The Non-Reduction “Reduction”: 636 W. Waveland in East Lakeview
We last chattered about this 1000-square foot 2-bedroom unit at 636 W. Waveland in March.
See our prior chatter here.
It has now been reduced by $15,000. Or so the listing says.
Except that the parking spot which before was available for $15,000 is now available for $30,000.
- March 2009 price: $250,000 plus $15,000 for parking
- April 2009 price: $235,000 plus $30,000 for parking
= Listing price of $265,000
Brian Grossman at @Properties has the listing. See the pictures here.
Unit #2A: 2 bedrooms, 1 bath, 1000 square feet
- Sold in April 1995 for $94,000
- Sold in March 2000 for $182,000
- Sold in February 2001 for $205,000
- Sold in March 2003 for $222,000
- Was listed in March 2009 for $250,000 (plus $15k for parking)
- Currently listed for $235,000 (plus $30k for parking)
- Assessment of $430 a month (includes cable, heat and water)
- Taxes of $3353
- Extra storage and bike room
- Bedroom #1: 12×11
- Bedrooms #2: 12×10
Not the best-looking vintage rehab I ever saw, but this seems like a super reasonable price for this area. We’re seeing many Lakeview 2 beds comparable to this falling to this price range, which makes me think that we might be nearing a bottom.
Is it me, or was the living-room ceiling dropped? It looks awfully low.
I would prefer to brag to my friends about what a great deal I got this place for so I would prefer in order of increasing preference the following unit/parking price combinations: 230/35k, 220/45k, 200/65k, 150/115k, 100/165k or best yet 50/215k.
I could also brag about my mortgage rate and how I got mine for a few bps less than them and I would be the envy of the party and center of attention.
Can you imagine how envious of me they would be if they found out I got this place for 50k at a 4.5% fixed mortgage rate? I can see their reaction already “Bob rocks!”
Pricing matters. I agree it’s still a little shady, but it’s the same concept of selling something for $19.99 versus $20.00
I’ve always wondered, if the listing has a separate parking space, can you just not buy it? Tell the seller to get fucked? Lots of places have parking available at additional cost but is it mandatory? And if you dont have to buy it, how do you sell a parking space by itself in a residential building. Seems to me splitting off the cost of parking is a marketing scam in itself.
Bob-lol. I was just thinking the same thing. How many more fancy unit/parking combos will that agent stir up before he cuts the price to get the place moving?!
Listing clearly states parking is optional, so maybe this is a pretty sharp agent just testing the actual value of a parking space these days.
Since a lot of units sell without parking, I guess it makes sense to list just the cost of the unit separately in the MLS for ease of comparison.
I personally hate manipulations like this one, though. Or the sellers who lower a listing price by two or three percent…If a unit were within a few percent of its value, it would already have sold! To me a signal of an unmotivated seller.
Looked @ a 1BR (first floor, front of the ctyard) for 200k without a dining room. It was about 750 sf.
The assessments were cheaper than this listing and so were the taxes. In fact, I believe the taxes were less than 2k if I remember correctly. So, I don’t think this is a diningroomectomy or whatever 🙂 There is probably a legit 2br in this building.
The listed room sizes add up to 592 square feet. Being generous with the bath, closets and hallway this place can’t possibly be more than 800 square feet total (not including the storage room.) So we’re talking at least $293 per actual square foot. Not a screaming deal for a so-so vintage rehab with a cheap kitchen.
Typical @ Properties games. Pretty shady operation. They sold the pig with lipstick (conversions) to so many people in the early 2000’s. I think they have the same values as American Invesco.
“Listing clearly states parking is optional, so maybe this is a pretty sharp agent just testing the actual value of a parking space these days.”
Are you kidding?
“Listing clearly states parking is optional, so maybe this is a pretty sharp agent just testing the actual value of a parking space these days.”
LOL what? This agent did what another agent said he’d do with my place if it sat too long… in order for things to appear “new” again in the MLS (to buyers) and to get fresh blood in (in a lower price range) he was going to split out the parking space. I didn’t hire him… (not for this reason alone, but it was part of the general package of crap I could see i was getting).
@ Properties selling pigs with lipstick?? NO…
@ properties is a step above a discount brokerage. Not the qaulity of a Coldwell Bankers and a Barid & Warners.
Steve,
Glad to see you’re back. You’ve been missed. But I flatly reject the notion that there is a difference between one brokerage and another. The agents are all the same and move freely from one brokerage to another. This week’s @Properties agent is last week’s CB agent and next week’s B&W agent.
Regarding the parking, I hate the parking listed separately but when all the other agents in a development are doing the same thing you have no choice. However, the seller should be willing to sell the space separately, which is often possible. On the other hand I’ve seen several listings where the space is listed separately along with a statement that it must be bought with the unit.
We inspected a unit here a couple of weeks ago. This association is just throwing their heating energy out of the basement. They really should get an energy saving program hashed out.
Gary – I disagree with you. Certain brokerages will take any agent with a pulse while others require a level of training before allowing you to hang your license.
Do you think CB would have marketed all the conversions that @ properties did? Not is a million years. My experience is that CB is filled with experienced agents and @ has every first year agent in the state. I guess they all want that chance to play softball at Wrigley field.
“Do you think CB would have marketed all the conversions that @ properties did? Not is a million years”
Ridiculous revisionism.
There’s plenty of moronic Coldwell Banker agents too. I did a brief stint at @properties (not as an agent) in 2004 and I can tell you that they do not hire everyone who walks through the door.
Yeah my last sentence above was just sarcastic. I think it is a fair statement that certain agency cultures attract people that have different moral standards and integrity (among other traits). I’ve seen this from both sides firsthand…and it’s not like it’s that big of a longshot to think certain organizations (in general) attract & retain certain types of people…and encourage certain behavior – in any industry. Of course it’s absurd to say the whole agency is full of corrupt agents, but my experiences were so bad that it’s hard for me to disagree with Steve. I know how much this board loves him, but I have to agree here. Of course it is impossible to prove any difference from anecdotal experiences alone, and I might have just run across some bad luck. So, to that end, I’d love to know the lawsuit-per-transaction rate between the different agencies. That would be telling, but probably impossible to ever get.
My last purchase was through an @ prop agent. Not only was it the worst experience but at the end of the day I felt I paid too much. Unfortunately I used one of their agents for guidance. I thought using an agent for buying would help me make better decisions. What a joke.
“I thought using an agent for buying would help me make better decisions”
Why you would ever think using someone who financially benefits from you making the transaction happen would be a good or better decision is beyond me. The agent makes a higher commission the more you pay or overpay for the property. Sounds like little thought was put into the whole process and sour grapes to me.
Bob, on the other side of that coin — they also make nothing if the deal doesn’t happen ^ they spent 3 months showing you properties. So, they are interested in getting the seller down too (and the buyer up…whomever is the most flexible or easily manipulated.)
I have to disagree with not using an agent to help you purchase. A good agent, I emphasize good, is something you can’t pass on if you hope to make your purchase successful. You have to use an agent that works with buyers and not one that is a listing agent. Find one that is successful and is not relying on your transaction to feed the kids and pay the bills for the upcoming month. Desperation makes many of these agents push you into a transaction even if it is not a good deal. The resources of someone who knows the market inside and out is so valuable. A good agent can tell you about buildings with problems. They can tell you which properties move quickly and which sit for long periods of times. They can tell you about upcoming projects and zoing changes that may affect the property’s value. They can tell you what to look for in condo docs to help protect you against upcoming special assessments. They can tell you how to negotiate like a pro and get the lowest purchase price possible. They can tell you the very best interest rates available and ensure that you are receiving what you should be getting. They can tell you which inspector to use that will give you an honest assessment of the property. They can tell you how to negotiate the most from an inspection report. A good agent knows the process and knows how to create a sucessful transaction. The general population has no idea what they are doing and usually gets beaten up pretty good when they are not accompanied by a buyer’s agent. Listing agents lick their chops when they see buyers who are unrepresented. It is like taking candy from a baby.
A good agent is your best friend if you hope to purchase successfully. A few non-agents may be qualified to do what I described above, but 98% of buyers will do better if they are using a good qualified agent to assist them. Why so many put so little time in researching their agent before using them is beyond me. You would think that chosing someone to represent you in such a large inventment would actually take some due dilligence. Many people use their friends or family members instead of someone qualified to do the job. Many people also overpay and get stuck in buildings with special assessments.
Take a look at the building at the corner of Fullerton and Clybourn. The building is foreclosed on but their are about 5 out of 25 units occupied with actual people who bought in this building. All 5 used agents to assist them. All five will be foreclosed on themselves eventually. Make sure you never use the agents that helped those 5 buyers make their all so important buying decisions.
You can never substitute the value of an expert’s opinion. This is true with any big decision you make in your life. Someone always knows more about something then you do. Find the expert and you will find success!
>Why you would ever think using someone who financially benefits from you making the transaction happen would be a good or better decision is beyond me.
I guess some of us fall for the “buyer’s agent” myth.
I thought maybe they would want my repeat business when I sell or perhaps a referral.
I spent almost all of 2007 looking for a “good value” on a 2/2 in LP/LV view that didn’t have obvious issues. I don’t think anyone would think that equates to “little thought”.
What is your complaint with your agent? An agents job is to help you find a sound property that meets your criteria at at today’s fair market value. An agents job is not to predict the future and know which way the market will move.
Just put it this way, at the end of the day, based on my own personal experience, I agree with Bob.
And no, I do not think that an agent’s job is to predict the future etc.
But I also think I would use an agent again. Just not that one (who I met and “interviewed” at an open house. I went to many OHs and met many agents).
“You can never substitute the value of an expert’s opinion. This is true with any big decision you make in your life. Someone always knows more about something then you do. Find the expert and you will find success!”
I ageee with the SHill, but then he goes on to add:
“An agents job is not to predict the future and know which way the market will move.”
All that knowledge and still not able to predict the obvious?
That’s right folks, all that knowledge and still missed the biggest RE downturn ever.
Hilarious. How much more worthless can an agent be?
I believe because of the state of the housing market today, prospective buyers will now walk into the RE arena fairly well educated on how the process should proceed and evolve. Instead of simply getting prequalified and leaving the rest of the process to their agent, thankfully people are doing their fair amount of research to avoid being a victim of unscrupulous developers, agents and any other member of this industry.
This theory of now having extremely educated buyers has been confirmed by the many agents I have spoken with over the past 9 months. A few agents and brokers have said they too have had to refresh their outlook and do more research themselves so as not to appear ‘out of the loop’ on any aspect of RE transactions. Just as many amateur flippers have left the business, so have many of the rest of the amateur RE players.
It is sad that the market had to get to this point for the general buying/selling public to realize that without this self education on all aspects of the business they would probably lose their money.
This is one very sneaky agent for them to even attempt this type of manuver! And for the seller to actually agree this was a winning strategy is going to force this unit to stay on the market unsold. While I never wish bad on anyone in general, this is a couple who hopefully will learn you cannot be a ripoff any longer and get away with dishonesty.
I don’t think I’m going to use an agent on the buy side of a property. I follow the market closely enough I don’t think there is a value add in it.
On the sell side of the transaction if it ever comes time I would probably use an agent. Its sad but true that young hot people can likely sell better as they inspire more confidence in prospective buyers. Much like that townhouse over on Fullerton.
Bob I actually think the opposite, I would sell the property myself, B/C I live there and can highlight the prop better than a stranger. but on the buy side, I feel they can help prod the sellers, esp. if they are a bank. I always would recommend a re-attorney they can be very awesome, they also charge less than the re-agents. (unless u know the law better)
For once in my life I actually agree with Steveo. This probably goes without saying but an agent’s primary purpose is to be an intermediary between the transacting parties. Buyers and sellers think they know what they’re doing but just like with medicine or plumbing, a little bit of knowledge goes a long way towards screwing thing up. Agents (are supposed to) know what they’re doing and help move a deal along in any way possible. People can be pretty weird or unrealistic about their homes and the agents are a buffer between the buyer and seller. As with anything else in life, there are agents that provide little value other than possessing the key to the lock box; other agents are invaluable, like what steve said about bad buildings, marketing times, resales, or even new properties not yet listed in the MLS. I had some issue with the 6% fee because I thought it was kind of high with bubble prices; but now that prices are retreating 6% doesn’t seem so unreasonable. Heck, 6% of $200k is only $12,000 – split four ways is only $3,000 per agent/broker – which isn’t a lot of money – especially if there was a lot of time put into the sale or if there was substantial overhead. I’ve seen mortgage prepayment fees larger than that! Anyway, in case you haven’t noticed, I’ve never directly knocked Realtors although they are America’s punching bag lately; Steveo has his problems but that’s his personality not so much his profession.
hd, many agents these days charge 5%.
I also agree with you and Steveo about what an agent’s purpose is. The best word I can think of to sum it up is an “advisor”. Not a salesperson, and this goes for both listing and selling side. A listing agent is not there to “sell” the property in what most people consider selling. A listing agent is there to inform the buyer of anything that’s not obvious (for example, no need to point out the large closets, the buyer can tell that him/herself), answer questions completely and accurately about the property and association, and to provide easy access to the property. To do these things they need to have a seller who is willing to help out with giving access to the property, and providing the correct information and/or where to get the correct information. They are also there to advise their seller about a proper listing price, and when/if the time comes advise on when and how much to do a price reduction, and then to negotiate the contract to get them the most money as possible. A buyers agent’s job is exactly what Steveo mentioned, to ADVISE a buyer about everything about a property, it’s location, etc. A buyer is either going to like a property or they’re not going to like it, no amount of “selling” is going to make them want to buy something.
Way too many agents today don’t look at themselves as advisors, they look at themselves as either a salesperson, a paperwork pusher, or a chauffeur. And that is why both buyers and sellers are unhappy with the agents they choose. That is also why getting referrals from people who actually used the agent is important, not just going and interviewing agents at open houses, or picking the person with the most ads.
As a former licensed real estate broker, I’m reluctant to call it a “profession.” To be sure, there are many fine brokers/agents who conduct business professionally, exhibit a high degree of professionalism, etc. But they’re really just business people – it just so happens that a (minimal) license is required to operate in their line of business (and that license is a requirement mainly as a result of broker lobbying, Realtors in particular, so that not just anyone can get a piece of the pie; remember the fight they waged against the MLS openning up to the public?).
The whole surge in “buyer brokers” is owing to one thing: the surge in the number of people who got real estate licenses (which was owing mainly to the run up in real estate prices and development). The problem is, the state doesn’t hand out exclusive listings along with new licenses. As such, new licensees, with no experience or client base, work as “buyer’s” agents until they start signing up some listings. If a broker could stay 100% occupied by showing and selling only his or her own listings, that broker would never act as a “buyer’s” broker. (Over the past year, many an experienced broker has certainly acted in a buyer broker capacity. Even worse, many were forced to do…gasp…rental work.)
What is truly problematic is the fact that many so-called “buyer’s” brokers forget or misunderstand the nature of their fiduciary duty. Countless real estate brokers no doubt breach the duty they owe to the buyer in the process of getting deals done (for that matter, many seller’s brokers also fail in this regard).
Many (if not most) brokers simply feel that “their duty is owed to the deal.” This is almost forgivable, as the seller wants to sell and the buyer wants to buy, both of which are satisfied by closing the deal. But to the extent that the seller receives too little or the buyer pays too much in connection with a deal, the seller’s or buyer’s broker, as the case may be, has breached his or her fiduciary duty. (And on the buyer side, of course, there can be other causes of such breach, e.g., not alerting a buyer to impending special assessments, etc.)
As another commenter noted above, there is much to be gained by the use of a (competent) residential real estate attorney. In an ideal world:
(1) There would be no such thing as a real estate “license.” Instead, some business people would undertake to market real properties, while other business people would undertake to find properties for buyers. One or both of such business people would be compensated, with perhaps minimal payments throughout the process and a larger payment in the event of a successful deal (not unlike consultants).
(2)Attorneys would then close the deal, which should be a minimal endeavor for the seller’s attorney (i.e., less than $1,000, likely around $500) and a bit more work for the buyer’s attorney (between $1 to $3,000, depending on the nature of the deal and the property involved and the extent and nature of title company involvement).
In the end, sellers would receive more at closing, buyers would pay less at the closing, and both will have experienced a more efficient and ethical process.
That last ost was truly ridiculas. The purpose of using ad agent is again was their expertise in real estate. An attonreys expertise is contracts and law. Is this not obvious to you? What makes attorneys so special that they are automatically expert negotiators, FMV analysts, and nwighborhood consultants? If you have a question on a contract you can call an attorney. I fyou have a question on the real estate market, please look to a real estate professional.
I also disagree on the buyer’s agent comments. Listing a property is marketing and sales. Buying a property takes market anaysis, financial analysis, neotiating skills, and an understanding on the neighborhoods. The typical listing agent reminds me of an old remax commercial with housewives holding open houses. A buyers agent has a different skill set and should help you create value through finding a solid property, negotiating the lowest price possible, and finding the best financing for a buyers situation.
No offense to the attonreys but they are truthfully the weekest link in a real estate transaction. They are typically paid $500 to make the a couple of changes to the standard real estate contract and request a real estate tax proration. Most states do not use real estate attonreys on real estate tranfer. We should get rid of them in Illinois as well as they ususally screw up deals based tydious inspection items. Brokers put the deals together and them fix the deal when the attornes f things up. It is pretty hard to neotiate a deal through a fax 🙂
Most states do not use attorneys, like Steveo pointed out. However, I don’t think they are the weakest link: that title is reserved for the mortgage brokers. Sometimes the attorney is the only party looking out for buyer’s or seller’s interests. They make sure the title is OK, they follow-up on tedious inspection issues, they attend the closing to make sure money goes to the proper parties. Likewise they have the most responsibility. If something goes wrong with the transaction the party sues their attorney and that’s the only party they can usually recover from. They try to sue the seller or the realtors but that usually goes nowhere.
The mortgage broker is the biggest a$$ of them all. He’s the party who put the buyer into a bad loan, usually he completed the loan app full of fraudulent misrepresentations, he gets the biggest fee for the least amount of paper; he tacks on the few thousand dollar origination fee, processing fee, administration fee, courier fee, e-mail delivery fee, he also gets paid the yield spread premiums and any other fee POC (paid outside of closing). For once steveo I defended your profession and in response, you turn around knock lawyers, the guy who has the most responsibility yet gets paid the least amount of money. Thanks.
HD,
How naive of you to think that you and your eternal nemesis would take the gloves off on this holiday weekend.
Per the SHill about buyer’s agents: “Buying a property takes market anaysis, financial analysis, neotiating skills, and an understanding on the neighborhoods.”
“An agents job is not to predict the future and know which way the market will move.”
Well, what’s the purpose of the “market anaysis (sic)” when it doesn’t even enable the “professional” to see the biggest downturn in RE history? Should it even be called market analysis?
The realtors job is to ensure that th epurchase price is supported by recent comps. Same as the banks. It is funny how you would expect a profession that requires a high school education to see a downturn yet the top economists with their ivy league educations get a pass?
I did see the bubble and corectly pointed out which areas would fall and which would hold up. Guess I am the smartest guy int he room.
but can’t type.
Realtors drank the kool-aid nearly as much as the mortgage brokers during the mania.
My fingers are real fat
Why wouldn’t they? Most in the RE ecosystem had a vested interest in seeing RE property values rise, even down to municipalities.
Its only the bagholders who bought at the top and now can’t afford their monthly nut who are truly screwed. Even they had a vested interest in continuing to see RE values go up in 2006, unfortunately for them these lofty values couldn’t continue forever, or even hold up.
I just drove by a development today and took a look: two foreclosures and one of them is in bad shape. Think those are going to devastate comps for the remaining homes? You bet.
We were staying at our condo at 330 W. Grand this weekend, and talked with a realtor. She said that because of the relatively low price we paid, one of her clients had taken a comparable unit in the building off the market. He didn’t want to sell at the level we paid. He was able to rent it though.
Bob – that is where you are wrong. Why do I care if values increase. I want slow increases (2.5% annually) so people can cover there selling expenses and still move after a couple of years. Volume is where are money comes from and not 10% annual increases in pricing. Think about it…
But Steveo, volume increases as price decreases! You should welcome lower prices. Too bad you’re not selling REO’s; REO brokers are making all the money your peers are not.
http://www.nytimes.com/2009/04/06/us/06convene.html?partner=rss&emc=rss
Homeowners’ Hard Times Are Good for the Foreclosure Business
PALM DESERT, Calif. — The celebration started early Saturday, with poolside music and drinks, as partygoers passed around business cards and compared notes on successful techniques for evicting residents who try to stay in bank-owned property, a process they call “cash for keys.”
One woman in a T-shirt walked around with a hand-written sign that read “Bank Property” affixed prominently to her chest.
Welcome to the spring 2009 Reomac conference, which has attracted nearly 3,000 real estate agents and property managers to this lush desert resort. The crowd brimmed with a gusto that is hard to find in this recessionary era. The hotel bar did more business on Saturday night than it did on New Year’s Eve. Small wonder: These are the people cashing in on the boom in foreclosed properties.
REO brokers and attorneys are ruining the market. Talk about shady! These guys do nothing to get anything close to a FMV price. Their goal is to price it where they will get 10 offers with no one even seeing the property. That is not maximizing profits for banks…
“We were staying at our condo at 330 W. Grand this weekend, and talked with a realtor. She said that because of the relatively low price we paid, one of her clients had taken a comparable unit in the building off the market. He didn’t want to sell at the level we paid. He was able to rent it though.”
Is the rent covering his costs? I wonder.
We’ll see more of this as the prices fall. Some sellers will try and wait it out and hope that “next year” will be better (so far, that strategy has not been working over the past 2 years.) But some can’t (or won’t) be able to hold on (due to job loss, divorce etc.)
Sabrina – Depends which neighborhood you are in. I think we know that by now.
Again, the last 6 months have been anything but a normal market. Buyers are starting to refer to this period as the “crisis period” and are beginning to realize that some of the comps from this time are not realistic going forward. Let’s not forget that LP went from a high of 24 months inventory in Dec to 6 months today. Things are getting back to normal in my neighborhood and I think you will see the April data will support this. I know how you guys are all Case Schiller guys and looking at data from 3 months ago as an indicator of what is happending now.
I had a listing that sat for 5 months with not more than 10 showings (lakeview). I received 3 offers in the past 3 weeks and the property is now selling $10k higher than what the seller hoped to get. Things are not as bad as you think Sabrina.
Really? Which ones?
As far as I’ve seen, every single neighborhood in Chicago has fallen in price in the last two years.
Sure- some have fallen more than others. But none has been spared. And if you bought in the last 5 years, it’s not a pretty picture (no matter where you own- be it LP or Rogers Park.)
I guess you have a crystal ball, Steve, that’s telling you that LP is done falling and by next year the prices won’t be any lower than this year.
Actually, from what I can tell (but Gary and others can set me straight) it appears that Lakeview is the neighborhood that is holding up the best (at least on the condo side- not the single family home arena.) The 20 and 30-somethings still view Lakeview as THE “prime” neighorhood (not LP) and are willing to buy there- housing bust or not.
“Things are not as bad as you think Sabrina.”
Yes, things are selling. This is the spring buying season. We’re not going to stay at only 1400 properties a month for the entire spring buying season.
But interestingly, last year’s spring buying season started out fairly well- but that didn’t stop prices from continuing to decline all year long.
But I agree with you, Steve, that the housing obsession is alive and well. People are buying right now. We won’t hit a bottom until people are genuinely scared to buy that $300,000 1-bedroom. (that is – “scared” that they’ll lose their shirt.)
I see little fear amongst buyers (but plenty amongst sellers.)
Sabrina – I hope you understand that we will see inflation in the next few years. I hope you understand that financing a property at 4.5% over 30 years is going to look pretty attractive when your rent is going up by 5% per year.
BTW – I just completed my taxes and saved $18k by itemizing my deductions. I will not save that much next year as I just refinanced my JUmbo into a 417k 1st at 4.5% and a $300k 2nd at 4.5% (1.25% over prime). My new interest payment is $2,500 and my total payment is $3,300 including real estate taxes. That is right, I live in a million $$ house for $3,300 ($2,600 after tax savings) per month in housing expense. See what 4 bedroom homes rent for in Lincoln Park and then tell me who is getting the better deal.
Sabrina – I will rent you my place for $6k per month if youa re interested. It might be $6,300 next year 🙂
I’m gonna call BS on Stevo’s. A 2nd mortgage at 4.5%?? Not buying it.
Saving 18k by itemizing but not hit by the AMT? Yah..right.
General inflation does not mean rental inflation OR real estate inflation. The price of food will go up. The price of oil will go up. Over 20 years, the price of water will also probably go up. It is possible (and I only took intro to economics, but even I know) that some things can go up while others go down or stay still. Everything has it’s own supply & demand that dictates the price.
Furthermore, the money supply has caused a massive inflation in home prices & when the money dried up, look what happened. And the car-razy thing is that buyers w/ good credit can get a mortgage for 4.5%. When you can only get a mortgage for 7.5% you think the prices will go UP?? Don’t make me laugh. Even more blood will be in the streets. Homowners under water at 4.5% will be suicide victims at 7-8% mortgage rates…especially if everything else becomes more expensive to the consumer, good luck selling your over-supplied 2/2 for 450. Maybe 250. To combat inflation, interest rates will have to rise eventually (unless this administration is dead set on punishing savers & rewarding people with high credit card balances) – and so ultimately mortgage rates will begin to follow.
Oh by the way, speaking of @Properties… has anyone on here seen the parody site that was up for a while? Someone emailed a few of the pages to me since it’s not up anymore…(unless it moved to a new URL…not sure). Here are a few…some are funnier than others:
http://img8.imageshack.us/img8/2913/indeximage.jpg
The Spire
http://img8.imageshack.us/img8/5876/spire.jpg
New Construction
http://img8.imageshack.us/img8/4247/newconst.jpg
And commercial real estate
http://img8.imageshack.us/img8/5516/commercialu.jpg
“Again, the last 6 months have been anything but a normal market.”
There are always typos in the SHill’s comments.
He meant 6 years, right?
If Steveo really has two mortgages totaling $717,000 (and who knows what to believe on an anonymous internet website) – then he really is the ultimate FB. He drank so much kool-aid during the boom he’s still drunk. He thinks he’s the smartest guy in the room because he’s got $717,000 in mortgages at 4.5%. He even admits that his payments is interest only. Oh the schadenfreude will be sweet when this house of cards crashes.
Inflation v. Deflation; nobody knows what’s going to happen. Japan is the textbook example of failed attempts to reinflate; 19 years later real estate prices are still going down. Japan now has the largest debt in the world compared to GDP.
On the other hand a quite a few ivory tower economists and big wig investors are saying that inflation, hyperinflation or even stagflation is in the cards. The truth of the matter is nobody knows what’s going to happen. Place your bets accordingly.
“He even admits that his payments is interest only.”
No, he doesn’t, HD. He only counts interest as an expense. The principal portion of the payment is savings. Not my bookkeeping method, but a fair one.
Read between the lines. His said “my total payment is $3,300.” His said his interest payment is $2,500. Therefore, his taxes are probably $800 which is reasonable for a $1,000,000 house.
This makes sense because the principal payment at 4.5% on $717k is about $950 a month. If his total payment is $3,300 then he’s either not paying principal or taxes. My guess is that he’s not paying principal.
“My new interest payment is $2,500 and my total payment is $3,300 including real estate taxes.”
Originally, I was agreeing with Steve on many points, but G is right – this is a contradiction. Real estate agents aren’t supposed to advise on market analysis or financial analysis. The problem is many – like Steve – go around saying they are experts in real estate, but that is waaay too broad of an area of expertise – closing real estate deals is more like it – i.e. buyer finds home they are looking for at best price given current listings, seller advertises, stages, and markets property.
Promising a good investment or prices will hold up is not something real estate agents should be doing, but they do all the time – every decent financial advisor says “past results are not necessarily indicative of future returns” and “investment may go down in value”… but here, the NAR has ads that say “on average, housing prices double every ten years” and they try to extrapolate that to future appreciation and that “real estate is the best way to build long term wealth”.
Also, NAR is on a huge ad blitz that “there’s never been a better time to buy” or the NAR prez saying “it’s unlikely that you’ll find a much better time to buy a home”… I don’t care how you mince words, basically they are saying the housing market will go up or at least that it won’t go down, otherwise, there would be a better time to buy – and they are trying to say that they can predict these things. You think they would have learned their lesson. Agents say it’s not their job to forecast housing prices (which I agree with), but then they basically say where they think the market is going – even in the face of strong data that housing will continue to fall over the next year or two. Agents should figure out what their job is, and try to do that well…
”
Per the SHill about buyer’s agents: “Buying a property takes market anaysis, financial analysis, neotiating skills, and an understanding on the neighborhoods.”
“An agents job is not to predict the future and know which way the market will move.”
“
HD:
You obviously don’t know what mortgage brokers do if you think the job is so easy. If being a Realtor, broker, attorney, or anything else in residential real estate were so easy, then more people would be doing it and actually be successful at it. Way more crash and burn than those of us who actually make a good living in the fields for a reason…
Bob:
There are 4.5% HELOCs available if you have enough equity… basically need a combined loan-to-value of 80% or lower.
Edumakated:
I said they were the weakest link b/c of all the BS charges on the HUD. That’s just the fly by night places. I know of plenty of brokers, some are good friends, who will only touch prime quality loans and didn’t gouge their clients for every penny they could.
No offense to the good brokers but the shady ones pushing subprime arms gave a lot of you bad names. Stringent regulation is coming.
For an unrelated purpose, I just ran some numbers on condo prices in lakeview, sold during the past 3 months, $500K+. In that price category, prices are actually slightly up from the 2004-2006 period (based on resales of the same units, not acccounting for renovations). It was a modest increase (3.5%) but i was a little surprised.
I glanced at the sales in the under $500K range and that is a much weaker market, at least in Lakeview. I didn’t do the calcluatinos (i’m much lazier than G, who i think is the one who will post detailed sales analysis).
“If Steveo really has two mortgages totaling $717,000 (and who knows what to believe on an anonymous internet website) – then he really is the ultimate FB. He drank so much kool-aid during the boom he’s still drunk. He thinks he’s the smartest guy in the room because he’s got $717,000 in mortgages at 4.5%. He even admits that his payments is interest only. Oh the schadenfreude will be sweet when this house of cards crashes.”
What house of cards? I will never sell. I can rent it out for nearly 2 times what my monthly expense is. The 1st is amortising and the 2nd is a variable interest only tied to prime. I send an extra $2,500 to the 2nd each month. I will keep this house for the rest of my life and simply rent it out when I am ready to move. Eventually it will be paid off and the cash flows will be ridiculas.
You just don’t get it.
bubbleboi – You mean prices are holding up? Don’t tell Sabrina, HD, or Anon. They will call you a liar and tell you the market is down 30%. I love dumb people…
You’re right Steven, you are most assuredly the smartest guy in the room.
Stevo:
Drunk again?
Not today. Too busy! You?
I wish. Took it you must be b/c I’m not one of those “routing”* for a market collapse–generally I’m not easily confused with Bob.
*not your typo, I know.
I am rooting for a market route alright. Actually a collapse.
Bob, Why are you rooting for a market collapse?
My reasons are purely selfish. Cuz I have a short position and I want to buy a nice big house in an area where they’re currently selling for 500k. That being said I see a lot of data that supports my hope, so we’ll see..it won’t be a quick process.
Owning a house outright or even having a lot of equity isn’t necessarily a good deal, as there is the loss of liquidity and lost opportunity cost that should be considered.
Steve:
An $18,000 tax deduction does not mean you save $18,000. A deduction lowers your taxes $18,000 X tax rate. Only an $18,000 tax credit can save you $18,000. The other problem with higher incomes is that your deduction and exemptions are decreased. Sometimes the tax rate has a large effect as with a married couple who make $250,000 or $200,000. The net (after state and federal taxes, etc.) can be a difference of $20,000.
Just a summary for now. There were 71 March 09 attached (condo/TH) sales in Lake View. 11 were developer sales. I don’t yet have prior sale info on 4, most likely they are 15+ years old.
Here are the remaining 56 March sales broken down by year of prior sale. The columns represent total of March 09 resales, total sold at loss, and total sold at loss after deduction of 5.5% transaction costs.
2008 1 1 1
2007 4 3 3
2006 8 5 7
2005 9 7 7
2004 13 7 11
2003 4 1 1
2002 4 1 1
2001 4 1 1
2000 3 0 1
prior 6 0 0
bubbleboi, I only have March 09 with me. I have 7 sales over $500K, 3 from developers. Of the other 4, 1 sold at a loss and another after transaction costs. In addition, 2 sales under $500K had prior sales over $500K (from 02 & 04, I think.)
g your data supports the notion if you hold your property you will usually do fine. That people bought in 04-07 and at least a few made some money is incredible with this market. Do you have magnitude or avg loss/gain for these sales? If people are not losing their shirt then the incentive for people like Bob to remain on the sidelines is lessened. An actually recover can start. The market should not support flippers^ or short term property holder* that is what got us into this mess.
^unless they are contributing to the property in some way
*(people who can’t plan) (for other, hope your new job pays for relocation)
“g your data supports the notion if you hold your property you will usually do fine. That people bought in 04-07 and at least a few made some money is incredible with this market.”
If you’re going to live in a property for a minimum of 10 years- then it’s not a bad idea to own your home.
Problem is- who lives in a condo for 10 years? Certainly not a 1-bedroom. The average time in them is short. You get married, you have a child and you want to move. If you’re in a 1 or 2 bedroom condo for even 5 years- that’s a long time. And as G’s data shows, those who bought in 2004 are still losing money.
DD – It is an $18k TAX savings. $60k in itemized deductions at a 30% blended tax rate.
and yes, the media is finally talking a general recovery and most of us are still waiting for the real drop to hit. When is LP going to fall off the cliff again? Is it coming soon guys? I am tired of waiting.
Be careful what you wish for Stevie lest it come true….
“When is LP going to fall off the cliff again? Is it coming soon guys? I am tired of waiting.”
sabrina, that few who bought in peak years are making some money conversely some are only losing a little money*(5.5% is a little given drops of 20-30% or more in this and other mkts); makes the argument of wait to buy/wait until 99 pricing or this is the worst market in the history of time, a bit dramatic/hopeful(which i can understand, just doesn’t make reality).
I do want to point out that yea there are many unit coming in 09-10 and that condo’s haven’t dropped as much as sfh/multi’s. Still that data isn’t as dire as one would expect given the underlying economic conditions.
This portends to a scenario of increased liquidity in the realestate market with some timely good news.
As far as people don’t live in condo’s for long, that a personal choice, if they can live with the loss, that their choice (& their paying for it), the ability to the move would be priceless for them, the halt in liquidity has cause a lot of the problems, people can’t go on with their lives.
*need more data to justify, the other approx 60%’s magnitude of loss
Good points revassal. Whereas previously life events may have precipitated condo occupancy times I think now financial events may dictate that (longer occupancy times).
Also revassal I am not the median homebuyer. Given the present scenario I am more inclined to try to cut my losses and attempt to wind up with the best place possible. I am not the typical consumer and can defer my consumption for five years for this. In fact I drove the same car since age 17 until age 28, to give you an idea.
Unfortunately for me it appears Chicagoland SFHs are cratering at a much faster rate than I would like. I don’t want the bottom to hit until 2014 but with 4.5% monthly declines in January alone it doesn’t bode well for my grand plan. Of course the CS index is of zero applicability to any particular area. Hopefully in a couple years it will be lower but I’m not setup for bottom timing quite yet.
If we get another absolutely dismal CS number I might be tempted to join the bulls camp. Afterall its much moreso the timing of when you get there as much as getting the eventual direction right.
G in terms of ownership being a good deal overall I think the past ten years is not a good barometer overall. If you had stats for other decades I think you’d arrive at different conclusions regarding RE as an investment. I know these are probably tough to dig up but thats my hunch. RE the past decade was a pretty spectacular/extraordinary investment not often repeated in others.
The halt in liquidity is directly related to tightening lending standards and the removal of toxic financing from the marketplace. There’s no way to fix that scenario unless Uncle Ben starts making helicopter drops into my neighborhood. the typical seller can no longer expect some greater fool to come along with 100% or greater financing and outbid all the other bozos with funny money. Yes it totally sucks for those that are stuck but seriously, what did they expect? They were players in the game just like all the other fbs and gfs. If you play with fire expect to be burned.
“the halt in liquidity has cause a lot of the problems, people can’t go on with their lives.”
“$60k in itemized deductions”
Over your standard deduction of $10,900?
So $71k of Itemized deductions, *after* considering the phaseout (which must apply, b/c I’m certain your AGI is over $160k)–in other words, probably over $90k in itemized deductions?
You’re one generous dude, Stevo. I’m sure the charities love you.
anon(tfo),
Most of his itemized deductions come from him running his own business. He’s even repeated on here the oft-used formula of fudging on the overhead costs of running your business to minimize your tax burden.
Seriously once you run your own business you can deduct everything real or imagined, just be ready to cook up some documents if they come knocking investigating the imagined parts.
HD, i agree that the tightened lending standards have put a damper on liquidity, but a majority of that and of people with $ is originating from fear. Once fear abates what ever the new normal(vol.) is will be a whole lot better than now, people with confidence can over come things like logic, will be able to justify living and outbidding people for a certain place because it fits them. (it those intangibles that can make the market move) Conversely people with confidence might accept no appreciation and sell/move because they will expect to buy a place in the same situation wherever they move to.
Bob:, that what I am talking about, you have to be in the market all the time, and make bids(at least keep ur feet wet), I understand your neighborhood hasn’t come to the level you would like/expect/and even justify, but with my above points if it desirable to you it will be to others and it may never come down as much.
you never know you might get lucky, get a place for what the bottom will be 2 yrs ahead of schedule.
I don’t see any “increased liquidity” in the Lake View condo/TH market. Sales are still at record lows, and fewer money-making sales appear each month. Drawing conclusions from one month’s results ignores these obvious trends, both of which appear to continue accelerating downward.
What do you suppose it will take to get sales moving again?
Closed Sales
Attached Single Family
Area 8006
Year Jan Median Feb Median Mar Median 1st Q
1988 35 $84,000 31 $101,000 45 $85,500 111
1989 50 $91,250 41 $80,000 67 $108,000 158
1990 46 $86,750 31 $103,500 78 $89,250 155
1991 34 $116,000 26 $116,500 76 $118,250 136
1992 43 $94,700 68 $107,050 103 $101,900 214
1993 54 $80,000 58 $141,500 93 $119,145 205
1994 62 $112,500 52 $120,500 110 $126,550 224
1995 65 $174,900 57 $132,500 95 $133,000 217
1996 70 $149,625 75 $144,000 123 $138,000 268
1997 81 $153,500 87 $166,000 135 $144,900 303
1998 83 $159,000 89 $153,750 166 $162,500 338
1999 112 $209,750 91 $245,000 138 $210,500 341
2000 72 $232,000 98 $217,000 138 $258,950 308
2001 95 $288,747 91 $255,750 151 $288,400 337
2002 80 $285,250 123 $279,000 150 $283,293 353
2003 123 $297,500 94 $287,500 173 $287,000 390
2004 95 $300,000 112 $284,550 170 $314,500 377
2005 120 $322,400 123 $330,000 209 $358,720 452
2006 127 $271,250 126 $302,500 232 $312,950 485
2007 95 $310,000 134 $259,875 180 $325,500 409
2008 67 $325,000 102 $357,500 190 $395,500 359
2009 40 $341,250 39 $401,500 72 $301,250 151
YOY -40.3% -61.8% -62.1% -57.9%
“What do you suppose it will take to get sales moving again?”
G: timely good news.
Also I never said there was increased liquidity, but argued that some given people aren’t losing 20%+ (-5.5% to some +, for about 40% of sales), it could lead to increased liquidity.
see above comments.
“timely good news.”
The news of increased affordability has been around for a while. Looks like the better news of even lower prices will be needed.
What I would be looking for would be more related to economic news. Unemployment, GDP, credit mkts, etc. Looking for good news in just the real estate sector is not where the confidence will come from because it is locked in a downward/negative feedback loop.
Your right affordability is already factored into the market place, that’s why many are complaining death by a thousand cuts. Its a waiting game. With better general economic news people will feel more confident, that confidence will help real estate.
I have seen a few places, not as much as when I was looking but sellers are stoking confidence (also more are pricing right) to help themselves; multiply it by 1000’s and it can change sentiment.
The market can overshoot down but it also can V up (or L), it depends, I don’t have crystal ball abilities, but I wouldn’t want to play a waiting game on a large investment, pounce when it works for you. Your definitely not going to lose (prices are lower), many are underwater, it will create a floor for downward pressure. Also, population changes, construction cost/materials are at very low levels, there are many reasons why it won’t go that much lower.
As in the run-up there are obstacles in the run-down as well.
And sometimes lower prices won’t work either because buyers need money down and the ability to repay the loan.
“Looks like the better news of even lower prices will be needed.”
Oh btw I had a client today come in and he says his monthly mortgage payment was $X. I asked how much were his paychecks. He said about 45% of X. I asked how often he was paid. He said every two weeks. I said, “if your paychecks don’t cover your monthly mortgage obligation how did you make the payments every month?” He said, “Oh I borrowed money off my sister every month. She took a home equity loan on her condo and lent the money to me.”
This house was used as a comp. With prices like this real estate can and will only go up! I’m sure this type of stuff NEVER happened in LP or Lakeview; only the cook county suburbs, right?????
revassal, I find it difficult to follow your conclusions. Take these, for instance: “I don’t have crystal ball abilities” followed by “Your definitely not going to lose (prices are lower)” and “there are many reasons why it won’t go that much lower.”
I am curious why you think that “construction cost/materials are at very low levels” is an “obstacle” to continuing price declines? RE corrections have no concern for replacement costs.
There will be no V-shaped recovery in RE values. I haven’t seen it before in prior regional downturns; why would it in this national downturn? An overshoot is pretty much a lock due to declining rents, which will turn the first round of “investor deals” into knife-catching. Then it will be mired at the bottom for some time.
“Oh btw I had a client today come in and he says his monthly mortgage payment was $X. I asked ..”; “I asked..”
But HD did you ask him if he was “livin’ the dream”? Because I would’ve laughed at him to his face. Sounds like his sister deserves to take a bath. Its stories like this that just leave me in wonderment at exactly how much dumb money is out there. A ton, it seems..
You have no idea how many stupid people are out there with money. Lawyers probably being the largest population of these folks.
But that’s the thing, none of these people had any money. The banks just gave it to them.
Sonies, I won’t take your slight personally, but, you are wrong. It’s a well known fact that doctors are the largest population when it comes to money. Very prone to getting ripped off, making terrible business decisions and also very litigious, which again, wastes money.
G then you are arguing the opposite of the slogans in the run-up, things are bad and only going to get worse. Right?
As as oppose to re always goes up. etc.
“RE corrections have no concern for replacement costs.” The market forces will then not produce, prices will level and rise because of scarcity. I believe many are underestimating the effect of housing destruction in this downturn.
Your agreeing their might be an L, but I don’t think we will be at the bottom for more than a few years, because of the many aspects that affect re prices will change for the better. Time can even heal re-wounds.
Many investors, if they took their time, will be happy with knifecatching, because it will turn into a fat stack soon enough, if they are willing to wait.
i agree with HD, doctors are stupid, can’t even practice their profession as well as re-agents. 😉
Revassal: “G then you are arguing the opposite of the slogans in the run-up, things are bad and only going to get worse. Right?”
No, I haven’t argued that “re always goes down.”
I have argued that the inevitable correction is not done running its course due to the proponderance of data that supports my claim (only a small amount of which gets posted here.)
“it will turn into a fat stack soon enough, if they are willing to wait.” I thought you said you don’t have a crystal ball?
“thought you said you don’t have a crystal ball?”
doesn’t prevent me from expressing my view point and expectations; based on the data I have and/or seen. Why hold back on the data?
G:, you should then also expect a recovery, what types of indicators are you looking for? besides volume increase/price reductions.
“”No, I haven’t argued that “re always goes down.”
I have argued that the inevitable correction is not done running its course due to the proponderance of data that supports my claim (only a small amount of which gets posted here.)””
anon(tfo),
Most of his itemized deductions come from him running his own business. He’s even repeated on here the oft-used formula of fudging on the overhead costs of running your business to minimize your tax burden.
Those are called business expenses, not deductions.