The Biggest Story of 2018: Has the Chicago Housing Market Slowed?
The spring market was hot in 2018. Inventory was low. Homes were selling quickly.
But rising mortgage rates in the second half of the year appeared to slow the strong housing market.
Monthly sales fell from those the year before.
Many homes seemed to take longer to sell.
Remember this 3-bedroom condo in Andersonville at 5603 N. Glenwood?
We last chattered about it in October 2018 but it’s been on the market since June 2018. See the listing again here.
It’s in a popular neighborhood, has central air, washer/dryer in the unit and gated parking all for under $380,000.
It’s still available heading into 2019.
Just down the street is another vintage 3-bedroom unit at 5412 N. Glenwood. It is also a top floor unit. See the listing here.
We chattered about it in May 2018.
It also has the features buyers look for including central air, washer/dryer in the unit and a parking space.
Originally listed in May 2018 for $515,000 it is still available and has reduced to $440,000.
At the height of the spring market, in March 2018, the average 30-year mortgage rate was 4.4%. By November 2018, it had risen to 4.9%.
However, with the 10-year on the decline in recent weeks, the rates have fallen from recent highs.
These two Andersonville properties are just two of the hundreds of properties we chattered about in 2018. Most of those properties did sell this year.
But there are some which appear to be sitting for longer time periods.
With the lowest unemployment rate in 20 years and a strong Chicago job market, why isn’t housing soaring?
What will the 2019 market look like?
Because inventory is still wicked low. You have to look at broad market times. Individual properties for sale tell you nothing. The condo market is slowing – just a bit. The single family home market is fine and actually doing better than last year.
Gary–certainly the number of transactions also reflects whether or not the market is “slow”. Seems to me there are (at least) three components of market pace–volume, time and price. Volume is down, price is a little soft, but time is holding steady-ish. If prices start actually dropping, *or* market times lengthen, then it would be a clear slowdown. So long as they are both mainly neutral, yeah, not “slow”, yet.
The ratio of transactions to inventory would tell us if your three-component analysis is accurate. Real question is why people aren’t offering houses for sale. I can see why people might not want to buy, but that shows up in the time on market figures.
“ratio of transactions to inventory”
That’s basically market time.
I think realtors pay undue attention to volume because it affects their paychecks. But as long as properties sell quickly that means the demand is there. I have to believe that if we had more inventory there would be more sales.
Now, I’m very interested to see how December turns out. I think sales will be down a lot because the contract volume in November was not good – and pending sales was a bit low also.
Higher rates, higher property taxes, uncertainty on Wall Street and in the White House will start dragging the prices down. Real Estate follows the stock market in a 1-2 year delay. Expect a decrease in 2019.
Annual property tax hikes of 7-10% are killing price growth. Prices will lag the National growth average for the foreseeable future as Chicago and nearly every Illinois municipality has to raise their rate to cover skyrocketing pensions and retiree health care costs.
“Annual property tax hikes of 7-10% are killing price growth.”
Other states and metropolitan areas have slowed and they don’t have the property tax hikes. Sales down double digits in November in Southern California and they have Prop 13.
In NYC, sales are down and prices have slid 15-20% from 2015 highs.
Why?
I’ll be back with new blog posts on Wednesday.
Happy New Year everyone! 2019 should be interesting for housing and the entire economy.
taxes are ridiculous in NYC too… and prices are freaking insane there to be honest… at some point there aren’t enough rich schmucks that want to tie themselves to that massive failing boat as the outlook for further appreciation has probably dropped significantly since the fed is turning off the loose money machine. People aren’t that stupid
‘taxes are ridiculous in NYC’
Not property taxes, tho. Property tax in NYC is super low–average rate is about 80 bps–so like $8,000 for every million of value. Just have to be able to hide your income.
NYC is now 2nd from the bottom in terms of home price appreciation according to Case Shiller.
I wonder who’s at the bottom?
yeah but thats what i said just taxes… a city income tax is brutal
“NYC is now 2nd from the bottom in terms of home price appreciation according to Case Shiller.”
“I wonder who’s at the bottom?”
Actually, it’s DC.
Chicago is third from the bottom. [1-year change as of Oct 2018] At 2.9%, 3.1%, and 3.3% growth, these three markets have not seen significant differences in overall price growth across their metro areas, though.
“NYC is now 2nd from the bottom in terms of home price appreciation according to Case Shiller.”
“I wonder who’s at the bottom?”
Actually, it’s DC.
Chicago is third from the bottom. [1-year change as of Oct 2018] At 2.9%, 3.1%, and 3.3% growth, these three markets have not seen significant differences in overall price growth across their metro areas, though.”
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The Amazon HQ2 makes for a natural experiment. What will happen to the three cities’ growth rates as Amazon gears up and moves in?
BTW, interesting NYT article last week about how cities are trying to avoid the development problems of other cities and how the city’s name becomes a shorthand for the problem to be avoided. Thus “manhattenization” is shorthand for overcrowded, and “friscoization” is shorthand for being too tech-y.
Chicago, boys and girls, stands for “too indebted.”
No wonder Amazon didn’t come to Illinois. It doesn’t want to deal with clowns in high places, and it doesn’t want to pick up the tab for problems it didn’t create.
“No wonder Amazon didn’t come to Illinois. It doesn’t want to deal with clowns in high places, and it doesn’t want to pick up the tab for problems it didn’t create.”
Does it even matter in the end? Chicago got the Salesforce commitment and Google and Facebook are both hiring thousands.
Google, by the way, will have more employees in Manhattan than Amazon will have in Queens, won’t it? Amazon just won the PR war, that’s it. Other technology companies expanding just as quickly in terms of professional jobs.
“at some point there aren’t enough rich schmucks that want to tie themselves to that massive failing boat as the outlook for further appreciation has probably dropped significantly since the fed is turning off the loose money machine. People aren’t that stupid”
Makes you wonder what’s going to happen in California as asset prices deflate. Could be really rough. Millions of people are counting on appreciation, which has always been there, to fund their retirement and even their children’s college educations. Even the Great Recession pullback in prices didn’t deter the belief in the California dream: that home prices only go up.
If you want to know how bad the bubble is there (again) take a look at Santa Barbara. I wonder how long the inventory is on homes over $2 million there? Has to be years worth of inventory. There are only so many buyers of $5 million+ houses (of which there are dozens on the market.)
“Does it even matter in the end? Chicago got the Salesforce commitment and Google and Facebook are both hiring thousands.
Google, by the way, will have more employees in Manhattan than Amazon will have in Queens, won’t it? Amazon just won the PR war, that’s it. Other technology companies expanding just as quickly in terms of professional jobs.”
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Irrelevant. Companies are shying away from Chicago because of Chicago’s finances, and those finances are a direct result of irresponsible politicians. Also, if you’re going to spend tens/hundreds of millions, or billions, in an area, do you really want your plans subject to aldermanic veto — a fancy name for the whim and caprice of some ignorant narcissist whose only skills are doing the hokey pokey and lying out of both sides of his mouth at the same time?
So it matters a great deal.
@Johnc
Your post states that companies are shying away from Chicago because of Chicago’s finances, yet from what I’ve been able to gather, Amazon may have actually been more concerned about crime:
https://www.chicagobusiness.com/node/828936/printable/print
https://chicago.curbed.com/2018/12/17/18145150/chicago-amazon-hq2-bid-incentives-details
So while I understand that the finances aren’t great, your whole post is predicated on companies shying away because of finances. I don’t think there is evidence of that (esp with WAG, Kraft, and tons more moving downtown). At best you are speculating.
Johnc – it’s important to recognize that we likely didn’t lose Amazon HQ2 due to those issues because we were never, ever, in contention to begin with. Every city they were “considering” was a ploy to extract their publicly shielded infrastructure development plans, the data of which they can now commodify to eventually gain an unfair advantage over their competition. With the decision to go to NY & VA likely being predetermined, they also used Chicago and other cities to extract sweetheart deals/incentives that they could leverage in the future should they decide to expand by opening up new HQs/offices in those cities. It’s unfortunate that the Chicago FOIA lawsuit to discover the deal’s specifics was rejected, but the reality is that the secrecy behind them this is what allows city officials to rob the middle class and keep our cities competitive (re: slaves) in the eyes of corporate overlords.
“Johnc – it’s important to recognize that we likely didn’t lose Amazon HQ2 due to those issues because we were never, ever, in contention to begin with.”
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Elliot — We weren’t in contention with D.C., surely, as that is a question of influencing federal politics. We could have given New York City a run for its money, though. Our employee productivity network effects wouldn’t have been as great as New York’s, but housing costs and other factors would weigh in our favor. Chicago’s, and Illinois’, debt was just too big to overcome.
All I can say is that anyone equating a multi-billion dollar, generational commitment (Amazon HQ2 to NYC) to a mere ten-year lease (Salesforce to Chicago) is whistling past the graveyard.
Amazon wanted to be on the east coast which is closer in proximity to about 50 million more people than in Chicago, and also much closer to Europe where they want to start dominating like they do here. The fact that DC and NYC are sort of in the middle of the eastern seaboard is no shock at all as those are both the centers of power for the area and practically the whole country.
Has literally nothing to do with housing costs and taxes and all that crap, they could probably give two shits about Chicago other than as a regional distribution hub
“Amazon wanted to be . . . much closer to Europe where they want to start dominating like they do here. ”
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Amazon will put its European operations HQ in Ireland. While you have a good point about European proximity, I’m not sure the travel time difference between Ireland and Chicago or NYC means that much.
Whatever, we lost out, and Chicago is shorthand for “too much debt.”
“Amazon wanted to be on the east coast which is closer in proximity to about 50 million more people than in Chicago, and also much closer to Europe where they want to start dominating like they do here.”
I thought Amazon wanted easy access to India since it has already spent $5 billion there and that’s it’s largest target market. So Chicago’s airport makes more sense for a truly global office (it’s easy to get to both Asia and Europe from O’Hare.)
Additionally, it’s making a big push into Central and South America, especially Mexico, and Chicago has great access to Mexico. Other than Houston, probably the second best access.
But this wasn’t really the issue for Amazon, in the end.
“All I can say is that anyone equating a multi-billion dollar, generational commitment (Amazon HQ2 to NYC) to a mere ten-year lease (Salesforce to Chicago) is whistling past the graveyard.”
I didn’t say it was the same thing. I said Chicago already won by Google announcing it was taking on more space in another building, Facebook also sending Sandberg here (Chicago was Facebook’s first expansion city outside of the Bay Area) and taking on more space and continuing to hire and Salesforce basically leasing most of a new high rise.
Chicago has created 25,000 downtown jobs since the Great Recession. Can you imagine getting another 25,000 over the next five years? Most cities couldn’t handle it. DC/Virginia won’t be able to. Housing costs will soar more than they already are. It’s just too inflationary for smaller cities. NYC is the only one that COULD handle it. It’s absorbing Google’s 25,000 employees pretty easily.
The largest single employer in downtown Chicago has only like 2,000 employees. Salesforce and Google will be among the largest single employers.
And if you think what is happening in Chicago with Grubhub, Groupon, Facebook, Google, Gogo, and Salesforce isn’t transformational for Chicago, you’re wrong.
“Also, if you’re going to spend tens/hundreds of millions, or billions, in an area, do you really want your plans subject to aldermanic veto”
And you honestly think NYC doesn’t have its own local politics? Pulease.
“Companies are shying away from Chicago because of Chicago’s finances, and those finances are a direct result of irresponsible politicians.”
Really? Who?
Last I checked Chicago continues to get new headquarters including several international companies setting up North American headquarters.
“And you honestly think NYC doesn’t have its own local politics? Pulease. ”
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Like Chicago does? As I said, whisteling past the graveyard.
Sing and dance all you want, but NYC doen’t have to jawbone the ratings companies to avoid a junk rating.
Chicago does.
‘Nuff said.
25,000 jobs? From what year. In the last 10 years downtown Chicago has added over 100K jobs from 520K to 621K.
Amazon is a stock ponzi scheme, always has been and it’s end game is total domination so the bets eventually pay off or if not, it will explode supernova style taking municipalities and retail investors with it. Google some of their accounting practices, quarterly reportings, growth model and what happens of they ever have shrinking market share to their stock price….it’s ugly. Its model is perpetual growth or death. Take away there cushy CIA, FBI and other 3 letter agency pork contracts for AWS and they are worthless. I dont expect Amazon to exist as we know it in 5 years. Some people think this dual HQ is because they know they are getting broken up too. Amazon is the 21st century South Sea Company.
” Some people think this dual HQ is because they know they are getting broken up too. Amazon is the 21st century South Sea Company.”
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Amazon spinning off AWS (Amazon Web Services) has been talked about for years. All depends on how Bezos thinks he can enhance his stock plays.
BTW, housing starts in Chicagoland area are under half what they were in 2005. Can’t buy new if there’s nothing to buy, so might as well not sell your old one.
https://blog.chicagocityscape.com/housing-production-in-chicagoland-is-below-half-the-peak-in-2005-916eb539718
380K and 440K seem expensive to me for condos when you can buy a whole house in a good Chicago neighborhood for way cheaper than that. That’s why they are sitting.
I’m not sad about losing out on paying Amazon whatever special deal they wanted to choose a city, although I suspect it was always going to be the cities they chose and the rest of us were being used to get them to offer more in their special deals.
There’s definitely stuff to buy, but inventory being low means choice is limited, so maybe people aren’t seeing anything they like enough to tempt them into the market (and thus to put their current places on the market). I didn’t have a problem finding a place I liked, but buying something new wasn’t an interest of mine.
After recounting the carnage in stock and real estate markets from around the globe, today’s ‘Almost Daily Grants’ concludes:
interest rate futures now point to 54% odds of a Fed rate cut by year-end with 0% odds of a hike. Less than a month ago, futures suggested 94% odds of a hike by December and 0% chance of a cut.
ps: I dislike CC’s new-design.
“ps: I dislike CC’s new-design.”
No one ever likes website redesigns. Ever.
No one has liked the other ones on Cribchatter over the years either.
You’ll all get used to it.
“380K and 440K seem expensive to me for condos when you can buy a whole house in a good Chicago neighborhood for way cheaper than that.”
The second floor unit of the $380,000 in the same building sold last spring (basically one year ago) for $400,000. It had similar finishes.
In the last year, essentially, that condo has “lost” at least $20,000 in value. For a reason that doesn’t seem quite clear.
“BTW, housing starts in Chicagoland area are under half what they were in 2005.”
You are comparing starts now to a bubble year. At least compare it to 1999 or 2000 for a little more accuracy. By 2005, developers were putting up condos like candy. Kind of like they’re putting up apartments right now.
Lots of those “starts” weren’t even lived in. Bought to be flipped by investors.
“Amazon spinning off AWS (Amazon Web Services) has been talked about for years. All depends on how Bezos thinks he can enhance his stock plays.”
You honestly think Bezos gives a rats ass about his “stock plays”???
Ba ha ha!
He has more money than any of us can even wrap our arms around and more than any human being could EVER spend in their lifetime or their children and grandchildren’s lifetimes.
He cannot spin off AWS (which, by the way, I’ve NEVER heard them talk about doing, let alone for “years” as it’s only been making decent revenue for about 4 years now) because it’s the only division that actually makes any money. It has margins over 20%. The rest of the business does not. Amazon retail has margins of 2%, on a good day. He uses AWS’s cash flow to pay for the rest of his crazy things, including subsidizing Kindles, his furniture brand, even Whole Foods, which also has low margins.
No way they will spin that off because the other businesses aren’t sustainable on their own.
“Its model is perpetual growth or death.”
Wrong. People who say this are talking about Amazon circa 2005, not the 2019 version. AWS is highly successful and pushes out a ton of cash. It has essentially “saved” the rest of the business and provides cover for the low margin retail business.
That’s what happens when you create a ground breaking technology and are first “in.”
Growth has slowed a bit because Microsoft is a formidable competitor now but the market is big enough for both of them to prosper for years to come.
For Amazon to get “broken up” you have to prove that there are anti-trust violations. That it has a monopoly that is hurting the consumer. What business does it have that does that? Not retail. (Heck, you can argue that Amazon has been the exact opposite for the consumer. It has actually brought LOWER prices.) Not the cloud. It failed at smartphones. Not Alexa. Not the movie content.
I honestly want to know. What do they do where you MUST use Amazon or you can’t get the service and then that means you MUST pay more for it?
“Like Chicago does? As I said, whisteling past the graveyard.”
In Queens? Yeah.
“Like Chicago does? As I said, whisteling past the graveyard.”
In Queens? Yeah.
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Trying to compare moving headquarters with MAYBE several hundred employees into a city with creating a headquarters complex worth billions that will have 25,000 employees is whisling past the graveyard.
Last I checked, Queens was part of New York City. And given Adlerman Ed Burke’s arrest, can you honestly tell us that you can’t see Alderman trying to shake down Amazon (or some ancillary business trying to move in) on permits? Yeah, other cities have local politics, but only in Chicago is local politics a blood sport.
BTW, I think the redesign is okay. Like Gary, I wish the response comment notification feature was back, but I see the merits of what was done.
So here’s a question for you, boys and girls, apropo of Gary’s observations about Chicago’s having weak price appreciation and Sabrina’s – misdirection accepted – getting the vapors about Chicago’s prospects: Given the arrest of Alderman Burke for the tawdry circumstances he was arrested for, and given that Burke was already being watched by the feds BEFORE he messed with the Burger King, how much has Chicago’s bush league and self-referencial politics held back home price appreciation in Chicago?
Feel free to incorporate debt levels, union deference, remodeling permit politics, the fact of the second most powerful politician in Chicago being effing-stupid-enough to even get involved with remodel permits to begin with, and what not in your answers and opinions.
I say Jeff Bezos is dancing with joy that he turned down Chicago. So much for my natural experiment — I didn’t control for avoiding bush league political corruption.
Oh, and please, Sabrina, BEFORE you respond, give us an example of the SECOND MOST POWERFUL politician in New York being busted for permit-stalling a fast food business in order to get legal business, either local OR state-wide. Your silence will be deafening.
“how much has Chicago’s bush league and self-referencial politics held back home price appreciation in Chicago?”
None. Dumb question.
Have we not had appreciation in Chicago for the last 50+ years? The Feds have been arresting Chicago politicians for that entire time. My god, 92 public officials were indicted in Operation Greylord in the 1980s.
Burke is part of the old guard, obviously. Other than Madigan, he has to be the second longest serving elected official in the country (Madigan is the first.)
Hopefully, that generation fades out (although Preckwinkle is the same era).
Again, I don’t think Bezos ever cared what is happening in Chicago. And it’s too bad he didn’t give the city a chance. But the big developments like Lincoln Yards will get built anyway. The poor Amazon employees will be stuck going to Crystal City for the rest of their lives on a substandard Metro while we will have a riverwalk that extends for miles and water taxis running year round up and down the river.
Have we not had appreciation in Chicago for the last 50+ years? The Feds have been arresting Chicago politicians for that entire time. My god, 92 public officials were indicted in Operation Greylord in the 1980s.
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Of course we’ve had appreciation, but if Chicago’s appreciation has been X percent over the last 50 years and other cities have appreciated by 2X percent, then how much of that extra appreciation do people think is attributable to owners in other places not having to put up with Chicago style clowns.
The thing that gets me is just how tawdry the whole Burke thing is. We can’t be a world class city if we only have third world class crooks.
I just posted my December update. Yeah, it was pretty weak – down 15.4% (IAR will say 17.4%). I still think the market is fundamentally strong with low inventories and fast market times. But January is likely to be soft also. http://www.chicagonow.com/getting-real/2019/01/chicago-real-estate-market-update-december-home-sales-plunge/
“Of course we’ve had appreciation, but if Chicago’s appreciation has been X percent over the last 50 years and other cities have appreciated by 2X percent, then how much of that extra appreciation do people think is attributable to owners in other places not having to put up with Chicago style clowns.”
You seem to think that lower appreciation (probably about the rate of inflation) is bad. People who focus on cities like SF, LA, NYC, Boston, Seattle, so on, are constantly complaining about how bad the appreciation is, how unaffordable housing is. Heck, many people complain that housing in Chicago is not affordable enough, although I think it very much is affordable still, and that is one benefit of being here. (Hopefully, they won’t screw it up with rent control.)
Thanks for the update Gary.
Usually we would blame this on the weather. Lol.
But since we can’t, I wonder what it will be blamed on instead? The “low inventory” excuse is getting old because it’s been low inventory for a few years now.
“Of course we’ve had appreciation, but if Chicago’s appreciation has been X percent over the last 50 years and other cities have appreciated by 2X percent, then how much of that extra appreciation do people think is attributable to owners in other places not having to put up with Chicago style clowns.”
Chicago’s appreciation has historically been 1-3% a year. That’s it. The bubble years, and actually the “reflation” we’ve seen the last 10 years, has skewed the perceptions of what “normal” real estate gains are like. Hint: it’s not 10% a year – not even in the Bay Area or NYC.
We’re likely going to be entering into a new era where there is little appreciation. That means living somewhere for just 1-3 years will almost certainly amount to taking a loss by the seller due to transaction costs. Once that becomes the norm, those people will no longer buy. They’ll simply rent one of the nice apartments until they buy their more “forever” home. And then people will live there 10-30 years.
“The “low inventory” excuse is getting old because it’s been low inventory for a few years now.”
How else can you explain it when market times are fast?
Any chance of getting the email notifications back?
“The “low inventory” excuse is getting old because it’s been low inventory for a few years now.”
You make it sound like market fundamentals are like granite countertops and subject to the whims of fashion. Economics doesn’t work like that,
The market IS soft but it’s more evidenced by the lack of appreciation despite low inventories, more than the relatively low volume. Many reasons to explain that.
“Chicago’s appreciation has historically been 1-3% a year.”
Over a period of 100+ years, Chicago’s nominal increase in residential real estate values has averaged about inflation + 50 bps. You want to argue that the accurate spread is 20 or 80, go ahead, but over any longer term, the reasonable expectation is centered around CPI + 50bp.
“You seem to think that lower appreciation (probably about the rate of inflation) is bad.”
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Question for you: In which would you rather put your money?
1. a FDIC insured savings account earning one percent, or;
2. a FDIC insured savings account earning three percent.
Let me give you a hint — if you could be earning three percent on your money for the same risk as earning one percent on it, then one percent is bad.
‘Nuff said.
“Heck, many people complain that housing in Chicago is not affordable enough, although I think it very much is affordable still, and that is one benefit of being here. (Hopefully, they won’t screw it up with rent control.)”
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Well, Pritzker’s in favor of rent control, so Chicago will have no price appreciation AND will have rent control.
When it rains, it pours.
If you consider the market to be an expression of supply verses demand, then it makes sense that low transaction volume can be explained by low inventory (low supply).
If you consider the market to be an expression of greed verses fear, then low volume without price appreciation is an expression of fear.
There is not enough market greed to drive prices up. What I see is the fear of selling in the absence of increasing prices. And the fear of buying at higher prices – in the absence of increasing prices.
People need to stop looking at primary dwellings like an stock or bond. You dont measure primary dwelling real estate value by how much “profit” you book over purchase price, you measure it instead by the premium you saved over renting a comparable property for the same duration of ownership. The fantasy years of 5%-10% compounding price increases were not normal and do not expect them to return. It seems an entire generation has been fooled into thinking that selling a house after taxes, closing costs, purchase costs, etc, you should net huge gains. Housing is a store of value with the benefit of living space. If you want to speculate you need to play at the margins, the fringe areas.
“Question for you: In which would you rather put your money?
1. a FDIC insured savings account earning one percent, or;
2. a FDIC insured savings account earning three percent.”
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I agree with Marko’s comment immediately above mine.
To elaborate, I would rather think of my house as a place to live and one that will have a cost I can afford when retired (which is a function of my retirement savings and also property taxes). I would rather property values/costs not increase dramatically as they did in the boom years and in some cities, since that results in people having to pay absurd amounts of their salaries for housing or else being effectively priced out.
That Chicago prices are high, but less insane than, say, SF or Boston or even Seattle is, IMO, a good thing.
Sigh, I need to learn to proofread. It’s not that Chicago prices are high that’s a good thing, but that they are less insane than those in many other cities.
“To elaborate, I would rather think of my house as a place to live and one that will have a cost I can afford when retired (which is a function of my retirement savings and also property taxes). I would rather property values/costs not increase dramatically as they did in the boom years and in some cities, since that results in people having to pay absurd amounts of their salaries for housing or else being effectively priced out.”
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You miss the point. You’re telling us that it’s good that we have corrupt clowns killing Chicago because we’d only misuse the extra money we’d make if they weren’t in charge. That’s bull. Let Chicago be governed simply as well (or as badly) as NYC or SF or LA, and we’d have better price appreciation.
It’s not a question of looking at housing as an investment (to Marco). It’s a question of not having value bled off by the third-world-class crocks that we have.
“You miss the point. You’re telling us that it’s good that we have corrupt clowns killing Chicago because we’d only misuse the extra money we’d make if they weren’t in charge.”
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Assumes facts not in evidence.
Specifically, I don’t think the difference between our housing market and, say, Boston or SF is that we have corrupt politicians.
In addition, people in many of the cities you are comparing us with think it’s terrible that housing is getting so expensive and unaffordable, it’s not a good situation. The idea that it’s normal and desirable to have housing go up crazy amounts yearly is wrong.
” The fantasy years of 5%-10% compounding price increases were not normal and do not expect them to return. It seems an entire generation has been fooled into thinking that selling a house after taxes, closing costs, purchase costs, etc, you should net huge gains.”
So long as almost zero down loans are available (FHA 3.5% downpayment), you’ll see big price appreciation in every loosening cycle. Let’s see what happens in this tightening cycle.
When you can lever yourself 29 to 1 in any asset class it will spell trouble. The FHA is enabling idiots to buy 700k properties that have no business having control over those sorts of investment decisions.
“The FHA is enabling idiots to buy 700k properties”
If they are actually underwriting the loans per guidelines, that’d be someone with a HHI of ~$150k or more. That’s definitely still a too-aggressive leverage, imo, but it’s not inherently unstable.
“In addition, people in many of the cities you are comparing us with think it’s terrible that housing is getting so expensive and unaffordable, it’s not a good situation. The idea that it’s normal and desirable to have housing go up crazy amounts yearly is wrong.”
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I never said it was normal or desirable to have housing go up crazy amounts yearly. Corruption, however, has a cost. If a wide variety of cities — literally from Boston to L. A. — can enjoy/suffer appreciation rates in excess of Chicago, then I want to know WHY Chicago isn’t enjoying/suffering those same rates. Your weaving and dodging isn’t helping your case any, Stephanie. You are arguing that Chicago clown class corruption is a good thing, since it “protects” us from crazy appreciation. Nice try, but we still deserve the numbers (or estimates), not dissing from those in denial of the situation.
So my question stands: How much has Chicago’s political corruption cost its homeowners in appreciation? Percentages? Prices? Estimates, conjectures, conspiracy theory results, informed ignorance, ignorant information, whatnot — all cheerfully accepted.
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Oh, and Sabrina, I sent you a private e-mail but I don’t know if you got it: I’m seeing the names and e-mail addresses of the last posters already filled in in the spaces where we have to put that info in in order to post. Please check your security settings.
” The FHA is enabling idiots to buy 700k properties that have no business having control over those sorts of investment decisions.”
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I agree, but we both recognize how paternalistic that statement is, and given some of the leveraging we saw/see in Wall Street these days, I have to ask: Why do you have such a crabbed view of the definition of “idiots?”
The Shrub demanded a bail out of Wall Street in 2008, not a bail out of homeowners. When Obama tried to bail out homeowners a few years later, guess what? Wall Street resisted.
“then I want to know WHY Chicago isn’t enjoying/suffering those same rates.”
We have more land. You can literally build for as far as the eye can see west. It’s why Naperville is now one of the largest cities in the state.
“So long as almost zero down loans are available (FHA 3.5% downpayment), you’ll see big price appreciation in every loosening cycle.”
We have a different take on this Bob. The price appreciation came from cheap money sloshing around the system that inflated asset prices. As the Fed tightens, the assets will now deflate. It could go on like that for 20-30 years (as long as the inflation lasted.)
It will totally change people’s perceptions of ownership. They won’t want to own it.
It’s ironic that all these luxury apartments are now being built, including units that are 3 and 4 bedrooms intended for families. We’ve come full circle.
These are the same units that were built in the 1910s and 1920s in the vintage buildings along the lake front. Those were all apartments, not condos. No one wanted “ownership.” It wasn’t until much later that they started getting converted into condos and co-ops.
“Housing is a store of value with the benefit of living space.”
True, but it has high transaction costs. So buying and selling of it isn’t really conducive for it being a “store of value.” You have to buy it and stay there.
“How else can you explain it when market times are fast?”
They are? Many of the properties we’ve chattered about have been on the market 6 to 9 months. They keep delisting and relisting. Maybe this is just the left over stuff so that’s why it’s sitting.
“Any chance of getting the email notifications back?”
I’ve put a new comments plugin in. I think the old one just stopped working. Let me know if you can now subscribe again. It looks like this plugin has a lot more commenting features, actually.
“Many of the properties we’ve chattered about have been on the market 6 to 9 months. They keep delisting and relisting.”
Yeah, look at my graphs. Homes that sell do so in 81-83 days. Granted, that’s just the homes that sell so it doesn’t measure homes that sit forever. May I suggest that your sampling method is biased? i.e.what is most interesting to talk about is not representative of the market as a whole 🙂
Thanks for the updated plugin. I subscribed so let’s see what happens. However, yesterday I’m sure nobody was able to post. I emailed you about it. It was looking for a captcha value but it wasn’t visible.