Nearly One Year Later and Still Trying to Sell the 3-Bedroom Duplex Up: 2629 N. Dayton in Lincoln Park
We last chattered about this 6-unit building at 2629 N. Dayton in Lincoln Park in February 2010.
See our prior chatter here.
At that time, Unit #3N, a 3 bedroom, 3 bath duplex up was on the market as was Unit #3S– it’s sister unit.
Unit #3N went on to sell in May 2010 for $574,624, or slightly over its final listing price of $574,500. Mario Greco at Prudential Rubloff was the agent.
But Unit #3S hasn’t been as lucky.
In that same time period, this 3-bedroom duplex up has been reduced $40,900 and is now listed for about $25,000 under the sale price of Unit #3N.
This unit is the same square footage as the other one, at 2400 square feet. It also has 3 private decks and parking is included in the price.
There are 22 foot high ceilings in the living room.
2 out of the 3 bedrooms are on the main floor with the master bedroom and the family room on the second level.
Has the market changed that much in the last year?
Mario Greco at Prudential Rubloff now has the listing. See the pictures here.
Unit #3S: 3 bedrooms, 3 baths, 2400 square feet
- Sold in January 1998 for $133,000 (this is what the public records state- not sure it’s accurate though)
- Originally listed in February 2010 for $589,900
- Reduced numerous times
- Currently listed for $549,000
- Unit #3N sold in May 2010 for $574,624
- Assessments of $177 a month
- Taxes of $9168
- Central Air
- Washer/Dryer in the unit
- Parking included
- Bedroom #1: 22×11 (second floor)
- Bedroom #2: 16×12 (main floor)
- Bedroom #3: 11×10 (main floor)
- Family room: 20×18 (second floor)
The 1998 price may have been for the lot. I think this place was built within the last ten years.
I don’t know what the personal situation of these sellers is, but they really should hold steady on their price. Think about it – they have a built in comp to convince buyers that their unit is a good deal – also, the spring market is right around the corner, and, finally the DOW IS NEAR 12000 today!!! Yeah!!
This looks like an ok unit. However, the market has trended down a little since May of last year (sale that would have been affected by the tax credit), so it probably sells for about 10% off that price, so around $520ish.
I don’t know – I really think people underestimate the psychological impact that an improving economy has on people. It seems like a perfect storm (in a good way) for real estate: the Dow at 12000, spring around the corner, low mortgage rates, and increasing chatter about how we are at or near the bottom in terms of prices – all of these things might motivate people to start buying.
Clio the Dow Jones was almost at 12k 11 years ago today, too.
Another Joe – while that is true, there was a time (about 2 years ago) when the dow went down to 6600. Instead of being scared and selling at such losses, smart investors not only held on to their stocks, but also kept buying – so now, they are being rewarded by HUGE returns. The same is true in real estate – instead of getting your panties in a bunch, people should have held on to their properties/prices and, if possible look for great deals right now. Mark my words – in 5 years, there WILL be appreciation over current prices (yes, anon, in REAL dollars).
Another Joe, so what if it was…? What clio is getting at that people who had money in stock now have almost a 100% more than had in 2008.
The discussion here has been do people have cash on hand to make downpayments.
If i had 50k in stocks in 2008, i know have around 100k.
“instead of getting your panties in a bunch” brilliantly said Clio!
Geez folks the pessimism here sometimes is unreal, for all the negative stuff folks say about real estate the stock market is incredibly more volatile and risky.
I’m extremely optimistic for declining home prices. I don’t know why this is mistaken for pessimism.
I’d guess that it will close somewhere between $509k and $529k.
Clio and Gesco, while I do agree with your outlook on optimism at the Dow being at 12,000 among other positive signs, I think a smart buyer has to understand where we’ve been and what caused us to get there. That being said, just because the Dow has had a good run and is well over it’s low of a few years ago, that doesn’t mean we should be less cautious when determining the value of a home.
“That being said, just because the Dow has had a good run and is well over it’s low of a few years ago, that doesn’t mean we should be less cautious when determining the value of a home.”
Wilson, I completely agree with you – unfortunately, the majority of people in the world are not critical thinkers and base their purchasing on emotion and other psychological factors. Just wait and watch….
I’m surprised that #3N sold for so much, given that this building is one of those “cinderblock surprises” of the early 2000s (see google streetview to see side of building). Good luck to the seller and the buyer(s).
clio, the problem with your logic is that a great percentage of investors did not make “smart” decisions in 2008. they never do.
for all those who bought aggressively at/near the lows, there were likely as many, if not more, who sold out entirely or, even worse, absorbed massive losses on margin calls.
and it’s not just your wealth on paper today that matters in real estate, it’s your viewpoint of the future. for all those who are perhaps getting back to even many, if not most, don’t feel as optimistic as they did back in ’07.
last, but not least, and as an extension of what i’ve just said, all the stock wealth that’s come back since ’08 is now in fewer hands than it was before.
that’s not exactly bullish for broad real estate.
though perhaps it explains why the Elysian is selling well…
food for thought.
old hickory – I totally agree with everything you are saying. Real estate is NOT the stock market and more moneym, analysis and risk is involved. However, the returns can be great!! Plus, don’t forget that there ARE people out there who want to move up – once cheaper units start selling, these people can get equity out of their places and move up. There are a lot of motivated people out there who will start making this move (mainly for personal reasons)
i will stick by my words from a past day
“#Groove77 on February 11th, 2010 at 11:36 am
@574k i would think i would get better finishes and not have the feel of Lowe’s middle grade special. can you get a discount for the Blandness of the kitchen, i like the black appliances but the menards “president edition” cabinets hurt my feelings. (well if i lived in palitine i would feel like home).
I would think if i am dropping 600k for a place it should have something substantial for me to open my checkbook”
“Another Joe, so what if it was…? What clio is getting at that people who had money in stock now have almost a 100% more than had in 2008.
The discussion here has been do people have cash on hand to make downpayments.
If i had 50k in stocks in 2008, i know have around 100k.”
So, then clio and you now also believe that every property has declined according to the CS index? Can you really have it both ways?
clio, psychological factors mean nothing if the lenders don’t have Finnish retirees and suburban radiologists to buy their MBS any longer. No mortgage bagholders mean no chance of bubble mania prices in real dollars in our lifetimes.
G- wait – that was Gesco that said that about doubling the money and, as far as I can tell, he DOES go by the CSI for real estate – so he is very consistent. As for me, I personally think CS is a bunch of BS – however, I don’t discount it’s psychological impact (the same as the dow being over 12000).
Again, I think these averages and indicators are bunch of BS and meaningless to individual investors – but their psychological impact is TREMENDOUS. So, I also, have been very consistent in my posts/beliefs.
Only if the unit is in good shape, i.e. no structural issues, no water damage, etc. 2400sqft, North of Sheffield, under $600K is a good deal. The architecture is ugly, but, not much uglier than the alternatives…So, the price seems right to me.
G – you left out a HUGE group of people in your odd post:
swedish retirees, english retirees, mexican retirees, chinese retirees, canadian retirees, american retirees, german retirees, spanish retirees, french retirees, polish retirees, african retirees, iranian retirees, iraqi retirees, indian retirees, russian retirees, australian retirees, swedish retires, norwegian retirees, moroccan retirees, egyptian retirees, greek retirees, turkish retirees as well as city radiologists, country radiologists, retired radiologists. Please try to be more inclusive next time!!
“So, the price seems right to me.”
There will be knife catchers all the way to the bottom, as 3N’s buyer has discovered and 3S’s will soon enough.
In a declining market, the first ones out win and the holdouts lose.
“Please try to be more inclusive next time!!”
Yeah, don’t forget “Wisconsin School Districts”.
G – are YOU serious? You are wrong for SO many reasons:
1. the neighborhood is good and will always be desireable – it is not a “fringe neighborhood” and will not only retain its value but will likely appreciate (albeit slowly).
2. there are HUGE personal gains that the person who bought this unit is likely experiencing. How exciting it is to move into a nice new place!!! Tremendous emotional return- priceless
These stock analogies are awful. Stocks were in a big bubble in 2000, they crashed. They took 10 years of earnings growth to catch up with the previous bubble pricing at reasonable valuations. The stock crash in 2008 was macro driven not pricing driven. Stocks weren’t at bubble pricing in 2008, but the banking system collapsed so stocks collapsed. It was a liquidity crisis (Though banks are a bit of a different beasts).
Housing was in a bubble in 2008 so theirs not much reason to think the old pricing is coming back. Even 10 years from now because housing is a depreciating asset (not the land but the structure) while stocks are continuously taking current earnings and reinvesting them in the business. Stocks are continuously becoming bigger businesses and it still took them 10 years to recover their losses so I highly doubt we will see the same thing in a housing which is a depreciating asset.
G, to be honest my stocks have appreciated less than 50% since 2008, but I have all my money in different emerging markets and they never fell as hard. My 5 yr rate of return i think is around 7%.
I mentioned dow jones as its a general indicator of the stock market, sure some people have had more gains and others less. But i think the overall point is that folks which money in stock have likely seen appreciation in the last 2 yrs and its been large
Clio, i use CSI index to a VERY limited extent. Mostly i use it to understand differences amongst properties that sold in the last decade. For example if im looking at a condo that sold in 2001 and comparing it to a condo that sold in 2004, if there is a lack of comps to use. I will use CSI to value how much the 2001 condo would have sold for in 2004.
I think CSI is more useful for condos than for SFH. Unfortunately CSI is city wide, but condos are really only in a a very small part of chicago…. really mostly just the GZ and then some outlying neighborhoods next to them. You arent going to find many condos in the west or south side (of course hyde park being an exception)
LOL clio your huge group post was hilarious
clio, “once cheaper units start selling, these people can get equity out of their places and move up. ”
any estimated time frame on this? I’m motivated and wanting to move up 🙂
Sean, no one was ever really talking about analogies with the stock market.
Posts just keep on saying that no one has cash right now.
I was just addressing that if you had money in stock over the last 2 yrs you would have likely seen significant appreciation. And mentioned the dow as well known example.
And i dont think it mattered what you originally had, just that in late 2008 you might now have had the cash to buy, nor in 2009, but you do know.
That is my situation and I know alot of people in the same situation.
you wanna know what’s neat? my mortgage(escrow) went down $80 a month this month due to lower taxes from an appeal thanks to crashing real estate values!
you are right HD, this is fantastic news!
“any estimated time frame on this? I’m motivated and wanting to move up ”
I would put your house/condo on the market in the next 4 weeks and see what happens – remember, you won’t sell it if it is not for sale.
“you wanna know what’s neat? my mortgage(escrow) went down $80 a month this month due to lower taxes from an appeal thanks to crashing real estate values!”
OK – sonies, u can’t be that clueless….. u know real estate taxes ARE going to go up no matter what home prices do. and you know the politicians will spin it so that the majority of morons out there don’t realize it until it is too late (ie, lower tax rates and higher assessed values or lower assessed values at higher tax rates). If you believe anything different, you are completely naiive.
well mine went down, so that pretty much throws your theory out the window now doesn’t it?
oh and I haven’t even filed my Homeowners exemption yet, so my mortgage escrow payment will be even LOWER in the future, explain that one skipper?
“I would put your house/condo on the market in the next 4 weeks and see what happens – remember, you won’t sell it if it is not for sale.”
Tried that last year and it didn’t sell…and before anyone asks, i set the price off the comps and dropped it as low as i could afford to go.
“2. there are HUGE personal gains that the person who bought this unit is likely experiencing. How exciting it is to move into a nice new place!!! Tremendous emotional return- priceless.”
I’m willing to bet that the buyer of 3N doesn’t value the extra 8 months of “emotional return” as priceless since they paid an extra $25,000 plus for those “personal gains.”
Sean, you must live in some sort of alternative land? People, who got in trouble due to the crash in the housing industry were mostly either people who bought homes they could not afford or people who treated their homes like atm machines. Housing for starters is not a commodity, and if you treat it like one, you will always lose. And how and with what kind of logic, can you detach the structure from the land it is physically attached to, is also beyond me. Housing, while it is cyclical, it is not a depreciating asset in the long run. Look up your numbers. I would also encourage you to look into few of the remaining houses that are falling apart, in the Lincoln Park area, and check their prices, you will see that their prices is a reflection of the value of the land they are standing on.
Not so in the stock market, a lot of decent and responsible people have lost their entire live savings during the crisis.
In either case, both housing and the stock market, people who respected the sound and common sense fundemantals of business, have endured the least damage, and even managed to make money during the crisis.
“well mine went down, so that pretty much throws your theory out the window now doesn’t it?”
Naw, it don’t work that way for the cognitively dissonant.
“People, who got in trouble due to the crash in the housing industry were mostly either people who bought homes they could not afford or people who treated their homes like atm machines.”
Sure, as long as they can afford the loss then no worries.
G, your post doesn’t make sense, in response to the paragraph you are quoting.
“as priceless since they paid an extra $25,000 plus for those”
G,
it may be more than 25k 3s hasnt sold yet. it may be 75k or -15k only time will tell
Really? Of course those who got in trouble were the ones who could not afford the losses. If they could afford the losses, then there is no trouble. Get it?
“or -15k”
If they had waited they could get this one for $25,000 less today by paying list. It would probably already be more if 3N was still competing for the lone buyer at the current price.
@G
“There will be knife catchers all the way to the bottom, as 3N’s buyer has discovered and 3S’s will soon enough.
In a declining market, the first ones out win and the holdouts lose.”
This is unfortunately, the short-sighted, problematic view of real estate. People do not buy real estate for short gains or losses that amount to less than most people’s monthly Starbucks budget. People buy a given real estate because they need it. These type of losses are acceptable for a primary residence buyer who will hold their property for long years to come.
That’s number one. Number two, Dear G., look at your math, and compare the rates between May 2010, and today. probably more than a point difference. So, that loss you are actually talking about, you may want to re-consider.
It is the people like you who shop for real estate for the wrong, mis-placed reasons, who will lose. Not the people who buy for the right reasons.
“If they had waited they could get this one for $25,000 less today by paying list. It would probably already be more if 3N was still competing for the lone buyer at the current price.”
shoot if they would have waited they would have realized paying top dollar for mediocrity to get a address would have been a bonehead move.
now they get to find ways to justify writing the bank a check every month.
“Really? Of course those who got in trouble were the ones who could not afford the losses. If they could afford the losses, then there is no trouble. Get it?”
What you are saying, is a rather useless addendum to what I was trying to say: it is not about affording the losses, but the route cause of the losses that have occured.
“It is the people like you who shop for real estate for the wrong, mis-placed reasons, who will lose. Not the people who buy for the right reasons.”
I guess buying West Town multi-families and vacant lots in the early-mid 90’s and selling all in the bubble was a mistake? Damn, damn, damn, damn. I guess I could have cleaned up in today’s interest rate environment? Shame on me. What can I do to rectify this blunder, andy?
G, talk is cheap. Let’s not have a conversation based on information I can not verify. Rather, let’s try to have a conversation based on facts and sound reasoning. I always enjoy debating and don’t mind to be proven wrong at all. I love learning.
“That’s number one. Number two, Dear G., look at your math, and compare the rates between May 2010, and today. probably more than a point difference. So, that loss you are actually talking about, you may want to re-consider.”
Umm, the one that the buyer of 3N is currently experiencing? Please explain how paying at least $25k more than 3S’s asking price in a lower rate environment isn’t even more of a loss? Your new at this, right?
The root causes of all of the losses was a mania-fueled housing bubble, regardless of being able to afford it or not.
“I’m willing to bet that the buyer of 3N doesn’t value the extra 8 months of “emotional return” as priceless since they paid an extra $25,000 plus for those “personal gains.””
G – I’ll take you up on that. Seriously, I ‘lost’ money on my in-town but the fun I have had over the past 2 years (which I would not have experienced had I waited) was well worth the 100k or so I “lost” – and, of course, I put it in quotes because I haven’t lost a dime. In 5 years, I am sure I will sell for a profit – probably not a big one, but the joy and pleasure I got from that place more than makes up for it!!! I would also willing to bet that you and your SO probably have a lot of disagreements regarding money and quality of life issues….
I see we have at least two more RE bulls that have come to play! Welcome!
G,
Matured over 30yrs. $25,000, is approx. $125 a month. A point difference in rate, is approx. $150 a month, which comes to $54K over 30 years.
“Umm, the one that the buyer of 3N is currently experiencing? Please explain how paying at least $25k more than 3S’s asking price in a lower rate environment isn’t even more of a loss? Your new at this, right?”
you know that it has been proven time and again that there is NO correlation between lower rates and higher RE prices right? this topic has been studied to death by economists.
“I see we have at least two more RE bulls that have come to play! Welcome!”
HD – better get used to it – as the market changes there are going to be more and more of us.
G- no response to our bet?
@G,
The rates were at least one point lower in May 2010, than today. We are about to top 5% today.
@jfmii, that’s not the argument. The argument, in this particular case, was to compare the numbers in terms of the effect of a point difference in rate, compared to a $25K loss.
However, I have clearly overlooked, G’s suggestion that the rates were higher in May 2010 comapred to today, which is not the correct.
“you know that it has been proven time and again that there is NO correlation between lower rates and higher RE prices right? this topic has been studied to death by economists.”
It’s been discussed to death here, too, and I (and others) don’t agree that “proven … that there is NO correlation” is an accurate statement, nevermind “time and again”. No correlation has been proven, either, but absence of evidence is not evidence of absence.
Sorry for typos.
“The rates were at least one point lower in May 2010, than today. We are about to top 5% today.”
I guess you don’t realize there are places to check this, just like population figures.
3N closed 4/23/10, and my source says average mortgage rates were 5.07% for 30 years that week.
That is beside the point, though. 3N can always refi, but he can never change his purchase price to today’s lower price.
“However, I have clearly overlooked, G’s suggestion that the rates were higher in May 2010 comapred to today, which is not the correct.”
I realize you don’t know much of anything.
“G- no response to our bet?”
Did you squander more of your beantown millions on Chicago RE? Because if you didn’t buy 3N, then it will be impossible to prove who won. Especially when you are the type who would pay them for the “right” answer.
G- are you ignoring my response to your challenge?
G- ok, I accept your “back down”….
“G- ok, I accept your “back down”….”
Sure thing, clio, just as I accept your cognitive dissonance.
Let’s not talk about emotional returns during tax season please.
G – did you fail a test in college on “cognitive dissonance” ? – because you use it several times a day – that, and “knife-catcher”. It may be time to expand your vocabulary. Here, I’ll start you off:
– profit
– rising values
– rising sales
– realist
– economic growth
we’ll go over some other terms you will likely be reading about in the coming months/years.
G.
What is your source? I mean, you are this big shot real estate developer, but we don’t know your name, you have a secret source who tells you about the rates as of May 2010-as if it was something of a state secret, but we don’t know the source.
Anyway, I don’t want to know…
I know the rates, and I know at what rates people have locked in, May of 2010. But, regardless, you are, once again, missing the point: $25K difference is not a significant of a loss-on paper! for a primary residence buyer. Period.
If you are a real estate investor, as you say, and you pay attention to these type of small numbers, spare us from your wisdom, please.
“Anyway, I don’t want to know…”
I do – come on – let’s level the playing field. You have already outed me here and written about what I do, why not fess up?
“you are this big shot real estate developer”
You can’t get a thing right, can you, andy?
“If you are a real estate investor, as you say”
But I didn’t say that. Wrong again.
Show me a source that indicates rates were a point lower on 4/23/10 than today. I couldn’t find one where they aren’t lower today. Here’s the first source I came up with on Google:
http://www.mortgage-x.com/x/ratesweekly.asp
Come on, here’s your big chance to prove me wrong and show us all your wisdom.
“I do – come on – let’s level the playing field. You have already outed me here and written about what I do, why not fess up?”
What is it with making stuff up around here today? No, I haven’t outed you or written about what you do.
“It’s been discussed to death here, too, and I (and others) don’t agree that “proven … that there is NO correlation” is an accurate statement, nevermind “time and again”. No correlation has been proven, either, but absence of evidence is not evidence of absence.”
Exactly. To death is about right. Mostly I’m happy to debate the same things over and over again (it is the CC way), but this is one that gives me a headache b/c it’s a really complicated issue to discuss properly and the people taking extreme positions don’t really care. Cue sparky (who I wouldn’t mention except Bob seems to be off today) with his Robert Shiller rule (if it’s good enough for Shiller…).
G,
Did you not say in the most self-congratulating way, that you bought a lot of empty lots in HP in the 90’s and made so much money? Maybe that makes you a pianist in a bordello?! My bad, sorry.
G, we can go back and forth in this rate debate forever, the point is simple. $25K is not a significant amount for a primary residence buyer. Nothing more that needs to be added to that.
“What is it with making stuff up around here today?”
perhaps it’s “cognitive dissonance”….. OK – I’ll stop…
“Nothing more that needs to be added to that”
….and yet it will —- wait for it…. wait for it……
“Nothing more that needs to be added to that.”
Then why did you feel the need to add so many incorrect statements?
“perhaps it’s “cognitive dissonance”….. OK – I’ll stop…”
Clio, I did not out you or your job. You, too, can prove me wrong if you believe this. But you won’t because you can’t, just like andy.
…and there it is!!!!
See what I mean?
Clio…it’s no use. Don’t waste your time. 🙂
AndrewT – I know…. I should be a bigger person – but there is a history there…
clio & andy – ok, I accept your “back downs”….
G- how old ARE you? Seriously, I sometimes feel I am in grade school here!!!
…and there it is!!!!
“I know the rates, and I know at what rates people have locked in, May of 2010. But, regardless, you are, once again, missing the point: $25K difference is not a significant of a loss-on paper! for a primary residence buyer. Period.”
Invite me over when you are throwing the money out the window. Paper losses are real if you need to sell
logansquarean,
yesterday (?) you related a story about a friend who was excited because she got a job and thought that she was going to now be able to afford her house payments. You couldn’t understand why your friend didn’t realize that it was going to be very difficult and couldnt understand why she didn’t just walk away. Well let me tell you why – psychology. Don’t you realize that many people have their self worth tied to owning their home? To undergo foreclosure means (to them) that they are a failure – almost like THEY are a foreclosure in life. Self-worth, pride and ego are motivational elements that FAR outweigh financial motivation. I am not saying that is the way it should be – but that is the way it IS for many people. This is why many people don’t just “walk away”.
“Matured over 30yrs. $25,000, is approx. $125 a month. A point difference in rate, is approx. $150 a month, which comes to $54K over 30 years.”
….this “25K” you speak of is of course, if it sells at current ask. It’s fairly clear these owners are chasing the market down. Is it really that hard to see?
“G – did you fail a test in college on “cognitive dissonance” ? – because you use it several times a day – that, and “knife-catcher”. It may be time to expand your vocabulary. Here, I’ll start you off:
– profit
– rising values
– rising sales
– realist
– economic growth”
Sales are not going to rise as rental rates crater. The bubble fueled as rental rates skyrocketed (peaking around 2008, in line with the bubble) from incredible 2001 lows.
Rents took another huge hit in 2009-2010, with many offering free rent, free parking — anything to fill vacancies. And I’m talking GZ here, not Rogers Park/Uptown.
I expect rates to rise
(comment got cut here because of the symbol) less than or equal to 5% or hold consistent in 2011, large in part to tax increases. The DOW rising means little to the average buyer looking for 1/1s, 2/1s, or even 2/2s if they don’t see any benefit — fact of the matter is, the younger monied simply don’t see any benefit. You’re locked in, have to re-sell, and might lose.
You cannot look at the sales market as a singularity, clio. In that market there is high risk (hence the continued credit crunch) with promises of minimal, if any, reward.
If the rental sector were making out like bandits, I would agree with you. During the bubble, high rents feeded more sales due to easy lines of credit, and easy lines of credit fueled higher rents in turn. Point is, the rental market just came off a year of tons of freebies and — as far as I can tell — still hesitant on what 2011 will bring and is hedging its bets. If it’s bad, the rental sector will go back to concessions and people would rather rent v. own.
As long as there are affordable rentals on the market, sales are not going to rise to the point where it drives up re-sale value. It simply won’t.
boiztown – I agree with a lot of what you are saying. I don’t mean to oversimplify the issues involved with real estate. However, I think the general consensus of people in the know is that rental rates ARE going to start rising in 2011 and continue rising thereafter. No more freebies or concessions – the economy is improving and more people are feeling increasingly secure in their jobs, etc.
In terms of sales, I know that there is no direct correlation between the Dow and real estate – but there is a very strong indirect correlation: when people are feeling richer and more secure, they tend to start spending more money – this includes starting to think about moving. Most people do NOT buy housing as an investment, but look at it as a comfort in their life (similar to the way they think about cars, shoes, hair, clothes, etc.). Very few people right now are thinking – ‘wow, how much money can I make on a house if I buy now’ – no, they are thinking, ‘ wow – wouldn’t it be cool to live there. I could have awesome parties, etc.’ Now, with the economy improving, more people will be able to fulfill their dreams!!!
“boiztown – I agree with a lot of what you are saying. I don’t mean to oversimplify the issues involved with real estate. However, I think the general consensus of people in the know is that rental rates ARE going to start rising in 2011 and continue rising thereafter. No more freebies or concessions – the economy is improving and more people are feeling increasingly secure in their jobs, etc.”
Thanks, Cli, for the nice words.
But let me just say my outlook is not as rosy as yours looking at the two markets. Buyers are incredibly fickle, and renters are even more-so. You’d like to think the “I want Granite/SS/outdoor space/700 sq ft minimum 1 bd for $1,050/mo” in the GZ prospective renter is uncommon, but it just isn’t.
The key word is that the rental market HOPES for higher rents in 2011, much like you say the spring is coming, so sell high or stay strong! to buyers.
You just never know. Just like a lot of people here are hoping for that magical foreclosure deal to happen constantly, renters also hope for that owner-rental magical condo they woefully under-market at $900/mo (with W/D in unit!).
The rental market will always try to undercut the owner market, if not just attempt at parity. The two are very much linked, and the generational mindset is far more skewed toward renting than home ownership because of ease of mobility and lack of consequence (“The landlord should fix it!” “This is a violation of my RLTO rights — some pro-bono attorney with a $200 consulting fee told me so! I’m leaving!”). I know you don’t like the pessimism — and I do appreciate your posts — but given the two markets as of right now? I don’t see the bounding back of the sales market. I just don’t.
I’m going to agree with Boiztown here – there is a fundamental change in young people 20-26 – they want to find a deal, and are working at getting it. They also want to be mobile and not tied down to any one spot for too long, so owning doesn’t appeal to them as much as their parents.
All the landlords think rents are going up, but even in the Southport area rents went down last year. Any increase will be minimal, except in high rises, which are often owned by institutional investors who have systems in place to keep rents artificially high, or even pretend like they are high by offering concessions, so the sticker price still looks high at the end of the day. Any landlord who thinks they can raise rents 10% this year is crazy and will get considerable push-back from their tenants.
Also, about the improving economy – the upper middle class and the rich are taking home all the spoils. The middle managers are often making $10-20,000 less per year than their predecessors did 10 years ago, even when adjusting for inflation. It’s a marked shift towards a division between the haves and have nots. Once you hit 35, you will know which track you are on.
The stock market will help, but more so on the upper end, where people have more of their wealth in stocks.
Dave —
Thanks for the props. To dovetail off your comments, I would broaden the rental age-range from 18-29 (30 seems to be the benchmark right now of the “I MUST own, or otherwise I am not a real person!” generational ownership divide) and also to point to the fact that the coveted Green Zone is an area of high, high, high turnover. It’s basically a real estate pit-stop on a Race Around Chicago. Sadly, there’s no $1m prize at the end for completing all of the Roadblocks and Detours.
While buyers may look more to GZ for — as Clio warrants — a safe investment, renters see it as a stepping stone. They’re more willing to try fringe areas: Uptown (oh, excuse me, Clarendon/Schiller Parks), “Greater Wicker Park” (aka East Humbolt), “Ravenswood” (your mileage may vary with that nebulous boundary), East Rogers Park, and so on after a year or two.
GZ rents affect GZ sales prices. And high-end rental prices in the GZ often pushes economical renters into the fringe neighborhoods for comp units at way lower prices compared to the GZ zip codes and overall expenses (City fund-mining via inevitable building code violations, property taxes, and so forth which affect rents).
All of these factors make me incredibly pessimistic. As you said: those with the finances will have them, and those that gain a little more will have more to spend and maybe feel more comfortable. But how many “in town” units can people have? It’s the “only town” people you need to buy, not just “in town”ers.
As long as rentals undercut the costs — both real and opportunity — people will rent, cosmetic finishes be damned (though, as always, they’re the sparkly exclamation point to any listing). Realtards can only do so much to sell a person on vanity sex appeal, and even many of them went begging to the rental sector for commission-based listings last year.
It’s why I remain very, very critical.
With all the condos coming up for rent as well, this is keeping rents stagnant in many areas of the Green Zone. It is funny that of all the owners I know, very few have much in terms of liquid assets and are saving little if any for retirement. The renters kind of have a different lifestyle altogether – they are living it up, but also saving – they go on great vacations, but also have a decent chunk of change put away. It’s funny how that works.
Word word word.
Under-market condo rentals in the GZ is a horrible trend. Most condo owners desperate to rent listen to shark “leasing professionals” that advise them to heavily discount their units to make an easy commissions.
Why? Because management groups, with overhead and staff, try to hold the market. Owner condos, without such a luxury, can depreciate the overall market, the leasing agency makes a cheap pop commission, the owner is satisfied (yet not happy), and it screws the market in the rear.
Granted, there are condo owners hoping for the moon, the sun, and the stars, but — like high sellers — they’re eventually talked down after months of loss.
The real fly in the ointment for these types is the RLTO. Most GZ private landlords have no idea about it, and are usually screwed out of thousands as a result while giving the tenant/prospective owner a false sense of control over these market decisions, creating the nefarious “walk away from what I own and let the bank eat it” owner types.
Rentals is a dangerous market and it most assuredly affects sales prices in many ways.
There are just too many units for rent at this point, which includes apartments, condos for rent, and alternative neighborhoods other than LP/LV/RV/GC. This will cause any rent increases to be much less than they would have been back in the day, when there weren’t as many options. I always laugh at the fake rental rates that are written about in the paper – it’s a sham that landlords use to try to raise rents. There is so much competition from condos in some areas in terms of price, that the regular landlords are not doing well at all. Also, new hires are down at almost all professional types of employment -legal, accounting, consulting, marketing, etc, that there’s less people with the ability to pay the higher rents as more of the people moving to Chicago are waiters, baristas, etc. Ask any recent grad how hard it is looking for work. It’s brutal and will affect the rental market in a big way.
“I always laugh at the fake rental rates that are written about in the paper – it’s a sham that landlords use to try to raise rents. There is so much competition from condos in some areas in terms of price, that the regular landlords are not doing well at all.”
Oh, gurl, word. word. word. Don’t I know it. Just like the rosy sales statistic chatter here, it’s all over the rental market chatter, too.
And the rest of your comment is ace, too.
boiztown –
that is very interesting and made me think of a larger social issue that may occur. I have seen it happen twice and it may (or may not happen again):
In Boston’s South End (when I bought) rowhouses were cheap and the main population were gay men. They had the same mindset you describe when you talk about the 19-30 y/o. They didn’t want to be tied down, didn’t want to be saddled with a mortgage and wanted to party and have fun – so they were very happy with renting. Guess what happened? – More and more buyers moved in and squeezed them out. Prices skyrocketed and all of them were forced to move to other areas. It was very sad to see someone HAVE to move because they couldn’t afford the rent). The SAME exact thing happened when I bought my unit on Halsted in Boystown several years ago – most people were renters and I got to know several people in the neighborhood. They also never wanted to buy – and guess what – they were forced to move to different areas. The vast majority of people that live around boystown (believe it or not) right now are straight, young couples, and families.
The stories of these people are very sad and most of them tell me stories about “if I had bought when I first moved here, I would be sitting pretty”, etc.
So, while renting seems like a great thing to do at the current moment – you should have a 20 year perspective. I personally have nothing to gain if someone rents or buys – but am just relating my experiences in the hopes of helping.
My opinion is that there are a glut of rentals and no demographic increases to support the excess inventory. Foreclosures makes the situation even better as investors buy up cheaper rentals wih a lower cost basis. The only losers are the rentier class with higher cost basises.
hd – maybe you are right – but all I now is what I have experienced in the past 20 years and, from what I know, experience and history have a lot more weight (in terms of predictability) than theory and hope……
No one in their early to mid 20’s is thinking about a 20 year plan. They are thinking about this year. Jobs are scarce and there were significant layoffs in 2008 and 2009. Why buy a place and be trapped? If they lose their job, most likely they will be thinking about relocating. I’ve had several friends move to Texas, Dubai, Europe, Southeast Asia, and California due to lack of career progression here. Unless you are established in your career and have good job security (professor, doctor, etc), why would you tie yourself to an anchor and buy now, especially with prices quite high?
When I was in town last week I was checking out some properties with my boyfriend’s dad and we were struck by the number of “for rent” signs on Sheffield between Addison and Belmont over by Wrigley Field. So I was wondering, are there so many rentals available in that area because no one wants to live next to Wrigley? Or is it because of the economy?
The funny thing is, I just checked out the streetview on Google Maps for that stretch and you see “for rent” signs there too.