Market Conditions: Tax Credit Blues as Chicago July Home Sales Sink 19.5% Year Over Year
July’s sales numbers were highly anticipated due to the expiration of the tax credits at the end of June.
Similarly to other parts of the country, as the tax credit pulled sales forward in the spring, sales sank in Chicago, the Chicagoland area, and statewide in July.
From the Illinois Association of Realtors:
In the city of Chicago, July total home sales (single-family and condominiums) were down 19.5 percent to 1,589 sales compared to 1,975 homes sold in July 2009. The city of Chicago median price in July 2010 was $196,500, down 19.8 percent compared to $245,000 a year ago in July 2009.
“In the city of Chicago, July’s reduction of units sold by 19 percent seems consistent with what Chicago REALTORS® anticipated for the summer as buyers on the fence moved up their purchases to earlier in the season in order to qualify for the federal tax credits then-offered to move-up or first-time homebuyers,” said REALTOR® Genie Birch, president of the Chicago Association of REALTORS® and a broker associate with Koenig & Strey Real Living, Chicago. “While it still remains a great time to buy, buyers are guarded as they consider their own financial stability and job security in the current market, hindering many from making a purchase.”
Statewide, sales in July were down 29.7%. In the Chicagoland area, they were down 25.1%.
Here are the statistics for Chicago for July for the last 4 years:
- July 2010: 1589 sales
- July 2009: 1975 sales
- July 2008: 2167 sales
- July 2007: 2738 sales
“The hangover from the expiration of the tax credit in April may extend into fall with forecasts for sales on an annual basis for the next three months indicating a continuation of the July experience,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois. “The anemic growth of private sector jobs is dampening chances for a more robust recovery. The expectation has to be that the slowing of the national economy will affect Illinois’ growth prospects over the remaining months of the year.”
Post-Tax Credit Pause in Illinois Home Sales Activity for July; Year-to-Date Sales Remain Up 15.0 Percent Statewide [Illinois Association of Realtors, Press Release, August 24, 2010]
I had this question: So wait – REALTOR is a trademarked term, not a profession? So not all real estate agents are REALTORS?
And realizing that instead of just asking CC I should research. Found this link:
http://www.realtor.org/realtororg.nsf/pages/whoisarealtor
The More You Know.
On this article, I did find the sales drop to perfectly illustrate demand being pulled forward as everyone predicted. Pretty neat and cut & dry.
Yeah, I screwed up yesterday. The 6.1% number I quoted was the decline in contracts for July. Contract activity was not as far down in July as in May and June. There’s about a 1 – 2 month lag between contracts and closings. So here is what has been going on with contracts: http://www.chicagonow.com/blogs/chicago-real-estate-getting-real/2010/08/chicago-home-sales-to-decline-for-first-time-in-10-months.html
Sort of a look into the future.
The number of sales decreasing is bad – but remember that this means there are more people on the sidelines waiting to jump in (as there will ALWAYS be a need for real estate AND the population keeps growing).
However, the median sales price data is garbage – remember this takes into account ALL of chicago. We already know that investors are snapping up foreclosures/short sales and “low end” properties. You have to take this number with a grain of salt. If you really want to personalize the data for your own decision making, check out sold homes in the price range you AND areas in which you are looking. You may be disappointed or pleasantly surprised – there is a HUGE variation between Chicago neighborhoods.
For those of you concerned about interest rate increases, which leads to higher mortgage rates, don’t be. The Eurodollar (trader talk for u.s interest rates) is trading with the idea that the FED is only going to raise rates by one-quarter of one percent over the next year. Inflation is nowhere in sight. Only major changes to freddy and Fannie could make mortgage rates go up alot in the next year.
Sounds like a lot of starving Realtors(tm) need to transition back to dog grooming and bartending.
Hold on tight folks, because this is the beginning of the next leg down in home prices….
If there is such a huge decline in sales in the Chicagoland area, are rental units are on the increase? Where is this information available?
As far as people ‘waiting to jump’ into the arena, this simply is not true. Are ppl waiting for better and better deals? Of course, but even with these so called deals (shortsales can hardly be called deals) most are simply too hung up on losing money on their RE investments to take that chance.
Personally, I will not be buying in Chicago for the next few years and I am fine with that. Providing financing for a few individuals, yes but buying for the sake of renovating, no.
As far as outside of Chicago, Miami in particular, I have recently invested in a number of new developments and have put those up for rentals. As fast as they hit the rental market, they are being taken as other than foreign investors, no one is able to obtain financing for them. NO ONE.
Starving realtors need to transition back to dog grooming and bar tending….that is funny! Nothing wrong with either profession. If you get good at either craft and build a clientle one can earn a decent living at either occupation. No surprises at the closing table (aka cash register) in either of those professions! And rarely does someone back oit of a drink because their friend saw something on the Internet ( crib chatter) making them feel bad about their decision.
Finally if your dog looks worse after the remodel (grooming) just give it a few months and he/she will grow it back and regain full market value!
Sounds like there is little down side!
Party like it’s 1999:
http://noir.bloomberg.com/apps/news?pid=20601087&sid=aTa9xAXkpKaU
Sales of U.S. Existing Homes Fell in July to 3.83 Million Rate
By Courtney Schlisserman
Aug. 24 (Bloomberg) — Sales of U.S. previously owned homes slumped more than forecast in July and the number of unsold houses swelled, evidence the market is depressed by foreclosures and limited job growth.
Purchases of existing homes plunged 27.2 percent to a 3.83 million annual rate, figures from the National Association of Realtors showed today in Washington. The pace compares with the median forecast of a 4.65 million rate, according to a Bloomberg News survey.
A tax credit of up to $8,000 boosted sales earlier in the year, pulling forward demand and indicating additional advances will prove difficult. Mortgage rates at record lows have provided scant relief to the industry as unemployment hovers close to 10 percent, foreclosures hold near record-highs and the economy cools.
“To have a full recovery in the housing sector we need a full recovery in the job market,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “The low mortgage rates normally would help quite a lot but we really need to see the job growth pick up for housing to improve.”
The pace of existing home sales is the slowest since comparable records began in 1999.
My issue with a bar is the inventory control and employee theft risks, coupled with the max units that can be moved. Very narrow band for profit.
The idea of owning a bar is very alluring though.
maybe you can open a place called RILF’s and have them dress up in short skirts and walk around with a clipboard taking your order
“Very narrow band for profit.”
Its my educated guess the majority of bars in Chicago either lose money or barely break even. Definitely not worth it for most bars unless you’ve got a catch. Like the only neighborhood bar around and it’s cash only (so no taxes), etc.
Despite all of the negative data coming through, I am very positive about real estate for both investors AND non-investors for several reasons:
1. Non-investors realize that their home is NOT going to be a cash machine but ARE looking for a nice permanent place to nest. For these people, now IS the time to buy (interest rates and home prices ARE at or near their lows) – so my advice to a non-investor looking for a good place to raise their children and be happy for the next 20 years is to go out and buy a place now or in the near future – you will have great peace of mind. Also, once you buy, do NOT track prices, etc. as they have no bearing on your particular situation (if you are planning on spending several years in your home).
2. Investors: home prices and rates are incredibly low right now. Do what westloopelo said he did and try to purchase all of the “great deals”, rent them out and then “flip them” when the market comes back. You have to remember that you may have to wait 5-10 years and should have enough reserves to cover periods when the unit is not rented, upkeep, etc. – but this strategy WILL work in the long run on MANY properties out there.
If people would learn to think “outside the box” they may be much happier than simply listening to idiotic misrepresented data and the opinions of several nay-sayers (and I don’t necessarily mean the people on this site).
This, unfortunately, is how you make money at a bar. He was just stupid enough to admit it to IRS agents who so happened to be recording their conversations.
http://cbs2chicago.com/local/bar.owner.taxes.2.1517750.html
“#Bob on August 24th, 2010 at 8:28 am
“Very narrow band for profit.”
Its my educated guess the majority of bars in Chicago either lose money or barely break even. Definitely not worth it for most bars unless you’ve got a catch. Like the only neighborhood bar around and it’s cash only (so no taxes), etc.”
Clio:
If I had a nickel for every seller waiting 5-10 years for the market to come back, I’d be even richer than you!
oh damn I loved the Holiday Club, is it still open?
“This, unfortunately, is how you make money at a bar.”
There’s only two bars in Chicago that I know of where I know the owners are making a killing and neither take credit cards. The reason is the owners know if they do that the IRS can figure out an approximation their net cash receipts. I’m fairly confident neither owner is straight on their taxes–their tax savings likely more than offsets any lost business from not taking CCs.
For all those folks saying we are “near the lows” or are “at their lows”, you really have no idea.
There is only one way to be CERTAIN that prices are at their lows: When a all cash buyer can rent a property and get a 6-7% return after all operating expenses. That is when you can be NEARLY certain that whatever bank owned overhang remains will clear quickly. Once it does, reduced long term demand for home ownership, as plenty of people got burned and will be renters for a long long time, will finally exceed supply. Then prices begin to rise.
Does this mean we WILL reach a 6-7% cap rate for all cash buyers? (ballpark another 30-40% drop from today depending on property) NO. I’m not saying we will.
I’m saying that if we DO reach those kinds of prices, we CAN start throwing around stuff like “home prices ARE at or near their lows”.
In order to convince anyone that our current price levels are a bottom, you have to explain how demand will exceed supply. That’s how prices rise and bottoms form!
You have to explain by what mechanism all that bank-owned supply is going to clear. You need to explain how the lender-owned supply is going to get off their books when just the lender-owned stuff represents several months worth of home sales in the city of Chicago. Then you’ve got to explain why lender-owned supply won’t INCREASE in the next year even if they start selling their current holdings aggressively. Let’s remember that good chunk of the foreclosures of the last 400-500 days will end up with the lender. It takes a long time to get to repossession. If a lender owns a property today the borrower was probably already behind when George W. Bush was President. So there’s a lot more coming.
Prices at or near their lows? Don’t bet on it.
“The number of sales decreasing is bad – but remember that this means there are more people on the sidelines waiting to jump in (as there will ALWAYS be a need for real estate AND the population keeps growing).”
Yeah right, all the folks I know are actually dying to “jump out”, except that they are stuck with negative equity. Each one of them would happily rent for the next few years if only the could get out of this mess.
“Yeah right, all the folks I know are actually dying to “jump out”, except that they are stuck with negative equity”
To continue the analogy–you mean they “jumped in” before, but instead of water it was an empty pool and they broke their legs?
So let me get this right. The sales just moved forward, so folks who were going to buy anyway got a lot of taxpayer money to do so. Wow, what a great use of taxpayer money. Maybe those billions could have been spent on improving education in this country so we could groom the next generation of engineers and scientists, or invest in infrastructure so businesses can grow in depressed areas. But no! we need to keep the builder, NAR lobby happy.
I hope they are happy now.
Over the past two years they’ve spent trillions robbing public coffers to give bailouts and handouts to special interest groups. You’re angry at just a few billion?
You honestly thought the US Government is answerable to the people and not special interest groups?
Unfortunately for some politicians, they are going to learn the hard way come election day. They can go bartend along with the former Realtors(tm).
Bob,
You know little to nothing of how a bar operates! Every bottle that is sold by a distributor is recorded and they are taxed pre-sale on those bottles. It has nothing to do with accepting CC or not. The only bearing CCs have relevence to the IRS are the paper trail they leave for both the business selling product and for the servers/bartenders who receive tips on them.
It is easy to ‘hide’ cash tips from IRS but not easy for either of them to hide CC charges.
As far as theft is concerned, a properly run (and profitable) barowner will allow his bartenders an ‘allowance’ or a set number of free drinks they are allowed to pour. These ‘buy backs’ or free drinks are rung up just as they would be in a real sale, then they are comped in order to account for the product both by the person responsible for the accounting (owner) and for the state alcohol regulatory agency.
The failure rate is high in bars and restaurants but theft by employees is only a tiny part of why they fail. Too much competition and not enough alcoholics is the main reason for failure.
“Every bottle that is sold by a distributor is recorded and they are taxed pre-sale on those bottles.”
I’m sure this is easy to get around as well.
“The failure rate is high in bars and restaurants but theft by employees is only a tiny part of why they fail. Too much competition and not enough alcoholics is the main reason for failure.”
I agree here. It sounds glamorous/cool as a business opportunity until you realize how much overhead and work is involved and how slim your margin for profit/error is.
But trust me those two bars I mentioned likely net their owners near six figures–they are definitely the exception not the rule.
“If people would learn to think “outside the box” they may be much happier than simply listening to idiotic misrepresented data and the opinions of several nay-sayers (and I don’t necessarily mean the people on this site).”
Or maybe they should realize that everything isn’t quite as hunky-dory of a picture as you’re painting, do a WHOLE LOT of thinking about taking on 30 years of debt (especially in these economic doldrums) and then make an appropriate decision?
I’m not a permabear like most people here (I just bought my first property a few weeks ago) but your care-free cheerleading that now is the time to buy is equally as bad as the permabears.
I am not a permabear. I’m bullish on further price declines.
“I am not a permabear. I’m bullish on further price declines.”
Life is all a matter of relatives and perspective.
“but your care-free cheerleading that now is the time to buy is equally as bad as the permabears”
please don’t get me wrong – nobody should jump into something blindly. People should be very careful and think about their particular job stability, life situation, etc. and do careful analysis before deciding WHETHER to buy or not. HOWEVER, once they HAVE decided that they want to buy, now IS the time to do it. That is what I am saying (not that everyone should buy right now).
Bob: “Its my educated guess the majority of bars in Chicago either lose money or barely break even.”
This is almost by design. Many clubs & restaurants have a group of silent partners who just might benefit taxwise from an loss. It’s also a cash business for people who already deal with lots of paper cash.
For a regular civilian (not in the know of how chicago works) to try to open a restaurant or bar would be folly. You’ll just end up getting screwed. The Chicago Syndicate’s indirect control over alcohol distribution, concessions, city inspections, equipment, labor, etc. is just too prevalent.
To start your own restaurant or bar, you need to already be in that business and understand how things really work in this city.
“Yeah right, all the folks I know are actually dying to “jump out”, except that they are stuck with negative equity”
satre – where are these people going to live? where do they want to jump to? Remember, everyone needs a place to live. Although I understand that they may feel the weight of the world on their shoulders, they should realize that the grass may NOT be greener on the other side (renting). As long as they do not NEED to move, they should stop looking at home prices, enjoy life and re-address the situation in 3-5 years (again, assuming that they do not HAVE to move). Seriously, who cares if you have negative equity when you don’t HAVE to move? Don’t panic. Things will change, just keep your eye on the distant future.
“If I had a nickel for every seller waiting 5-10 years for the market to come back, I’d be even richer than you!”
~70mm homeowners (not all of whom are waiting) = $3.5mm, max, probably more like $2mm. Nothing to throw away, but not exactly richer than the clio persona.
Hate to go against the grain and agree with Clio again but his concept is true. If you are buying for 20 years and truly intend to stay there for the long term perspective then buying now is not much more of a risk than buying in five years.
Unless the world changes dramatically then average prices in 5 years for SFH in good areas could easily be +/- 15% from today’s prices. That means that on an amortization schedule you will be 5 years further down the line on paying off the note and living for taxes and upkeep. This is a great place to be!
“Unless the world changes dramatically then average prices in 5 years for SFH in good areas could easily be +/- 15% from today’s prices. ”
I don’t see any +15% upside in 5 years. You would have to be extremely bullish on inflation to believe that.
“I don’t see any +15% upside in 5 years. You would have to be extremely bullish on inflation to believe that.”
….care to make a wager on that?
“Hate to go against the grain and agree with Clio again but his concept is true. If you are buying for 20 years and truly intend to stay there for the long term perspective then buying now is not much more of a risk than buying in five years. ”
Of course. I don’t think that’s against the grain at all–altho recently my suggestion that ~7 years for break-even on an open market purchase was contested.
If you have reasonable confidence that you will stay in a house for 20 years, you buy within your initial means, in a stable neighborhood, and the house has no major defects, you are *extremely* likely to be ahead financially at the end. The 20-year ‘hood stability is the one hardest to account for thing.
“If you are buying for 20 years and truly intend to stay there for the long term perspective then buying now is not much more of a risk than buying in five years.”
What subset of the population KNOWS that they’re going to buy a place and live there 20 years? It has to be razor thin. This was obviously much more prevalent in the days of ethnic neighborhoods and working at the same job your whole career, but it just doesn’t happen anymore.
‘~70mm homeowners (not all of whom are waiting) = $3.5mm, max, probably more like $2mm. Nothing to throw away, but not exactly richer than the clio persona.’
anon, your literalness would make even Scalia blush!
“What subset of the population KNOWS that they’re going to buy a place and live there 20 years?”
Bob- I get your point, but there ARE many people who expect to live in a place for a long time. Sure, things happen and they may have to move – but you can’t live your life expecting something terrible and disruptive to occur.
sorry bob, i meant “barry”
“If you are buying for 20 years and truly intend to stay there for the long term perspective then buying now is not much more of a risk than buying in five years.”
There is the option to wait a year or two. What are the odds that prices will go down significantly over that period? (And yes you have to take future interest rates into account too.) That’s the risk you have to assess. And of course it’s not certain and timing the market is not easy.
Certainly if you stay in a place for 20 years you’ll be fine in some general sense.
“….care to make a wager on that?”
We have no way to settle the bet. But yes a gentleman’s wager. In five years time there is no conceivable way, IMO, that house prices will be +15%. I don’t see it in the cards from where I sit.
Would the wager be inflation adjusted?
“There is the option to wait a year or two. What are the odds that prices will go down significantly over that period? (And yes you have to take future interest rates into account too.) ”
DZ- absolutely true and good advice. Each person should look at the risks of buying now and buying in 1-2 years.
Pluses and minuses for buying now vs. waiting:
“+”s for buying now:
1. peace of mind
2. lock into a guaranteed low interest rate
3. low home prices
4. you start whittling away at your principal earlier
5. tax advantages (mortgage interest and real estate tax)
“-“s for buying now:
1. prices MAY go down another 10% (MAYBE)
pluses and minuses for waiting 1-2 years:
“+”s for waiting:
1. prices MAY do down another 10% (MAYBE)
2. your life situation may change (most people overemphasis this point and people’s lives rarely change)
“-“s for waiting:
1. interst rates could go up
2. home prices could go up (risk of being priced out of the market)
3. miss out on potential tax savings
4. throwing away money on rent
5. 2 years behing on whittling away your principal
“1. prices MAY do down another 10% (MAYBE)”
Prices could go down another 20%+..
“2. your life situation may change (most people overemphasis this point and people’s lives rarely change)”
Not to be a nitpicker, but you visit here plenty, how often do we see baby cribs in 2/2 condos bought 2-3 years prior?
“Prices could go down another 20%+..”
extremely doubtful in the decent areas of chicago.
On the -‘s for waiting:
1. almost certainly rates will go up, to what extent is unclear.
2. home prices are not likely going up unless we have inflation.
3. tax savings are irrelevant–spending $1 to save at most 35c.
4. the vast majority of the payment in a mortgage payment when originated is “throwing money away” in interest, taxes, insurance and HOA fees.
5. 2 years behind on whittling away principal is irrelevant if we’re talking about additional price declines.
Your +/- analysis is overly simplistic and filled with points not really related to the rent vs. buy decision.
“extremely doubtful in the decent areas of chicago.”
Your overly simplistic +/- analysis leads me to believe you’re more of a qualitative person and not quantitative. Hence your predictions regarding future valuations hold little water with me.
“Not to be a nitpicker, but you visit here plenty, how often do we see baby cribs in 2/2 condos bought 2-3 years prior?”
absolutely true – but in today’s market, if you are newly married, engaged or looking for a spouse, you should be EXPECTING to have kids in the next 10 years and will be looking for the appropriate housing. Thoses poor souls who bought 2/2 condos, didn’t realize that the housing market was going to tank and thought that they could flip and move up. That is NOT the thinking any more.
Basically clio cheerleaders like you and your ilk have been on this board posting the same nonsense since 2008. When your ilk are irrefutably proven wrong in retrospect they magically disappear never to be heard from again.
Your continued cheerleading to buy also lends credence to my theory that you’re just an underutilized junior Realtor.
The bears have been right, Clio, and your position has not been for the past two years. To believe you now is laughable at best, downright misleading and insincere at worst.
My +/- 15% comment was really to demonstrate that I feel comfortable that many SFH in neighborhoods (burbs) with great schools, decent housing stock, and stable histories will continue to hold most value. Sure they might dip over the next 2 years but I suspect that in 5 years they will be back to at least 85% or higher of today’s values. I do agree that +15% is highly suspect!
As for the “twenty year plan” you are all correct in suggesting that it is not as realistic as our parents that we will stay put. Jobs will come and go and our desire to withstand another Chicago winter get harder as we age.
My perspective is slanted as I own a business that ties me to Chicago and my wife does not want to take the bar exam again in another state. Perhaps that is the exception but I know a fair number of people that telecommute or work from home some days. This allows them to live wherever they prefer. Will that subset continue to grow over the next decade?
“tax savings are irrelevant–spending $1 to save at most 35c.”
WTF are you talking about?!!
Maybe you DO need me to simplify the answers. Let me explain it to you:
When you pay 2000/month rent, you can’t deduct that from your income tax (100% loss of that money) – but when you pay 2000/month in mortgage interest, you can deduct that (yes, you only get 35cents to the dollar max) but you still get that savings….(which could be up to 8000/year).
I’d like an additional $8K per year added to my discretionary income. That would be welcome anytime!
“Your overly simplistic +/- analysis leads me to believe you’re more of a qualitative person and not quantitative.”
OK – why don’t you go and listen to all of the “experts” and their in-depth analysis. Seriously, if they knew what was happening, they would have predicted it (I know, some did) and stopped it before it happened. Even now, if the “experts” knew WTF they were talking about, they could implement measures that would work and ease this recession. So far, all I have seen these “experts” do is spend our tax dollars on programs that have miserably failed. Maybe what people need to do IS take a qualitative, simpler look at the problems.
“When you pay 2000/month rent, you can’t deduct that from your income tax (100% loss of that money) – but when you pay 2000/month in mortgage interest, you can deduct that (yes, you only get 35cents to the dollar max) but you still get that savings….(which could be up to 8000/year).”
Because in Chicago, clio, you can actually get a much nicer rental for the same amount as your mortgage as there doesn’t exist rental equivalency. “Tax savings” are on of the things people throw in there after the fact to console buyers of this reality.
Can’t an owner of rental property deduct interest as well? If rental prices had some relationship to the cost of providing rentals, wouldn’t the deductibility benefit be reflected, to some extent. I don’t own rental property, just curious about this.
“So far, all I have seen these “experts” do is spend our tax dollars on programs that have miserably failed.”
I agree with your entire paragraph and especially this sentence but not your last sentence. These days I think a simple analysis is flawed–there are too many variables at play here and too much near-term uncertainty with regard to how involved the government is going to be in the housing market, interest rates, the economy, etc. I think one should only consider owning when they are reasonably confident about the future.
“OK – why don’t you go and listen to all of the “experts” and their in-depth analysis. Seriously, if they knew what was happening, they would have predicted it (I know, some did) and stopped it before it happened. Even now, if the “experts” knew WTF they were talking about, they could implement measures that would work and ease this recession. So far, all I have seen these “experts” do is spend our tax dollars on programs that have miserably failed.”
You’re assuming that the people that (somewhat) predicted that the shit was about to hit the proverbial fan were in any way capable of doing anything to prevent our disaster, when in fact it was the Treasury Department (Brought To You By Goldman Sachs) and everyone they were in cahoots with looking out for their best interests and looting the American public for DECADES.
“Can’t an owner of rental property deduct interest as well?”
Not really – the interest you pay goes into your yearly expenses and can be deducted from the rental income and/or when you sell the property (for a gain or a loss). You can also depreciate your rental property over 30 years (and avoid – actually defer- paying income tax on your rental income).
“anon, your literalness would make even Scalia blush!”
Enh, not if Scalia were messing with HD, too. altho I fear it might end up like messing with sasquatch.
“Not really – the interest you pay goes into your yearly expenses and can be deducted from the rental income and/or when you sell the property (for a gain or a loss).”
Why isn’t that a deduction (or effectively the same)? You pay less in taxes because of the interest payments?
“Why isn’t that a deduction (or effectively the same)? You pay less in taxes because of the interest payments?”
Doesn’t offset Ordinary Income–so it won’t reduce the taxes you pay on your income, but would create a tax loss for the property to offset gains upon sale. Quite useful for a professional RE investor (or a RE investment Co.), but not so much for someone with 1 or 3 or 4 rental units.
“Why isn’t that a deduction (or effectively the same)? You pay less in taxes because of the interest payments?”
It is pretty much the same – just more convoluted and confusing to figure out.
Agreed anon, and Clio it’s only pretty much the same if you have substantial RE investments. When I rented out the first place I owned (for years), I was pleasantly shocked how much better the tax advantages when I “moved up.”
Great example of getting hosed by being honest (I think I might’ve been the first person in Chicago history to not take homeowner deduction while owning only 1 property. . . but I didn’t live there).
I’m not in the bar/restaurant biz, but I intuitively disagree with the following:
1) “The failure rate is high in bars and restaurants but theft by employees is only a tiny part of why they fail.”
It seems to me that Chicago bars have great lasting power, with many of the ones in the Green Zone open for years and decades now. Isn’t Northside in Bucktown still going? What about Justin’s in Lakeview? there are tons of places that are still going strong….
2) “To start your own restaurant or bar, you need to already be in that business and understand how things really work in this city.”
What about all the chain restaurants that entered the market in the last decade? What about newcomers like the Leftist “Revolution Brewing” that pop up and do well?
I can barely think of places in the GZ that don’t continue to prosper.
PS so how is it possible these places don’t make money???
Dan you have to understand the mentality of some CCer’s.
1. Nobody makes money.
2. Nobody can afford a million dollar property.
3. Nobody makes money.
Is Clio serious?
Even if things get back to “normal” in the RE market, single family home prices have a historical low percentage increase year over year in this country–that’s especially true when you look at 80 years of data. Generally, prices can be expected to match inflation and maybe beat it a bit. Those are historical numbers.
If you look at the massive percentage increase in prices from the late 90’s through 2007 they are disproportionate to the historical rule. That’s the bubble, which is essentially unprecedented in its breadth in this country.
So my question is, instead of blowing sunshine at folks with well reasoned arguments like Bob, how about explaining the how and why of the RE market returning to price growth greater than inflation, the CPI, or it’s historical numbers of 3-5% (and that’s a generous range)?
valasko,
If everything is so fine and honkey dory what do you think will happen with the CS index released next week? It should still reflect the tax credit as I believe it is June data. What do you think the CS index is going to do next month when it is July data, after the vast majority of closings from the credit deadline are done?
If things are so great valasko why did our government feel the need to try to bribe people to become owners to the tune of eight thousand dollars?
Sounds like your rose colored glasses are thicker than economic sunlight, or even common sense.
haha yeah thousands of bars in the city and none of them make any money… give me a frickin break, if you knew how cheap bars bought their booze and beer for you’d shit a brick at how much they make per glass they serve
Re restaurants/bars – personal knowledge, so I’ll speak.
1. You can make a lot of money in the business.
2. Most people don’t.
3. Biggest problem for most is recouping the initial investment. Since you mentioned Revolution brewing co., it’s a good example. Google their story, how long it took them to get up and running. People spend a lot of time and money getting those businesses off the ground. If they aren’t very well capitalized this leaves with a very short time to get cash flowing after the doors open. Hence most failing within a year or two.
4. Even for those that do make money, it’s a very, very hard way to make a living. I grew up in a restaurant/bar family. Long hours and your employees are typically unreliable and untrustworthy.
Bob,
Never said things are fine and honkey dory. As I have mentioned many times, I think this country is fck’d. That doesn’t mean that there aren’t ways to make money. The real estate bubble was just another nail in the coffin of the middle class in this country.
“Even if things get back to “normal” in the RE market, single family home prices have a historical low percentage increase year over year in this country–that’s especially true when you look at 80 years of data. Generally, prices can be expected to match inflation and maybe beat it a bit. Those are historical numbers.”
True – but you forget one VERY important point. When you buy, you get a fixed payment for 30 years. As you go further and further into your mortgage, the majority of that payment is principal – so by year 30, you are basically lving in your house for free (as opposed to renting).
In addition, if you are talking about an investment property, it is even better. As an example, you buy a 500k unit, put down 100k and have a 400k mortgage. Assuming a 4%mortgage and 750/month taxes/assessments, your monthly payment will be about 2700/month. If you can rent it out for that amount (I know, a big “if”), you will be far ahead in 30 years – EVEN if appreciation only follows inflation and your asking rents don’t go up. Basically, in 30 years, your mortgage will be paid off and even if you sell for an inflation adjusted price of 500k, you have gained 400k over 30 years on a 100k investment. That is a 400% return over a 30 year period (annualized return of 13% ). More realistically, your gain will be even higher because appreciation will likely be more than inflation AND rents will go up.
“if you knew how cheap bars bought their booze and beer for you’d shit a brick at how much they make per glass they serve”
Given the turnover in bars I’d say very few make money. The ones that do are likely the ones that have been around forever.
I’d say the average bar age in Lakeview is maybe 3-4 years old, and thats including the ones that have been around forever and will be until the owner dies.
Re the tax deduction/benefit issue, what I don’t understand is the proposition the tax deduction is a clear benefit in favor of owning a home, if there are comparable tax benefits for rental property owners. Yes, if you were comparing renting to owning, you would consider your personal tax benefit from deductibility of interest (and it’s got to the be incremental benefit that matters), but then that depends on how much the rental etc. is. I don’t understand the general proposition that the tax benefit is what makes owning better than renting. I can think of other benefits, but I don’t understand why there would be a clear benefit because of deductibility of interest.
“When you buy, you get a fixed payment for 30 years.”
Of the PITIA elements of owning real estate, only the P&I portion is fixed. The other two or three components: taxes, insurance and assessments (if applicable) most certainly are not and will increase over time.
Wow this is great.
Clio: “peoples lives rarely change”. That’s a big lol. Peoples lives change way more than they expect. Get married/have kids/lose job/job transfer/health issues/changing tastes w age/family issues (eg divorce, sick parents) are huge factors that people don’t consider. Your parents might have found it easy to stay in one job/place their whole lives, but good luck being 23-35 now and buying and holding for the next 20 years. As long as you buy within your means you can make things work, but that doesn’t mean that financially it’s the right call. I agree with anon in that if you think you’ll be somewhere for >7 years, you should probably buy.
“most bars fail”. Yeah, of course, most businesses period fail and most people who start them have almost no chance at success. People make horrible financial and strategic decisions in businesses across all industries, it is no surprise that in a competitive industry that is attractive to Joe six pack (literally), most people fail. Quite simply, don’t fail because of lack of alcoholics or because of the chicago “politics,” they fail because of the decisions of the people running them.
“but I don’t understand why there would be a clear benefit because of deductibility of interest.”
Because its FREE MONEY FROM THE GOVERNMENT!
Don’t do a comparable cash-flow rent vs own analysis, per clio’s point that is way too complicated. Instead just buy now (or else risk being priced out forever) and take your FREE MONEY FROM THE GOVERNMENT! woohoo!
PIMCO newsletter: http://bit.ly/aVDohq
300-400 bp!!
Bill Gross Explains Why The Housing Ponzi Must Go On, Or Else Society Will Suffer
“Having grown accustomed to a housing market aided and abetted by Uncle Sam, the habit cannot be broken by going cold turkey into the camp of private lending. The cost would be enormous in terms of yields – 300–400 basis points higher than currently offered, crippling any hopes of a housing-led revival to the economy.”
“Bill Gross Explains Why The Housing Ponzi Must Go On, Or Else Society Will Suffer”
Should read: “Bill Gross talks up his book, threatening Mayan Armageddon, if policymakers don’t acquiesce to his demands.”
“The other two or three components: taxes, insurance and assessments (if applicable) most certainly are not and will increase over time”
yeah – and so will rents – and rents will likely increase at a greater rate than taxes/insurance. so, if you are an investor, the increase in rents should cover the increases in taxes/assessments and if you are a buyer comparing the cost/benefit of renting vs buying, you should realize that the increase in rents you will be paying will likely be MORE than the increases in taxes you will incur as a buyer
“Clio: “peoples lives rarely change”. That’s a big lol. Peoples lives change way more than they expect. Get married/have kids/lose job/job transfer/health issues/changing tastes w age/family issues (eg divorce, sick parents) are huge factors that people don’t consider. Your ”
so I suppose you advocate living in fear of everything your whole life because life is unpredictable? Come on!! Live your life – life is too short and you don’t know when you are going to die/get sick. You HAVE to take a leap of faith once on awhile otherwise you will be a shriveled up little person w/anxiety issues!!
“and rents will likely increase at a greater rate than taxes/insurance.”
I disagree–ESPECIALLY on taxes. Also although economically motivated I am not payment neutral: I’d prefer to send a dollar to a landlord who I know any day over Uncle Sam, a bloated bureaucracy hundreds of miles away who I represent an SSN to and no more.
When you own unless you are a senior in Cook County you have a giant crosshair on your back for the taxman.
Owning really isn’t that useful of an asset class unless: 1) you’re poor and pay no taxes, or 2) you’re a senior and pay few taxes.
People are going to see their taxes at a minimum remain constant for the foreseeable future–somebody needs to pay those teachers 100k–the teacher’s union demands it, and this is bluest of blue Crook County.
“You HAVE to take a leap of faith once on awhile otherwise you will be a shriveled up little person w/anxiety issues!!”
Your most hilarious quote yet. These days to purchase real estate is exactly that–a leap of faith. I liken it to the economic equivalent of juggling those poisonous snakes some people like to do.
And as far as anxiety issues I’d say those are much more prevalent in the newly minted owner class of 2001-present instead of renters, generally.
Clio, it’s not so simple. You’re calculating ROI without figuring in costs. You figure that after 30 years of paying off a $400,00 mortgage (on $500,000 purchase price) that you’ve made $400,000–because you put down 20%. Here’s how substantially off you are.
1. That $400,000 mortgage doesn’t cost you $400K. It will cost you $400K (principal) plus interest plus your down payment. With your fact pattern, you’d be repaying about $330,000 in interest.
2. Your return is not a gain of $400k “over the years” as you state. Your return is (Home Value in 30 years) – (your $100k down payment) – (interest paid, here about $330,000) – (taxes/assessments paid) – (maintenance) – (insurance).
On a $500K purchase price, you’re paying $830,000 in principal and interest–not figuring in the other costs. Granted, I didn’t figure in interest deductions and real estate tax reductions–those will help your cause.
So, at the end of the day you own something but you’re not looking at the whole picture. And, the big missing variable is the Home Value in 30 years. That’s where the historical rate of return hits you. If it’s 3-5 percent, you’re in trouble because you could’ve put your $100K down payment into an investment at 5% over 30 years and fare better.
But hey, you always need a place to live and dump your money.
Why do you need to buy real estate to “live your life”?
Maybe for some life is too short to be saddled down with a 30 year mortgage.
“so I suppose you advocate living in fear of everything your whole life because life is unpredictable? Come on!! Live your life – life is too short and you don’t know when you are going to die/get sick. You HAVE to take a leap of faith once on awhile otherwise you will be a shriveled up little person w/anxiety issues!!”
Why Are Banks Withholding Highend Repossessions Over $300,000 From the Market?
“Let’s begin with Chicago.
RealtyTrac lists 2,650 repossessed homes for more than $300,000 and 169 for more than $1 million.
Here is where it gets really interesting. Out of 28,829 repossessed properties, there were only 1,292 listed by lenders as “for sale.” The vast majority of these available homes were inexpensive.
A mere 29 homes over $300,000 were for sale. In other words, the banks have withheld from the market 2,621 properties listed at $300,000 or higher.”
more… http://bit.ly/cu6YcR
“And as far as anxiety issues I’d say those are much more prevalent in the newly minted owner class of 2001-present instead of renters, generally”
True of people who bought in the early/mid 2000s – but not necessarily true at all of someone who buys now. remember, hindsight is 20/20 and does NOT necessarily represent what will happen in the future.
“and does NOT necessarily represent what will happen in the future.”
No clio you’re right. But I think credit markets are a pretty good leading indicator as that’s actually betting real money, as talk is cheap.
“In yet another clean sweep, the third in a week or so, sales of existing homes dropped twice as much as expected, worse than every economist forecast, to a 15 year low. Inventory soared to 12.5 month, the highest since 1999. Treasury yields plunged with yield on the 10-year note falling as low as 2.50 and the 2-year note hitting a new all-time low at .47%.”
http://globaleconomicanalysis.blogspot.com/2010/08/existing-home-sales-plunge-27-worse.html
The economic maelstrom is returning and no-one on this board who didn’t get sucked into RE between 2007 and today is likely going to any time soon. Why buy now when I can get a killer deal on someone else’s failed dreams who overextended themself in a few short years time?
Bill Gross = world’s biggest shill
seriously… he’s so aggregious now I don’t even know why people listen to him or give him money. If people weren’t so stupid and actually knew how bond funds work they would be out… and really fast
“So, at the end of the day you own something but you’re not looking at the whole picture.”
OK – fine. However, you failed to factor in the money you would be spending on RENTING instead of buying. That figure is SO RIDICULOUSLY HUGE and a complete oversight in your rebuttal.
You know what else is huge? The amount of interet you paid on that place over 30 years
Well Sonies I used to run mortgage calculators and think that that amount of interest paid on a 30-year was bat sh_t crazy.
But now with rates at 4%…you’d actually wind up paying more in principal on a 30yr vs. interest iirc. As we approach zero the amount of debt you can service does appear to significantly spike. Not a big deal in the days of 4.5%-6% we’ve been in for the past few years, however these days we’re in uncharted territory.
regarding cheap interest rates, what Gross pointed out was that without Gvt. involvement in the market, mortgage rates could be 300-400 bp higher. This makes locking into a 30-yr. mortgage at today’s rates very attractive long-term?
“You know what else is huge? The amount of interet you paid on that place over 30 years”
R U guys crazy? Why don’t you compare that number with the amount of rent you will pay over the next 30 years? Come on – w/ a 2000/month rental, that is nearly 750,000 you are paying in rent – if you do the calculations correctly, you are paying much less in interest (i know there are other costs involved, but you guys are talking about interest).
“This makes locking into a 30-yr. mortgage at today’s rates very attractive long-term?”
I don’t think our government will touch Fannie & Freddie. And while Gross was talking his book I think he’s right in that the government will continue to be involved in backstopping mortgage finance. The problem is the market already in place is so big that any change could have drastic consequences for the $6T already on the books of Fannie & Freddie.
But IF the government were to exit backstopping mortgages (as I think they should and wish they would), you would likely see a decline in house prices, a catastrophic decline if on the order of 300bps-400bps.
I certainly don’t trust his prediction nor any economists prediction as to what will happen with rates though, other than them generally going up.
I recall them saying the quantitative easing was resulting in rates going 50-75bps lower than they otherwise would have. Then that ended on 3/31 and rates are far below where they were with quantitative easing. Predicting the direction of rates is damn hard.
“Dan on August 24th, 2010 at 12:18 pm
Why Are Banks Withholding Highend Repossessions Over $300,000 From the Market?”
________________________________________________________________
Great article, Dan. Thanks for sharing that. I’ve got about $200k in cash and cash equivalents and have been thinking about going out and finally dipping into the condo market while rates are really low, but every time I get ready to go out, I read a story about how the City and State are on the cusp of insolvency, how the police are woefully understaffed and the City is getting ready to turn into Chi-Troit, etc. Now, after seeing that article you posted, my theory that I can stay liquid longer than the money center banks can stay solvent seems correct. I guess I’m just more comfortable being that sucker who throws his money away on rent and can flee to the ‘burbs or another state when things get really bad in Chi-Troit than having the prestige of being able to join clio in the class of people who try to convince everyone that debt is great because of the tax deductions it offers.
“That figure is SO RIDICULOUSLY HUGE and a complete oversight in your rebuttal.”
That wasn’t the point I was trying to make. You are correct, clio, that the renter would pay a boat load of rent and, I’d add, rent increases over a 30 year period. Who would dispute that? Kind of a silly, “gotcha” point….
I was pointing out how foolhardy it is to claim what you did: “That is a 400% return over a 30 year period,” which you did. That’s nonsense.
If you’re still not getting it here it is: there is no 400% return; to believe so is to be fooled; and people shouldn’t perpetuate the myth. You say it so matter of factly.
If the issue is are you better off owning over buying, I think the answer can be yes, ownership makes you slightly better off under many long term scenarios. Yet folks like you walk around throwing up figures like it’s play money. There is no 400% ROI. The answer: you might be slightly better off owning under the right circumstances–it’s not investment or a windfall.
“The answer: you might be slightly better off owning under the right circumstances–it’s not investment or a windfall.”
I absolutely agree – personal real estate should never be looked at as a “money-making” venture (investment properties are a different story). However, owning has many other non-financial advantages. I would venture to bet that, given equal costs of renting vs buying almost every person would buy. If renting was so great, why would this be?
“regarding cheap interest rates, what Gross pointed out was that without Gvt. involvement in the market, mortgage rates could be 300-400 bp higher. This makes locking into a 30-yr. mortgage at today’s rates very attractive long-term?”
How does this explain the 30 year jumbo market at 500 bps flat? Those arent government backstopped as far as I know.
“Dan you have to understand the mentality of some CCer’s.
1. Nobody makes money.
2. Nobody can afford a million dollar property.
3. Nobody makes money.”
Let me add #4:
“If I post it often enough, it will come true.”
Oh wait #5 too:
“The world ending affects everyone else *except* me because I am a renter and am timing the real estate market like a CHAMP.”
“when you pay 2000/month in mortgage interest, you can deduct that (yes, you only get 35cents to the dollar max) but you still get that savings….(which could be up to 8000/year).”
$8000 a year? That’s less than the standard deduction, which you have to give up in order to take your interest deduction. Oh, so you can deduct your property taxes as well. Great. Now we are getting somewhere. But no! Someone that can afford a home in which interest + taxes are $8000 greater than the standard deduction is certainly making a lot of money, right? Probably up into that AMT area, eh?
Someone as rich as you are clio should know that once your AGI is up over ~$250,000 that AMT eats all your nice itemized deductions. Do I need to give you a link to the IRS form? Maybe you should get a new accountant.
“Someone as rich as you are clio should know that once your AGI is up over ~$250,000 that AMT eats all your nice itemized deductions. Do I need to give you a link to the IRS form? Maybe you should get a new accountant.”
Sorry, I am not affected by AMT because the tax I owe every year(even w/my deductions) is still much higher than the AMT.
clio: “so I suppose you advocate living in fear of everything your whole life because life is unpredictable? Come on!! Live your life – life is too short and you don’t know when you are going to die/get sick. You HAVE to take a leap of faith once on awhile otherwise you will be a shriveled up little person w/anxiety issues!!”
No, I actually have been self employed since since I was 20 years old, I’m quite good at managing risk (thus far).
“live your life” is you trying to justify your opinion that “if you want to buy a house, now is the time to buy” (whatever that even means). the way i want to “live my life” is to make sound decisions based on logic rather than common knowledge or speculation.
like i say over and over again, for some, buying is the right decision. it just depends, a lot. people treat buying a home like it’s a prerequisite for success, it isn’t. i just hate seeing people make bad financial decisions when if they were educated they could have avoided them. for you, clio, i’m sure buying a home is the right call. you’re rich, don’t want to move, and seem to have a high level of job security or financial cushion. for most other people, i’m not sure this is true.
“Someone as rich as you are clio should know that once your AGI is up over ~$250,000 that AMT eats all your nice itemized deductions. Do I need to give you a link to the IRS form? Maybe you should get a new accountant.”
Have to agree with clio on this one, too. AMT doesn’t eat up your itemized deductions. *Especially* because mortgage interest is *still* deductible under AMT.
However, the itemization phaseout (starting around $200k) can be a killer. Not an issue this year, thanks to the 01/03 tax cuts, but likely springing back to live next year.
Let’s put this out there. Some have stated that the interest deduction is minimal at best. If The current administration attempted to repeal the tax deduction on mortgage interest would the general population take it in stride or would it cause another uproar and frustration among voters?
“If The current administration attempted to repeal the tax deduction on mortgage interest would the general population take it in stride or would it cause another uproar and frustration among voters?”
Everyone with a mortgage will be insanely p*ssed off. Everyone without a mortgage will be completely fine with it.
Obama _proposed_ limited the size of the mortgage interest deduction early in his administration to limit the mortgage deductability of the top bracket to an insanely high amount (like 50k interest/year) and then cut it back to 28% beyond that. Even that seemed to cause an uproar. I remember Joe Zekas was ranting and raving about sacred cows lol.
“*Especially* because mortgage interest is *still* deductible under AMT.”
Makes sense why clio is so fond of mortgage debt! 😀
“The world ending affects everyone else *except* me because I am a renter and am timing the real estate market like a CHAMP.”
Its financially akin to staying out of the ring when you have a 21yr old Mike Tyson in there foaming at the mouth.
“If The current administration attempted to repeal the tax deduction on mortgage interest would the general population take it in stride or would it cause another uproar and frustration among voters?”
If Joe Sixpack was paying attention, they would realize that they aren’t getting much (if anything) from the deduction and shouldn’t care. (Assuming married filing joint, a 6% mortgage, and 1% property taxes, you need roughly $160K in principal before itemizing makes sense.)
On the other hand, talk radio hosts probably have big enough mortgages to benefit, so there will be a shrill campaign against any attempt to fix the tax code.
In your example K, Joe Sixpack winds up paying ~$1,200/yr more if he’s at the beginning of his mortgage.
$100/mo buys seven cases of beer, or twenty-eight six packs. Think he’s not going to notice this or care? I’d beg to differ.
I’d bet that Joe six pack has a keg-erator in the basement or garage.
Speaking of Garage drinkers where the heck is Groove77? I have not seen a post from one of my favorite opinion makers in two weeks. Is he on vacation or did his boss turn off his Internet access to get more productivity out of his department?
“Someone as rich as you are clio should know that once your AGI is up over ~$250,000 that AMT eats all your nice itemized deductions.”
This is not correct.
AMT does not impact mortgage interest on primary residence up to $1,000,000 on the first and $100,000 on the second lien. RE taxes are affected though. And Clio is right — there is a bit of an AMT doughnut hole from about 250k to 400k for married couples — once you are over 400k AGI AMT is not longer a concern.
The AMT effective rate is 28% on M (for modified) AGI but most top earners have enough AGI in the 35% range that they don’t pay AMT.
The people who really get crushed by AMT are NYC residents who have huge state and local tax deductions relative to their income. Property taxes get lumped in here too.
Procrastination on Foreclosures, Now ‘Blatant,’ May Backfire
http://www.americanbanker.com/issues/175_165/foreclosures-modifications-california-1024663-1.html
“It is becoming harder to blame legal or logistical bottlenecks, foreclosure analysts said.
“All the excuses have been used up. This is blatant,” said Sean O’Toole, CEO of ForeclosureRadar.com, a Discovery Bay, Calif., company that has been documenting the slowdown in Western markets.”
blatant is probably right, although they’re still trying to be coy in Chicago. I’ve talked about my friend w/ the $400k+ mortgage on a legal secretary’s salary, and how they finally files Lis Pendens foreclosure in November last year. She had gotten to the point of the 2 month redemption period, and then “miraculously” found that the case had been dropped. I even inquired about the legal term used for that action here. So, she gets to stay in the house until they restart the foreclosure! There was no “mistake” here, as far as I’m concerned. She hasn’t paid anything in a long long time. Frankly, it would be better to just pull the bandaid off FAST, rather than watch her agony for all these months and months.
AND, speaking of shady stuff when it comes to the “assistance” programs, that are supposed to try to help people keep their homes… My own bank offered me a re-fi at a lower rate. They chased ME. I have most excellent credit, am fully able to pay, but they chased me, and how could I refuse a zero-closing-cost refi, at about 1.5% less than the original rate? I just got a letter yesterday that my loan has been sold to Freddie Mac. What the hell? I didn’t NEED help, and I suspect I was not the kind of homeowner the special refi programs was supposed to help. No, I’m not sorry I got the offer and took it, but it’s pretty clear the banks are not really working to the spirit of the programs that are supposed to help people in bad shape.
“She hasn’t paid anything in a long long time. Frankly, it would be better to just pull the bandaid off FAST, rather than watch her agony for all these months and months.”
What “agony” are you talking about?!!! I would LOVE to live in my houses and not pay mortgage/taxes/assessments of for “months and months” – that would be absolutely wonderful!!!!
No kidding. Once you got past the moral quandary of paying nothing for shelter (wouldn’t take me long!) that would be the best thing ever. Put it all the housing money in the undoubtedly neglected retirement fund!
But then you could never be like these stupid people, who confuse their credit score with wealth or more than marginal economic value:
http://finance.yahoo.com/banking-budgeting/article/110488/quest-for-the-perfect-credit-score?mod=series-m-article-c
Wow there are a lot of people out there that lack hobbies.
oh, no, you guys don’t understand…
this legal secretary got the mortgage, lost her job, spent all her savings, all of a modest inheritance (that was, I suspect, partly collateral on that loan), and cashed in her entire 401k as well. She’s been unemployed over a year and a half, and I think she’s just given up psychologically. She is only managing to feed herself and pay the bills with whatever she can get from her grown kid living there and a boarder. No unemployment money. She can’t even collect public aid, because she won’t leave the house behind, so it’s considered an “asset”.
She needs to get out from under the weight of this house, but for her it’s her “dream home”. And, she wastes a few dollars every week on the lotto, which breaks my heart. I’ve given her odd jobs to help me out at my house, but this will end very badly for her. The sooner she loses the house, the sooner she can move on with her life. She’s lost in dreamland right now.
Sorry logansquarean, we do tend to forget the HUGE psychological impact that losing your house/job has on most people. It is probably far more damaging than the financial impact. I hope things get better for your friend. Tell her to hang in there!!
What I wish I could tell my friend is, “hey, here’s a JOB!”
Illinois ranks 6th in terms of mortgage delinquency. A full 11% of mortgage loans in Illinois are seriously delinquent, with a further 5% less than 90 days delinquent.
Anybody buying property now must be an ostrich with their head in the sand if they don’t think these statistics won’t have to be worked through the pipeline and significantly, negatively impact valuations.
http://3.bp.blogspot.com/_pMscxxELHEg/THagpHKijqI/AAAAAAAAJLw/yricFLY1gG8/s1600/StateDelinquencyQ22010.jpg
“Anybody buying property now must be an ostrich with their head in the sand if they don’t think these statistics won’t have to be worked through the pipeline and significantly, negatively impact valuations.”
True only in CERTAIN areas, However, I am not seeing any/many deals in Oak Brook, Hinsdale, and the better sections of the Gold Coast and Lincoln Park. I AM seeing great deals in S.Loop, River North, Old Town, Lakeview, Uptown, Bucktown, Wicker Park, and other fringe areas of Chicago as well as the outlying suburbs. To tell you the truth, the “better” areas (Winnetka, Kenilworth, Oak Brook, Hinsdale and certain sections of G.C./L.P) are considered “safe” and people who need/want to move are looking more seriously at these areas as they think (?know) that homes in these areas will likely retain their value.