The Lincoln Park Townhouse for Under $530K: 1806 N. Larrabee
This 3-bedroom townhouse at 1806 N. Larrabee in Lincoln Park recently came on the market and it’s priced at under $530,000.
Built in 1974, the townhouse has a private garage and private back deck. It also has my personal favorite- skylights.
All 3 bedrooms are on the second level. There is also a lower level family room that is 28×11.
The kitchen has white appliances and maple cabinets.
Yes, there is central air.
Is this a deal for the amount of space and the location?
Eric Rojas at Prudential Rubloff has the listing. See more pictures and a virtual tour here.
1806 N. Larrabee: 3 bedrooms, 2.5 baths, 1 car parking
- Sold in March 1999 for $300,000
- Sold in September 2005 for $535,000
- Currently listed for $529,900
- Assessments of $321
- Taxes of $5272
- Central Air
- Bedroom #1: 13×11
- Bedroom #2: 13×10
- Bedroom #3: 10×8
I think it’s gotta go for under $475K-480K unless it’s structured so that there’s a credit to the buyer for some remodeling work. The kitchen is dated and the 3rd bedroom is tiny.
The location is ok. It’s right near a bunch of very expensive homes. Still, it’s lacking something for me, probably because it looks dated.
Across from low income housing. Master bed is 10′ wide and 2nd and 3rd beds are 8′ wide. There is no utility.
Another mistake by a buyer back in 2005.
Across from low income housing. Master bed is 10′ wide and 2nd and 3rd beds are 8′ wide. There is no utility.
Another mistake by a buyer back in 2005.
The very first photograph looks to me like a low income apartment complex from Joliet (my hometown) rather than a townhouse in Lincoln Park.
They don’t look that different from the townhouses in Sandburg Village that look really dated too and yet still fetch good prices.
This is at the north edge of LP (I think). I looked at it the week it came on the market. It is small, but very cute. Clean, nice, bright, etc. I’m wondering what it sold for:
http://www.redfin.com/IL/Chicago/2724-N-Dayton-St-60614/unit-A/home/13361813
Please find me a handful of true three bedroom plus family room, private garage, full attic, laundry room, utility room, large private patio (for LP) under $550K in Abraham Lincoln School district… which actually means something to parents and re-sale value. Don’t rattle off a bunch of three beds out of the district.
There is plenty of “utility” here. Ridiculous amount of storage. Private garage is great for bikes, and parking is really easy on Larrabee for guests or second car.
There have been recent sales and closings of town homes near by of similar three bedrooms without family rooms. We’ve priced under almost all of “comps” we’ve researched and seen this past 6 months.
The market demand will decide this one, as all props… I can understand if people don’t like the style, but if you’re a parent looking to stay in LP this is a top choice under $600K (unless money is no object, of course).
The kitchen was remodeled prior to these owners… it’s really a nice design and does not need replacement. Terrific condition. I think some people would like the natural wood cabinets and functional layout. Sorry, no granite counter-tops here.
I have a duplex in Ravenswood with two kids and can easily see my family in this town home; the school is a top choice. We are sending our kids to private in our hood, but would easily send our kids to Lincoln school. Taxes are pretty low too for a good school district.
It’s priced under owners purchase price and has new windows and patio sliding doors throughout since they bought. The fact is we have had heavy interest and a second showing in the first week. Over 20 documented showings plus walk-ins to out open house last week. We are busy this weekend. It’s not for everyone, but there is plenty to like here if someone needs a “home” rather than a condo. Please make a distinction between your personal needs and budget and the actual market demand for this place.
Actually, it’s a very nice place, clean and open and spacious.
But as Steve Heitman points out, it is too close to public housing. He’s correct here- this place was a mistake and should sell lower, about $450K.
if only you could shave this townhouse’s arse and make it walk backwards
Laura, have you ever been in this town home? “and should sell lower, about $450K.”. Please, do tell… That does not jive with anecdotal or factual market data relative I have to actual property bought and sold in this general location, not withstanding location specific to the school district.
“I have a duplex in Ravenswood with two kids and can easily see my family in this town home”
LOL. This isn’t the first time you used this sales pitch on a property you were selling. Get some new material.
You might also want to consider that when someone says something “should sell” at a certain price they are likely indicating their opinion of value, not that someone else might overpay for it.
“but if you’re a parent looking to stay in LP this is a top choice under $600K (unless money is no object, of course)”
Eric i like this place for the utility of it. Great space in LP and Lincoln district, OUTDOOR SPACE TOO, parking, lower level family room, ALL THREE BEDROOMS on the SAME FLOOR. I like the kitchen only cause i hate SS and granite (everybody has it).
I do think the bathrooms are dated and will need to be redone, just personal opinion cause it reminds me of the bathrooms in the places in rented in college.
I can see 100% a practical family that needs/really wants to be in LP and dosent have extreme amounts of duckets to get a SFH.
thanks for the advice “G”, you’ve never met me, but you can ask my past clients if I’m straight with them. Your “sales pitch” is my reality. I see a lot of homes under $550K and need to make the call… could we fit in this place? Will it work? I feel this place would be great.
You can actually get a townhouse in LP for less than half this: 1749 W Atgeld for $252k. Can’t figure out whats wrong with it tho..
For a 3/3 you can get that a block away at 1639 W Atgeld for 465k. Not sure if the location premium here is worth 65k.
“I can see 100% a practical family that needs/really wants to be in LP and dosent have extreme amounts of duckets to get a SFH.”
Incorrect, sir! This property is already competing with smaller SFHs in LP. See 2700 N Wilton for 550k (only a 2/2 though).
Eric, I agree with your re utility. Problem is, most people looking to drop this money — in Lincoln Park or elsewhere — don’t want a place that looks like this. They want something that’s pretty or looks cool. That’s why they’re in Lincoln Park. No ill will, and I wish you luck, but I think you may be over-estimating the number of people who both want to live in Lincoln Park and value utility over other qualities.
Surely proximity to public housing isn’t always a huge dealbreaker. Is it public housing just for seniors? Is it hundreds of units or just a small building or two? There’s a big difference in having the nicest house on a block full of section 8 and projects vs. being one of many upper middle class owners in an upscale neighborhood that contains a small public housing property nearby.
J,
but its not just East LP its in the lincoln district (think families), with parking and a lower level family room.
For me being a parent and dropping over 500k on a place it would be great not having to pay private school tuition.
It looks like the building across the street is Elizabeth Woods apartments, a CHA property for seniors with studios and one-bedroom units. That doesn’t sound like much of a problem to me.
I do not know about the public housing here…So my opinion – this looks ok; a good amount of indoor space (outdoor space I am not clear on), Lincoln elementary; I don’t mind the kitchen and the baths at all (Rojas correctly says they are “neutral”) – nothing to write home about, but perfectly livable until one can redo them in one’s own preferred style. Like the new windows, too. Well done listing, Eric!
Bob – Your posts prove the fact that you KNOW NOTHING ABOUT REAL ESTATE OR LINCOLN PARK. You are quite funny though… keep posting!
It would be fun to sell you that great SFH on Wilton. Great location! LOL 🙂
I like this place but the high assessments are an issue for me. Why does one townhouse association charge $321 while another charges $50. The variations are bizarre.
J,
Did you take a poll or something before you decided Eric was wrong?
“but I think you may be over-estimating the number of people who both want to live in Lincoln Park and value utility over other qualities.” That’s a bizzarre statement based upon tons of assumptions about people’s priorities that you know nothing about. Although according to your statement I hope you realize it only takes one person that values utility…
Hey Danny – Some townhomes are fee simple and other are part of a condo associaiton. Teh $50 assessments do not cover insurance or a reserve fund for maintenance on the property. The $321 assessment does.
Don’t buy anything until you learn about real estate.
AaronErg — No, I didn’t take a poll. And I didn’t say Eric was wrong. I said he “may be over-estimating.”
Maybe I’m projecting my own preferences too much, but I just think the market for this is small. Personally, if I (1) had to have this much space, and (2) only had $500k to spend, then I would probably conclused that Lincoln Park is not the neighborhood for me. This place would not change that analysis.
Like I said, I wish Eric luck in selling it. It looks like a perfectly fine home. But I think it’s a good sign for the market if he finds a buyer anywhere near $500k for a property that is not single family and that everyone seems to agree is not exceptional.
J – the market is hot hot hott! Buy now for $500k or be priced out forever!
Single familes in LP average around $2.5 million. I don’t this is a good comparison for a SFH. I changed my mind… It will sell quick even with the obvious negatives. Being in the Lincoln Park School district is priceless!
Well, not exactly “priceless”, eh? But certainly worth $530K, perhaps.
J,
I like your balanced opinion but you fail to understand the ugly crap people buy to be in Lincoln Park, the amount of ugly buildings in LP and the level of finish that you can get in LP for $500K. This development itself is 1970s ugly, but the interior is really pleasant. People have reacted well to this home as it has a really good vibe. We have a couple more second showings this weekend from last week’s over 20 showings. Mostly families, the most probable market for this place.
Really, this is about supply and demand and needs and wants. Sorry, there is very little choice for families under $550K close to downtown and in a top school district.
AaronERG has it right… people have priorities. “G” gets bent when I question why Laura would say this “should sell around $450K”. Why should it sell there? “G”, (no offense, but you could change your approach to me a bit) she made an unsubstantiated estimate of where this “should” sell at in the market. According to your defense of her comments, she really should have said “I would only pay $450K”, which would be a fine opinion… an opinion of value to herself assuming she had the scratch and wanted the location, school etc…
So, I have no problem with people saying what they would personally pay (which, of course, may have nothing to do with what the next guy would pay depending on needs and wants).
This is not a game for me… I have to accurately figure out what someone in the real time market will pay… and based on this I have to advise and help a seller to prep their home including spending money on improvements. I can’t leave money on the table because a couple people think the exterior is ugly.
Some of us are city people. Live in this city long enough and this is a great location, great school and a mansion for those making under $200K gross in their household!
Groove et al… on the finishes:
They are very neutral and the material actually is pretty nice and in great condition… tile, vanities, cabinets etc… Baths are a little small, but not bad. In a lot of other LP town homes, there is a lot of stuff you HAVE to rip out of the home STAT. You can live nicely with these finishes (unless of course, money is no object).
Bob, you are funny. 2700 N Wilton would be great if you’re a big fan of knee walls, hitting your head on the ceiling, two bedrooms and oh, yeah… the train in your non-existent (I think) backyard.
Seriously though, you are funny.
See Bob… I told you you were funny 😉
This just in… G, HD, and Bob have rented a studio together in the Albany neighborhood. They each pay $76 per month in rent. Way to go guys!
J-
Eric is right, “Really, this is about supply and demand and needs and wants. Sorry, there is very little choice for families under $550K close to downtown and in a top school district.”
There isn’t much out there for sale, especially at this price range in LP, I have no doubt there have been 20 showings last weekend and probably even more this weekend.
The problem is that there is so little inventory in the price ranges that most people can afford. So anything priced ‘reasonable’ sells rather quickly like this property – listed only 12 days and will probably go under contract shortly. $550k is ‘reasonable’ in the neighborhood compared to the rest of the over priced crap we see in LP – which G has shown time and time again, simply languishes on the market. Sales volume in LP is at generational lows for SFH and attached home sales. Yes that’s right, generational lows.
This is the problem is most good neighborhoods. I live in old irving and any decent home priced reasonably goes under contract in days. I watched one house for $385k list on Monday and go under contract this morning (Friday). It didn’t even make it through the weekend. Yet there are other similar homes priced 50% more and have been on the market for months and months.
That’s the problem with the real estate market. The top 25% of the market can no longer afford the crazy prices of 2004/2005/2006 (due to financing issues, lack of income, unwillingness to stretch the budget to an oversized home, etc); yet, most sellers are still wanting those crazy prices. The pent up demand is just sitting on the sidelines waiting for the deals and then it gets hyper-competitive. The market will remain slow for years and years to come as sellers are unable to sell at 2007 prices and buyers are unable to buy at 2007 prices.
yet, the shadow inventory lurks: here’s a link to a realtor who thinks that there are 26,000 homes lurking in the shadows just in her little area of chicago (the NW burbs).
http://activerain.com/blogsview/1412836/shadow-inventory-housing-overhang-and-you-
I imagine that the north side of Chicago has tens of thousands of units in mortgage purgatory. Sabrina had linked to one the other day where the property was in the shadows for 18 months or longer.
Any way you look at it, these are interesting times we live in.
This isn’t LP but here’s a prime example:
This home has been listed on and off since Jan 26, 2007 – today it’s priced at $449k. Languishing.
http://chicago.craigslist.org/chc/reb/1596399122.html
This bigger, nicer, better located home a few blocks away went under contract in 4 days for $385k. Listed Monday night, went contingent in the MLS this morning.
http://www.redfin.com/IL/Chicago/3923-N-Lowell-Ave-60641/home/13459273
The fact of the matter is that there are plenty of people sitting on the sidelines waiting for reasonably priced homes. The difference is that the owners of this home have a lot of equity and can price their home to sell. The guy in the home above bought in 2006 and is way way underwater. He can’t sell for anything less than he’s listed for.
I promise, the days of most homes on the market in ‘good’ neighborhoods being reasonably priced will return. It’s just going to take a long time to get there. Too many people are too far underwater to sell meaning that the only sales will be distressed sales, estate sales or long time owners without significant HELOC’s. And those sales are few and far between. Generational lows.
Good night everyone.
HD – What is your point with your link. That is $450,000 dump in a rather boring neighborhood. The place is a tear down.
Generational lows? Last six months closed properties in LP (attached) is 25% higher than the previous year. Do you mean almost “generational lows”? Should I gloat that vloume is thorugh the roof?
Tell G to move over and quit whispering in your ear when youa re trying to sleep 😉
Steve H… really funny.
“This just in… G, HD, and Bob have rented a studio together in the Albany neighborhood. They each pay $76 per month in rent. Way to go guys!”
“Generational lows? Last six months closed properties in LP (attached) is 25% higher than the previous year. Do you mean almost “generational lows”? Should I gloat that vloume is thorugh the roof?”
heitboy, didn’t your eponymic SHill teach you anything about playing with numbers?
Here are LP attached closings for the 6 months ending January 31st of each year:
1989 = 461
1990 = 439
1991 = 346
1992 = 429
1993 = 489
1994 = 627
1995 = 556
1996 = 554
1997 = 548
1998 = 615
1999 = 568
2000 = 563
2001 = 560
2002 = 547
2003 = 596
2004 = 707
2005 = 804
2006 = 893
2007 = 612
2008 = 543
2009 = 328
2010 = 396
They are up 20.7% YOY and you can judge for yourself when they were last at these levels.
Here are the LP attached closings for the calendar years:
1988 = 845
1989 = 889
1990 = 904
1991 = 959
1992 = 1,052
1993 = 1,198
1994 = 1,279
1995 = 1,067
1996 = 1,223
1997 = 1,282
1998 = 1,316
1999 = 1,270
2000 = 1,247
2001 = 1,191
2002 = 1,281
2003 = 1,481
2004 = 1,566
2005 = 1,916
2006 = 1,366
2007 = 1,446
2008 = 910
2009 = 720
It is important to keep in mind that comparisons of sales volume over time can be misleading due to the increase in the number of condo units over the timeframe of the data set. I would say that the number of condo units have increased quite a bit over the past 20+ years. This leads me to believe that there is a very sizable number of sellers sitting on the sidelines just hopin’ and prayin’ for a new round of suckers to appear.
“Buy now and be priced in forever.”
“Should I gloat that vloume is thorugh the roof?”
Some do consider the crawl space ceiling the roof I suppose.
Heitman, you should brush up on your reading comprehension skills. I said generational ‘lows’. Notice the ‘s’ on the end of the word low? I didn’t say generational low, I said sales are at generational ‘lows’, of which G’s data above clearly confirms.
You should analyze the data very closely because your income depends on it.
HD, that home on Lowell looks great! Oversized lot, good street, 3 br’s on 2nd floor. Did you put on offer on it?
I would have loved to put an offer in on it but 1. There’s no way I could have even seen it before it went under K; and 2. I’m sort of waiting until there are more ‘deals’; I hate hate hate feeling pressured to buy anything – i’m the kind of guy who would rather not buy at all than feel under the gun to buy a $389k home without more than a night or two to think about it.
“roma on February 13th, 2010 at 7:34 pm
HD, that home on Lowell looks great! Oversized lot, good street, 3 br’s on 2nd floor. Did you put on offer on it?
“
G – Thanks for proving my point. Sales are up a 20.7% compared to last year. Is that bad for some reason?
1991 = 346
1998 = 1,316
2005 = 1,916
2009 = 328
2010 = 396
Up 20% means sales volume has increased to 20% of peak from 17% of peak.
Congratulations! You can make your Lexus payment next month!
“steve Heitman on February 13th, 2010 at 7:52 pm
G – Thanks for proving my point. Sales are up a 20.7% compared to last year. Is that bad for some reason?”
SH,
How does it feel to know that your personal peak income was in 2005? You will never earn that much money *ever* again as a Realtor ™.
As much as volumes have slowed, the number of active realtors has declined. My earnings were the highest in 2008 and only off 8% in 2009. 2010 is off to a block buster start HD. Hoping to close 20% more than last year.
HD – Not sure the stats you listed a couple posts above but they are wrong. You need to brush up on your statistics. Not understanding is the reason you live in a studio with Bob and G.
Sounds like Stevo’s beloved LP is not providing much commissions these days, eh Stevo?
Or is it all unicorns and fairies? 😀
Best Tribune Real Estate Article Ever! Here’s some comedic gold!:
“Added Michael Golden, co-founder of Chicago’s @Properties, a full-service residential and commercial brokerage firm: “It’s an incredible opportunity to buy now and build equity quickly. Think about it. If there is inflation, prices will go up, and your equity will grow. If there’s not inflation, prices still pretty much have to go up, because there will be a need for new housing. … Prices won’t go up again as they did in the last decade. But I think there will be a bounce.”
**************
It’s likely a losing strategy for potential buyers to sit on the sidelines, waiting for prices to drop further, said Alan Lev, president of Belgravia Group, which cut prices at 565 Quincy, near Union Station, by as much as 30 percent in mid-January.
“”I think they’re going to miss the opportunity on several fronts,” he said. “Prices are at rock bottom, they’ll lose out on the tax credit, and I believe interest rates are going to tick up later in the year. I can see why a year ago people would have waited. But today, I believe if they do, they’re going to kick themselves and say, ‘Boy, I really should have bought.'”
**************
“”The market presents an excellent buying opportunity, certainly unmatched by anything we’ve seen recently,” Lissner said. “For anyone with a job, who feels good about their employment, this is a great time to buy. There are some outstanding values in the market.””
http://www.chicagotribune.com/classified/realestate/advice/ct-mre-0214-condo-market-20100211,0,5177148.story
“I can see why a year ago people would have waited. But today, I believe if they do, they’re going to kick themselves and say, ‘Boy, I really should have bought.’”
This Pres/COO of Belgravia, Alan Lev, is a riot. If he believed this, why was Belgravia’s price “guarantee” available last year but not now when prices are at “rock bottom”?
A minimum of 40% of 565 Quincy units are still available. Most buyers’ biggest fear is further price declines. Why no real price guarantee now that prices are already at “rock bottom” per the developer?
I mean, his shill Joe Zekas even went so far as to make unavailable all videos that depicted Lev discussing the “nuances” of the past guarantee. Why care if they are now at “rock bottom” anyway?
I guess it won’t be hard for a buyer to get Belgravia to agree to one now, right?
hd,
Your lame shilling for the sleazy apartment finders isn’t cutting it with intelligent home buyers. And, despite your fantasies and fear-mongering, most of them are pretty damn intelligent.
Buyers aren’t paying attention to Michael Golden’s foolish statements about appreciation.
They’re running the rent vs own numbers at 565 Quincy and other discounted projects. Have you done that on a 7/1 ARM or even on a 30-year fixed? On an after-tax basis, even with a low down payment, the numbers are pretty compelling.
While you’re diddling yourself with your “sky is still falling” routine, home buyers are doing the math, locking in most of their housing costs for an extended period, reaping the rewards – and not putting their money in your paymasters’ pockets.
Take my challenge. Run the rent vs own numbers for 5 years on a 2/2 that’s comparable in all respects to one priced at $318,900 (parking included) at 565 Quincy. Can you find any realistic scenario in which the renter’s ahead after 5 years? 10 years?
G,
The 49 people who signed contracts at 565 Quincy in the last month are obviously not all that concerned about further price declines.
One trick punies (not a typo) like you are. Take the challenge I posed for hd.
“Take the challenge I posed for hd.”
What did you input for future price and rent declines? No use going further if you still fail to acknowledge these.
How come you are avoiding my obvious question? Why wouldn’t Belgravia continue to offer a price guarantee if, as their Pres/COO Alan Lev declared, “Prices are at rock bottom”?
“The 49 people who signed contracts at 565 Quincy in the last month are obviously not all that concerned about further price declines. ”
That’s no confirmation of their lack of concern since 62 buyers bought before the inevitable price declines and were predictably vetroed. It only confirms what Alan Lev has previously stated that their sales team is the most important factor today. “Coffee is for closers.”
This is hilarious. Thanks for participating in my enjoyment, Joe Zekas.
Stop the juvenile attribution of sentiments to people about whom you know absolutely nothing. You’re just showing yourself up to be a fool, G.
Businesses respond to customers. When buyers were concerned about price declines, Belgravia offered price guarantees. When buyers demanded price cuts, Belgravia responded. Your question was irrelevant to the real world.
I repeat my challenge – show us how you believe a renter comes out ahead after 5 or 10 years vs a 565 Quincy buyer.
No, Joe, it’s up to you to show, with your ‘new math’ that owning at 565 Quincy will be better than renting. A few weeks ago it was clearly better to rent and the market proved that. 565 Quincy had to lower their prices to compete with the robust tenant’s rental market, not the other way around.
“I repeat my challenge – show us how you believe a renter comes out ahead after 5 or 10 years vs a 565 Quincy buyer.”
G, homedelete,
You’re the guys who are claiming that buyers are making a mistake by buying at 565 at current price levels. The onus is on you to back up that claim, since 49 recent buyers at 565 Quincy have clearly voted against you.
Until you detail your assumptions and make your case everyone is entitled to assume that you don’t have one.
Joe – G is on a month to month lease where he negotiates the lease down each month by 3%. He assumes this will continue for the next 20 years where eventually rent will be completely free.
Stop the juvenile attempts to get others to do your homework for you, Joe Zekas. Let’s see that rent vs. own calculation you are now boasting as a selling point, shill. I’ll bet that this will remain another of your unproven claims.
“Businesses respond to customers.”
Is that your basis for removing access to the videos where Alan Lev explains the “nuances” of the former price guarantee? Did customers ask that it be removed because of their confusion? Besides, are you really trying to claim that buyers today wouldn’t respond to a real price guarantee? And I’m not talking about that “read the fine print” one you mocked a previous buyer for not understanding.
Alan Lev has now said the bottom is in and buyers will be “kicking themselves” for not acting at current prices. You, being the fine shill you are, now claim that current buyers are “obviously not all that concerned about further price declines.” Well then, what’s the harm in selling to those who are concerned by offering a real price guarantee? The developer knows that the bottom is in, so how would it not help sell the remaining 100+ units? Do you really believe the “real world” wouldn’t respond to a real guarantee?
I enjoy seeing the developer and his shill speaking out of both sides of their mouths. I think it’s time for Joe Zekas just to go back to ad hominems – he’s much better at those than actually addressing facts.
G,
You’ve run the numbers and know you have nothing to back up your claim. You’re just trying to distract attention from that simple fact. You’re a cornered rat simply snarling at his / her captor.
Man up and admit your error or continue to duck responsibility for your statements.
No one knows how many of the alleged 49 buyers choose to buy rather than rent because they believe that owning is cheaper than renting. Proving your theorem is an exercise in futility.
Buyers today are like Alex from the other day who wants to own so he can buy nice furniture and hang his flat screen television on the wall – regardless of the financial pitfalls associated with owning. He even admits this when when he says:
“I basically want to make the least financially stupid move I can that ends up with me owning a place within 9 months.”
“Man up?” That’s the best you got? Why yes, it is. I just can’t stop laughing that you are the best shill out there. And so concerned about lil ole G that you resort to such obvious nonsense. Where is all that knowledge you bloviate about? Afraid that a know-nothing like me will see right through your rent vs own analysis? Why would that worry a genius such as you? LOL.
“You’re the guys who are claiming that buyers are making a mistake by buying at 565 at current price levels. The onus is on you to back up that claim, since 49 recent buyers at 565 Quincy have clearly voted against you.”
The 62 who have already been vetroed and find themselves way underwater listened to the developer and their shills, too. I said they were making a big mistake prior to signing contracts. I also warned that any who did sign and not forfeit their earnest money were also making a big mistake since price reductions were inevitable. I also added on a thread here that the fact that Belgravia was pressing for closings meant that the reductions were a lock. How did I do with my claims so far?
We all realize that you could care less about those 62 buyers, just like you could care less about the 49 plus however many more marks you con. The developer will make more money which you will determine makes them great men. You value anything that results in profit for you or your masters. We get it.
Thanks for all of your comments here. They are making my case for me as to what a shill you are. Effing hilarious, to boot.
“Joe – G is on a month to month lease where he negotiates the lease down each month by 3%. He assumes this will continue for the next 20 years where eventually rent will be completely free.”
Once again, heitboy, you prove that you haven’t mastered basic math.
G, homedelete,
Everyone with any sense sees that you can’t back up your claims and are desperately trying to change the subject.
You’ve done the rent vs own, and you know that buying at 565 is the better gamble over renting. You’re being dishonest here, and you’re fully aware of that but press on nonetheless.
My challenge still stands unadressed: you claimed 565 buyers are making a mistake. Back that up with a credible 5- or 10-year rent vs own analysis, stating your assumptions.
“G – You’ve run the numbers and know you have nothing to back up your claim. You’re just trying to distract attention from that simple fact. You’re a cornered rat simply snarling at his / her captor.
Man up and admit your error or continue to duck responsibility for your statements.”
“Stop the juvenile attribution of sentiments to people about whom you know absolutely nothing. You’re just showing yourself up to be a fool,” Joe Zekas.
BTW, look how easily the shill tells lies. What statement about rent vs own am I ducking responsibility from?
Was it this one: What did you input for future price and rent declines? No use going further if you still fail to acknowledge these.
How about this one: Stop the juvenile attempts to get others to do your homework for you, Joe Zekas. Let’s see that rent vs. own calculation you are now boasting as a selling point, shill. I’ll bet that this will remain another of your unproven claims.
That’s the extent of my references here and I do not duck responsibility for my statements. The shill is caught in another blatant lie. Once again, though, I seemed to have called something correctly and the shill’s rent vs own claim remains unproven.
I’m really enjoying this, keep ’em coming shill.
Gamble. You said ‘gamble’. You’re right joe, it is gambling, buyers are gambling that they might get vetro’d, again.
That’s not a bet I’m willing to make.
Joe must have some outstanding invoices from Belgravia group that’s why he’s shilling so hard today.
“You’ve done the rent vs own, and you know that buying at 565 is the better gamble over renting.”
Here’s Joe Zekas’ opinion of buyers:
“The grown-ups listen to everyone they perceive as being worth listening to and then make their decisions, recognizing that sometimes their decisions take them off a cliff. I can’t make them do anything. Developers and real estate agents can’t make them do anything. But at least they pay attention to us because we know things they want to learn.”
HD and lil ole G are ignored per Joe. Why does he now feel that our rent vs own analyses are desired by anyone when he has already done his on 565 Quincy? C’mon Joe Zekas, you know things that we want to learn. Was that another lie?
G’s latest defense: “I didn’t do my homework before babbling away.” But then, that’s how s/he always operates.
You’ve claimed buyers at 565 are making a mistake. You have nothing to back that up. Nothing. There’s no way to duck that, no matter how wildly you flail away.
LOL. Yes, Joe Zekas, nobody can predict the future. That’s what you have said about the correction since at least 2007. You didn’t think those first 62 buyers were making a mistake, either. I did. That just burns you up, doesn’t it? All of your knowledge, all of the knowledge of those you shill for, yet you never called that correction? LOL. You are either much less knowledgable than you claim or you are a liar. I say both.
I’m obviously not “flailing away” or you wouldn’t feel the need to keep responding to me. I am making my points loud and clear. Go ahead, prove me wrong with your rent vs own analysis. I still bet we will only hear more bloviating and deceptions from you. That’s all you shills and developers got now.
Now, do you have anything substantive to add or will it be more about me?
Joe Zekas said: “They’re running the rent vs own numbers at 565 Quincy and other discounted projects. Have you done that on a 7/1 ARM or even on a 30-year fixed? On an after-tax basis, even with a low down payment, the numbers are pretty compelling.”
Quit evading, shill. Post the analysis.
Again, G, with all due respect (i.e., none), you’re the one who claimed that 49 current buyers at 565 are making a mistake.
Or just keep repeating that you won’t be held responsible for what you say.
The entire group of CC egulars has fallen strangely silent here.
Let me expand my challenge to all the CC regulars and casuals.
Show us a credible 5- or 10-year rent vs buy analysis that suggests that renting a comparable 2/2 is better than buying a 2/2 at $318,9900 (parking included) at 565 Quincy.
Can anyone get the hook out of G’s and homedelete’s bleeding mouths?
A lot of loop area luxury condos built during the boom are definitely NOT cash flow positive these days, especially as you go up in valuations and FHA can’t fund as many loans.
For instance the Legacy at Millenium Park has a 1/1 listed for 390k now, but also for rent for $1,850 (parking incl).
5.6% yield before even counting other expenses. Ouch!
The Loop area condos will be death by a thousand cuts. Investors are slowly bleeding out CF each month hoping for a turnaround.
Again, Joe Zekas, with all due respect (i.e., none), you’re the one who claimed that 49 current buyers at 565 are not making a mistake (just like you did the vetroed 62, LOL.)
Or just keep repeating that you won’t be held responsible for what you say.
The entire group of realtards, shills and developers have fallen strangely silent here.
Let me expand my challenge to all the realtards, shills and developers.
Show us a credible 5- or 10-year rent vs buy analysis that suggests that buying a comparable 2/2 is better than renting a 2/2 at $318,9900 (parking included) at 565 Quincy.
Can anyone get the hook out of Joe Zekas’ bleeding mouth?
G,
You’re hoping that people’s reading comprehension is as poor as yours. Bad gamble. Anyone who reads what I’ve said carefully can see you’re doing your usual thing of creating a straw man to argue with.
This started with you and hd hijacking this thread into a cheap, unwarranted shot at one of the city’s best and most honorable developers, and at 565 Quincy buyers who are demonstrating the unreality of your position.
I’m guessing you started this here – in a thread unrelated to 565 Quincy – because you’re snivelling little cowards who know I don’t read everything here and who hoped you could get away with some back-stabbing.
I chimed in, asking you to back up your assertions. You haven’t, because you can’t. And you’ve already made it crystal cleaer that you won’t take responsibility, so why keep blathering on here?
What straw man? You claimed that “They’re running the rent vs own numbers at 565 Quincy and other discounted projects. Have you done that on a 7/1 ARM or even on a 30-year fixed? On an after-tax basis, even with a low down payment, the numbers are pretty compelling.” I asked for your analysis and you failed to provide it. What are you hiding, anyway? Did your masters tell you not to provide it in this forum where it could be discussed openly?
My record of providing actual data on this site will be hard for you to negate with your nonsense. I have given you another opportunity to put me in my place with your expertise, yet you hide in plain sight. Once again, what are you hiding?
62 previous buyers in 565 Quincy are already big losers. You and Belgravia helped lead them to their losses with your expertise that they wanted to know, as you so humbly put it. I can only imagine what those rent vs own analyses looked like then. Now, with your past record in this bldg a dismal failure for those 62 buyers, you want us to believe that your inputs in a rent vs own analysis will be better now.
Sorry, it’s your analysis which is in question since mine has been correct to date. Try to get something right first before begging for info from those who have. Here’s your chance to show your analysis and impress us with more than your bloviating and deceptions.
Keep in mind readers that Joe Zekas “analysis” means nothing. 565 Quincy only shows 69 recorded closings over at the Chicago Tribune’s website today. Far below the 240 units originally constructed. Joe tries to use the straw man argument of an imaginary or at least illegitimate metric of “contracts signed” whereas we all know these frequently do not result in closings.
Anyone considering jumping into home ownership should consider the motivations of people such as Joe Zekas whose livelihoods are personally invested in putting people into ownership status either directly or indirectly. They should also consider that Joe has chimed the same tune that its always a good time to buy, even back in May 2009 when they started closings at 565 Quincy. He ignores the financial impact on the people who completed these initial closings who would’ve followed his advice only a year ago.
One year later and he’s still the same parakeet with the cover over the cage singing the same tune.
Joe how did those initial closers fare at 565 Quincy last year and why did you remove a video talking about a price guarantee from the internet? You are an extraordinaire at not only poor salesmanship but also revisionist history, apparently.
Here’s something right, G. No one bought at 565 Quincy or anywhere else based on what I have to say, and I wouldn’t want them to. I simply present facts and buyers draw their own conclusions and make their own decisions, based on lots of input from lots of sources. My site refers them to 100s of those sources, including this one.
No one in their right mind buys the proposition that I or anyone else in the real estate industry gulls the type of person who buys at 565 Quincy into doing something that they think doesn’t make sense to them. That’s beyond ridiculous.
I don’t present a rent vs own because every buyer is going to make his or her own assumptions and not simply adopt mine.
Your complete inability to back up your claims is what’s in issue here and there’s no way to evade that.
Bob,
My track record and identity are transparent, and anyone can speculate about my motives with some knowledge, which is more than anyone can say about any of the anonymice here
If you knew anything at all about me or my business you’d know that my livelihood isn’t dependent on what you claim it is.
homedelete: thanks for sharing those choice shyster quotes from Lissner, Lev, and Golden. Of course, they’re probably down at Harlan Berk on Clark buying physical gold.
It’s amazing, the “chutzpah”, some people have to openly lie through their teeth.
…still a nice town house!
If I did a 5 year analysis, I see another ~10% drop in rents – 6% in the next year and slightly less than 4% the year after (2011). I don’t think inflation will be as significant, and if it is, rates will rise and deter prices from rising in tandem. Even with 3% annual increases in rents in 2012 through 2014, i don’t see how buyers can come out ahead, unless you put at least 20% down, which Joe Z claimed wouldn’t be necessary.
Huge uncertainties are property taxes and assessments. Property taxes will cause a world of hurt for many owners as the city has huge revenue shortfalls. Even if they are flat, renting still would be better than owning.
Dave M,
Where are you renting a comparable 2/2 in a comparable location or near the West Loop and what first-year rent are you assuming, with parking?
Market rents may fall as you predict, or they may rise in later years – no guarantees either way, but 5 years is a long time.
Market rents mean nothing to an individual tenant unless he moves to take advantage of them. Have you factored in all the costs of doing that? In fact, 2nd year rents are likely to jump significantly for tenants in rental buildings, since landlords are highly unlikely to extend the several months’ free rent they’re offering to attract new tenants.
I assumed a 28% tax bracket buyer, 5% 30-year fixed rate loan, 10% down. You? I assumed the $8k credit. You? I assumed that a buyer takes advantage of the homeowner property tax exemption and that taxes come in at 1.5% of purchase price. That’s easily in line with comps, and doesn’t account for the fact that first-year taxes will likely be lower, since it’s new construction and not fully assessed. You? Assessments are $301.
First-year after-tax costs are $1,725 month, round numbers. You’re unlikely to get a comparable new 2/2 with parking at that rate, even after first-year concessions. Year two and beyond you’re more likely looking at $2,200 to $2,400.
Tax and assessment increases? Who knows? Rent increases? Who knows? Fair to assume they cancel each other out? As likely as not.
Imputed returns on the down payment? Negligible without risk of some principal loss. Appreciation? Assume none. Transaction costs on sale after 5 years? Covered by principal amortization over that period.
My analysis has the buyer ahead at least $8k (the tax credit plus any lower real estate taxes) in year 1, and (round numbers) $6 to $8k ahead each year thereafter.
Over to you.
Dave M,
Some brief additional thoughts.
565 is FHA-approved, so my “claim” that 20% down isn’t necessary is a fact.
Inflation? Who knows – but the buyer has substantially locked in his housing costs while the renter hasn’t unless he moves.
If prices do appreciate the buyer has upside, and gets any gains tax free. The renter has no upside.
Can prices fall further? Speculative, but possible. Is the renter behind year after year: almost a certainty.
The thing that kills the analysis is the 6% transaction cost at the end of year 5 (assuming a sale occurs).
I also assumed the tax credit will correspond to more than an $8,000 drop i value after it’s over, so that is a wash as well.
i used a 5.1% 30 year fixed rate with 10% and 20% down – both scenarios yield the renter coming out ahead.
In a down rental market, you can threaten to move and landlords are willing to negotiate, especially in West Loop. A friend of mine rents a 2/2 in skybridge w/parking and cable included for $1,925. it’s above the 20th floor too. And he may be able to get his rent down due to talking to his neighbor who also is renting and got an even better deal.
I also assumed tax increase 5% per year, but start at around the same point yours do.
I also assumed assessments would rise to ~ $450 per month in year 5, based on the need for reserves in the building and assuming a good association is in place. This would still be very low for a high-rise building downtown. Anything less and the association would be running the building into the ground, based on my knowledge of number of units, and basic property management and maintenance costs, and the need for reserves.
West Loop 2/2 with parking for $1,750/mo:
http://chicago.craigslist.org/chc/apa/1600596356.html
Joe is correct that the 8k tax credit is significant, however I think you can draw your own conclusions how fragile current housing valuations are if a prospective buyer needs an 8k tax credit to make a 400k purchase feasible.
Prices will undoubtedly fall further given the tax credit pulling transaction volume and demand forward.
Throwing an up-front $8k in cash at people (in addition to FHA financing) in fact I believe has changed the mix of RE buyers to a much more toxic one than if these government programs never existed.
If anything, there could be a lot of foreclosures in this building in the coming years if lots of FHA buyers are coming in. The tax credit is just going to create more problems for when it’s no longer there.
FHA is going to be turning bad in 2012 from purchases made in 2010, much like sub-prime purchases in 2006 turned bad in 2008…
Home Affordability: Prices Are Still 40% Higher Than ‘Normal’
http://www.dailyfinance.com/story/real-estate/home-prices-must-drop-40-more-to-reach-normal-affordability-lev/19355381/
While Joe Z claims he does not like to make market predictions (especially in a declining market), other people are more than willing to look at the data and interpret it as negative for future housing valuations.
“The average (mean) house price in December 2008 was $301,200 — almost twice the 1975 cost. To be exact, 90.7% higher. In other words, in an “apples to apples” comparison adjusted for inflation, homes cost almost twice as much as they did in 1975.”
Your friend has a good deal at Skybridge (not a new building). The developer was a high school classsmate of mine and kept half a dozen units to rent out. If he’s your friend’s landlord, good luck with those threats to move.
See how many 2/2’s you can even find for rent in the West Loop in the MLS. That market is tight. And check comparable rents in newer rental buildings.
Principal amortizaton over 5 years, which is built into the monthly carry, more than nets out the 6% transaction costs.
You’re not only assuming the market adjusts for the tax credit, you’re assuming that adjustment holds for nearly 5 years.
Totting it up your best case, on some pretty optimistic rental assumptions and very conservative ownership assumptions, seems to be a break-even on the rent vs own in later years. You’re still down on the early years.
Dave M,
FHA’s problem loans have, in the past, largely been written in problem areas.
That experience provides little guidance for what happens in any particular building. And FHA’s looming problems don’t become a buyer’s problems.
A few things not mentioned: The future stress of any of the FHA buyers will be in addition to the 62 current owners already underwater on their purchases (and nearly all on their mortgages.)
Also, the 2/2 units for $318,900 w/pkg are under 1,000 square feet, so choose your rental comps accordingly.
I know there have been recent rentals in 565 for 2/2 units at $2000 & $1900 but not clear if they incl pkg or were the under 1000SF units.
Keep in mind that rents in new bldgs tend to decline from the start as the reality of the number of specuvestor-owned units hit the market. I know there were specuvestors in the first 62 sold and it is likely that the 49 contracts claimed since the price reductions included more.
One more thing. First time buyers with fha loans who qualify for the $8k credit are likely now taking the standard deduction, so the tax savings from the interest deduction are reduced.
I assumed they were already taking the standard deduction in my analysis. Although Skybridge is not a completely new building, it has better architecture and design than 565. I don’t think it opened until summer 2004, it’s not like it was built in 1995.
I also wanted to note that the assessments for a 2/2 would probably be much closer to $500 than $300 at the end of 5 years. This would be a couple thousand a year extra, which adds up.
G,
You’ve submitted no hard numbers to counter my analysis. And, you’ve got lots of negative speculation with nothing to back it up other than “it happened somewhere so it will happen here.”
Belgravia has an anti-speculator policy. Tell us how you “know” speculators bought at 565 at a time when they had otherwise abandoned the market. Show us your sophisticated stats that tease out the impact of your mythical speculators from all other market variables in driving down rents in new buildings.
Etc.
You’re left with nothing but your usual half-assed hypotheticals to counter an analysis that shows real economic benefit from buying. And that’s what accounts for your desperate evasions earlier in this thread.
Dave M has at least painted a reasonably credible scenario that the rent vs own is breakeven in later years, likely lower from the outset. I’d submit my scenario is equally reasonable, if not more so. Assign equal probabilities to both and your choices are stark: a 50% chance of almost breaking even if you rent vs a 50% chance of significant, immediate savings.
Dave M,
Give us an example of a comparable building from a top-tier developer that had 66% assessment inreases within its first 5 years.
If you’re making an assumption of that kind of inrease because you’re very conservative personally, that’s fine. Suggesting it’s a likely scenario is another thing.
If this were truly an investment decision, the renter would be more liquid in all scenarios, which has value. So, the buyer must be buying for other reasons than being an investment, unless their horizon is more than 5 years. I didn’t run that analysis, because it’s way too difficult to predict at this point.
Dave M,
On a 3.5% down scenario the renter is only more liquid for a brief period of time.
Buying a home, I’d submit, should never be a pure investment decision. The investment value should only be one factor in the purchase decision. In this case, it’s a very favorable factor.
Aren’t more investors/buyer going to default with only 3.5% down, especially if prices drop 10% from where they are now?
Assessments will go to $500 if the condo association is well managed. If it’s not well managed, they will stay at $300, and owners will be hit with special assessments every few years that will exceed what the $500 minus $300 difference would have been.
It’s like taking care of your car – spend $100 every 6 months keeping it up to avoid the $2500 repair bill.
Dave M,
Of course the likelihood of default increases with lower down payments – as a general proposition that doesn’t tell us much here.
Assume even 25% FHA 3.5% buyers and a high 10% default rate and you’re at 5 buyers spread out over some period of time. Not a big deal. I used 10% down in my analysis. And how realistic is a further 10% price drop?
I note that you’re giving me generalities re assessments, not the examples I requested.
Joe if 565 is such a great deal, how many do you own?
Bob – you didn’t look at the numbers, at the end the article
“If average house prices were to return to the 1975 ratio of approximately 3 times average household income, the average price would drop from $290,000 to around $195,000.”
* 2008: median income $50,303, median house price $245,300
Home price/income ratio: 4.87
—random news article–
The real estate roller-coaster ride continued last year as the median price of U.S. single-family home plunged 11.9% to $173,200.
**enough of a price drop 30%
“Bob on February 15th, 2010 at 12:45 am
Home Affordability: Prices Are Still 40% Higher T”
“Eric Rojas on February 14th, 2010 at 10:01 pm
…still a nice town house!”
Eric,
this is now taken the thrown of “the funniest comment on crib chatter ever” when you take into context of the off topic back and forth 🙂
in that article it also had 2008’s at “But the increases weren’t enough to push the median home price above 2008’s bar of $196,600, according to the National Association of Realtors.”
I think you need to look at it from the association perspective. Assuming all units sell out in the next 18 months (that’s a big if), you spread an average of $300 a month over 241 units, which is ~$867,000.
What do you have to pay for as the association?
– Elevator maintenance and routine inspections
– Common insurance
– Common area utilities
– Trash/sewer
– Snow removal
– doorman wages and benefits
– Accounting fees – to file the tax return
– Legal/collections fees – to go after tenants not paying
– Common area maintenance – cleaning, replacing light bulbs, etc
– parking garage maintenance – cleaning and security
– maintaining the “Q” room – the 2 lane bowling alley, fitness center, lounge, etc
– I really hope there’s no pool or else add in another $125k
– building reserves – I would want at least $75/month per unit
I just don’t see how you can keep it under $1,000,000 for the building. I estimated $1,195,000 for 2011. And add in annual increases of 3 % brings you to $1,306,000 in 2014 (year 5), which averages to $451 per unit. Is the 2 bedroom the average unit in the building in terms of square footage? No, so it would be higher assessments, probably around $500.
Hey Bob & HD – Is G still sleeping 🙂
“G, You’ve submitted no hard numbers to counter my analysis. ”
Joe, look at the time of my post before your comment. You can safely assume that any posts from me that early were from my phone while droppin’ a zekas. Hard to show my mastery of facts there, but very satisfying nonetheless.
“I note that you’re giving me generalities re assessments, not the examples I requested.”
How about these assessment examples from 565 Quincy?
#810 active $319,000 w/pkg assmt $350
#1110 active $318,900 w/pkg assmt $301
#1110 expired 4/09 $409,000 no pkg assmt $335
#1010 cancelled 12/06 $343,000 no pkg assmt $335
#1010 expired 12/07 $353,000 no pkg assmt $351
#1210 expired 2/08 $366,900 no pkg assmt $335
What’s the deal with the assmt amount you are quoting for #1101? While you are at it, how about some rent examples in support of your conclusion? I see that Trio is asking $1950 with pkg from the developer and have several available. Wonder what they will settle for? Similar units there show an assmt of $174, but I don’t believe that either (or the developer is stuck with so many units they have no incentive to raise assmts, which does sound familiar.)
“And how realistic is a further 10% price drop?”
Are you still rehashing your old comments from 2007? You blew those badly. What is your analysis to determine this conclusion again? There’s a short sale of a similar under 1,000SF 2/2 with parking for $229,000 avail now in Trio. I know, I know, it’s not in an almighty Belgravia bldg so there is nothing to see here, move along folks.
“Belgravia has an anti-speculator policy. Tell us how you “know” speculators bought at 565 at a time when they had otherwise abandoned the market.”
Note that I said “specuvestor.” You could have asked if you were stumped by the usage. I define it as someone who buys per a faulty cash flow analysis and really needs appreciation to make money.
Now that you mention it, could you please explain Belgravia’s anti-speculator policy as it pertains to 565 Quincy? 10 of the 62 previous closings have already been rented or offered for rent on the mls, and the mls usually doesn’t see all rentals. There doesn’t appear to be a moratorium. One of the original buyers owns 3 units that have all been leased on the mls. Another has two, one of which has been leased on the mls. Is there really a policy in place that restricts specuvestors or rentals? I am certain that the price drops have lured in more specuvestors. How many of the 49 contracts do they represent, Joe?
I think it’s safe to say that rents are under $2,000 for West Loop 2/2’s with parking. How does a buyer come out ahead after 5 years?
Rents have come down and will fall further until employment stabilizes. They will continue to fall in this building as more people close and try to rent out their units.
Oh HERE’s the 565 discussion. I wondered where it went. Hey Sabrina, can we get an RSS feed for comments and user profiles so we can see people’s posting history? I hate to miss this stuff 😀
Can anyone recommend an area to look at that is near a metra stop that isn’t too shady and where you can get a good amt. of land/$ that has hit/will probably hit bottom in the next 8 or 9 months?
Dave M,
Instead of making up an assessment budget out of thin air, why not go to 565 Quincy, get a copy of the property report and see the actual assessment budget?
I know – fact-gathering is not the CribChatter way. And all CCer’s are, by definition, more knowledgeable than one of the city’s top-tier developers.
Ditto for your rental assumptions.
Even if I grant you your Year 1 assumptions, a buyer is in-pocket $8k on the tax credit, ahead on an after-tax vs rent, and further ahead on the non-fully assessed real estate taxes. That’s $12k in actual cash the buyer is ahead of the renter.
You’re speculating that the numbers turn against the owner in later years, ssuming that rents are relatively flat over 5 years. You may be right but you have to concede it’s pure speculation, while the owner has locked in most of his monthly costs.
You’re speculating that prices fall by the $8k tax credit. So what? If you’re right you pay $8k less while the buyer has $8k in cash. People are going for the cash based on the rapid sales.
You’re speculating all over the place without any basis in fact to go on – purely on guesses.
G,
You’ve seen my rent vs buy and you have nothing real to counter it with. Just your usual wild flailing and misdirections. And “begging for info” because you’re an information desert. Rental comps aren’t hard to find – you just don’t like to admit to what you’ve found.
homedelete,
Once again you demonstrated that you have nothing of substance behind what you claim. You’ve been challenged and shown to be a blowhard who gets his kicks by defaming people who’ve accomplished anything. I suspect that whatever it is in your life that has made you into a such a bitter loser is well-deserved.
And, you continue to make it clear that “attorney” is a role you play on CribChatter rather than what you do for a living.
LOL! Literally every sentence you type is either a lie, wrought with errors and omissions, or just plain wrong, or in some cases, all of the above!
“homedelete,
Once again you demonstrated that you have nothing of substance behind what you claim. You’ve been challenged and shown to be a blowhard who gets his kicks by defaming people who’ve accomplished anything. I suspect that whatever it is in your life that has made you into a such a bitter loser is well-deserved.
And, you continue to make it clear that “attorney” is a role you play on CribChatter rather than what you do for a living.”
Joe Zekas, everyone sees that you posted nothing to back up your speculation about most inputs into your “rent vs buy” analysis.
I can understand why you won’t clear up your claim that Belgravia has an “anti-speculator” policy at 565 Quincy considering the facts I posted. And nothing from you about those mysterious assmts in unit #1101 that you used as your example? We know you can clear both of those up rather easily. It must be the truth you are hiding. Again.
Oh yeah, it’s me who is an “information desert.” Keep trying, shill, you are proving my case against 565 Quincy for me.
Yes, HD, Joe Zekas’ success as a shill depends on his ability to just keep on lying. And boy is he “good” at it. It’s great how he lays it out so clearly here for all to see. I thought he was brighter than that, but apparently not.
My whole point was given the amenities in the building, the doorman, and the parking assessments that would be required, plus adequate reserves, $301 is quite light as there are only 241 units to cover it all.
So would most people take $8,000 right now if they know they will lose $20,000 over the next 5 years? In a world where people think and make rational decisions, it’s obvious what they would do. At the end of the day, buying versus selling is a slight loss and possibly a wash given more optimistic assumptions. Given the lack of liquidity/mobility when buying and the higher expected default rates (due to it being FHA), it really doesn’t make sense to buy at the current prices. Lower them by $20,000-25,000 a unit, and we are where we need to be.
Alex, go ahead and wait 3-4 months. By then prices will probably have fallen $20,000-25,000 and you should get in. If not, take your money elsewhere because there will be deals to be had.
One more thing – obviously the city’s top developers are geniuses, because they have these 6,000 units on their hands and no idea how to get rid of them. Overshot demand a little too much.
It’s kind of hard to stop a flood with a paper towel…
Just one piece of silly misinformation and made-up stuff after another.
Where does your 6,000 number come from, Dave M? And what conceivable bearing does it have on whether Belgravia’s budget numbers are accurate?
How do you challenge a budget without having seen it? Make up some numbers based on your vast experience – in making up numbers.
When the rent vs buy goes badly against you – just misrepresent and plunge back into fear-mongering.
What’s been the fate of FHA financing in buildings comparable to 565? No need to have actual knowledge when you can confidently assert something that sounds plausible to people who also know nothing but buy into your prejudices.
And if prices don’t fall as you predict, Dave M? We already know the answer – if you’re a confirmed CCer you’ll come up with a way to say they did.
When anyone challenges something that G has simply made up out of thin air – they’re a liar. When they don’t understand his baby talk the same way he does …
G, if you want to know what Belgravia’s policy is with regard to investors, go into the sales office and ask. Or simply make a phone call. But then you don’t really want to know anything, do you?
You all can babble on and on with your fantasies and fictions. But … Rational people signed 49 contracts at 565 Quincy since the price reductions. Go ahead and repeat your random idiocies about what misguided rubes they all are. You’re only preaching to your parched-throat choir.
If you have a doorman building and those amenities and parking, there’s no way assessments can stay at $301/month for that unit. Unless reserves are negative…
We all know how that will turn out.
Dave M,
You really need to get in touch with Appraisal Research Counselors.
Despite their best efforts to track unsold developer inventory on a project-by-project basis, they only find half the units you do, as reported in Crain’s today:
http://www.chicagorealestatedaily.com/cgi-bin/news.pl?id=37079
I don’t expect this, or any aspect of reality to affect your thinking.
And, of course, G and homedelete will simply say they’re shills and liars.
Joe Z, what do you think the budget looks like? Have you worked in property management and can know if it looks correct or not? I’m not saying it’s fair to be paying $500/month in assessments, but when you want solid reserves, those amenities including a doorman, and only 241 units, it’s tought not to get to that level.
6,000 units is the oversupply – don’t give me the 3,000 unit garbage. There’s quite a few units not on the MLS – well over 1,000 total. Developers play the game, they will even rent out a few of these units to conserve capital. In addition, there’s lots of speculator/specuvestor foreclosures. Add it up and you have 6,000 units available.
Even then, 3,000 units is a lot of inventory to work through when there’s only 150 sold per quarter at most. That means it would take 5 years to work through all of it.
Dave M,
You continue to insis that facts are irrelevant.
Keep at it. It works on CribChatter, but not in the world the rest of us live in.
Do you not think there’s an oversupply? What about all the people who are underwater from 2006 and 2007 purchases downtown? What will they do? What will happen to their unit if they have to sell or move? It’s pretty brutal out there and the price declines have at least another 12 months to go. Maybe the absolute fall won’t be as large, but 7-10% is my prediction. The cheapest units under $250K won’t see this, but those between $250K and $450K will.
You never answered my question about the assessments.
Dave M,
ARC’s numbers come from a sophisticated independent count of the available inventory being carried by developers. A great deal of experience, intelligence and hard fact-grubbing go into compiling that number.
You want to make up a number and expect anyone to believe it because that’s how things are done on CribChatter. You want to pretend to knowledge of what developes do and ask people to believe that ARC’s numbers are wrong based on your pretensions.
No one in the reality-based world believes you.
If sales continued at last year’s pace it would take 5 years to work through that inventory. First quarter sales appear to be up and no one knows what future quarters hold.
You’re beginning to sound as naive and needy as G, hd, Bob and some of the other regulars here. Not a good position to be in – unless you’re flat-out incapable of doing any better.
Do you not think there’s an oversupply downtown? I want to see 500 closings a quarter for there to be more of an equilibrium in the market. Prices are still 10% too high downtown on average.
Cut prices by 10% more, and there will be 500 closings next quarter at a minimum, if not 600.
Dave M,
You’re posting as I’m writing.
I’ve been the sole general partner in limited partnerships that owned and managed 100s of apartments in about a score of buildings. I’ve developed property and owned blocks of up to 80 units in bust-out condos in the past. So yeah, I know athing or two about condo and apartment management and budgeting.
Knowing what I know I wouldn’t speculate on assessments without having seen Belgravia’s budget and passing it by some currently active managers of major properties for comment. No responsible person who isn’t 100% active in managing or developing comparable properties would do otherwise.
Have you even looked at the IREM data for comparable properties? Have you ever even seen it or been aware of its existence?
Considering I used to work for a condo developer, I know how things work. Skew the facts, and then sell people on units for a price that is more than it’s true market value, all the while hyping up the upside and the attitude that you are missing out if you don’t buy now. It’s just like selling used cars… They want you to jump without looking. Brilliant people did jut that.
I have a conscience and didn’t want to continue in condo development, so I got out back at the end of 2004 and turned my attention to a different part of the real estate industry.
Dave M,
Everyone knows there’s an oversupply. No one’s contesting that.
I repeat – so what?
Will prices decrease further? I don’t know and neither do you. Belgravia cut prices to the level it thought would be attractive to buyers. Buyers responded.
So wait for your anticipated price drops if that’s what you’re comfortable doing. The most desirable units will still be available, won’t they? There’s no chance, is there, that the market or interest rates might move against you? No chance that you could go in with an offer today at where you think the market will be?
Dave M,
If you had a conscience you’d have more respect for facts, and wouldn’t paint your slender experience as representative of anything about the industry.
How long were you in the business? What was your level of responsibility and your role? Who did you work for?
“There’s no chance, is there, that the market or interest rates might move against you?”
No chance of interest rates really moving against someone if they rise. As studies have shown real estate is payment based, a rise in rates will translate into a fall in the equilibrium price of housing.
In fact record low interest rates via government intervention should be sounding off alarm bells to potential buyers as as soon as this government stimulus is removed rates are likely to go higher. Meaning lower RE valuations.
As for the market moving against someone–thats always a risk. These days I think the opposite is more likely due to: 1) massive foreclosure shadow inventory in pipeline, 2) Fed keeping interest rates artificially low via buying agency debt, 3) first-time homebuyer tax credit, 4) FHA underwriting any and all loans with a bare minimum of documentation.
Rates almost certain to go up and the taxpayer credit expiring should not be a call to buy now. Instead it should be a call to caution as these things indicate we have might another leg down.
“one day the bottom will drop out” -Bob Marley
I will just note it was a developer not in the Chicago area, and I worked there for 4 years. Originally, it was an apartment rehabber, but became a developer when the owners saw the opportunities were in for sale property.
Real estate is in my family – have had some investors in my family – uncles and great uncles who tried to get me into the business, and used to take me out to help out on weekends and summer breaks on their buildings. Property management is hard work, but I learned that things that seem too good to be true are probably something I should avoid. Real estate is a long-term investment and making a quick buck is just not going to happen. The days of flipping condos like tech stocks are long over.
I do agree that you can offer less and see if they will take it. Everything is a negotiation, and savvy buyers will do better negotiating and get more for their money.
In brief, Dave M, you have no direct experience with this type of property. You didn’t state your level of responsibility or role, even with non-relevant property.
You refuse to even look at the 565 Quincy budget, make up some numbers and expect people to believe that your numbers are more accurate.
Ah, the CribChatter way of analysis!
“As studies have shown real estate is payment based, a rise in rates will translate into a fall in the equilibrium price of housing.”
Cite those studies, Bob.Cite even one.
I was a development project manager. We did rehabs and conversions of 3 to 8 story buildings primarily built in the 1960’s and 1970’s and converted to condos. In addition, we also did new construction in 2003 and 2004. I did a lot of work monitoring the GC and subs. If there was one thing I learned the most, it’s that nothing ever goes according to budget or your pro-forma. I’d love to see the Quincy budget; I’m sure I would pick it apart.
Dave M,
I was asking for the cites so that others can watch Bob demonstrate once again that he’s really a high school sophomore who’s learned to spell a few words without understanding them.
Anyone who can read well (a set that doesn’t include Bob) would learn that mortgage rates are only one factor affecting housing equilibrium prices and other demand-side drivers can and often do trump the impact of interest rates.
Good luck with predicting the impact of broad interest rate changes on housing values in any particular sub-market, let alone in a particular building. Only the Bobs of the world would venture that – an economist would laugh at the notion.
I have been enjoying this spirited thread. Many opinions on this site are just that…opinions that often lack the concrete facts to back them up. For instance, I too want to see anyone cite a single study that shows that there is a correlation between higher mortgage interest rates and falling house prices, a point that was raised a few conversations above. It is a claim made repeatedly on this site. Prove that claim by citing a study and show me the money. Carry on.
Wow. JZ… You know this stuff gets saved forever right? Do you really want your kids and co-workers to search for your name and see this type of stuff? Come on guys, we all have some great knowledge to contribute, or at least some perspective, let’s keep it civil. We are all interested in real estate, in a way we should be closer than most people.
So… no good cheaper metra suburb recommendations?? 😀 Preferably running into the Olgilvie stop?
Wow. JZ… You know this stuff gets saved forever right? Do you really want your kids and co-workers to search for your name and see this type of stuff? Come on guys, we all have some great knowledge to contribute, or at least some perspective, let’s keep it civil. We are all interested in real estate, in a way we should be closer than most people.
So… no good cheaper metra suburb recommendations?? 😀 Preferably running into the Olgilvie stop?
Alex,
You’ve got to be “kidding” me. My kids have been with me for 26 and 27 years. My employees have been with me for a very long time, as have my customers. They all know me very well and won’t find any surprises on the Internet.
Direct your advice to the CCers who trash anyone who’s honest or knows anything. Look at the names I’ve repeatedly been called here, and the savagery that CCers direct at decent people.
Calling out the CC regulars bluntly for what they are and how pathetically little they know is the right thing to do.
Joe Zekas writes: “(Appraisal Reserach Counselers) ARC’s numbers come from a sophisticated independent count of the available inventory being carried by developers. A great deal of experience, intelligence and hard fact-grubbing go into compiling that number.”
LOL!!! what exactly is this “sophisticated” methodology? Have you ever audited it? Do you believe all press releases companies put out?
I have a friend in the hedge fund business, and I once remarked about hedge funds: “I read that so-and-so hedge fund has a sophisticated and hi-tech algorithm…….”
His response? he chuckled, “what are they supposed to say, our investment program is low-tech?”
Sparky wrote: “I have been enjoying this spirited thread. Many opinions on this site are just that…opinions that often lack the concrete facts to back them up. For instance, I too want to see anyone cite a single study that shows that there is a correlation between higher mortgage interest rates and falling house prices, a point that was raised a few conversations above. It is a claim made repeatedly on this site. Prove that claim by citing a study and show me the money. Carry on.”
It’s clear if you look at REIT prices that most of the cap gains were driven not by revenue increases or NOI increases, BUT YIELD/DIVIDEND decreases. For the most part RE investments did not increase their net operating incomes, what happened was a fall in interest rates, which led to a corresponding fall in cap rates, of the very same income, and property prices doubled!
If cap rates return to 9% like they were in the 80’s and 90’s prices will fall. REIT prices will fall also if people want a higher yield to buy them. The days of pricing real estate at 5% might end…..maybe not if we are like Japan, where prices are still down, which Joe Zekas refuses to acknowlege could happen here.
If the NOI stays the same, and the yield required of investors doubles, that means the price falls. The exact reverse is what happened in the decade of 2000, incomes did not go up, interest rates fell by 50% and prices doubled.
Our market system works because there are bears and bulls and potential customers who need to sort through all the information to decide whether or not to buy. There is no inherent bad or good on either side – bears have been right in real estate before and so have bulls.
As a realist, I happen to agree wholeheartedly with HD and G on where the market is going and, while I acknowledge his bias due to a client interest, I don’t fault Joe Zekas for a bullish conviction supported by cohesive arguments. I’m willing to give Joe the benefit of the doubt that he believes what he says, and I consider his informed perspective alongside the other sources of available information on Chicago real estate. If he truly believed the market would tank while he talked of it soaring, his credibility would be shot along with his website. This is one of the realities of the transparency of today.
When John Smith spoke of the “invisible hand” in 1776, he assumed equal access to information for buyers and sellers. That assumption is so much more valid today than it was 234 years ago. Personally, I think HD and G have it right, but Joe Z. has a full right to speak. I think he’s dead wrong on this one, but others think he’s spot on – and that’s what makes the world go round.
“Cite those studies, Bob.Cite even one.”
Joe–you’re not the professor here, you actually don’t have the temperament for it. Jason M already cited two studies, however. “Sparky” aka Joe Zekas, this answer was already given in a response before mine. Also Joe its funny because no matter what other variable you can possibly mention it doesn’t bode well for RE valuations going up. Can you provide even one variable that does support that stance?
If we’re in Q&A mode here Joe answer one of mine: show me _one_ of your clients customers that made the right choice buying real estate since 2007 when you started shilling online.
Joe if you’re soooo much more knowledgeable than the regulars that post here what do you have to say since this site has started they have been right? And why do you continue to post here? Afterall you did leave in a huff before. Why the return Joe? A little idle around the office these days Joe?
You are indeed a coal town boy who bounced around from job to job, never excelling in any and never did and still doesn’t understand the impact of free information. Its hilarious you decry this site for its anonymity as if there is something wrong with that and also that you remove videos where you previous defended questionable practices by developers (IE THE 565 PRICE GUARANTEE that has since been rescinded).
chi_dad don’t confuse Joe Zekas for a RE bull. Instead he is an old man prone to temper tantrums to this day when reality does not turn out the way he tries to will it. The only skin he personally has in RE valuations is perhaps his north shore home aside from his publications.
“Anyone who can read well (a set that doesn’t include Bob)”
I dunno Joe. Your website was filled with comments of people f*cked on their earnest money by developers whose projects got stalled and you said it was on them to read the finer print. I never bought into such mania and hype and never had my earnest money tied up. Would you say I can read better than them? What about those who bought on your advertisements since 2007, would you say I could read the proverbial TEA LEAVES more than them?
Since my track record at reading tea leaves seems to be markedly better than yours I have some sage advice for our audience: don’t buy a condo in Chicagoland this year, especially at 565 Quincy.
Foreclosures Seen Still Hitting Prices
John Burns-“..efforts to avert foreclosures have slowed the flow of foreclosed homes onto the market, temporarily constricting supply…if the economy slumped anew and interest rates jumped that’s going to cause prices to fall further.”
http://online.wsj.com/article/SB10001424052748703562404575067452797224606.html?mod=WSJ_hps_LEFTWhatsNews
Joe Zekas may be no expert at all between the relationship between interest rates and housing valuations, but those quoted in the Wall Street Journal these days seem to be a little bit more knowledgeable. And Joe if you were ever quoted in the WSJ as you claim on here I’d love to see that article. I can’t imagine it was often nor lately.
You people just keep shamelessly making stuff up.
Let’s start with the most recent lie: I never claimed to have been quoted in the WSJ. The WSJ is a client of mine, along with a number of other major newspapers throughout the country. An obvious indication that I know nothing.
I report on new construction for the benefit of people who are interested in buying it. I don’t recommend that they do anything, and I don’t attempt to predict the market.
I keep waiting for a credible response to the rent vs own analysis above, and am not seeing anything but lies, miesdirection and personal attacks.
The regulars here want to paint home buyers as rubes and suckers gulled by people who offer them facts and links on which they base their own decisions.
The 49 recent contracts at 565 Quincy send a cler and unmistakable message about whether buyers think the price is right. All the hysterical flailing here doesn’t change that.
“Rational people signed 49 contracts at 565 Quincy since the price reductions”
so joe your saying the previous 61 buyers in 565 were irrational?
“so joe your saying the previous 61 buyers in 565 were irrational?”
No, just that they believed that the (higher) price they paid was “right” and they turned out to be quite wrong. Which doesn’t make them irrational, just out $100k+.
ANON!!!!!!!!!!!!!!!!!!!,
doode your back 🙂 you have been MIA i was beginning to think your alter ego was Joe Z.
Its fun to watch Joey, G, HD, Bob and Dave go at it. (informative too).
Didn’t like the Joey called out Dave M asking “how he was in the biz and to what extent” and Dave answered and Joey Z (who criticizes CC’ers) looked down at it and tried to “spin” his experience.
Joe when you do crap like that people will loose respect for you. i know i lost all respect for you this past week.
check out the scam at 2626 N Lincoln. Why Does Sabrina keep deleting the posts on this subject? Is she involved too?
He disagrees with anyone who think the market is due for another 5-10% correction downwards, and tries to discredit them. I know how the game works, and he’s part of it. Real estate is kind of like the stock market – insider traders make a ton of money because of assymetric information the same way developers and realtors do off of soon to be FB’s. That’s the way the world works, but then he tries to say that doesn’t happen. I’m not buying into that Joe Z.
If you think the market is going up starting today, Joe, how much are you buying? Did you put your money where your mouth is?
heitboy, why don’t you provide some facts about 2626 N Lincoln and then we might know wtf you are accusing someone of?
I simply asked for proof of your claims that there is a correlation in the rise of mortgage interest rates and falling RE prices. Back up your claims, please. Cite me one study – just one! Talking about simple housing stock. BTW, I don’t know JZ.
“Joe–you’re not the professor here, you actually don’t have the temperament for it. Jason M already cited two studies, however. “Sparky” aka Joe Zekas, this answer was already given in a response before mine.”
Joe Z,
Why don’t you invite some of you favorites on this site to a video interview?
The real estate industry would not like such a study to even be conducted. More recent data would make an interesting study to say the least, regardless of the potential results. History does not always repeat itself, and you can’t say that an increase in rates wouldn’t hurt prices in some way, unless there’s significant inflation and economic/employment growth that goes along with it.
We know rates will rise in the next 5 years. When and by how much are the big questions.
The studies are out there, but will they show what you are claiming? I made no claim – I simply asked others to back up theirs. Anyone else want to give it a try?
Sparky said – “I simply asked for proof of your claims that there is a correlation in the rise of mortgage interest rates and falling RE prices. Back up your claims, please. Cite me one study – just one! Talking about simple housing stock. BTW, I don’t know JZ.”
Dan M said – “The real estate industry would not like such a study to even be conducted. More recent data would make an interesting study to say the least, regardless of the potential results. History does not always repeat itself, and you can’t say that an increase in rates wouldn’t hurt prices in some way, unless there’s significant inflation and economic/employment growth that goes along with it.
We know rates will rise in the next 5 years. When and by how much are the big questions.”
Sigh – I haven’t made any market predictions. I’m not delusional enough to think I can do a better job of it than the many sources I linked to so that people can draw their own concluisions.
Valasko,
I’ve invited people here to do video interviews with me.
It’s pretty obvious that they’re not willing to put their credibility and their knowledge on the line against mine.
homedelete, g, Bob, Sonies, Groove77 et al – you’re invited. You pick the place. I’ll even allow you to be off camera while I’m on it.
I think the typical consumer has changed – if interest rates rise without economic and employment growth or significant inflation, how can prices not be affected? Studies done previously did not show strong correlations – I read a study done by Morris Davis – see link.
http://www.bus.wisc.edu/realestate/documents/09-06%20whatmoveshousing.pdf
“Sigh – I haven’t made any market predictions. I’m not delusional enough to think I can do a better job of it than the many sources I linked to so that people can draw their own concluisions.”
Finally some truth from Joe Zekas. It is also the answer of why his site links to Crib Chatter. LOL.
If you go to page 22 of the linked paper above, it notes that the housing boom and interest rate movements is outside of the scope of the paper. There is probably another study going on right now for this very subject – an extension of this paper that has more updated data through the end of 2009. The real estate industry probably doesn’t like such a study even existing. It could be compared to the JFK conspiracy theorists. Their opinions have been frequently discounted over the years by those who say to just believe the goverrnment and be done with it. In the same way, the NAR wouldn’t want such a study done until they know the results.
So should we just believe the lies that NAR spouts out?
If you go to page 22 of the linked paper above, it notes that the housing boom and interest rate movements is outside of the scope of the paper. There is probably another study going on right now for this very subject – an extension of this paper that has more updated data through the end of 2009. The real estate industry probably doesn’t like such a study even existing. It could be compared to the JFK conspiracy theorists. Their opinions have been frequently discounted over the years by those who say to just believe the goverrnment and be done with it. In the same way, the NAR wouldn’t want such a study done until they know the results and would discount such a study or try to discredit those who did it, just the same way Joe Z tries to do.
So should we just believe the lies that NAR spouts out?
“homedelete, g, Bob, Sonies, Groove77 et al – you’re invited. You pick the place. I’ll even allow you to be off camera while I’m on it.”
I am in, i am willing to do a tour of my current neighborhood.
Joe loses again!
“I am in, i am willing to do a tour of my current neighborhood.
“homedelete, g, Bob, Sonies, Groove77 et al – you’re invited. You pick the place. I’ll even allow you to be off camera while I’m on it.””
Groove77,
Suggest a time and place to meet.
Groove:
I don’t enjoy particpating in the J-Zee mutual flaming society meetings. Which has consumed most of the oxygen around here for a week plus.
Sparky wrote: “I simply asked for proof of your claims that there is a correlation in the rise of mortgage interest rates and falling RE prices.”
The entire decade of 2000 proved the reverse is true. As was explained, NOIs were generally flat however prices doubled and this was due to interest rates and yield requirements falling.
When interest rates rise and yield requirements rise, prices will fall. This also assumes that NOIs are flat, but we’ve seen revenues and rents fall, while costs/expenses like RE Taxes, assessments, etc. rise.
“Groove77,
Suggest a time and place to meet.”
Could we do some time in May or June?
March and April are UGLY months with the rain and mud. I do want to do my hood some justice visually. plus i also would like to do some historic fact digging on a few spots for that extra umph for the video tour 🙂
Anon,
It did get very anti J-shizzle here and i got caught in it for the entertainment factor.
Good to see you didnt find another interwebing site to hang out on.
Groove77,
Drop me an e-mail or give me a call when you’re ready.
“Groove77,
Drop me an e-mail or give me a call when you’re ready.”
Cant wait it would be good to show that there are other areas besides LP and LV. people there is life west of western ave 🙂
“Good to see you didnt find another interwebing site to hang out on.”
how can you think anon is incapable of dropping knowledge on multiple sites…dude is all over schooling people at okcupid simultaneous with cribchatter.
Groove 77 good for you doing something positive….. Always liked the Groove!
Now where is HD and G……. do I hear crickets Joe Z?
Meeting Joe Z in person would result in assault charges against me. I’d probably deck him in the face.
“#valasko on February 16th, 2010 at 2:31 pm
Groove 77 good for you doing something positive….. Always liked the Groove!
Now where is HD and G……. do I hear crickets Joe Z?”
I’ll post a video of that on youtube.
Eric,
I believe, the two units in Lincoln Park West had large patios and heated garage spots included:
1926 N LINCOLN PARK WEST ST 3A (http://www.trulia.com/property/1079634317-1926-N-Lincoln-Park-W-3A-Chicago-IL) – closed for 435K
1717 N Crilly Ct Unit 1 – closed for 532K
1926 N LINCOLN PARK WEST 3B – closed for 522K
* * *
Eric Rojas on February 12th, 2010 at 1:29 pm
Please find me a handful of true three bedroom plus family room, private garage, full attic, laundry room, utility room, large private patio (for LP) under $550K
homedelete,
Your physical assault would definitely be as off the mark as your verbal ones.
You’re doing a spectacular job of portraying a lawyer on CC – a jailhouse lawyer.
Real lawyers marshall facts and present arguments. Try doing that for a change.
valasko,
No thanks, this forum provides enough enjoyment.
I have been correct in my real estate market forecasting. My conclusions obviously impact Joe Zekas’ bottom line. That’s what pisses him off so much. His abilities are obviously in propagandizing and shilling. To each his own.
ok Joe, I’ll do a video with you about my awesome new coffee table I just got.
Dan – I am not in the financial field, and do not understand the acronyms that you used in trying to explain the oft asserted claim that there is a correlation between rising mortgage interest rates and falling RE prices (real houses and homes on the street).
So I will ask once again to anyone up for the challenge – please cite a study that historically proves that claim.
Dan said “It’s clear if you look at REIT prices that most of the cap gains were driven not by revenue increases or NOI increases, BUT YIELD/DIVIDEND decreases. For the most part RE investments did not increase their net operating incomes, what happened was a fall in interest rates, which led to a corresponding fall in cap rates, of the very same income, and property prices doubled!
If cap rates return to 9% like they were in the 80’s and 90’s prices will fall. REIT prices will fall also if people want a higher yield to buy them. The days of pricing real estate at 5% might end…..maybe not if we are like Japan, where prices are still down, which Joe Zekas refuses to acknowlege could happen here.
If the NOI stays the same, and the yield required of investors doubles, that means the price falls. The exact reverse is what happened in the decade of 2000, incomes did not go up, interest rates fell by 50% and prices doubled.”
Dan then said “The entire decade of 2000 proved the reverse is true. As was explained, NOIs were generally flat however prices doubled and this was due to interest rates and yield requirements falling.
When interest rates rise and yield requirements rise, prices will fall. This also assumes that NOIs are flat, but we’ve seen revenues and rents fall, while costs/expenses like RE Taxes, assessments, etc. rise.”
“Dan – I am not in the financial field, and do not understand the acronyms that you used in trying to explain the oft asserted claim that there is a correlation between rising mortgage interest rates and falling RE prices (real houses and homes on the street).”
Then it stands to reason that Dan has a more informed opinion than you, spary.
Here’s a study, the abstract says that “This study examines the role of appreciation expectations in overcoming the negative effects of nominal mortgage interest rates on house prices.”
http://www.springerlink.com/content/h5706r3816556466/
and another:
“Property prices across many OECD countries have witnessed remarkable increases over the past 10 years. Two factors frequently posited for this boom are higher income levels and the benign interest rate environment experienced in many of these countries. However, empirical models of house prices struggle to achieve credible results concerning the impact of interest rates with coefficients that are frequently insignificant or of the wrong sign. In this paper we propose an intuitive theoretical model of house prices where the demand for housing is driven by how much individuals can borrow from financial institutions. This level of borrowing depends on disposable income levels and current interest rates. We empirically test this model by applying it to the Irish property market. Our results support the existence of a long-run relationship between actual house prices and the amount individuals can borrow with plausible and statistically significant adjustment to this long run equilibrium.”
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VB1-4PHJH0G-1&_user=10&_coverDate=05%2F31%2F2008&_rdoc=1&_fmt=high&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1209469771&_rerunOrigin=google&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=751fd38fc87f7e3b5802d285841f806d
Bob that statement of yours makes absolutely no sense. Anyone on here can explain anything and everything in a manner that is difficult for others to comprehend. Ooooh they used acronyms, so it must be true! Cite a published study to prove your claim. How hard is that to grasp? Is it because you will only find studies that show that there is NO correlation between rising mortgage rates and falling RE prices of homes on the street?
Bob said – Then it stands to reason that Dan has a more informed opinion than you, spary.
Housing Prices and Interest Rates: Do the Math
Historic records show that home prices don’t drop when rates rise. The trend is quite the opposite, writes Marc Roth
http://www.businessweek.com/lifestyle/content/dec2009/bw20091229_199828.htm
Sparky/AKA Joe Zekas–you know very little. But here is an article written by a CFA (that is, somebody who knows a lot more about this than you):
http://www.investopedia.com/articles/mortgages-real-estate/08/interest-rates-affect-property-values.asp
“Most retail investors, especially homeowners, focus on changing mortgage rates because they have a direct influence on real estate prices.”
“Our results support the existence of a long-run relationship between actual house prices and the amount individuals can borrow with plausible and statistically significant adjustment to this long run equilibrium”
But HD, that doesn’t use the magic phrase “interest rates”, so how could that *possibly* prove what sparky asked you to prove? And one of the subheads sez “Nonlinear effect of interest rates”, so that might imply that the correlation is exagerrated. And you must be hiding something, since it’s $31.50 if we want to read it.
[/sarcasm]
Sparky/AKA Joe Zekas–here is an article that explains this phenomenon in more layman’s terms for you, as I do understand you are at a bit of a handicap with regards to reading comprehension.
http://www.four-pillars.ca/2010/01/10/home-mortgage-interest-rates/
Here you go Sparky/Joe Zekas, more food for thought to help you comprehend and understand this relatively simple concept.
Property prices in Canada falling as mortgage rates go up
http://www.propertywire.com/news/north-america/property-prices-canada-200906093196.html
Also it is obvious sparky and Joe Zekas are one and the same. Evidenced by the similar writing styles and sparky’s fixation on JZ’s incorrect rebuttal that mortgage interest rates and real estate valuations are not negatively correlated.
Sorry Joe you lose again! Doesn’t reality stink when it doesn’t agree with the way you think the world should work? 😀
Bob:
Funny link at 4:40–>did you read the four comments, including 2 from the apparent/claimed author which disagree with the premise.
sparky,
Dan cited a study that has no relevance to the issue. How institutional investors behave is very different from how home buyers behave. Bob’s not bright enough to know the difference, nor is Dan. Anyone else suspect that Bob, Dan and G are the same person?
homedelete, not being an actual lawyer, can’t be bothered to read more than an abstract or to understand that Ireland is a very different environment from the US.
Throughout this entire thread you’ve seen the CC crowd challenged to back up anything they say and coming up empty-headed.
Bob,
Hate to break this to you but a public relations “news release” is, uh, diferent than a study.
LOL yeah good catch. Unfortunately for Mr. Cheap when he writes articles it appears as Mr. Cheap. That particular article was written by “Mike” so not sure what the heck he is referring to.
Funny strategy of trying to refute data by claiming to the author of the original article and rescinding its observations and conclusions. LOL.
“How institutional investors behave is very different from how home buyers behave.”
And why would that be JZ? Is it because institutional investors are more economically rational and home buyers are just easier to shill to without laying out the cashflows?
again – I do not know JZ. Another absurd assertion by the chatterers. Here’s another excerpt from that article.
http://www.businessweek.com/lifestyle/content/dec2009/bw20091229_199828.htm
Reading the Data
Maybe prices will go down further as interest rates rise. All I needed to do was look at historical trends to find out.
The analysis took about two minutes. I searched the internet for historical home prices and found that average existing home sale prices steadily increased from 1970 through 2006 (the peak before the housing bubble burst). (Click here if you want to double-check my work.)
I even found a nice graph (see above) that converts the data and illustrates the nominal home prices as well as inflation-adjusted pricing, which showed the same thing.
When comparing this data to the interest rate data I provided in an earlier article, I found that housing prices did not fall in the years when interest rates were rising. In fact, housing prices generally rose when interest rates climbed. When reviewing the numbers adjusted for inflation, housing prices still rose when interest rates made their steepest climbs and even fell when interest rates retracted. The most obvious examples were the years from 1975 through 1983.
“Throughout this entire thread you’ve seen the CC crowd challenged to back up anything they say and coming up empty-headed.”
You still haven’t backed up your claim about the $300 assmt of the $318,900 unit at 565 Quincy.
You still haven’t backed up your claim of comparable market rents for the 970 SF 2/2 at 565 Quincy.
You still haven’t backed up your claim of an “anti-speculator” policy at 565 Quincy.
I challenged you with facts pertaining to each of these claims. You still come up empty-headed on all of the above.
There is definitely a correlation between interest rates and home prices. However, you also have to strip out the the other factors that are also correlated. In addition, interest rates fluctuate constantly and some increase probably has a relatively negligible effect on buyer behavior.
At one point in ’06-07 I believe the 30 year was approaching 6% and people were still buying in droves. There hadn’t quite been the pull back in financing like it is now.
The purchase market will not crash, nor will prices necessarily fall just because rates go from 5 to 5.5% or even 6% because that level of increase in does not make or break most buyers.
What has a bigger impact on housing prices is probably the overall availability of financing, particularly as it relates to down payments. As someone on the front lines of this every day, this is what I see preventing folks from buying, not whether or not their payments are $100 bucks/month cheaper. As as result, prices fall to meet the tighter financing requirement.
I see this quite frequently with the higher income borrowers. They are scaling back their purchase prices to meet liquidity requirements, but aren’t really affected by interest rate increases in terms of affordability.
“LOL yeah good catch. Unfortunately for Mr. Cheap when he writes articles it appears as Mr. Cheap.”
Ah–I bet he meant he wrote something similar in ’07 and now has changed his mind somewhat.
I think that Four Pillars comment was *most* accurate–that extreme swings in interest rates will certainly affect demand and thereby prices, while smaller changes are much, much less likely to affect prices.
Attempting to deny that, say, a doubling (or more) of prevailing interest rates (5–>10 or 12) would *not* decrease demand and therefore sale prices is silly. But so to is saying that a 75 bip increase in rates is foreshadowing a meaningful decrease in prices.
Here’s a paper (haven’t read carefully yet):
https://www4.gsb.columbia.edu/null/download?&exclusive=filemgr.download&file_id=3549
Sparky, that article in Business Week is unbelievably shabby work. Joe Zekas could confirm this if he was an honest man.
Average house prices are useless since they depend on the mix of units sold. In other words, every individual house could sell for less yet the average could increase if more valuable houses sell, or vice versa. Average house prices tell us nothing about individual house prices.
Also, the effects of the availability of financing and down payment requirements must be isolated for a meaningful analysis. Not to mention employment and income interactions.
That article is worthless towards this discussion. The analysis is very complicated and fault could be found with every study. The mere fact that Joe Zekas thinks this is his “gotcha” moment should tell everyone that the game was rigged.
Sparky,
The article you posted was written by one: Marc Roth.
“Marc Roth is the founder and president of Home Warranty of America, which touches just about every part of the real estate industry since it sells through builders, real estate agents, title companies, mortgage companies, and directly to consumers.”
Is it any surprise another similarly tied to the RE ecosystem as JZ has a similar outlook as him (in terms of now being a great time to buy)?
His study stands on its own merits and not by who performed the study or what they do for a living. I’ve seen other studies done by economists, and the results were the same as Marc Roth. Prove me wrong. Cite a published study of US home prices and its correlation to mortgage interest rates that backs up your claim.
btw – are you saying that because Marc Roth works in the RE industry that we should trust Mr Cheap more than Marc Roth? What a hoot!
The anti-realtor dogma on this site is clouding some chatterers thought processes. How absolutely absurd!
“I think that Four Pillars comment was *most* accurate–that extreme swings in interest rates will certainly affect demand and thereby prices, while smaller changes are much, much less likely to affect prices.”
I think it depends on the magnitude of the interest rate movement. IE: a movement from 4.5% to 6% would have a much more negative impact on valuations than a move from 7.5% to 9%. As the closer i gets to 0 the greater the impact any change in i will have on the payment.
Lets consider two scenarios whose payment, p, was initially $1,000. Keeping p constant here are the breakdown of principal, interest and house valuation for each scenario at payment 1:
Scenario 1: 4.5 -> 6%
Principal: 259.9 -> 166.04
Interest: 740.11 -> 833.96
House valuation: 197,363 -> 166,792
House valuation decline: -15.5%
House valuation decline per bps rise in i: -.10%
Scenario 2: 7.5 -> 9%
Principal: 106.14 -> 67.89
Interest: 896.86 -> 932.12
House valuation: 143,017 -> 124,282
House valuation decline: 13.1%
House valuation decline per bps rise in i: -.09%
Which is why today’s extraordinarily low rates are a bit of a concern–coming off historically low rates (especially those historically low via government intervention) is likely to prove extremely problematic for house valuations over the near term future.
Joe Zekas how many more names are you going to come up with on the sight? I think its a bit cute that you invent aliases to make it appear your opinion and positions have more merit and support than they actually do in reality.
Could you at least be a bit more creative with the name of the next one? Maybe “DeveloperHulk” or something?
sparky,
You’re just playing into Bob’s game. Just remind yourself that Bob very pompously pronounced on the basis of non-existent studies. Bob makes stuff up. That’s what he does. And then he obfuscates and questions the integrity of anyone who calls him out on his ignorance.
It’s simple common sense that interest rate movements affect house prices to some degree. The weakness and unpredictability of the interest rate impact can be demonstrated easily by two plain facts: 1) intrest rates are fairly uniform across the nation’ housing prices, especially at a sub-market level, often move in very different directions across the nation.
It doesn’t take a rocket scientist or an economist to know how off-base Bob is.
G,
You don’t even know how assessments are initially determined and how that relates to varying prices over time, do you?
Bob,
I have the same identity all the time everywhere. I don’t ever post anonymously or under a different name – except, of course, YoChicago.
Getting more and more desperate as your ignorance becomes clearer and clearer, aren’t you?
Where are those studies?
“The weakness and unpredictability of the interest rate impact can be demonstrated easily by two plain facts: 1) intrest rates are fairly uniform across the nation’ housing prices, especially at a sub-market level, often move in very different directions across the nation.”
I am off base? Hah. One quick read of your posts shows how befuddled and non-sensical you are. Have you been taking your meds on schedule lately Joe? Where is fact 2?
“are you saying that because Marc Roth works in the RE industry that we should trust Mr Cheap more than Marc Roth?”
Sparky where was an article by Mr. Cheap ever mentioned? You need to brush up on your reading comprehension before I can respond to your posts.
Those studies, Bob. Where are they?
“Where are those studies?”
The same can be said both directions, folks. sparky’s touting studies “by economists” he has seen. But no links to back it up, other than to a guy defending a post titled “If You Don’t Buy a House Now, You’re Stupid or Broke” with a quick conclusion drawn from national (and regional) *average* home prices. This is not a “study”.
So, no studies presented by anyone–you got a study to back up your position, J-Zee, or are you holding everyone else to a different standard?
Even during the steepest increases in mortgage interest rates in the 1980’s still saw an increase in home prices during that same time period. Prove me wrong guys!
From the article again – “When reviewing the numbers adjusted for inflation, housing prices still rose when interest rates made their steepest climbs and even fell when interest rates retracted. The most obvious examples were the years from 1975 through 1983.”
http://www.businessweek.com/lifestyle/content/dec2009/bw20091229_199828.htm
Bob said “I think it depends on the magnitude of the interest rate movement”
“From the article again – “When reviewing the numbers adjusted for inflation, housing prices still rose when interest rates made their steepest climbs and even fell when interest rates retracted. The most obvious examples were the years from 1975 through 1983.””
To disprove this, one need only look at the sidebar chart presented with the article–the bold red line is “the numbers adjusted for inflation” and they *clearly* went down in the late-79-early-82 period when average rates rose from ~11 to ~16, with higher peaks. One could argue that there is little correlation, but to say that real dolalr “housing prices rose when interest rates made their steepest climbs” is simply incorrect.
J-Zee has no studies. He only tries to attack others credibility. J-Zee I posted studies of similar repute that sparky did, you are welcome to go above this thread and read them as you seem to be orally fixated on the quote “where are those studies?”.
So I take from your response that you agree that there is “little correlation” between increasing mortgage interest rates and falling RE prices. Thank you.
The proof is in the data, no matter who is reporting it or what they do for a living.
Peace out.
Ok guys can we please stop the pissing match, I am wringing wet.
LOL yeah good catch. Unfortunately for Mr. Cheap when he writes articles it appears as Mr. Cheap. That particular article was written by “Mike” so not sure what the heck he is referring to.
It was actually Mr. Cheap who wrote that post over 2 years ago on his original blog. I recently republished it on 4P which is why it shows the name “Mike”.
For the record, what he rescinded was the idea of doing real estate investing based on interest rate swings since it is not a realistic strategy. I believe that he still thinks that interest rates and home values are inversely correlated.
As for the idea that extreme swings of interest rates will affect housing prices – I think there has to be a time element involved as well. I remember when interest rates dropped quite low around 2003-4? It was neat that rates were so low (ie 4%, 3%) but it seemed like it took a couple of years for people to really start to believe that they weren’t just an abberation and would shoot right back up again. Once people started being more confident in low rates (after 1-2 years) then I think they really started to push house prices up.
anon (tfo), Bob,
I need a study to demonstrate that Bob had no studies? Bob’s already done that.
CC regulars have amply demonstrated in this thread that they lack credibility, decency and knowledge.
Now you’re working hard to demonstrate a complete lack of sanity. Soldier on. You’re almost there.
Hey guys, guess what. I’ve capitulated.
Joe is totally right about the housing market. He’s an expert and I am in awe of his knowledge. Joe’s well articulated and coherent arguments have put everyone’s and I mean everyone’s arguments to shame. I’m a convert.
Real estate IS at the bottom, there is little correlation between interest rates and housing prices, 565 Quincy is full of smart savvy owners, Belgravia is the best builder around, and damn it, I’m not a real lawyer, I’m just a real loser. Joe said so.
I bow to you Joe. You’ve converted me. What else can you teach me? Please inspire and awe me with your knowledge!
HD, So glad you have seen the light….. you had me worried for awhile.
In response to anon(tfo) – Here’s an excerpt from another study – again showing little correlation between housing prices and interest rates. The challenge is still on – show us a study that backs up the claim that there is a historical correlation between these 2 variables. There’s alot of noise on this site, but very little data to back it up. Prove me wrong with data, not rhetoric.
From the article – “First of all, although they seem related, historically there has been little correlation between housing prices and interest rates……. A 2006 study of mortgage rates and New York City housing prices going back to 1975 by Lucas Finco of Quadlet Consulting found no correlation between lower mortgage rates and higher housing prices, or vice versa.”
http://www.time.com/time/business/article/0,8599,1903660,00.html
anon(tfo) said “The same can be said both directions, folks. sparky’s touting studies “by economists” he has seen. But no links to back it up, other than to a guy defending a post titled “If You Don’t Buy a House Now, You’re Stupid or Broke” with a quick conclusion drawn from national (and regional) *average* home prices. This is not a “study”.”
Bob, there’s nothing wrong with my reading comprehension, thank you very much for asking. How is your short-term memory?
Bob on February 16th, 2010 at 6:10 pm asked “Sparky where was an article by Mr. Cheap ever mentioned? You need to brush up on your reading comprehension before I can respond to your posts.”
Bob on February 16th, 2010 at 4:48 pm wrote “LOL yeah good catch. Unfortunately for Mr. Cheap when he writes articles it appears as Mr. Cheap.”
homedelete,
You exit this thread as you began – with pointless adolescent sarcasm, and no knowledge.
From everything I’ve seen at CC you’re quick with vile defamation of anyone who’s been successful. And you’re quick with the anecdotes about your friends, family and (imaginary?) clients.
I’ve never seen you demonstrate any knowledge of the law. None.
Can anyone here recall homedelete’s ever having contributed anything intelligent on a point of law? His having cited a case or a statute?
I can argue like Joe:
Oh come on Sparky, Time magazine? For New York? Sparky, not being an actual RE professional like J-Zee, can’t be bothered to read more than a Time magazine article or to understand that New York is a very different environment from the rest of the US.
That’s the j-zee dismissal. Just say it’s different and that the rules of economics don’t apply. And that’s his entire argument.
Here’s another ‘successful’ guy, more successful than Joe Zekas, who sold the American dream, made a billion dollars and scared America into thinking that housing prices will only go up. Buy now or be priced out forever!
Joe if you try hard enough you can be as successful as Bob Troll.
http://www.nytimes.com/2005/10/16/magazine/16brothers.html?_r=1&pagewanted=all
“In the past couple of years, Toll and his deputies have begun analyzing European housing data to see if they hold any lessons for a maturing American housing market. Toll has been talking up the research to stock analysts and the financial press for the past year. His conclusions carry a whiff of new-paradigm thinking, but he nevertheless seems convinced that Europe’s present-day reality is America’s destiny. I asked Toll what our children – my kids are both under 8, I told him – would be paying when they’re ready to buy. “They’re going to live with us until they’re 40,” Toll said matter-of-factly. “And when they have their second kid, then we’ll finally kick them out and make them pay for the house that we paid for. And that house will cost them 45 to 50 percent of their income.”
I grew alarmed. Was he kidding? He assured me he was not. “It’s all just logic,” Toll said. “In Britain you pay seven times your annual income for a home; in the U.S. you pay three and a half.” The British get 330 square feet, per person, in their homes; in the U.S., we get 750 square feet. Not only does Toll say he believes the next generation of buyers will be paying twice as much of their annual incomes; in terms of space, he also seems to think they’re going to get only half as much. “And that average, million-dollar insane home in the burbs? It’s going to be $4 million.”
Are you out of your mind? Do you think people are going to read my posts if I cite statutes? that’s hilarious, keep ’em coming! that’s awesome!
“Can anyone here recall homedelete’s ever having contributed anything intelligent on a point of law? His having cited a case or a statute?”
“Quote of the Day
“My guess is we’re at the bottom, if not up a bit. People are not coming out to the sales centers for sport. They’re coming out because they’re looking to buy.” – Alan Lev, president of the Homebuilders Association of Greater Chicago.” (Chicago Sun Times, Apr. 15, 2008) “
homedelete,
People are frequently talking in a confused fashion here about legal issues, and offering up misinterpretations of the Condominium Property Act, etc. That Act contains important consumer protections that I’ve referenced here on occasion.
You won’t cite a statute or demonstrate any legal knowledge because you’ll lose readers? And you’re a lawyer?
Which one of us is being hilarious?
homedelete – its just more of the same with you and the regulars here, with no data of your own to disprove the articles that I have listed in this thread. Your rhetoric is meaningless without the data.
So once again, I challenge you (and anyone else) to back up the claim. Show us studies that prove that there is a correlation between rising mortgage interest rates and falling U.S. RE prices. Go ahead, I dare ya.
Sparky,
Even if they had the studies, the studies wouldn’t support their thesis.
National trends tell you little (if anytning) of value about metro Chicago, nothing of value about a sub-market such as the West Loop, and become complete meaningless at the level of a single development.
Sparky aka Joe Zekas:
First of all, it wasn’t me who claimed that rising interest rates = lowered home prices. It was Bob and G who make that argument.
Secondly, I don’t disagree with them.
Third, the two alternatives are that housing prices rise with interest rate increases OR housing prices are unrelated to interest rates;
Finally, I showed in my abstract above (I don’t have access to a library of studies anymore) that housing prices correlate to what a buyer can borrow, and how much he can borrow is tied to interest rates. Therefore, if interest rates go up, then people can borrow less, then housing prices drop.
Of course you (joe zekas) being the master of the universe simply dismiss my example which said that “ireland is not applicable to the US” as if the laws of economics are different in another english speaking nation on other side of the pond.
It’s a whole new paradigm!
“Premonitions of a bubble on the verge of popping do not ruffle those who are bullish on real estate. In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely.
“South Florida,” he said, “is working off of a totally new economic model than any of us have ever experienced in the past.”
http://www.nytimes.com/2005/03/25/business/25boom.html
There are plenty of (serious) studies for both sides of this debate.
From Glaeser and Gyourko (2007):
However, there is considerable debate in the literature over one important result involving the impact of interest rates on house prices. Equation (5) suggests a powerful relationship between interest rates and house prices, and McCarthy and Peach (2004) and Himmelberg, Mayer and Sinai (2005) have relied on it to justify currently high house prices at least partially as a function of historically low interest rates. In contrast, Shiller (2005, 2006) argues that there is no economically or statistically significant relationship between house prices and interest rates over any reasonably long period of time. When we regressed the real value of the median quality home from 1980 (using the OFHEO index as described above) on the real 7-year interest rate using data from the last 30 years, the results indicated that a one percentage point increase in interest rates is associated with only a 2-3 percent rise in house prices. The R2=0.12, which is well below the nearly 2/3rds of variation in house prices that can be accounted for by metropolitan area fixed effects. However, this is a very complex issue that cannot be definitively answered within the confines of such a simple static model. For example, one can imagine a dynamic setting in which interest rates mean revert and in which homeowners either can refinance loans or expect to sell and buy another home within a few years. In that context, temporary rises in rates need not lead to substantially higher debt service costs (in present value terms) that are capitalized into lower house values if refinancing costs are low and borrowers believer rates will drop in the relatively near future. Of course, borrowers will not want to refinance mortgages obtained during periods of abnormally low rates. Still, the extent to which temporary drops in interest rates are capitalized into high houses will be mitigated by the expected length of tenure on the margin. In general, mean reversion in interest rates implies that we should see far less connection between current rates and house prices than is predicted by the constant interest rate version of the model (Glaeser and Gyourko, 2006). In addition, we would expect interest rates to have relatively little impact on house prices in elastically supplied markets where prices tend to be pinned down by construction costs, which themselves are determined primarily by labor and materials costs, not capital costs (Himmelberg, Mayer and Sinai (2005); Glaeser and Gyourko (2006)).
JZ – yes I understand that markets are regional, even down to the level of a single development. This claim has been made on other CC threads, not just the one re: 565 Quincy, and not specifically to the Chicago market (although this is a Chicago blog). I was trying to make a point that this is a common fallacy that is often repeated in RE blogs.
Personally, I will take the word of Robert Shiller (of the famed Case-Shiller economic powerhouse duo) before that of the RE so-called ‘experts’ here who spout the claims without the data to back it up.
“In contrast, Shiller (2005, 2006) argues that there is no economically or statistically significant relationship between house prices and interest rates over any reasonably long period of time.”
props to you DZ
and finally, my last thought on this thread – Lawyers who make assertions without the evidence to back it up will be challenged and laughed right out of court, and rightfully so.
Peace out
homedelete,
Assume a unicorn known as universal economic laws.
Even if there were such an animal, economic conditions, demographic drivers and prevailing practices in US and Irish housing markets vary so significantly that a study in one country can’t be used as evidence for what happens in the other.
What’s in issue here is the completely ridiculous notion that anyone can predict prices in a single development months from now based on interest rate changes.
I don’t know that taking Robert Shiller’s word for it (I haven’t read the Shiller pieces cite, maybe you have), when there are serious contrary studies out there, makes much more sense than quoting random articles in Time or BusinessWeek.
Wow, this thread is getting lengthy. Let me summarize it with a Cliff Notes version for those who don’t want to read the entire thing:
Zekas calls for Cribchatter readers to post proof of everything they say (largely common sense stuff). Proof is posted. Zekas dismisses it without providing any counterclaims. Zekas also refuses to back up anything he is claiming, apparently expecting us to just bow to his superior intellect and economic reasoning (or lack thereof).
This brings back memories of yochicago: Zekas demanding exact proof from anyone he disagrees with (shortly before banning them) while he posts wild-ass stories and analogies backed up with nothing but his usual condescension.
Pete,
Unfortunately for you, people can read what’s transpired here.
http://www.youtube.com/watch?v=QVBY_SqzJtI
Sparky: good links
However, I’m not persuaded. The gist of the articles is traditional economics:
Rates rise in improving economies, and rates fall in recessions. That is the theory, and it makes sense. If interest rates are rising it’s the sign of boom times, so people can afford more interest costs because they are making more.
But that theory was TOTALLY disproven by the decade we’ve just lived through, where the economy was booming (dow hit 14,000, etc) while interest rates fell to historical lows.
How did this occur? It disproves the arguments in the articles like the Time mag link.
Basically, rates rising this time around won’t be due to strong economic activity (like the theory says), they will rise due to US credit default risk.
I think 2000-2020 will give us new data, and therefore “studies”, that show interest rates are correlated inversely to property values.
It was lower rates, and short-term ARM products, which allowed people to afford the bubble prices. I thank homedelete on past threads for clearly outlining how lower-interest ARM product drove UPWARD housing prices and “bidding wars” etc.
@LP,
“LP on February 16th, 2010 at 2:58 pm”
Eric,
I believe, the two units in Lincoln Park West had large patios and heated garage spots included:
1926 N LINCOLN PARK WEST ST 3A (http://www.trulia.com/property/1079634317-1926-N-Lincoln-Park-W-3A-Chicago-IL) – closed for 435K
1717 N Crilly Ct Unit 1 – closed for 532K
1926 N LINCOLN PARK WEST 3B – closed for 522K
* * *
LP Commenting on my…
Eric Rojas on February 12th, 2010 at 1:29 pm
Please find me a handful of true three bedroom plus family room, private garage, full attic, laundry room, utility room, large private patio (for LP) under $550K
Nice study LP, but my comment above was answering what I felt unrealistic selling price predictions for this unit due to little comparable choice in Lincoln School under $550K. That said, your comps above are not exactly comps and also prove the point 1806 Larrabee will likely sell lower than two of your comps (my point, that this is priced well, a good value blahh, blahh, blahh).
The 1926 Lincoln Park West units and 1717 Crilly Court you point out are simplex “3” bedroom condos (two bed and den for Crilly and I think one of the 1926 units). No 28 ft lower level family room, no laundry room, no utility room, no full attic and they have varying degrees of outdoor space (Larrabee fenced yard is like 30×15 plus good sized deck)… long story short, the condos you point out are a different market to 1806 N Larrabee which is (as I see it) a rare town home a family of up to 4 can enjoy staying in Lincoln Park and send their kids to a top school… a good comp within the last 6 months was 1607 N Larrabee closed at $567K (still no family room or good storage, but more modern, larger bedrooms, two car garage).
1806 Larrabee is a true three bedroom with family room, two and one half baths, private garage, private fenced in patio etc… and a town house style home… no one above or below. Different from the places you have sent. Crilly is a two bedroom plus den condo, neighbors above (with vintage floors), smaller, has outdoor parking space and no family room and closed at $532K (more than what we’re asking).
If I had to pick between the three presented to me over $500K to put a one or two kids in, 1806 Larrabee hands down.
HD: “It was Bob and G who make that argument.”
Don’t forget Joe Zekas, too:
“It’s simple common sense that interest rate movements affect house prices to some degree.”
Way to take a quote out of context, G.
http://www.youtube.com/watch?v=QVBY_SqzJtI
“In response to anon(tfo) – Here’s an excerpt from another study – again showing little correlation between housing prices and interest rates.”
That, again, is not an “excerpt”–it’s a single sentence reference to a study that covered only NYC. Which I *think* we can all agree is a sui generis housing market, at least in the USA.
Anyway, I don’t think you and I disagree much about the conclusion, but I do take issue with what you cite as a “study”, especially when one of them includes a significant statement proved false by a chart it cites with approval, and more especially when you complain (at length) about the lack of “studies” supporting the contra-position.
“Lawyers who make assertions without the evidence to back it up will be challenged and laughed right out of court”
I doubt that there would be any laughing when the challenge is also made by naked assertion without the evidence to back it up.
Is there any way to move this hijacked crap over to another thread? Groove and I are trying to sell this place!
Annnnnnd… done.
just think of all the eyeballs that this thread received….(and your listing as well!) 😉 Cheers
Join ERic Rojas for a video tour of this listing at 1806 Larrabee:
http://yochicago.com/touring-a-lincoln-park-townhome/14307/
Sparky, AKA Joe Zekas:
“Bob, there’s nothing wrong with my reading comprehension, thank you very much for asking. How is your short-term memory?”
You obviously missed the prior comment by anon(tfo) where he clarified the commentator he was referring to was not the author of the article.
Also Eric you can blame the balance of this thread on Joe Zekas and his internet alias sparky.
There are some gems in here, for instance Joe Zekas/AKA Sparky’s quote:
“understand that Ireland is a very different environment from the US.”
Joe Zekas/AKA Sparky are you insinuating we need a different discipline of macroeconomics to differentiate between nations? What other social and physical sciences to you believe to be different across nations? Does Newtonian physics not apply in Iceland as well?
Bob,
Your inner troll has taken you over completely.
Bob – in case you missed it.
Robert Shiller (1/2 of the Case/Shiller duo and professor of economics at Yale University) argues that “there is no economically or statistically significant relationship between house prices and interest rates over any reasonably long period of time.”
Cite your studies that prove otherwise.
Buy now while interest rates are low or be priced out forever!
I think the decade of 2000 might be proof. The test will be what happens to Chicago housing prices when interest rates get back to 1999 levels above 7%.
Plus low interest rate ARMs fueled easier monthly payments for many, who then were able to offer a higher price.
I’ll stand by my own empirical observations of the last decade.
REIT stocks are another example. They used to yield 9% dividends in the late 1990’s. In the last decade their yields dropped to 4%-5% which is why their share prices went up, it was not due to a doubling of net income, I can assure you of that.
off topic: homedelete, I’m following a lis pendens on a friend’s house, seeing if I can help out. If it says on ccrd that the lis pendens foreclosure was executed on 1/8/2009 and recorded on 1/20/2010. Does this mean that the borrower hasn’t been paying since Jan 09? Thanks. What’s significance of that ’09 to ’10 time lap?
It’s entirely possibly haven’t paid in over a year; I see that all the time, or, it could be a data entry error in ccrd i.e. executed 11/8/2009 or 1/8/2010. It’s tough to say without looking at the original. Lis pendens are usually filed shortly before the foreclosure but with all the loan mod stuff going, it’s entirely possible they were about to go into foreclosure, got a loan mod, defaulted again, and the bank picked up exactly where it left off and filed the old lis pendens. I’ve got one client who stopped paying in June ’08, forclosure in Janu 09, dismissed in feb 2009 due to loan mod, refiled again January 2010, just got served the other day, so he has at least 7 months before sale and then a couple month after that before the sheriff is knocking on his door.
There are literally millions of homes in mortgage purgatory. I told another good friend and now bankruptcy client to stop paying the second mortgage; the client said that the family needs to move in 2011; and I said stop paying the 1st 6-9 months before you move and then send the keys to the bank.
It was at that moment that I again became acutely impressed at how massive this forclosure crisis really is. Any and every underwater joe with no real assets (90% of the population) can just walk away and start anew somewhere else.
“off topic: homedelete, I’m following a lis pendens on a friend’s house, seeing if I can help out. If it says on ccrd that the lis pendens foreclosure was executed on 1/8/2009 and recorded on 1/20/2010. Does this mean that the borrower hasn’t been paying since Jan 09? Thanks. What’s significance of that ‘09 to ‘10 time lap?”
this house has $500K loan it, worth let’s say $425K. Is it possible then that I could go to the sheriff’s auction, get lucky that nobody else shows up, then buy this for $200K cash and then sell it back to my friends and be their bank?
I thought I heard something about bank’s always bidding their loan amount? 1) Why would a bank do this if the property is worth less than their loan?
2) Why do the banks bother to REO, if they could just take the proceeds from the sheriff sale and be done with it?
You’re unlikely to get such a deal at a sheriff’s auction. Investors are very active in this market.
The answer is no. You’re a little confused about how the process works but I’ll do the best i can to explain it without typing too much.
Bank forecloses and obtains judgment in the amount of the outstanding principal balance. The judgment can be used like a money or credit in the amount of the judgment at the judicial auction. The auction day arrives and people line up to bid. The first bid is usually the bank for the amount of judgment. Investors have to bid above that amount. 99% of the time there isn’t enough equity in the property for an investor to bid above the bank’s bid, so, the property automatically goes to the bank because they had the highest bid. Sometimes the bank will bid less than the judgment, i’m not quite sure why, they usually bid no more than what they believe the property is worth. The bank gives an asset manager permission to enter the place, etc, and the asset manager hires a realtor to sell and market it.
“#Dan on March 13th, 2010 at 4:24 pm
this house has $500K loan it, worth let’s say $425K. Is it possible then that I could go to the sheriff’s auction, get lucky that nobody else shows up, then buy this for $200K cash and then sell it back to my friends and be their bank?
I thought I heard something about bank’s always bidding their loan amount? 1) Why would a bank do this if the property is worth less than their loan?
2) Why do the banks bother to REO, if they could just take the proceeds from the sheriff sale and be done with it?”
“
1) Why does the bank bid up to its loan if the value is lower?
2) Why doesn’t the bank just let a private bidder succeed and pay them out immediately, therefore they don’t have to take it as an REO?
“The auction day arrives and people line up to bid. The first bid is usually the bank for the amount of judgment. Investors have to bid above that amount. 99% of the time there isn’t enough equity in the property for an investor to bid above the bank’s bid, so, the property automatically goes to the bank because they had the highest bid.”
“1) Why does the bank bid up to its loan if the value is lower?”
(a) If they aren’t going to pursue a deficiency anyway, then they’re just bidding monopoly money, anyway, and it allows them to not think about it–either they get every cent they are owed or they get the property.
(b) some states allow post-foreclosure-sale redemption of the property. The redemption amount is the foreclosure-sale price plus interest. It’s easier to bid everything the same (esp. b/c it’s monopoly money) than to take a chance that the lender doesn’t know applicable law and it gets redeemed for a $200k loss (even if that’s all it’s actually worth).
Down to $509k!