Market Conditions: Single Buyers Driving Chicago’s First Time Home Buyers Market
According to the Chicago Tribune, single men and women make up nearly half of all first time home buyers in Chicago.
Percentage of first time homebuyers in Chicago who are:
- Married couples: 41%
- Single women: 31%
- Single men: 16%
- Unmarried couples: 9%
- Other: 2%
Average home price for single men and women in the city of Chicago who were first time buyers:
- Single men: $141,000
- Single women: $141,471
Several realtors were quoted in the article as saying that now is a good time for first time buyers, given the price declines and low interest rates.
“These people are getting into the locations they want to be in, Lincoln Park, Gold Coast, Bucktown. These are all places they were priced out of,” said Joe Zimmerman, an @Properties agent.
After renting with a group of friends, Chris Tabor, 27, started thinking of buying his own place two years ago but figured it would take several more years of savings to be able to afford a Chicago condo. Instead, in late November, he closed on a small one-bedroom Bucktown unit that has such extras as a parking space and an in-unit laundry that will help its eventual resale.
“I’m single now but I won’t be forever,” Tabor said. “Then I have this place and I can make some money on it and sell it for a down payment on something more permanent.”
Mario Greco, a Prudential Rubloff agent, said singles of both sexes are focused on the bottom line.
“A lot of these singles have been waiting for a few years” to buy, Greco said. “It’s prudent functionality.”
Singles, especially women, a growing share of homebuyers [Chicago Tribune, Feb 26, 2010, Mary Ellen Podmolik]
Tabor said. “Then I have this place and I can make some money on it and sell it for a down payment on something more permanent.”
Oh my how some people are disconnected from reality. IMO, there is no way you can buy a one bedroom with these market conditions and expect to sell it for a profit five, even ten years from now when taking into consideration closing costs, property taxes, assessments, maintenance, insurance, and the home buyer tax credit.
But then again, as anon and Groove always say, “Buy now or be priced out forever!”
“I’m single now but I won’t be forever,” Tabor said.
Sure…right.
Buy now and be priced in forever.
Tabor said. “Then I have this place and I can make some money on it and sell it for a down payment on something more permanent.”
Anybody that is thinking about selling when they are buying is not thinking.
“as anon and Groove always say, “Buy now or be priced out forever!”
I never say that.
I agree to a point. However, there aren’t that many good one bedroom condos in Bucktown, so maybe he will be able to sell more easily if that neighborhood is still considered to be “cool” in 4 – 5 years. However, I think his chances for profit are slim, and he will most likely lose a little bit of money on it overall.
“I never say that. ”
Woops, got my cribchatter regulars confused.
Tabor better hope that when our country’s borrowing costs get out of hand and the boys in Washington are looking for places to generate “revenue”, they don’t get rid of all the housing subsidies. Home prices would fall at least 15-20% if all the govt subsidies were to suddenly end.
how is that possible?
“Woops, got my cribchatter regulars confused.”
“a small one-bedroom Bucktown unit that has such extras as a parking space and an in-unit laundry that will help its eventual resale.”
I know I don’t speak for all buyers, but I wouldn’t even consider a condo that didn’t come with parking or in-unit laundry, so to me these are not “extras”
“Anybody that is thinking about selling when they are buying is not thinking.”
Really? Anybody? I don’t think this is true at all. Anyone that is thinking about selling for a profit when they are buying may be a little off. Especially if they’re buying a one bedroom condo.
But if you’re looking at two condos, say, and one has a really strange layout that you like but are worried no one else will like, I’d say thinking about selling or your inability to sell is a good idea, no?
Or maybe I’m just misunderstanding…
“I’m single now but I won’t be forever,” Tabor said.
Sure…right.
My god you guys are a negative bunch. I hope you all have a much more positive outlook in life outside of Cribchatter.
“how is that possible?”
Completely un-, of course.
Wait…whaddaya mean we aren’t the center of everyone’s day?
I would hedge a bet that if you buy the right place now low enough (no cookie cutter crap and it pretty much has to have parking/WD/CA), you could potentially make 10% by selling in 5+ years.
All you people who say differ…I betcha you didn’t make anything when the stock market was dropping around Thanksgiving 2008 eh??? Keep thinking negatively and not investing!
I would hedge a bet that if you buy the right place now low enough (no cookie cutter crap and it pretty much has to have parking/WD/CA), you could potentially make 10% by selling in 5+ years.
All you people who say different…I betcha you didn’t make anything when the stock market was dropping around Thanksgiving 2008 eh??? Keep thinking negatively and not investing!
Rental/ownership parity for $2,000 in monthly rent is around $420k right? Assume taxes of 5k and HOA of $250 / mo.
Honestly, I think a lot of 2/2’s are pretty close to parity in LP. The rents have held up pretty well. I can see frustrated renters wanting to buy based on this.
The article proves my theory that a lot of the gap between renting and the ownership premium is the nesting instinct.
“Single women: 31%, Single men: 16%”
“Average home price for single men and women in the city of Chicago who were first time buyers: 1. Single men: $141,000, 2. Single women: $141,471”
These averages seem awfully low for Chicago. If they are indeed correct the purchasers may not take a hit in the future resale as we know the government is doing any and everything to support the entry level of the housing market. Doesn’t seem that irresponsible if someone making 70k buys a 140k place to be honest.
I just wish we had financing details for some of those interviewed. 😀
“Rental/ownership parity for $2,000 in monthly rent is around $420k right?”
That’s a little aggressive, unless you’re assuming 20% down and disregarding the op.cost (not wholly unreasonble, to me). But you certainly could make it look pretty if you wanted to, so someone inclined to own would readily believe it.
“Doesn’t seem that irresponsible if someone making 70k buys a 140k place ”
But the people buying the $140k places are probably (mostly) making $40k. And to them, $8k seems a lot bigger than it does to a hi-roller like you, bob.
I dunno. When I think of idiots supporting crazy housing prices in Chicago I think of 24-31yr old people earning 50-80k buying a 210-250k 1/1 in one of the green zone hoods. Which is probably what category Mr. Tabor falls into to a tee. Not someone buying a 140k place (which indicates the mix is obviously outside the green zone).
“Not someone buying a 140k place (which indicates the mix is obviously outside the green zone).”
If you’re interested, do a Redfin search for 3 month close under $100k in any sub-hood outside the green zone. There are *tons* of ridiculous low-price closings (sub-$10k), which obviously drag down the average, and some number of them are going to first-timers.
I also suspect that, with the $8k out there, there are a fair number of younger, single folks getting a little parental bump to take advantage of the “free” money–it’s very easy to imagine a parent with a kid making ~$40k in their mid-20s looking at a $125k condo and $8k free, kicking in a few shekels to make it work out.
Is CCRD down right now?
“Is CCRD down right now?”
Must be taking Pulaski Day off, too. The servers must be Polish.
It’s been down since yesterday
~~~~Why bother paying your mortgage when you can default and live for free?????
February 16, 2010
“S&P Estimates a Three-Year Overhang of Shadow Inventory ”
That looming shadow of housing inventory that’s graced so many headlines lately has put the entire industry on edge. And that uneasiness was validated in a report published by Standard & Poor’s (S&P) Tuesday. Theratings agency said this hidden supply of REOs and pending foreclosures will likely take 33 months – or nearly three years – to clear if liquidation rates hold steady.
Even more unsettling is that S&P called its estimate “conservative” because the company’s analysis was based on the number of properties the company believes to be lurking in the shadows right now – repossessed homes that banks have not put on the market and already delinquent mortgages that will likely turn into foreclosures. S&P’s assessment does not take into account any loans that have yet to show serious signs of distress.
“We believe that in reality additional loans will default in the near future due to the weak economic environment, distressed residential home values, and the resulting contraction in the supply of mortgage finance,” further increasing the overhang of the shadow inventory, S&P said.
http://www.dsnews.com/articles/sp-estimates-three-year-overhang-of-shadow-inventory-2010-02-16
~~~~~ But very few of those DQ home owners are getting permanent loan mods, only 116,000 so far. And those have a 55 or 60% redefault rate. So what happens when the trials expire or they don’t qualify for permanent mortgages?
February 17, 2010
http://www.ustreas.gov/press/releases/tg551.htm
” WASHINGTON – The U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today released January data for the Administration’s Home Affordable Modification Program (HAMP), demonstrating that the number of homeowners receiving immediate relief and converting to permanent modifications continues to rise. More than 116,000 homeowners now have permanent modifications, nearly doubling the number from December, which also marked record progress. An additional 76,000 permanent modifications have been offered, and are waiting only for the borrower’s signature. In total, over 1 million homeowners have started trial modifications and nearly 1.3 million offers for trial modifications have been extended to homeowners.”
“I dunno. When I think of idiots supporting crazy housing prices in Chicago I think of 24-31yr old people earning 50-80k buying a 210-250k 1/1 in one of the green zone hoods. ”
So what price should 1/1s in the green zone be then? 2x earnings?
“So what price should 1/1s in the green zone be then? 2x earnings?”
I’m financially more conservative than most and would go with that. Others not as much. Perhaps around 3x earnings.
The thing is 1/1s in the green zone are “waystations” to the suburbs as another put it. And they’re taking significant risk with their financial and overall future by buying these.
I can’t figure out why a 1/1 condo in Lakeview should go for 220-300k whereas a spacious SFH in the burbs for 350k. Or a spacious SFH in the city in a non-prime hood for 450k. You’re getting a lot more house for your $$$ in the SFH.
I suspect the high valuations for the apartments is indeed due to past and continued massive government intervention.
um they get kicked out of their homes and become bad renters?
I agree Bob, a 1/1 in Lakeview for that price is fairly silly. However, I think there is a lot of value attributed to the neighborhood itself and being close to the lake/LP by young people. The nightlife in suburbs isn’t great.
Is buying a 2/2 a less idiotic option? I’m considering buying in RN, 5-10 minutes walking distance from work. I’d be looking at about 4x earnings.
don’t tell that to ppl on this site
“I’d be looking at about 4x earnings.”
I don’t have the quotes but Warren Buffet generally agrees with my view. The ultra-low end in most markets have reached rental parity. That market is bottoming out.
It’s the ultra-high end that continues to be over-priced and challenged (along with a few other structurally messed up markets).
“It’s the ultra-high end that continues to be over-priced and challenged ”
What do you consider the threshold for “ultra-high” end in Chicago? (and, for that matter, ultra-low)
If you are talking “ultra-high net worth” that’s $30mm+ NW. The market for housing for that asset class has always been screwed up–ie detached from RE fundamentals.
If you’re tagging “ultra-high” as something like $1mm+, it’s screwed up, but it’s not anything that “ultra-high” makes sense with.
“The ultra-low end in most markets have reached rental parity”
In my view the ultra-low end in Chicago is actually far below rental parity. Chicagoland has always been weird in a sense to me in that the rent differentials between bad and good neighborhoods isn’t _that great_ for comparable dwellings. The RE differential is astronomical however.
You can get a house in a bad ‘hood for well under 100k. Yet it would rent for $700-900. In a good ‘hood you could rent a similarly sized condo for $1300 but the house would go for $300k+.
I suspect a lot of this is (again) due to government intervention in the form of section 8 vouchers and other programs which keep rents otherwise higher than they would be in these other neighborhoods.
“I can’t figure out why a 1/1 condo in Lakeview should go for 220-300k whereas a spacious SFH in the burbs for 350k. Or a spacious SFH in the city in a non-prime hood for 450k. You’re getting a lot more house for your $$$ in the SFH.”
Really? I’m not being apologetic for $300k 1/1’s in LV/LP or whatever, but I’m willing to pay a high premium to live in a great neighborhood (I don’t need much space), instead of throwing a dart at a map and choosing one of any of a number of suburbs that are boring carbon copies of each other.
“I suspect a lot of this is (again) due to government intervention in the form of section 8 vouchers and other programs which keep rents otherwise higher than they would be in these other neighborhoods.”
Of course it does, b/c they don’t use particularly narrow areas to define “market rent” (or whatever the exact term is). So the rent for the luxury condo in the GC increases (slightly, but still) the rent payable for the rathole in Lawndale (or wherever), making that property more valuable as a cashflow property, then driving up the price of the exact same property in a decent hood (b/c if the bungalow is a warzone is worth x, the same house in Bridgeport *must* be worth at least x+20%), which then repeats.
“Is buying a 2/2 a less idiotic option? I’m considering buying in RN, 5-10 minutes walking distance from work. I’d be looking at about 4x earnings.”
4x income for a 2/2 is totally doable (and a much less idiotic option than buying a 1br) if you ditch your car, and walking to work on a nice day as well as the time saved commuting is priceless.
“4x income for a 2/2 is totally doable (and a much less idiotic option than buying a 1br)”
Why should the type of place have any bearing on the “doability” of a mortgage at 4x your income? Idiocy of buying a 1br notwithstanding, I’d think it would be even less doable at 4x income for a 2/2 since you have appropriately higher assessments/taxes for the bigger unit.
Because if times are really tough you can rent out your other bedroom in your 2/2, what can you do with a 1br? Rent out your fouton?
“but I’m willing to pay a high premium to live in a great neighborhood (I don’t need much space),”
With regard to renting you really don’t have to. I lived in the Woodlawn neighborhood a few years ago and my rent was $670/month (all utilities included). No cable and internet included though.
Here in Lakeview my rent was recently $755/month (now its $695), with cable and internet included but not electric. My place in Lakeview is about 100sf smaller.
Thats whats crazy about Chicago: there aren’t significant differences in rents in two drastically different neighborhoods.
Even a total apples-apples using, say a top floor 3/1 in Humboldt Park you can get this for $1,050, in Wrigleyville it can be had for $1,550. Yet the RE premium on Wrigleyville vs Humboldt Park is far more than 50%.
“Why should the type of place have any bearing on the “doability” of a mortgage at 4x your income? Idiocy of buying a 1br notwithstanding, I’d think it would be even less doable at 4x income for a 2/2 since you have appropriately higher assessments/taxes for the bigger unit.”
Does “doability” only account for the cost of living (e.g. PITI+HOA+food+other spending), or also how desirable a property is? If my total expenses (including savings/entertainment spending) are less than my take-home pay, then what is un-doable about a property? (Assuming zero debt and emergency cash reserves).
“I would hedge a bet that if you buy the right place now low enough (no cookie cutter crap and it pretty much has to have parking/WD/CA), you could potentially make 10% by selling in 5+ years.
All you people who say different…I betcha you didn’t make anything when the stock market was dropping around Thanksgiving 2008 eh??? Keep thinking negatively and not investing!”
Is that 10% after you pay the realtor fees, closing costs and transfer taxes (which will eat up anywhere from 7% to 9%?)
If so- that means you’ll have to see 20% appreciation in the next 5 years to “make” your 10%.
Considering the Chicago market has yet to hit a bottom- and historically has risen 1% to 3% a year- I’m not liking your odds of that return.