Market Conditions: Signs Of Life As March Sales Jump 12.1% And Median Price Also Rises 5.2% YOY
I couldn’t get to the IAR monthly home sales report when it came out yesterday (sorry!) but here it is for what I’m sure will be a lively Friday discussion.
As we’ve already been chattering about for some time, sales rose in March year over year. Median price also rose.
In the city of Chicago, March 2012 home sales (single family and condominiums) totaled 1,626, up 12.1 percent from 1,450 homes sold in March 2011. The city of Chicago median home sale price for March 2012 was $171,750, up 5.2 percent compared to March 2011 when it was $163,200.
However, when compared to prior yearly data, sales continue to be rather anemic.
Here’s the sales data going back to the 1990s (thanks G!):
City of Chicago condo/TH/SFH closed totals March
year/closed/median/% REO-Short Sales
Year Closed Median %REO/SS
1997 1,226 $126,875
1998 1,540 $137,003
1999 1,766 $152,125
2000 1,793 $167,500
2001 1,800 $195,000
2002 2,112 $210,000
2003 2,261 $225,000
2004 2,772 $244,950
2005 2,822 $271,125
2006 3,000 $275,862
2007 2,399 $285,000
2008 2,098 $300,000
2009 1,219 $217,000 37%
2010 1,860 $207,750 38%
2011 1,481 $163,763 49%
2012 1,630 $170,500 44%
“There are encouraging signs in the market,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois. “Sales volumes are up, time-on-the-market levels are down significantly from a year ago and prices appear to be stabilizing in Illinois although continuing to fall in Chicago. Further, in the last month there was a more even spread of sales prices compared to previous months where homes sold for less than $200,000 dominated the market.”
“REALTORS® are continuing to see an increase in the number of buyers looking to buy a home today, as rents are going up and interest rates are at an all-time low,” said REALTOR® Bob Floss, president of the Chicago Association of REALTORS® and Broker/Owner of Bob Floss and Son Realty. “While we are still closely monitoring the impact of distressed properties now and those that may enter the market in the coming year, continued stabilization of the market will ultimately come from buyers looking to make a long-term investment in a community with the dollars they invest today.”
Inventories are much lower than a year ago. Many people are reporting multiple-bid situations on properties (and not just on the distressed ones either.)
Is this the price bottom?
March home sales in Illinois best in four years; median prices show signs of stabilizing [Illinois Association of Realtors, Press Release, April 19, 2012]
“Is this the price bottom?”
“price” meaning what? Median? Real or nominal? Measured how?
Wow. I managed to make my purchase at the very bottom. Go figure, its the homedelete way.
Just kidding, this is a dead cat bounce. Look out b-low!!!
“this is a dead cat bounce.”
So, looking just at the median, we’re below (a little over 5%) Mar-1997 median in real dollar terms, and you believe that–again, just based on the median–we’re headed *significantly* lower in nominal terms?
It all depends on what your definition of bottom is.
We should see several months of higher closings. Contract activity has been running 20 – 40% above last year and that’s even after allowing for a 20% failure rate: http://www.chicagonow.com/getting-real/2012/04/maybe-the-chicago-housing-market-isnt-so-fragile-after-all/
And the pickings really are slim. Ask anyone who is looking right now. Certainly hard to find a “deal”. Put in a bid on a low end condo the other day, which was priced at the market as far as I could tell, and there were 12 offers after 5 days on the market. Of course, many of those could have been incredible lowballs but we were certainly outbid.
Exactly how high does a dead cat bounce? Does it bounce more if it is dropped from higher up, or does it splatter if it is dropped from higher up?
Questions like these sometimes keep me awake at night trying to figure out…
I’ve noticed a noticeable uptick of “GZ/upper-middle class” residential properties under contract in past month. But I’m willing to attribute that increased activity in buyers wanting to hedge their financial bets in anticipation of sharp increase in mortgage rates and inflation come post election/2013. Anyone else read that NYT article about IRS tax rate increase (tax cuts expire) and deep Fed budget cuts come Jan 2013?
I’m anticipating another drop in GZ/UMC home prices late summer, as EU faces Spain’s and Italy’s financial defaults.
“It all depends on what your definition of bottom is.”
CS index numbers are better; median is just the mix of housing sold and the mix on the low end has dried up.
_____________
“Exactly how high does a dead cat bounce?”
Not very high.
____________________
“I’m anticipating another drop in GZ/UMC home prices late summer”
Prices will continue to fall far into the future as underwater homeowners unload.
There is very little good supply right now and, if your in the market for something other than small distressed (often needing work or in less desirable locations), its going to be tough to find.
“I’ve noticed a noticeable uptick of “GZ/upper-middle class” residential properties under contract in past month.”
Me too Architect. Surprisingly, the $750,000 duplex downs ARE starting to sell again in Lakeview and LP. Mainly I’m seeing the new construction going under contract (fairly quickly too.) Everyone wants “new”.
“And the pickings really are slim. Ask anyone who is looking right now. Certainly hard to find a “deal”. Put in a bid on a low end condo the other day, which was priced at the market as far as I could tell, and there were 12 offers after 5 days on the market. Of course, many of those could have been incredible lowballs but we were certainly outbid.”
It’s only a matter of time (days???) before the Tribune and/or Crains does an article about the housing market recovery based on the multiple bids and how things are selling for OVER asking now. They’ll feature 30-somethings selling their $600,000 3 bedroom, 1 bath house in Bucktown and getting 10 bids and talking about how much the market has improved.
When that happens- and word starts to get out to the greater population that the housing bust is “over”- then we will see a large number of sellers listing in order to “get out” (as we’ve talked about before.) That’s when we’ll see inventories rising (again).
my anecdotal 2 cents: my brother and his wife RENTED out their duplex in bucktown as they bought on the north shore. My sister RENTED her house out in the city to buy in the suburbs. I have a feeling there is a HUGE amount of people doing the same thing. These people aren’t always going to own two homes. I consider this shadow inventory.
I’m mixed. On the one hand visible inventories are down, and pickings are certainly slimmer for anyone looking these days. On the other, as Housing Bear notes, I know a boatload of folks renting out their previous underwater home and buying their bigger new home with low-down loans like FHA. Lots and lots of liquidity out there, but not so much capital. I’d really like to see where the “cash” is coming from for all the all-cash sales being reported on Calculated Risk and elsewhere.
I think some of the perceived lack of inventory is that many houses are still listed high. And there’s enough idiosyncrasy in some areas that everyone gets to think their houses are special for some reason. So prices may be high relative to what would bring a fairly quick sale, but who knows, maybe they’ll get something close to their wish price if the right buyer comes along, and maybe they won’t.
I think inventory is pretty low as well. I have a couple of clients looking for single families in LV, North Center and LqS and between the 2 clients about 5 properties have come on the market in 4 months. What was on the market when we started looking was crap but got snatched up quickly. Happy to be under contract on my own place because finally, after 10 yrs (at the price we’re purchasing the condo for) it’s cheaper to own than rent. Not everywhere, but at this particular property it is.
I don’t know that I agree with Sabrina…
“When that happens- and word starts to get out to the greater population that the housing bust is “over”- then we will see a large number of sellers listing in order to “get out” (as we’ve talked about before.) That’s when we’ll see inventories rising (again).”
I think that there will be some of that going on, but by and large there are too many people (primarily in non GZ) who bought in the boom who can’t take the lose, can’t come to the table with the cash needed, etc.
underwater homedebtors can’t hold their breath forever…
But the inventory does suck these days; I’ve reduced my redfin browsing significantly since purchasing but every so often when I look I haven’t seen anything (in my price range at least) that makes me say “Wow, I should have waited.” I have a feeling I’ll be crying in 2014 or 2015 when my neighbors are selling for 2/3’rds of what I bought for. But their homes will be old and outdated whereas my home will be much newer and updated.
In my City (non-GZ, though not certain) neighborhood, 4 SFH were listed and closed within 3 months at list.
“my anecdotal 2 cents: my brother and his wife RENTED out their duplex in bucktown as they bought on the north shore. My sister RENTED her house out in the city to buy in the suburbs. I have a feeling there is a HUGE amount of people doing the same thing. These people aren’t always going to own two homes. I consider this shadow inventory.”
Absolutely. I also call this shadow inventory. A huge percentage of my listing presentations end up with people deciding to rent out their places. Then a year later they call me to see if the market has improved and when I tell them it got worse they rent it out for another year. This is going to go on for quite a while – especially if rents go up like they have in the last year (9.5% according to Crain’s). So, while it is shadow inventory, it can remain in the shadows for quite some time – especially if rents keep going up.
“Exactly how high does a dead cat bounce? Does it bounce more if it is dropped from higher up, or does it splatter if it is dropped from higher up?”
It’s a lot like dropping a piñata or stuffed animal, not high at all.
@ Gary
What do you think it easier / harder to rent in Old Town / Lincoln Park / Gold Coast?
in order of preference: 1 bd / 2 bd / 3 bd condos and then SFH
I’m thinking its
1 bd
2 bd
SFH (although for the landlord – I wonder if renting if they are stuck covers the carry)
3 bd
We haven’t found anything we are willing to spend the next decade in at our price range. There are plenty of homes that would be decent starter homes but knowing we will be there for a long time and not able to sell.
There are also plenty of homes where someone told the owner back in 2007 that their house was worth over half a million so they refuse to price their home more reasonably even though HD and CCRD say they can.
“underwater homedebtors can’t hold their breath forever…”
they only have to hold it until their mortgage = market value unless they are in my HOA in which case they intend to hold it until Market Value = their purchase price + every dime they’ve put into it + insane expectation of additional profit.
chichow:
That’s ranking from easiest to hardest? Or v.v.?
“@ Gary
What do you think it easier / harder to rent in Old Town / Lincoln Park / Gold Coast?
in order of preference: 1 bd / 2 bd / 3 bd condos and then SFH”
I don’t really focus on rentals so I don’t have information at that level of detail. There are probably more 2 beds for rent than anything I bet.
The rates right now are just ridiculous. That’s why we’re seeing this level of activity and no pressure on prices. If a buyer finds a place they like, they’re not going to risk losing it over $10-20k when the net impact of that negotiation might save them $50-$75/mo.
My understanding is that current rates are at an artificially low level right now in large part b/c of Operation Twist. Before Twist, even with the target rate at essentially zero since 2008, we weren’t seeing mortgage rates below 5%. Twist is currently scheduled to end in June, but that probably won’t happen in an election year.
I am worried about what will happen when any normalcy returns to mortgage rates. This time next year buyers are going to be pissed b/c they’ll feel like they’re paying a penalty rate at 5%.
Rates won’t be going anywhere but down for years to come.
“they only have to hold it until their mortgage = market value ”
You mean, .92*MV, to cover transaction costs.
Underwater HD’s can “hold” their breath as long as their income is pumping enough “air” to comfortably cover the nut.
“We haven’t found anything we are willing to spend the next decade in at our price range.”
I thought maybe you’d bought the gazebo house. Or are you obfuscating?
“I thought maybe you’d bought the gazebo house. Or are you obfuscating?”
We went to see it but the Open House was canceled. The house was later delisted then relisted and under contract in one day. Perfectly legal I’m sure.
“We went to see it but the Open House was canceled. The house was later delisted then relisted and under contract in one day. Perfectly legal I’m sure.”
You need to get a realtor license so you can file grievences about that stuff. Other than realtor/MLS “rules”, what rule/regulation/law could they have broken?
“What do you think it easier / harder to rent in Old Town / Lincoln Park / Gold Coast?”
To rent out as a landlord, or to rent as a tenant? I’ve been (casually) looking at 3 beds to rent (we may or may not move into one for 6 – 12 months in either one or two years from now), but haven’t really seen anything suitable in our range (up to $3,200(ish)/mo; 3/2 (I can live without a powder room if it’s a rental and for no more than a year); garage spot; w/d in unit; on or within two blocks of park (the “park” for search purposes is bounded by Diversey/Lakeview Ave/LPW/Clark/North Ave)).
p.s. No carpet in living areas.
nice to see the old HD is back in form today…
all sunshine and daydreams…never gonna sweet dream…
I’ve never seen so many north shore homes with market times less than 2 weeks. Seems like anything with a pulse is under contract now that YE bonuses have been paid.
I, too, wonder what the effects of the expiration of both the 2001 & 2003 bush tax cuts along with the payroll tax cut will have on consumer sentiment. Along with quantitative easing expiring. I don’t think the future looks so rosy as the economy never came roaring back as intended.
Friends have two kids in law school and another in business school, all with about $150,000 in loans. These financially-struggling but solidly white-collar parents won’t be able to float them a down-payment five years from now. Their three kids need to marry well, or there won’t be GZ homeownership in their near future. I think this is what the future looks like for that generation.
” there won’t be GZ homeownership in their near future. I think this is what the future looks like for that generation.”
would it be ironic if the GZ of today became the non-GZ hoods of tomorrow and vice-versa?
“” there won’t be GZ homeownership in their near future. I think this is what the future looks like for that generation.””
You’re wrong about this. The current homeowners will eventually need to sell, and they’re going to sell to lawyers, accountants, consultants, etc; and they’ll sell it at a price the younger generation can afford, and that price is nowhere near what prices are today.
I was thinking easiest to hardest to rent out from the landlord perspective.
I’ve been doing fine renting out apartment thanks to QE.
@anonny – Your 3200 number sounds about right. Have you seen a decent amount of inventory meeting your price constraint and various requirements?
“@anonny – Your 3200 number sounds about right. Have you seen a decent amount of inventory meeting your price constraint and various requirements?”
No. I haven’t seen a single thing.
I consider Highland Park north shore and in March there were 52 HP SFH’s asking between $999K-$1.7 mil with 1 closing in previous 2 months. A lot of inventory. The worse news for HP (and likely other north shore community) SFH owners/ would be sellers is that good lots can be found for $300K +/- and construction costs are low. Rational prospective buyers with time and qualifications should also look at build to suit.
” Seems like anything with a pulse is under contract now that YE bonuses have been paid.”
“Priced over a million over what it was bought for in 2009.”
Check your math.
It’s the UIC thing, I guess…..
Clio,
Do you ever feel the need to just have to take a shower to clean yourself just from that feeling of dirtiness from being so close to yourself??
that feeling is long dead
“Clio,
Do you ever feel the need to just have to take a shower to clean yourself just from that feeling of dirtiness from being so close to yourself??”
No – only after being w/ your wife
“I consider Highland Park north shore and in March there were 52 HP SFH’s asking between $999K-$1.7 mil with 1 closing in previous 2 months. A lot of inventory.”
I like to hear JMM’s rebuttal to this.
No wants to live in highland park right now.
“You’re wrong about this. The current homeowners will eventually need to sell, and they’re going to sell to lawyers, accountants, consultants, etc; and they’ll sell it at a price the younger generation can afford, and that price is nowhere near what prices are today.”
There just aren’t enough people with $250K+ consistent incomes to purchase all these north shore properties with $20K+ annual property tax bills that are $900K+. The younger generation will take much longer to get into these homes, if they even aspire to be 20-30 miles out from downtown as it is.
“I consider Highland Park north shore and in March there were 52 HP SFH’s asking between $999K-$1.7 mil with 1 closing in previous 2 months. A lot of inventory. The worse news for HP (and likely other north shore community) SFH owners/ would be sellers is that good lots can be found for $300K +/- and construction costs are low. Rational prospective buyers with time and qualifications should also look at build to suit.”
Agreed with you. As tear-down prices have come down and with low construction costs, all the outdated homes in prime suburbs will need to be torn down. Who wants to live in an $800K house in Wilmette with one full bathroom that was built in 1925? Not me.
Who wants to live in a suburb
“Who wants to live in a suburb”
A lot of people.
But what they _don’t_ want to do is pay through the nose for the same bland suburban existence that costs a multiple for a house of what it does in other metro areas.
I laugh my ass off at people in Highland Park thinking their precious home should be priced at estate levels. Got news for them: just because the taxman told you it was worth 900k its you the sucker as that was the taxman’s excuse to extract more $$$ from you!
“Agreed with you. As tear-down prices have come down and with low construction costs, all the outdated homes in prime suburbs will need to be torn down. Who wants to live in an $800K house in Wilmette with one full bathroom that was built in 1925? Not me.”
You can pay 13k/year to live like a tenement!
Then when you tell other people from other parts of the country you live in Wilmette in a one bathroom house with a 13k tax bill they’ll look at you like you’re mad. Then you’ll have to explain that it’s because it’s like the Connecticut/LI/Orange County of the midwest they’ll laugh. Because it isn’t any of those things nor near approximating them.
The 900k homes won’t be 900k but the tenant will be a higher incomes professional. The million dollar McMansions in many suburbs are now half off so that upper class and upper middle classes can afford them without exotic financing the ns will be no different.
Bob, highland park is a bit different than the bland suburban existence. Huntley, Schaumburg, Plainfield, that’s a boring existence. The north shore is a Jon Hughes movie. It’s not the suburbs, it the country estate for the landed gentry type of place. You really need to leave Lincoln park once in a while because half the time u don’t know what ur talking about.
Nicely put re. HP, Homedelete. Couldn’t have said it better myself.
Makes me wonder again if we’re neighbors!
Bob is a douche from Ohio who has no idea that there are 9,000,000 people in the chicago area and only 2,600,000 of them live in the city, and less than 1,000,000 live in the urban green zone. There are many ways to live in the metro area and bob has unilaterally determined that he knows them all despite never visiting 99pc of them. Ill take you on a tour someday bob. Bring your camera to capture the memories.
“Then when you tell other people from other parts of the country you live in Wilmette in a one bathroom house with a 13k tax bill they’ll look at you like you’re mad. Then you’ll have to explain that it’s because it’s like the Connecticut/LI/Orange County of the midwest they’ll laugh. Because it isn’t any of those things nor near approximating them.”
I dunno Bob, I disagree on this one. People hate diversity, and they will choose a smaller house in a good area with good schools over a bigger house in a suburb with a blade runner soup high school. Google the book: The Big Sort: Why the Clustering of Like-Minded America Is Tearing Us Apart.
Highland Park is typical of this anti-diversity, self-segregating, flight-mentality. There are alot of douches that have no idea about anything other than their narrow-view. Places like Deerfield and West Northbrook take this to extremes, like School District 27, Hickory Point in Northbrook, it’s almost entirely Jewish there with no diversity whatsoever. For HD to claim that this existence is anything but bland is just ignorance and it’s anti-Chicago, because of all the self-segregators that succumb to flight and go there.
“Ill take you on a tour someday bob. Bring your camera to capture the memories.”
I’ll take Hd on a tour of Chicagoland outside of the Milwaukee Ave corridor, and he”ll be the one to learn what’s going on. The arrogance of some people.
yeah helmethoofer and teh southside is nealry entirely african american and mchenry is nearly 100% white. what else is new? I thought you hate the ‘soup’ where its so diverse no one understands their neighbor. which is it helmet? do you like diversity ,or not?
“Bob is a douche from Ohio ”
But I’m not you dumbass. You’re a local yokel born and raised in Chicagoland. I moved around a lot in my life so I think I have some idea of what else is out there, especially in terms of a suburban existence (most of my life was suburban).
You’re the dumbass with blinders on who would gladly pay 900k for that Highland Park house with 13k in taxes if you could afford it as you don’t know anything else.
“The north shore is a Jon Hughes movie. It’s not the suburbs, it the country estate for the landed gentry type of place.”
I work up there now. One time I got lost going out to lunch (even with nav haha). Same suburbs.
Yeah there are some estates up where I work for sure. But there are regular houses on regular lots in subdivisions as well. Old housing stock 900k regular houses, with 13k tax bills.
“thought you hate the ‘soup’ where its so diverse no one understands their neighbor. which is it helmet? do you like diversity ,or not?”
HD, you must remember you are talking to someone who considers diversity as having sex with someone other than his own sister.
“HD, you must remember you are talking to someone who considers diversity as having sex with someone other than his own sister.”
So says the one from a tribe one of whose fundamental tenets is keeping the gene pool close by. Tay Sachs ze indeed.
I know ze many like you, now that modern genetics is more understood, are in a mad scramble to add more genetic diversity for sake of the health of your offspring. However you breeding with an arawack can only partially mitigate the damage done to you and them by your lineage.
was not talking to you bob… sorry if I hit a sore spot…
..and my lineage owns all the nice shit.. what problem do we have?
Come to think of it.. my lineage is your lineage and da Muslims as well. All sons of Abraham if I read the books correctly. You and I are practically brothers.
“I consider Highland Park north shore and in March there were 52 HP SFH’s asking between $999K-$1.7 mil with 1 closing in previous 2 months. A lot of inventory.”
Another part of the problem for those selling in HP and the other “older” interior suburbs- are the vintage layouts. People live differently today. They don’t want the chopped up rooms. They want the kitchen open to the den/family room. They don’t use huge dining rooms anymore. They want a master suite with a huge master bathroom with a walk in show and soaking tub. Unless the house has been really renovated- many of the more expensive properties don’t have the modern amenities like this.
So the younger buyers don’t bite. So not only is the seller of the $1.2 million HP or Lake Forest house working from a smaller buyer pool than ever before but they also have to fit the needs of the buyers who want everything updated and the layouts of today. Tough sell.
Most of the sellers are baby boomers. They don’t understand what the Gen X and Y buyers even want.
“Most of the sellers are baby boomers. They don’t understand what the Gen X and Y buyers even want.”
It’s quite simple really: early 1990s pricing.
But we know those boomers cannot give that to them: they HELOC’d the hell outta their 900k north shore houses to fund their spendthrift, profligate lifestyle. You really think all of those MDXs and E550s came from daddy’s X-mas bonus?
Bob, when you accuse me of buying a $900,000 house in Highland Park with a $13,000, you most assuredly have no idea what the hell you’re talking about.
And also, please explain how growing up in the Chicago area makes me a yokel – didn’t you grow up in Ohio just a stone’s throw from Appalachia? Living in the land off the hills?
It is the same logic that makes Dan/HH call me outsider when at some point he was claiming he is from Jo’burg : )
“And also, please explain how growing up in the Chicago area makes me a yokel – didn’t you grow up in Ohio just a stone’s throw from Appalachia? Living in the land off the hills?”
BTW… forgot to mention.. Ze went under contract on his place. Closing June 18th. Market is hot, hot, hot… Now in honor of Miu, and diversity in general, I am going to go watch a Yun Fat Chow flic.
People keep talking about a 900K house in HP. Actually, you can get a pretty nice house up here in a decent (non subdivision) neighborhood for less than $500K. But you have to deal with the stuff Sabrina says Gen X and Y don’t like – chopped up rooms, separate dining rooms, no hot tubs, etc. I find those things charming, but realize they’re old fashioned.
Helmethofer’s obsession with Jews continues, I see.
“Helmethofer’s obsession with Jews continues, I see.”
He is preparing for Yom HaShoah
No HD. Lived on the east coas3 diff places until 13. Then concur both sides of river & overseas for half a year. I must correct you when you try to dismiss me as some Ohio guy from the hills. It is you who has the blinders on because you’re from here & never left. You think a mediocre home on the NS will maintain its crazy valuation cuz you think the NS is glitzy. The house won’t maintain its price & the NS isn’t that glitzy.
Well concur = cincy
I know the units I had my eyes on are selling like hot cakes. I am dying to see what price they end up closing at.
“Ze went under contract on his place. Closing June 18th. Market is hot, hot, hot…”
Just wait another year until the apartment bubble is obvious. Look at all of the new apartment buildings going up in the GZ. The expected rents are outrageous and more buildings are being planned as we speak. Tell me this is not a classic bubble, just like 2008.
Pete (April 23, 2012, 12:04 am)
“Just wait another year until the apartment bubble is obvious. Look at all of the new apartment buildings going up in the GZ. The expected rents are outrageous and more buildings are being planned as we speak. Tell me this is not a classic bubble, just like 2008.”
The developers of the K Station apartment towers (353 N Desplaines, 555 W Kinzie) agree with you:
http://www.rejournals.com/2011/08/17/several-class-a-apartment-towers-up-for-sale/
“900k regular houses, with 13k tax bills”
Where are the taxes that low in the NS burbs? Isn’t 900k going to get you at least $16k, if not $18k in most towns?
“Where are the taxes that low in the NS burbs? Isn’t 900k going to get you at least $16k, if not $18k in most towns?”
One property I checked in HP was at 13.8k. Wouldn’t be surprised at the higher rates you mentioned.
“One property I checked in HP was at 13.8k. Wouldn’t be surprised at the higher rates you mentioned.”
So you admit you’re ignorant and that you haven’t done your research. You look at one property in one suburb and make a generalization. good job!
No HD. That data point does not refute my thesis on the matter, if anything understating the taxes supports my argument. How in the hell did you pass the lsat?
“That data point does not refute my thesis on the matter”
What is your point, exactly? That people, even now, pay $900k for houses in HP? Doesn’t seem that crazy to me. It seems like a diverse area (in terms of housing costs, not ethnicity/religion – relax helmut). There are lots of $400-600k houses there in which a family could quite comfortably spend decades. The richest people I know live there. Not sure what their place would go for today, I suppose $2 mm ballpark. But they, like lots of boomers on the N. Shore, have other homes.
Bob’s specious argument is that the NS is really just the shitty midwest and shouldn’t command a premium as compared to Orange County or Grenwhich CT or whatever. Yes, the scenery may suck compared to the ‘hills’ of the west coast or the palatial estates of the east coast but that’s irrelevant. Many homes may be a bit lacking in architectural style, or just old, but plenty of wealthy people choose to live there – doctors, attorneys, sports stars (michael jordan anyone?), and most importantly, its too expensive for Bob – sitting in a cube 8.5 hours a day doesn’t pay enough to live in highland park so he rips on it all day. Sorry Bob, like Heitman used to say, you need to earn more money or shut the hell up.
I pulled the trigger Bob and I found a modest home in a nice older suburban town, it’s in the ‘poor’ section of town but ‘poor’ is relative. The house is median priced for the town and my HH income is also median for the town so I’ll (hopefully) fit in quite well. Time will tell but it sure beats my studio in uptown.
Doesn’t this essentially mean you bought the best house on the block?
” it’s in the ‘poor’ section of town but… The house is median priced for the town “
No HD they aren’t all practicing physicians and law firm partners on the NS in those 900k houses. The other day at lunch overheard a retired Abbott engineer who presumably lives there. My thesis is that when he started his career corp types could afford houses there. But now with the bubble & those taxes they are largely out of research.
So now who is going to buy these places exactly. The sub-1mm homes aren’t quite up in the top 1% like the lakefront estates are. And the top 2-9% haven’t fared so well the past decafe. I predict a LOT of pain in this segment.
Also you can a nice mcmansion with a bit of land in Barrington for 360k now. You mean to tell me the mediocre HP house thats a few miles from lake isn’t going to be impacted by pricing deterioration in the further in burbs? North shore is fucked, with the possible exception of the multi million dollar lakefront estates.
To buy a $900K house, and pay the $15-18K in annual real estate taxes, it requires a significant down payment, and also a $200K+ combined income, probably $250K. If 2 people work, that is possible, but probably not very likely if we are talking people under 35 years old. How will a young family ever buy there? 30 years ago, it didn’t take anywhere near as much, and the houses a family could afford there didn’t require an extensive renovation to be considered “current”.
I break it down in layman’s terms: when today not even my boss’ boss can afford one of thesr NS houses yet 25 years ago my boss could’ve with breathing room to spare, that should tell you a thing or two about where these valuations are headed.
You need 2 incomes to lead the NS life then, unless you have family money. Even my doctor friend who makes $190K at 34 years old would have a lot of trouble buying there because his wife doesn’t work. 30 years ago he could have purchased a nice place there. Sad how the bubble ruined it for so many.
Bob – maybe you work in a dying industry with stagnant wages.
“my doctor friend who makes $190K at 34 years old ”
Did M&D pay for Med School? Or does (did) he have $100k+ in student debt?
Obtaining financing for people who have a lot of assets is incredibly difficult now. Just to refinance, I had to submit well over 1000 (thousand) pages of documentation – then, that all has to be reviewed and there are numerous questions with each piece of documentation you submit. It is so awful that the people who are most financially solid are getting overlooked for financing. People with simple and straightforward applications get the financing. (and loan/mortgage brokers know that there is much more work involved with someone with assets, so they don’t encourage their business). Another way that the government, in trying to do the right thing, totally fucked up everything. Good luck to all of you trying to get access to healthcare in the future –
My doctor friend had to borrow more than $100K, but in 4 years of working since residency has paid down at least half of it. Even without that debt, he’s pretty out of luck if he wants a $900K house, that his doctor co-workers who are 20 years older, would think is too small as it is.
“Even without that debt, he’s pretty out of luck if he wants a $900K house”
I dunno, if he had no school debt, and saved the $180k dp, it’d be a bit of a stretch for the $900k house w/ $20k + taxes, and less so if “only” $13k. Depends on priorities and earning growth potential.
Not a good choice for principal preservation, in real dollars, but not unattainable.
yoss it’s CPG: stagnant industry with shrinking wages. But I always get a chuckle out of the inflationistas like ze who think corporations have pricing power in this environment.
But realistically when you strip away the hype what industries, other than healthcare & education, are growing? Sabrina used to say Groupon is going to save chicagoland bwahaha yea with some accounting fraud help.
“what industries, other than healthcare”
But that’s a big one, isn’t it? An expanding “healthcare” industry means more than just additional upper-middle class doctor jobs, middle class nursing jobs and working class/service sector support jobs. There’s added work in research and sales on the products/drug side, plus the finance/management/law work that attends growth in any industry, let alone a highly regulated, IP heavy, and litigation heavy one like “healthcare.”
“An expanding “healthcare” industry means more than just additional upper-middle class doctor jobs, middle class nursing jobs and working class/service sector support jobs. ”
HAHAHAHA – oh God – you guys really don’t know what you are talking about, do you? This is a major disaster about to happen in the next twenty years – not only will all of you lose all of your money on healthcare (via copays, insurance, taxes, etc.), there will be so much government waste that NOBODY is going to get helped (physically or financially). Just go to cook county hospital and tell me how great it is – you basically will be supporting the healthcare costs of gangbangers and 20 year olds with 10 kids (and their healthcare too). Doctors will be paid a pittance (which will severely affect the quality of people pursuing degrees in medicine) and nobody will be happy.
I’m thinking there will be a larger percentage of the population that will self-select out of Chicago if their careers do not progress to allow them to live in a nice suburb. This is happening all over California and has been that way for quite some time.
I am an avid follower of this site but rarely post comments. It seems like you all know each other (at least in the virtual world) and you each have your own theories on the current state and the future of the housing market. There is seemingly endless debate on whether we have or have not reached “the bottom” if such a thing can be predicted.
I posted here last year when Sabrina listed a property my husband and I were in the process of buying. Unfortunately the inspection was a disaster and we did not go through with the deal. We are back at it again, and I am wondering if anyone can provide me with reasonably solid advice on whether this is a good time to buy. We are looking for a long-term place and we have more than 20% to put down, great credit, etc. We are under contract at a place but I’m nervous because I am a first-time homeowner and this is obviously an important decision we probably can’t get out of for a very long time.
We are looking in LP. (Please hold your rotten tomatoes–we want to be as close to our downtown jobs and the lake as possible in a non-high-rise in a neighborhood with decent schools). Priced out of SFHs so looking mostly at 3br town homes, and it seems like everything is selling quickly and at a premium. Everything we have looked at in the past few months is under contract. Posters on this site like to claim that everything is overpriced, but if someone is always out there willing to pay close to the asking price, that argument doesn’t hold a lot of water. Things are worth what someone is willing to pay, right? Like people have said above, getting “a deal” in this market, especially in LP, is nearly impossible for your average person who is not an investor or developer.
Does anyone have any recommendations for me? Is this a decent time to buy a town home in this area if we intend to stay there for a while? Are LP prices just always going to be inflated to some extent because so many people want to live there? Does nobody care because this is such a boring and predictable decision and property type? I have no experience with this process so please don’t hurl insults at me. –I am looking for honest advice. Thanks.
“Things are worth what someone is willing to pay, right?”
Your argument is specious because you could use it at the height of the market just as you could use it today. But that aside, you ned to buy when it makes sense for YOU. Down payment, credit, income security, family considerations, %off bubble peak in the area you want to live, etc. However, it sounds to me like you’re priced out of LP, especially if you’re looking at three bedroom townhomes that get snapped up rather quickly. unfortunately, the way that chicago is set up is that if you want to stay in the city and have good public schools, you need to live in a very select few lakeshore neighborhoods (or on the non-GZ Northwest side), or, move to the suburbs. There really isn’t much in between. So you may have to suck it up and move to the suburbs like hundreds of thousands of families have done before you, and hundreds of thousands will do after you leave too. there are few areas , other than manhattan, in the country where residents can live in an urban area, live close to work, and have access to great public schools. And they’re all *very* expensive bc the demand is so high.
312Mom, Rule #1 for Crib Chatter – don’t overthink (or put too much weight) on what is said on Crib Chatter.
With that the one thing I would take from my almost two years of being on this site is that many people seem to find themselves growing out of their homes faster than they anticipated especially once children come along.
So you really have to have determine what you consider “stay a long time.”
Once upon a time LP was a terrible scary neighborhood and if the zombie apocalypse occurs, it might become that again. Until then, LP will command a premium because of benefits you mentioned (proximity to downtown and lakefront). The good news is you will likely be able to shed your townhome if you do need to move quicker and at less hassle/loss than other hoods.
If you cannot find a “deal” in LP without stretching yourself beyond your means, you might want to consider a slightly less expensive nabe. You can still get proximity to the lakefront and downtown without breaking the bank.
“Is this a decent time to buy a town home in this area if we intend to stay there for a while?”
Is “a while” 3-4 years at which point you intend to move up, or 7-8 years through e.g. elementary school? If former, I personally wouldn’t buy. If latter, I’d think hard about whether you could afford an e.g. 10 percent drop in (nominal) prices (which I don’t know that anyone can confidently rule out)? If so, and if your family would be much happier in the new place, then fine.
Agree with homedebtor’s point that just because people are willing to pay the current price, doesn’t mean it can’t go down, and significantly. And I personally think that the downside risk is prob greater than upside (certainly in real dollar terms) in the near-medium future, but am still myself prepared to buy as it makes sense at this point in my life.
312Mom, so you’re under contract for a townhome in LP. People here are always very comfortable opining on what others should do and pointing out flaws of any given property. Ultimately, no one has a crystal ball, and no one but you and your family can decide what balance of pros and cons work best for you and when/if to purchase. You’re already ahead by thinking of this as a long term proposition but as HD says, you have to do what’s right for you, and only you know what that is bc you are the only one familiar with all aspects of your situation and what you find important and are willing to give up. For any given price, there are always a variety of options in terms of property type, condition, layout, attributes, undesirable aspects, etc. and each of us might, given the same budget and intent/ability to purchase at a given moment, pick something different because we are all different and have different wants and needs. Might you see comps later on for your townhome that are unfavorable? Yes, but that shouldn’t necessarily make you rent forever. It’s one factor of many. i.e., unfortunately, there’s no such thing as one-size-fits-all-guaranteed-correct-prognostication. Folks purchasing now at least have the benefit of looking at the past when making decisions. Good luck!
“there are few areas , other than manhattan, in the country where residents can live in an urban area, live close to work, and have access to great public schools.”
Wait–what are the great (open-enrollment for neighborhood kids) public schools in Manhattan? And keep in mind that “great” is a relative term–must compare reasonably favorably with top 10% suburban open-enrollment schools.
Thanks for the comments. I consider “a while” to be at least ten years, possibly forever. I know that a lot of people outgrow their properties, especially condos and town homes, and head to the suburbs. Am I naive to thing that it doesn’t have to be that way? There are a lot of people all over the world in both richer and poorer places living happily in far less space than we will have in any of the places we are considering, so I feel like a family of four that is dedicated to living in the city can make life work in a three bedroom place with a garage and some decent closet space. Am I crazy to think that? My parents keep insisting that it can’t be done, but their house in the suburbs is full of crap they never use because they have never sold or gotten rid of anything.
“Am I crazy to think that?”
No, not crazy at all.
“My parents keep insisting that it can’t be done, but their house in the suburbs is full of crap they never use because they have never sold or gotten rid of anything.”
There’s a reason for the explosion in self-storage. You don’t have to sell or get rid of anything, you can just spend $4k/year on off-site storage!
312Mom – Another good comparison is rent vs own. How much would it cost to rent a similar place to what you want? Look at the rental cost vs what it would cost to purchase (including taxes). Currently Chicago is one of the most favorable markets to buy instead of rent. That is Chicago in general and might not be true for LP. That being said I’m under contract to buy a place in LP right now so I’m making the leap too!
“Is this a decent time to buy a town home in this area if we intend to stay there for a while?”
Maybe. I’d be wary of many of the more modestly priced THs in LP, i.e., the clusters of places typically priced between $400-$500k(ish). Many are getting to be pretty run down, which means a “long-term” owner will end up spending a lot on major exterior updates. And as such places further age, and newer places hit the market, reselling is going to be difficult. (Plus, such places almost never have a garage, which is a tough sacrifice to make on a “long-term” place.) This isn’t to say that one can’t find a worthwhile 3 bed TH in LP for $500k, it’s just that they’re rare.
If you’re looking more in the $600-$800k(ish) range, there are some more solid choices. But many of those are often in west LP, and you did say you wanted to be close to the lake (which I read to mean “casual walking distance to the lake”; if that’s not so much the case, then there are spectacular THs in west LP in the $700s, as well as rather nice ones for up to $500k out yonder past SoPo ). However, I have noticed a couple of listings in those TH (or TH-like) places in the 1700-1800 blocks of Wells/Clark, which I think are in the high $600’s to low $800s. One of those might be a good opportunity.
“Are LP prices just always going to be inflated to some extent because so many people want to live there?”
Pretty much, yes. Icarus already chimed in with the profoundly relevant “once upon a time, LP was a slum” comment, but for the foreseeable future (i.e., the period of time during which your kids will grow up), I wouldn’t expect the pricing hierarchy/order of the nicest hoods to change that much. Or are you asking if LP prices (just like prices anywhere) could further decline? Sure, who knows.
The two biggest LP-specific factors that could affect pricing in the near future: 2520 N. Lakeview and the hospital area redevelopment. (There are some expensive new THs/RHs going up in west LP that could influence the TH market, as well as some other discrete developments, but nothing like the two factors I’ve referenced.)
2520 will directly impact the other buildings along Lakevew Ave and LPW (and on Diversey and Fullerton). Will it raise prices in its immediate neighbors (as they’ve now got a luxury building next door, instead of a dreadful medical building)? Will it put downward pressure on the most expensive condos in the immediate area? And, in turn, will that downward pressure have a ripple effect on less expensive units? Lastly, what if there’s a big problem getting the units in 2520 sold at their expected prices? How will that affect things elsewhere?
Perhaps more relevant to your (TH focused) inquiry: the hospital redevelopment. I don’t recall what the most recent plans called for, but it’s going to add several dozen run-of-the-mill 2/2 condos and some THs. I’d look into (i) how many THs are currently slated and (ii) how much they’re expected to list for, as they might impact you. For instance, were I looking for a TH between $650-850k in LP (east of Halsted) in the next year or so, and I came upon one currently listed at, say, $750k (which might have gone for $850k 4 years ago), I’d make it known to the seller that I can sit tight and buy a brand new TH/RH right near Oz, so if they want out, now’s the time – which their ultimate price would need to reflect.
“Does nobody care because this is such a boring and predictable decision and property type?”
Sure, I do. Most CC regulars pray to the almighty lord SFH, a deity whose blessings extend to those with tiny private backyards, gator decks, 10 minute walks to the L, and 10 minute drives to the lakefront.
312 mom,
Your thinking is sound and I do think it is a good time for somebody like you to buy. Rates are low and prices are pretty good. You have clearly given it a lot of thought.
Best of luck!!!
@ 312Mom, you asked for a good reason to buy: interest rates. They are dirt low and I think a 3BR town home is more than sufficient to raise a family if you are not a hoarder IMHO.
“10 minute walks to the L”
How far is your walk to the L, anonny?
If interest rates went to 5% next year, wouldn’t prices need to fall further to counteract this in the short run? Economic growth is in the low 2% range, and inflation is in that same range, so why would prices stay the same if rates rose?
“If interest rates went to 5% next year, wouldn’t prices need to fall further to counteract this in the short run? ”
There is no correlation, especially in the short term, between housing prices and interest rates. Studies have shown this again and again. there is however, a correlation between interest rates and the size of buyer’s mortgages – which indirectly affects housing prices, but there is no direct correlation between housing prices and interest rates.
Thanks, everyone, for the thoughtful comments.
Yoss, congrats on your place. I have no idea about renting, as I have never looked into it seriously, but with the rent prices I have seen in passing, I feel sure it makes more sense to buy. We can definitely rent elsewhere for less money, but for the same property in the same location, it would be much more.
Annony, we are under contract at 650k, just slightly east of Halsted, if that helps the analysis. We made similar conclusions as you have about the town homes in the 500-550K range. That’s where we ideally wanted to be price-wise, but many of the places (often built in the 70s) are starting to look old, most don’t have garages, and generally don’t seem like they will be able to compete with newer places farther into the future. We definitely would have purchased one if we had not had the ability to stretch a little farther. It’s interesting how hard it is to find a place between about 500K and 700K in this area. A lot of people must be in that price range. The place we are buying is not new, either, but it doesn’t look as dated as some, and the unit has been redone inside.
I often wonder whether it would be a lot smarter to buy a SFH farther out, but I don’t know that with full-time jobs and kids and no home maintenance skills, we are really ready for that cost, responsibility, and time commitment. I used to be very opposed to the idea of an assessment and an association, but I’ve come to realize it’s probably the best choice for us.
“There is no correlation, especially in the short term, between housing prices and interest rates. Studies have shown this again and again.”
If there’s one thing I’m tired of on CC it’s this debate, but the claim that studies have clearly found no effect is clearly wrong. The issues are complex and the findings are mixed. If there is any received wisdom, it’s prob that (a) that there is some effect, but estimates on how big an effect vary significantly, and (b) any effects (from interest rate changes, or more broadly from looking at the cost of owning, sometimes relative to rental costs) are not big enough to explain the bulk of past observed price volatility incl bubbles. (And please don’t cite me anything idiotic, such as not understanding real v nominal.)
Also, sorry for hijacking the thread. I appreciate the responses.
“How far is your walk to the L, anonny?”
Were I not in the Loop M – F, I would probably forget that the L exists. If I lived within 5 minutes of it, I’d gladly take it. But I don’t terribly mind walking for about 45 seconds to a bus stop, even if it’s a 25 minute bus ride.
“Were I not in the Loop M – F, I would probably forget that the L exists.”
So that’s an admission that you live further than your oft-repeated 10-minute-limit from the L. Gotcha.
“not understanding real v nominal”
Are you trying to imply that the fact that nominal home prices (measured by medians, averages or both)continued to go up during the time of 18% mortgage rates isn’t sufficient evidence for you?
Would it help if we measured home prices in ounces of gold equivalent?
anon: Isn’t it impossible to live no more than a block from the park and still be within 10 minutes of the L in LP? *I* have no need of being within 10 minutes of the Loop, but from what I gather, that’s the sweet spot for L riders (as between being far enough away to avoid the L noise yet close enough for convenient travel).
“from what I gather, that’s the sweet spot for L riders (as between being far enough away to avoid the L noise yet close enough for convenient travel).”
With what the prevailing walking speed seems to be (miu and slooper exclude, natch), I don’t know how it’s possible to be both within a 10 minute walk AND far enough away to not hear it.
” Isn’t it impossible to live no more than a block from the park and still be within 10 minutes of the L in LP?”
That horrid place at Kennelly Square is a 10 minute walk (per Google maps, not per my walking pace) to the L and less than a block from the park. So … that’d be a no.
“Would it help if we measured home prices in ounces of gold equivalent?”
I’ve been building my collection of jim baker dollars (would have gone for george shultz dollars, but they are really hard to find) and will be by shortly to initiate hostile buyout of your place. I dunno exactly how the hostile part works but sure I can find someone to advise me.
“I’ve been building my collection of jim baker dollars (would have gone for george shultz dollars, but they are really hard to find) and will be by shortly to initiate hostile buyout of your place.”
I thought it was HD who convinced us that old money was worth more than new money–have you figured out for sure that HD bought someplace you don’t want to live?
“so why would prices stay the same if rates rose?”
“If there’s one thing I’m tired of on CC it’s this debate”
I have it on my CC.doc page to copy and paste along with “HD you are a dumbass” and “Clio, suck my balls”
“Depends on why rates are rising”
Gringo, I’m glad that we share the same opinion of each other.
“Gringo, I’m glad that we share the same opinion of each other.”
LOL… It’s not what I really think… Linear minded , yes. But dumbass, no. I just like saying it.
Could it be that you are overleveraged? Collateral is becoming increasingly important.
“Obtaining financing for people who have a lot of assets is incredibly difficult now.”
There are other economic factors to look at besides rates. We are in uncharted waters here. Chris Whalen (Institutional Risk Analytics) writes about the impact of ARM resets on default rates, which could put further downward pressure on prices.
“In a rising rate environment, home owners with adjustable rate mortgages will default in droves, fulfilling the worst predictions of housing experts when it comes to strategic defaults.”
He goes on to detail the duration risk in the banking sector:
“As and when short-term yields do start to move, the damage done to corporate and financial balance sheets will show that the Fed’s cure of low interest rates has created even more financial and economic problems than we had prior to the start of QE2 and ZIRP”.
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp
“Are you trying to imply that the fact that nominal home prices (measured by medians, averages or both)continued to go up during the time of 18% mortgage rates isn’t sufficient evidence for you?”
“Could it be that you are overleveraged?”
Nah, he’s just bitching about having to document every deposit of $2.50, and, presumably, every similar expense related to each of his rental props. And it’s not acceptable, with the best rates, to say “just ignore that income–look only at this easy to document stuff, which alone oversecures the loan, and the fact that, in the aggregate, the rest is a net positive, so doesnt compromise the stuff I want you to look at.”
““As and when short-term yields do start to move, the damage done to corporate and financial balance sheets will show that the Fed’s cure of low interest rates has created even more financial and economic problems than we had prior to the start of QE2 and ZIRP”.”
Overall I think we’re in a low-interest rate environment for at least a decade. But that doesn’t matter as right now BOTH the Fed AND the FDIC has been artificially manipulating both the short & medium term yield curve. And once operation twist ends even a 75bp rise can cause financial problems.
(The FDIC’s corporate debt that was backstopped during the financial crisis still had over $200B due this year. All of it matures before 12/31/12. But watch it quietly extended.)
And yes GE and other large corporations took advantage of the DGP component of TLGP (itself a component of TARP the govt bailout of wall st.) to issue billions upon billions of government/taxpayer backstopped debt to save in aggregate billions in interest and their very business models during the panic.
Also 2Q 2012 represents the last quarter of Option-ARM recasts. But remember even after payment shock hits it takes 2+ years for properties in IL to work their way through the foreclosure pipeline.
y’all think too much…
“Also 2Q 2012 represents the last quarter of Option-ARM recasts. But remember even after payment shock hits it takes 2+ years for properties in IL to work their way through the foreclosure pipeline.”
Also remember that OARMs were a very small slice of the (non-fraudulent) IL mortgage market. And most of the fraudsters stopped paying within a year, and thus 4+ years have passed for the slow banks to f/c them.
Anectodal tales that are real estate related, just perusing redfin 6 out of the 7 units in my building are ‘pending’ (a few of which I know have closed a while ago) and I know a guy who had his house on Wildwood sell before it hit the market for over a million bucks.
So things are picking up I guess compared to the last few years. Still no good inventory at good prices, that gets bought up real quick but I think it would be a great time to buy if I was looking for a SFH in the burbs (which i’m not)
And I think it would be a good time to sell my SFH in the burbs, during this dead cat bounce. Wish I was ready to do that.
“I think it would be a great time to buy if I was looking for a SFH in the burbs”
Where’s G’s April sales data? I’m showing sales up 19.5% over last year but was curious how that compares to long ago where I don’t have the data.