden boy, but time will tell whether 2013 is more like 2010 or 2012. My guess is the former.
“Maybe because they see little chance of achieving the American Dream, so they live in their parents basements and spend their wages on bling?”
This is happening in Japan. Actually, has been for the last decade. The younger Japanese aren’t getting married. They’re simply spending all their money on luxury items like designer purses, iPhones etc. They see no point in getting married and having kids. Their lifestyle is better if they never move out of their parents house.
“It’s 15.62 today. Off of earnings that were done with cost cutting–not as good as earnings as from sales or margin growth.”
That’s trailing P/E. Okay- I can deal with that. Forward P/E is 13 but who knows if we’ll get there. Most companies are saying that they expect a much better second half of the year because China will be cranking up again by then. But if China disappoints, then who knows.
Bob- it’s not cost cutting. Not in 2011. That was done in 2009. The companies are seeing organic sales growth all over the place. Go look at Caterpillar. Go check out a ton of the companies that have been around 100 years. Many had record 2011s. Things are booming for them because of the emerging markets and strengthening North American business.
Don’t bet against America. You will always be wrong.
You can really feel the US economy turning on now. Nearly everyone I talk to across all businesses (except for the big banks) are hiring and going full throttle, especially manufacturing. But even the service industry as well. I know someone who works at a strip club as a bouncer. He says they haven’t been this busy (bachelor parties etc.) since before the recession. He is buying a new car.
By the way- with the holiday tomorrow there will only be one post. I wasn’t going to do any but given this discussion about market conditions, I thought I’d post some other interesting arguments about where the market may be headed next so you all can chatter about it.
How many times in the last 4 years have news stories quoted “experts” saying that the bottom had been reached? I’ll start believing the bottom is in once there are sustained YOY price increases; not before. In other words, you can only see the bottom once you are past it. My guess is that a true market bottom won’t be reached until about 2015 at the earliest, based on how long previous (less severe) real estate bubbles have taken to bottom.
Stocks are up because Bernanke has targeted 3-4% inflation and the Fed is using ZIRP, which sets price controls on interest rates at a level which causes negative real returns on bonds. The Fed’s game plan is to push people into stocks. Also, the Fed is using QE and Operation Twist to provide (newly printed) liquidity. All the central banks around the world are printing too, a portion of all of these billions and trillions make its way into stocks.
Funny how all this printed money is making it’s way into stocks but not the hands of the commoner.
that’s called the inflation tax.
Who gets their hands on the newly printed money first? Wall Street, military/industrial complex, Fed Gvt. employees (that’s why now some of the richest counties in the US are in VA & MD). By the time this money somehow makes it down to Main Street or the midwest etc. it’s been handled and coin-clipped and somebody’s already gained from it.