This 2/2 Has Reduced Under the 2001 Price: 1525 W. George in Lakeview
We last chattered about this 2-bedroom at 1525 W. George in Lakeview in February 2011.
See our prior chatter here.
It was an example of someone trying to sell 10 years later.
Would they make money?
HD thought the seller should lower the price $5,000 every 10 days to drum up interest until it sold.
At that time, it was listed $32,000 over the 2001 purchase price at $370,000.
The unit was recently reduced and is now listed $12,000 under the 2001 purchase price at $325,000.
If you recall, it has 1200 square feet on one level with a south facing deck off the master bedroom or from the unit.
It has diagonal hardwood floors in the main living areas.
The unit has a wood burning fireplace and a master suite with shower/tub combo.
The kitchen has black appliances and stone counter tops.
The unit has the amenities buyer look for with central air, in-unit washer/dryer and deeded parking.
The listing asks: “Bargain Hunters? Huge $45,000 price reduction!”
Is this now a deal?
Bob Kinsloe at Portola Real Estate still has the listing. See the pictures here.
Unit #2: 2 bedrooms, 2 baths, 1200 square feet
- Sold in November 1995 for $200,000
- Sold in September 1999 (no price listed)
- Sold in June 2001 for $338,000
- Originally listed in January 2011 for $370,000
- Was listed in February 2011 for $370,000
- Reduced
- Currently listed for $325,000
- Assessments of $88 a month
- Taxes of $5343
- Central Air
- In-unit Washer/Dryer
- Garage space included
- Bedroom #1: 12×12
- Bedroom #2: 12×10
280
Nice place.
For under $300K it’s a good deal. Plenty of space, nice living room and kitchen, all the modern amenities, low assessments, garage parking. Decent location, though I’d prefer farther north on the Southport Corridor, as this area is kind of dull.
I would have some qualms about the building itself. As we’ve discussed in other threads, thousands of similar buildings were constructed in the same era, and they all went up quickly and probably on the cheap. I’d want someone good to do a thorough inspection before I bought any place in one of these.
That stove looks weird… no vent above and it seems that it’d be an incredible danger with equally easy access from both sides. I could just imagine a toddler reaching from the back side and pulling off a pot. Given the typical market for these 2/2’s, that should be a real concern.
And now Obama is talking about more housing help for underwater “owners”… pushing the banks for principal reductions and telling them it will be good for them.
http://finance.yahoo.com/news/Obama-talks-about-new-housing-cnnm-3602667627.html?x=0
future for fannie/freddie?
http://online.wsj.com/article/SB10001424052748704681904576317524068112278.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsForth
“And now Obama is talking about more housing help for underwater “owners”… pushing the banks for principal reductions and telling them it will be good for them.”
That’s a negotiating position; won’t get the banks to accept longer-term mods w/o a plausible threat–it’s exactly what Boehner is doing with the debt limit.
I like a concept of a mod with a A/B sort of split, with the B a non-recourse, PIK balloon, that would be re-payable only at sale for over a certain price, possibly with the lender having the option to purchase the house at the offer price instead. Thus, the current cost to the borrower is reduced in as if there were a principal reduction, but the bank can recapture that “equity” if there is a rebound in prices (most likely via inflation). And then allow the B-piece to remain through refi’s of the A-piece, which preserves freedom to contract, etc, etc, without denying the original lender their contingent rights in the collateral.
With all that’s been built (or converted to condos) in the past decade, as a general rule, I’d say that going forward, when it comes to LP, LV and RW/AV, nobody should buy anything other than a SFH or a very large/super nice TH, once you’re more than a few blocks from the park/lakefront.
…unless it’s an incredible steal and for investment/rental purposes.
Exactly. And this will continue for years and years to come.
“#Dan on May 12th, 2011 at 10:37 am
This property validates HD’s assumption that the unemployed, debt-laden Gen Y won’t be able to pay the Sellers’ prices, esp. with no more funny-money mortgages. This place is a commodity in a nice location, the only thing this Seller can do is deal on price, and perhaps swap out the black appliances and paint the trim white. I wonder if spending that extra $4000 would be worth it?”
“With all that’s been built (or converted to condos) in the past decade, as a general rule, I’d say that going forward, when it comes to LP, LV and RW/AV, nobody should buy anything other than a SFH or a very large/super nice TH, once you’re more than a few blocks from the park/lakefront.
…unless it’s an incredible steal and for investment/rental purposes.”
Or, at a minimum, convenient to the el. Despite my view that less than a mile really ain’t that far, anything over half a mile isn’t exactly convenient either, and a quick/easy commute has a lot of value to most.
I do wonder if under 300K is the new price point for a 3/2 in a less than ideal location within Lakeview. I noticed this unit (1943 W George @ $299K) has been lowering its price over the past couple of months.
http://www.redfin.com/IL/Chicago/1943-W-George-St-60657/unit-1F/home/12753671
I wonder if $299K is the price that 1525 W George needs to eventually reach.
“future for fannie/freddie?”
That article made me LFMAO and I only read the first paragraph. Fannie & Freddie effed up massively and are each costing taxpayers hundreds of billions of dollars so the government’s answer is to replace the two of them with five companies that do the exact same thing!
LMFAO!
“I wonder if $299K is the price that 1525 W George needs to eventually reach.”
Probably.
I dunno which of those two locations I like less, tho. Probably NorthCostCo, but I’m just not sure.
310k
My how times change…
I began looking at 2BD condos in LV/LP during the dark days of Dec 2008. Everything was unknown at that time, the mess had really just started. But my realtor insisted that many places were “good deals” and that he hadn’t seen deals likes these in years. Looking back, they were nothing special. And I certainly never saw a 2/2 in a 3-flat, which is what I really wanted, not even one like this that lacks any character and isn’t in the greatest of locations.
I still follow properties, but am no longer interested in buying. My timetable has become too short and things are still very uncertain. However, from what I’ve seen, if a decently nice 2BD place gets down around $300K, they seem to sell. Perhaps its mental trickery, but all of the places I follow that sell, eventually sell in the very low $300s. I’m beginning to wonder if we’re going to break through that barrier and go lower though.
I hate diagonal wood floors… SO MUCH
As for roma’s link on Fannie/Freddie, what a crock. They’re going to replace Fannie/Freddie with five more Fannie/Freddies? But this time, it will be different!!!
They want an explicit government guarantee and strict capital requirements. I don’t see how this changes much. The government (taxpayer) is already on the hook for Fannie/Freddie now, courtesy of the $260 billion and counting we’ve put in. Why not just put higher capital requirements on Fannie/Freddie and call it a done deal.
Oh yeah, because that will cut off lots of funding and lots of people that vote won’t be able to get mortgages. The fact is this is a compromise, which is the only plan that has any chance of getting passed. Isn’t there some saying about a compromise being the worst of both sides.
One of the sponsors of the bill is quoted in the article as saying the only other approach out there is to replace Fannie/Freddie with nothing. I think that sounds like a much better approach than what he’s proposing.
“310k”
$299.
Commodity 2/2s don’t get to sell for over $300 anymore.
As far as access to the L, a mile is too far. A half a mile is about as far as I’d want to walk. I speak from experience, having lived about 1/4 mile from my Metra stop for the 6 years I took the Metra downtown to work. To walk twice as far as that would have been about all I’d want to do, especially in winter at night when sidewalks weren’t all shoveled.
One you’re on the L at the typical stop in, say, LV, how long of a ride is it to the Loop?
Dan, furthermore, there’s one park ridge home I like, a lot actually, needs some updating, no mortgage, and the boomers are asking the same inflated price for 6 months now with not a single price reduction…uh huh. good luck selling with that strategy.
This is the problem with teh housing market. the Gen X/Y parents can’t afford the asking prices for the suburban mcmansions (or suburban 3 bedroom 60’s split level ranches) and so the homes just sit. the smart ones sell their home today and even though their just ‘giving it away’ it’s better to do that than wait for the market to return to 2006 prices (which it won’t ).
a boomer in my office is trying to sell a house in teh suburbs and it obviously isn’t selling, there is some interest, but it’s all lowball offers at 20% off list – and you know, boomers can’t just give away their homes. so the house sits vacant. and there is equity too.
well, buyers are scare and its goign to be a while before teh return.
“Once” you’re on…
that is bc you are a pampered ham-dodger dan#2!
haha, jk. but I used to walk 3/4 of a mile to the el and it wasnt bad. 15min max.
“One you’re on the L at the typical stop in, say, LV, how long of a ride is it to the Loop?”
Totally depends on which Loop stop you’re heading to. But, Belmont to Jackson is *supposed to be* 17 minutes on the Red and 25 on Brown/Purple.
I find that Brown [Purple] is time competitive (that is, still slightly slower–like 20 v 15) to Wash/Wells [Clark/Lake] as Red is to Lake, so they can make sense based on your Loop-side walk.
One block away, you have 2 SFH’s under contract in the 700-800k range plus a 3 flat that traded for 750k+. On the same block and I believe almost next door, a newer mcmansion appears to have rented for north of 7k / mo.
I think the answer is 1) this is an awkward place for a condo and 2) 350k is too much to pay for one floor when you have have 3 for about 250k per floor.
This area is family central with Burley school. Not sure why a Gen-Y condo goof would buy here honestly.
“haha, jk. but I used to walk 3/4 of a mile to the el and it wasnt bad. 15min max.”
Well, you, me and miumiu (? someone else who walked ~1.5 miles in ten minutes?) apparently should be on the US Speedwalking team, if you listen to most here.
Still think there is a sweetspot of over .25 (so quiet enough) but under .5 that most el-riders would prefer.
http://www.urbanrealestate.com/property/1537-W-George-CHICAGO-IL-60657-FN66NU2YYFWXG.html
Not sure, but I would imagine this rented north of 7k given the short market time. Proof there are people just begging to throw money away without having to risk capital depreciation. Hilarious.
Sorry meant not sure bc sometimes a month of free rent is thrown in. But face value 7,300 is a huge rental price for… west lakeview?
it was miumiu. congress to water tower place in 15min iirc. pregnant too
“congress to water tower place in 15min iirc.”
Had thought it was Roosevelt to Freedom Plaza, but you could be right.
lol…CH…I was few month in when I made the comment and haven’t been able to measure since then as now I am too big to walk fast. I promise to do some testing this summer and report back : )
Let me ask the renters this — how much money does one save up to buy a home with a $7,300 rental bill?
Assuming this home would trade for $1.4M (as a comp about a block away did), with 25% down before ANY tax deduction you are home for about 7k. With the tax deduction assuming income to afford it puts you at 35% marginal, you are looking at 5.5k assuming AMT takes away any deduct for RE taxes.
That is crazy. Proof of a negative bubble.
aww man, my bad. I will have to scratch that one from my list of acceptable funny off color stereotypes.
http://www.bloomberg.com/news/2011-05-11/average-u-s-401-k-balances-reach-highest-level-fidelity-says.html
I’m just now realizing that I’ve never taken the L into the Loop.
JMM-
I know three people renting in the $6k and up range right now. But it is because they are in Chicago short term and are on the corporate dime. FWIW, they are all in West Lakeview. Good schools being a factor in 2 of the rentals.
CH:
My problem is taking something totally unrelated and making it about someone’s religion.
Dan
Trudi —
Not saying you aren’t right, but that is strange to me because generally the types of corporations that can afford that type of plan and the type of people impacted by the relo converge on the North Shore, like Winnetka or west like Hinsdale (because of high school). And usually, they just end up buying because the corporate relo allows gives them partial cost coverage, plus pays all closing costs on both ends. On an after tax basis, they usually make out well.
By the way, I believe Blaine is the only west lakeview school that would actually attract someone to live there, but honestly, it isn’t that good. The playground is a parking lot on Ashland. Looks like a dump the few times I have driven down Ashland there.
The other thing that is odd is generally F500 relo execs are coming from suburbs of large towns (unless NYC), or smaller towns such Cincinnati. North side of Chicago urban existance with the silly neighborhood tavern for drunk old men does not seem likely to appeal. But that is just hazarding a guess really.
“Blaine[‘s] playground is a parking lot on Ashland.”
Um, no, it isn’t.
ps: Confusing it with Prescott, maybe? At Wrightwood and Ashland?
No, that one is a bigger dump. Soon to be a closed dump if CPS has its way.
Ok, so the parking lot technically on Ashland is not part of the school (in some senses that is worse) but the playground is literally an asphalt block abutting a parking lot on Ashland. Same difference. It doesn’t inspire a lot of confidence. Blaine certainly makes it look like a dump.
JMM – SW lakeview is really nice, you should go check it out sometime
Blaine is on Southport…across from a DQ. It’s a yuppie parents wet dream for a city PS.
We owned some 2 flats in the general area at one point, so I know it. Lots of yuppie families and older folks that are legacy back to the roots as a working class german enclave. Typical lakeview. Somewhat dumpy. Just saying the school there isn’t that great. Certainly not the kind of place that would attract someone out of state, at least not intuitively.
JMM: You couldn’t be more wrong. My kid goes to preschool there. 1/2 of the families we have met are from out of state.
“Blaine is on Southport…across from a DQ. It’s a yuppie parents wet dream for a city PS.”
I could see Blaine attracting a relo family, or Lincoln, but not Burley. Otherwise my sense is suburbs north or west. Especially given that many F500 companies in the area aren’t downtown. Professional services relo maybe, but that usually limits to consultants or finance types as many lawyers typically don’t change jurisdictions for short periods of time (even if reciprocity).
JMM must be referring to Burley.
“JMM: You couldn’t be more wrong. My kid goes to preschool there. 1/2 of the families we have met are from out of state.”
First of all, paid preschool right? So could be from anywhere in the city right? How many actually live in the attendance area?
Second of all, 1/2 of families at any CPS school being from out of state (whatever that means — they were born in Wisconsin 35 years ago?) seems like a gross exaggeration. There aren’t enough jobs in Chicago created to even foster that condition, unless they are all from Groupon lol.
JMM: we were crossed up….I was referring to Blaine…
but preschool was free this year at Blaine and filled by attendance area kids…so not from all over.
Yes I mean Burley. Blaine I could see, sort of. Wrigleyville has a draw for people from Iowa. So, out of state.
“JMM: we were crossed up….I was referring to Blaine…”
So was JMM, until he wasn’t.
“JMM must be referring to Burley.”
Yes, he must, and he appears to think that he actually *typed* Burley in the first instance, but I quoted him accurately.
Did you just take a cheap shot at Iowa? Hilarious.
They all run together BELL BURLEY BLAINE. Just another excuse to overpay for a shitty frame house on the north side of Chicago.
“Did you just take a cheap shot at Iowa? Hilarious.”
Far better than all the cheap shots in the other thread.
“They all run together BELL BURLEY BLAINE. Just another excuse to overpay for a shitty frame house on the north side of Chicago.”
You are right…location and schools have nothing to do with home values. 😉
Sorry, the school on Ashland that looks like a dump that is not Prescott and is in SW lakeview. Starts with a B.
I ran into a lady at a fundraiser who was talking up Burley and was very proud of buying a home there, so on and so forth. I asked, well why do you think the school is so good? A. Test Scores. Ok… but isn’t that more representative of the parents genes and parenting than the school? A2. They have ipads at school.
Oh man. I didn’t ask the same question in a different form, but you can guess what I was thinking.
Suggested donations $1000 per family last year.
“May 12th, 2011 at 3:17 pm”
The difference in order of comments shown under the post versus flagged on recent comments list is odd.
Iowa has a Cubs farm team, plus the cubs fan base could be mapped by a rhumb line starting at 1060 W. Addison through Bartlett all the way to Des Moines. So that comment is i) legit and ii) true.
“I asked, well why do you think the school is so good? A. Test Scores. Ok… but isn’t that more representative of the parents genes and parenting than the school.”
Isn’t that usually the case, and as such, wouldn’t you try to put your children in a situation where those around them care?
Or JMM, I guess you’d prefer people to buy a cheap crappy frame house in a bad neighborhood, with schools that have parents that don’t bother to get involved. Because, hey, it’s the same house?
“Isn’t that usually the case, and as such, wouldn’t you try to put your children in a situation where those around them care?”
Is it the school or the raw material put into the school? I’d argue its usually the latter. Therefore the important things to me are i) budgets, ii) teacher quality, iii) facilities (huge and sorely lacking in the city) and iv) academic rigor.
“Because, hey, it’s the same house?”
Only 75% cheaper.
“Only 75% cheaper.”
Until CPS goes bust and all the “improving schools” or otherwise yuppie-approved neighborhood schools get their budgets slashed. Good luck with that one then.
“The difference in order of comments shown under the post versus flagged on recent comments list is odd.”
I feel like I remember it happening before.
“Only 75% cheaper.”
Yes…for all the reasons you are stating as well.
What school district won’t have that happen? Maybe only the in the very rich suburbs. Maybe that is why the woman you referred to was helping to subsidize her local elem. p.s.
Again, a community of parents who care.
JMM’s position is Chicago housing stock sucks and the schools suck too and based upon those deficiencies, housing is way too expensive compared to suburban housing. And in some respects, he’s correct.
Regarding the high dollar SFH rentals in Lakeview, while it stands to reason that most short term high end re-lo’s would live on the north shore, in Hinsdale, Oak Brook (that one’s for you, Clio), etc. (for all the reasons noted above), I could see plenty of folks being persuaded by friends or co-workers, etc. to opt for the mcmansion in Bell/Blaine/Burley (e.g., John, who’s a managing director based in the Chicago office, purchased a 5 bedroom place in that area for $1.5, and when Jim comes in from the NY office for a 1-2 year tour of duty here, and starts looking at places, John has Jim and his family over to grill out on the gator deck and to hear the rave reviews of B Cubed (Bell/Blaine/Burley), and that’s that).
And yes, I believe that $1,000/year/kid is the suggested “donation” to B Cubed and Lincoln elem.
“JMM’s position is Chicago housing stock sucks and the schools suck too and based upon those deficiencies, housing is way too expensive compared to suburban housing.”
“expensive” needs to be broken into three parts:
1. House purchase price too high for quality/size of home
2. Property taxes too high for quality of schools (and other services)
3. Risks of negative situation for future DZ/anon/NYC to deal with w/r/t house resale, schools, other services too high given relatively high costs of 1 and 2.
“And yes, I believe that $1,000/year/kid is the suggested “donation” to B Cubed”
Haven’t heard, nor heard of (apart from here), that suggestion.
“And yes, I believe that $1,000/year/kid is the suggested “donation” to B Cubed”
Nobody hit me up for that.
“Nobody hit me up for that.”
Hey, JMM, what’s the “suggested” donation at Sears? Looking at the fundraising stuff, seems to be $2000, but total, not per kid.
I know what we give but not what suggested is. The numbers you saw are probably skewed low because a lot of stuff is in kind. Many business owners donate items for fundraising purposes. Of course, flow control actuators don’t exactly excite people so you do what you can.
The answer is not as much as you’d think given the community and a lot lower than a private school for sure. The district is pretty well funded but if anything is needed they just do a drive.
“The numbers you saw are probably skewed low because a lot of stuff is in kind.”
I was just basing it on the amount to get a full page in the program, which is (in my experience) a signpost for “expectations”, even where there isn’t really an expectation.
Lol. Those sorts of subtleties are lost on me. Spouse picks those things up.
“One block away, you have 2 SFH’s under contract in the 700-800k range plus a 3 flat that traded for 750k+. On the same block and I believe almost next door, a newer mcmansion appears to have rented for north of 7k / mo.”
There are plenty of condos nearby.
What this really represents is that the condo market is dying (or dead?) but people are still willing to pay high prices for SFH. Those who are in the stock market and have seen their stock portfolios rise again- now feel much, much better about purchasing the $800k house.
But those looking to buy the $350k condo likely don’t have much (if anything) in the stock market and don’t have money saved for a downpayment anyway.
Also- those looking in the $350k range who DO have the downpayment are now deciding to move to the suburbs and get a single family home with a nice yard- knowing they have to live in the property for at least 10 years and finally realizing that, no, they’re not going to raise their child(children?) in a 2/2 condo in Lakeview.
“Perhaps its mental trickery, but all of the places I follow that sell, eventually sell in the very low $300s. I’m beginning to wonder if we’re going to break through that barrier and go lower though.”
Sure. When interest rates rise.
We’re a monthly payment nation. Make the monthly payment higher and people can no longer afford the $300k condo.
That is what is worrying me. I don’t dare to buy now as the prices seem to be dropping but we are not cash buyers so it is interesting to see what happens if the interest rates go up. It will be terrible for the sellers of course but pretty bad for the non cash buyers too.
“It will be terrible for the sellers of course but pretty bad for the non cash buyers too.’
Buyers with a large cash downpayment will do well (even if they don’t have ALL cash.) Everyone else will be screwed when rates rise.
Even if one is paying 33% say 200K from 600K in cash; still having to pay mortgage at a rate of 6% compared to say 4%, will cost 2400$ a month for 30 years as opposed to 1900$, or total interest of 460K vs 290K. That is a huge difference.
“Even if one is paying 33% say 200K from 600K in cash; still having to pay mortgage at a rate of 6% compared to say 4%, will cost 2400$ a month for 30 years as opposed to 1900$, or total interest of 460K vs 290K. That is a huge difference.’
But the price will come down to compensate for that. The person won’t be paying $2400 a month. Or, as happened in the early 1980s, they will buy a cheaper property that still gets them the $1900 a month (i.e. they will trade down.)
mm… It’s about 10-12k of risk per year per 100k. Substantial.
Prices will still fall even if rates don’t rise. Its happening right now.
yep… I like the tightening lending standards very much…
I am curious why a majority of this board focuses on the quality of the elementary schools, but rarely the middle or high schools. Do the “B” schools Blaine, Bell, etc. feed into the same high quality of middle and high schools?
“Do the “B” schools Blaine, Bell, etc. feed into the same high quality of middle and high schools?”
In a word, no. (And elementary in CPS is through 8th grade generally.) Others know much more about this, but I think the only attendance area HS program that is arguably ok is Lincoln Park (which is not attendance area for any of the “good” elems except Lincoln).
What happens when all these kids get out of elem (there’s got to be a big increase in kids from upper middle class+ families, right?), I do not know.
“Those who are in the stock market and have seen their stock portfolios rise again- now feel much, much better about purchasing the $800k house.”
Not quite that simple, but yes bonuses, employment prospects and overall wealth for those who can afford a home of that expense is vastly improved vs. 1 and 2 years ago.
The condo product in Chicago “neighborhoods” (to be contrasted with downtown mid-high rise areas) is a relatively new product. I think it started in the 1990s in certain areas of Lincoln Park and spread from there. I think what you are seeing is a shift in preferences, though not necessarily to renting and definitely not to owning a house in Schaumburg at age 28. You are also seeing people hold back which is normal in deflationary periods. In Lakeview, the easy alternative to condo living is for one to one his own 2 flat and rent the other unit(s). I know at least two older families who are helping their adult children buy 2 flats with the view that in time the rental income will equitize the parents out and they will own it outright. In both cases the prime areas are Bell and Burley. Much better alternative from a cash flow and tax perspective and you control your own destiny versus a condo. You can convert to SFH if you wish or keep as an investment property when you get older. Condos in general are fraught with troubles and I think a lot of that has caught up with people.
“What happens when all these kids get out of elem (there’s got to be a big increase in kids from upper middle class+ families, right?), I do not know.”
They are K-8 so the problem hits at HS. The options I have heard of are as follows:
Parochial — St. Ignatius or even Loyola
CPS schools — northside, payton (good luck)
Latin or Parker
Jewish schools, of which there are many good ones
Suburbs
Rates will be falling again as prices continue to decline. Another dough4dumps will not appeal to voters. So, QE is all that the govt’s got left to help the banksters, therefore, they will try hard and likely succeed. The negative housing talk in the msm appears intent on facilitating another round.
Besides, higher rates would mean even more shadow inventory not being correctly priced into the then current market than we are seeing today.
“But the price will come down to compensate for that. The person won’t be paying $2400 a month. Or, as happened in the early 1980s, they will buy a cheaper property that still gets them the $1900 a month (i.e. they will trade down.)”
What matters is real interest rates. If inflation, including wages, goes from 2% to 4% and mortgage rates go from 5% to 7%, you are paying the same real rates.
In 1982, your checking account yielded 12% and your mortgage was 15%. People got 10-12% raises per year. If you do some research you will understand it did not cause people to trade down, though it did slow business investment, including new RE builds.
Sure hope you are right G.
JMM, do you think wait and watch is a good strategy now?
My opinion is that waiting cannot hurt you. But I wouldn’t postpone a life choice due to concerns over real estate decline. If I had a small child and lived in a condo, I’d get rid of the condo and buy a house regardless of the RE market. Market timing is a fallacy. And price depreciation and appreciation are illusions too. Prices go up, sure you have more equity, but when you trade up or sideways, the next place costs more. Prices go down, sure you have less or zero equity, but when you trade up or sideways or down the next place costs less. You have to live somewhere — the notion of timing in and out of RE as an principal residence owner-occupier is nonsense.
I go back to the example of the young couple in the 400k condo in Lincoln Park. Both have new cars they paid at least 35k for. That 70k will be worth 35k in 3 years. Yet they are worried about selling their place for 380k to move on with life?
Housing is a cost not an investment for 95% of people. So long as its manageable, what is the concern?
By the way, the forced savings of a RE mortgage can be very powerful. We owned our house outright in 7 years using salary cash flow (not existing wealth). We did not by consistently paying 50% of the mortgage payment on the side and putting in a few bonuses or other cash events rather than spending on ski trips, etc.
Now, living in a quiet suburb where many of our neighbors spend the end of their lives in their houses they’ve owned for 50 years is probably rare for most. But it does illustrate the time horizon in which RE is most effective.
“Market timing is a fallacy. And price depreciation and appreciation are illusions too.”
I don’t disagree with some of your general points, but if you were a renter in e.g. 2006 and thinking about buying, you wouldn’t have done better by waiting to buy now versus then?
The forced savings of a mortgage doesn’t really kick in until 10+ years into the amoritization schedule, which should be another reason why if you buy real estate, do it for the long term only.
“There are plenty of condos nearby.”
By the way, not really. Condos don’t really belong on lake view side streets anyway. Google street view shows lots of 2/3 flat rentals and large SFHs, some with extra lots for their spoiled kids. This is not a neighborhood for condos.
“Housing is a cost not an investment for 95% of people. So long as its manageable, what is the concern?”
In a stabilzed market, I agree. In a market where too many still holding on bought as an investment and only funny money made it manageable to begin with, not so much.
This certainly has some merit (and is repeated ad nauseum by realtors), though of course prices do not rise and fall uniformly across housing types, as we are seeing now. More importantly, though, it ignores renters, and price-to-rent is also highly variable.
“Prices go up, sure you have more equity, but when you trade up or sideways, the next place costs more. Prices go down, sure you have less or zero equity, but when you trade up or sideways or down the next place costs less. You have to live somewhere — the notion of timing in and out of RE as an principal residence owner-occupier is nonsense.”
“doesn’t really kick in until 10+ years”
On a conventional amort, I’d say 15+ years. But run an amort schedule putting 50% of PMT in alongside each month. It get’s you there a lot faster. We were paying 50% interest, 50% principal in only a few years as I recall.
But yes, long term is right. Part of the structural change is people are more transient now. That is both good and bad. The bad is being displayed in RE right now.
Thanks JMM. We have a SFH where we live during a week and it is paid off (it is in a small town so was pretty cheap to start with), have a 1BR in town in Chicago which suffices for us even with a baby arriving (owe 110K mortgage on it). But want to buy another 2BR in Chicago so we are not a real rush to do so. We have substantial down payment but no way we can afford what we want without getting a mortgage. We want to pay the 1BR off aggressively and rent it out. But if we get a good rate for 2BR, I want to slow down and use my income for other investments. My husband is worried about inflation (he is holding close to 200K cash) and interests rates rising. That is our main concern. I feel though buying right now is a bit too risky.
“In a stabilzed market, I agree.”
Define “stabilized” market. Prices always fluctuate up and down. The huge price swings have come and gone. While we may still go down, the market is back to its normal (stabilized) volatility.
“doesn’t really kick in until 10+ years”
“On a conventional amort, I’d say 15+ years. But run an amort schedule putting 50% of PMT in alongside each month.”
I realize I may be revealing my ignorance, but isn’t what is going toward interest v principal just an accounting (and maybe tax) issue? If I pay a extra in teh early years, even if that nominally goes toward interest in an accounting sense, if I actually sold the house and paid the mortgage off, I’d owe a lot less than the original principal amount.
“I don’t disagree with some of your general points, but if you were a renter in e.g. 2006 and thinking about buying, you wouldn’t have done better by waiting to buy now versus then?”
It’s like asking yourself the same question about the equities market in March 2009. The lower the market, the less risk on the downside, by definition. The only difference with RE is you cannot dollar cost average. But again, the same folks that worry about housing prices are buying cars that depreciate 50% in 3 years. Lol.
As an aside, most places I see are priced below rental parity at present. Consider the $7,300 SFH I posted. You don’t think that would sell below rental parity?
It’s a difference between making your regular payment and making extra payments. If you just make your required payment, the “forced” savings doesn’t kick in till 10+ years. If you are making your required payment PLUS putting in extra every month/year, that is going directly to paying down principle. And that “forced savings” starts with your first extra payment.
“Define “stabilized” market.”
It ain’t decades low sales volume and the highest shadow inventory since pre-WWII, that’s for sure.
“It’s like asking yourself the same question about the equities market in March 2009. The lower the market, the less risk on the downside, by definition.”
You were making what sounded like a general claim about fallacy of market timing. Sure it doesn’t make much sense to wait if you think the market is more or less fairly priced.
“Consider the $7,300 SFH I posted. You don’t think that would sell below rental parity?”
I dunno. I know I’m paying $2K/month rent. I also think the place I buy (which will be much nicer) will cost something close to $1.5K/month in taxes/upkeep even if I paid cash.
“While we may still go down, the market is back to its normal (stabilized) volatility.”
Record low monthly sales and 50% of all sales distress sales is “normal (stabilized) volatility”?
You are right DZ. It is a simple math which interestingly most folks ignore. Just multiplying the monthly payment with the duration of loan tells you how much you are paying in interests; by paying the loan off say in 8 years vs 30 years, one achieves a lot of saving. But, people have this idea that they get tax credit, can make much more in stocks instead of paying off their mortgage and all which I am not convinced is true for most folks.
“Record low monthly sales and 50% of all sales distress sales is “normal (stabilized) volatility”?”
Yes, in terms of pricing. Housing market is going to go up or down 5-10% every year. That is where we are now.
“I think it’s a no-brainer to put that $200K to work in gold, make $100K and also see SFH prices drop by $100K”
Ha.
“which will be much nicer”
DZ —
If you cannot calculate rental parity yourself, NYTimes has a decent calculator. You should investigate. Obviously if a place you buy is much nicer, you are comparing apples and oranges to a certain extent.
As a landlord, or at least overseeing a RE portfolio, I can tell you that landlords also have costs which figure into the equation. Someone always owns the property be it an owner-occupier, an institution, an investor or even a bank. We do very well on our rental portfolio so that means that the renter is paying us a nice profit margin after we figure taxes, implied debt (no mortgages but we task it with a cost of funds), and upkeep.
Gold is for people who take a very dystopic view of the world. Certain posters here fit that to a tee.
“$1.5K/month in taxes/upkeep even if I paid cash”
Sorry but $1.5k in taxes and upkeep is representative of a nice SFH, not something you could rent for anywhere close to $2k. That is 12k in taxes and 6k in maintenance capex per year. Unless you are looking at a 50 floor high rise or co-op, that makes zero sense if you are comparing to $2k rent. The two arent comparable.
“chuk: respectfully, this was the dynamic in place in 2009 and it played out exactly like that. All the fundamentals that made that arbitrage happen over the last 2 years are still in exactly the same place, imho.”
But that’s also the same thing people said about housing in 2003. Gold (and oil) prices are being driven by traders. Remove all the ETF’s, etc from the market, and you would have a very different price on gold. Hard to say when they will pull the plug. The hot money just shifts from one hot sector to the next. dot.coms to housing, housing to gold, gold to ????
I am certainly not saying it won’t happen. But it is far from a no brainer IMO.
“Sorry but $1.5k in taxes and upkeep is representative of a nice SFH, not something you could rent for anywhere close to $2k. That is 12k in taxes and 6k in maintenance capex per year. Unless you are looking at a 50 floor high rise or co-op, that makes zero sense if you are comparing to $2k rent. The two arent comparable.”
Well, they’re comparable for me (as in I’m comparing them, not that they are the same). As I said (and as you quoted) the place I’d buy is much nicer than I’m currently renting.
“Acquistion deal cap rates ranged from 5%-9% over the last decade.”
Talk to Harry Macklowe about acquisition cap rates. He busted out because of a few billion of sub-3** cap *pro forma* (that is, expected rental income after renewals/new leases which, of course, did not materialize) acquisitions. And Macklowe wasn’t actually unusual in taking that level of risk (compare, Cooper Village/Stuyvesant Town).
**Feel like it was under 240 bips, but not confident enough in the recollection and not enough time to track down.
“Well, they’re comparable for me (as in I’m comparing them, not that they are the same). As I said (and as you quoted) the place I’d buy is much nicer than I’m currently renting.”
Ok though if they aren’t equivalent so I am not sure there is much to really discuss. That isn’t rent/buy, rather it is: should I move to a larger, nicer and more expensive home. One is real estate related, the other is personal finance related.
RE is cash flow diversification, not absolute return driven. LCM on most properties so so far below current prices due to portfolio maturity the returns would not make sense in terms of how you view them. We could MTM, but the CF allocation is always positive, so divestitures don’t make sense, nor is there any use for liquidated positions.
“Record low monthly sales and 50% of all sales distress sales is “normal (stabilized) volatility”?”
“Yes, in terms of pricing. Housing market is going to go up or down 5-10% every year. That is where we are now.”
But Chuk, going up or down 5% to 10% every year is not “normal” in Chicago. Not even close.
So why do you keep insisting that this market is “stable” or normal?
Chicago real estate has appreciated about 1% to 3% a year since the Great Depression (when prices did sink.) In the mid-1980s there were 5 or 6 years when the prices didn’t rise (but didn’t go down. They were flat.) And there was a condo price decline in the 1980s due to overbuilding and condo-mania in the 1970s. But overall housing prices didn’t decline in those years (but they did as measured against inflation.)
A 5% to 10% price swing for the Chicago market- in ANY year- is HUGE. This is what we saw during the boom years and are now seeing (on the down side) in the bust years.
Neither of those conditions is “normal” or “stable.”
We haven’t seen a normal market in Chicago in at least 10 years.
And we’re not going to see it in 2011 either (because prices continue to slide- which isn’t “normal.”)
You can see the pattern of what is “normal” in pricing in the Crib Chatter posts that has the property’s pricing history back into the 1990s. It’s pretty routine to see a property bought in 1991 for $110,000 sell in 1995 for $122,000. That was “normal” for Chicago.
I completely agree, but how do you respond to/factor in the argument that the massive price spikes were balanced out by interest rates dropping?
As a first-time home buyer, me & my wife were approved for a certain amount in 2001, then in the 6 months we were looking interest rates were plummeting and on paper allowing us to buy more expensive properties while the P/I stayed the same or even dropped.
“Chicago real estate has appreciated about 1% to 3% a year since the Great Depression (when prices did sink.) In the mid-1980s there were 5 or 6 years when the prices didn’t rise (but didn’t go down. They were flat.) And there was a condo price decline in the 1980s due to overbuilding and condo-mania in the 1970s. But overall housing prices didn’t decline in those years (but they did as measured against inflation.)
A 5% to 10% price swing for the Chicago market- in ANY year- is HUGE. This is what we saw during the boom years and are now seeing (on the down side) in the bust years.
Neither of those conditions is “normal” or “stable.”
Even if prices have stabilized, and even if prices are affordable, and even if it is cheaper to own than rent, there quite simply are not enough homes listed in the MLS to satisfy the above criteria so you get these bizarre situations where random propertieis are subject to bidding wars after a few days on the market while the house accrooss the street hhas been listed on the market for over a year.
“I completely agree, but how do you respond to/factor in the argument that the massive price spikes were balanced out by interest rates dropping?”
The boom was created by a combination of easy and cheap credit. We hadn’t had those conditions in the last 70 years. There is no doubt that when rates dropped from 8% in 2001 to 5% by 2006 that it boosted prices. And then everyone who was breathing (and even some dead people probably) could get loans with no money down.
We still have the lowest mortgage rates on record yet it is doing NOTHING to stabilize this market. The Fed has been trying to keep the rates down, however, because they know that if it rises to even 6% the already dead housing market really, really dies. There are just too many implications for the economy if that were to happen (it’s bad enough as it is.)
Part of the reason the low rates are doing nothing is that it is now harder to get a loan.
While on vacation, I talked to a couple from Florida that have been retired 20 years. They both have university pensions. They said it took them 6 months to buy (with 20% down) because of the insane amount of paperwork the bank was requiring (they are both independent “consultants” as well which raises a red flag with mortgage companies these days.) They couldn’t believe how hard it was to get a loan- and they told me they had plenty of assets and cash otherwise.
The easy credit isn’t coming back anytime soon. In fact, it is going to get tighter come September when the Fannie/Freddie/FHA upper loan limits expires (where it went up to as high as $719,000 in some cities.)
In Chicago, the Fannie/Freddie level will stay at $419,000 but FHA will drop to around $365k from $420k. So if you’re looking to buy with an FHA loan above $365k – you’d better do it before September.
“There is no doubt that when rates dropped from 8% in 2001 to 5% by 2006 that it boosted prices.”
Rates were neither 8% in 2001 nor 5% in 2005.
http://www.freddiemac.com/pmms/pmms30.htm
“They couldn’t believe how hard it was to get a loan- and they told me they had plenty of assets and cash otherwise.”
Private pensions do not increase with inflation, hence the concern lending against that income stream. Not so much debt service which can be fixed but other costs crowidng out ability to pay. Plus if they have lots of cash and assets, why the need to borrow? Someone retired 20 years should own their house outright or rent. A mortgage at that stage in life seems highly questionable.
“So if you’re looking to buy with an FHA loan above $365k – you’d better do it before September.”
Sorry but how does 365k loan limits impact Chicago when the median home price is 200k? It seems misleading to point to Englewood “ghetto” Chicago price data on one hand yet fear monger with data that is inapplicable on the other hand.
“There is no doubt that when rates dropped from 8% in 2001 to 5% by 2006 that it boosted prices.”
Rates were neither 8% in 2001 nor 5% in 2005.”
JMM: I was talking about the 30 year fixed. I bought in late 2001 and rates had just fallen to 7.0% which was super low at that time. I just looked at the chart. Pardon me for getting it “wrong”. Rates had dropped from over 8.5% in April 2000 to around 7% by the end of 2001.
I said in 2006 they were at 5%. I was wrong on that too. It was between 5% and 5.5% in 2003, 2004 and 2005 (for part of those years.) Looks like it was on the rise in 2006.
You’re buying with an FHA loan in any number of new buildings (including the Silver in River North.) Many of those units are over $365k. So if you think you’re buying with the 3.5% down for the $400k come September- you are not. Better buy now or come up with that, gasp, 10% downpayment!
Oh- and never once have I pointed to Englewood “ghetto” price data. If that is all that is selling (and hence, pulling the median home price down) – then that tells you all you need to know about the Chicago real estate market.
Oh- and by the way- have you ever looked to see how many properties actually sell in the “ghetto” neighborhoods you all say are where all the foreclosures are selling? Many of the $5,000 properties aren’t even selling in those neighborhoods. Gee- wonder why?
The Chicago price data is being set by OTHER neighborhoods. Beverly, Chatham, Logan Square, Avondale, Portage Park, South Shore, Kenwood, Bronzeville, Hyde Park, Albany Park, Rogers Park.
I could go on.
Those are neighborhoods where investors are willing to put their money. And even then- it’s still taking awhile for the super cheap properties to sell.
The foreclosures/short sales ARE the market.
“Plus if they have lots of cash and assets, why the need to borrow? Someone retired 20 years should own their house outright or rent. A mortgage at that stage in life seems highly questionable.”
They were doubling down. They had another house in another part of Florida that they were going to sell. Bought it in 2003 for $360,000. Were hoping to get $280k (but seemed aware that they may get much less.) They owned it outright in cash. Hence the loan on the second property (while they wait to sell the first.)
They feared for their kids (in their upper 20s) that they would never be able to buy with the tight mortgage restrictions. It was interesting to get their perspective. They had owned a bunch of homes all over the US during their married lives.
“The Chicago price data is being set by OTHER neighborhoods. Beverly, Chatham, Logan Square, Avondale, Portage Park, South Shore, Kenwood, Bronzeville, Hyde Park, Albany Park, Rogers Park.”
Pick your neighborhood. Many, but not all, of those listed are not appealing to your audience nor are they the subject of postings which seem to spend a disproportionate time on South Lake View for some reason. You know my point, and it is that all the macro data is heavily influenced, I might even say driven, by neighborhoods many of you would rarely set foot in, let alone buy in.
“Many of the $5,000 properties aren’t even selling in those neighborhoods. Gee- wonder why?”
Contingent liabilities in the form of gang shootings, property crime and, if an investment property, lack of marketability? 200,000 presumably lower income residents exited these neighborhoods in 10 years.
“They feared for their kids (in their upper 20s) that they would never be able to buy with the tight mortgage restrictions.”
Common fear among boomers, if that is their age. They rode the greatest generational wealth creation gravy train in our nations history. I am not convinced we are at all better off given their legacy. Talk to members of the greatest or silent generation and you’d get a different perspective about their children and their prospects.
“They were doubling down.”
Explains why they can’t get a loan. Double property taxes, upkeep, etc. Uncertain balance sheet due to lack of price discovery. Fixed income, unemployed/retired. Good grief. New mortgage are not for retired people.
“Pardon me for getting it “wrong”.”
Just being factual. Being off by 100 bps is meaningful. It equates to 30% value delta at that duration. That is not insignificant. Perhaps your rate was higher due to credit, assets, etc. but that was not the conforming market then.
“The foreclosures/short sales ARE the market.”
Then market supply has a finite life? At some point, foreclosures stop in an improving economy. That is actually a bullish statement because it leaves us with demand yet no supply at some point in the future. Sort of like used cars.
“So if you think you’re buying with the 3.5% down for the $400k come September- you are not.”
I don’t think this is a done deal — there was just the usual political manuevering IIRC. If so, please provide the backup as I am curious.
“You know my point, and it is that all the macro data is heavily influenced, I might even say driven, by neighborhoods many of you would rarely set foot in, let alone buy in.”
Of course it is. That is why the city median continues to decline. But those are SALES.
It tells me that there are more sales in the neighborhoods that “many of you” would never set foot in- than in the neighborhoods where everyone is desperate to live.
Why?
Because the other neighborhoods are overpriced. Sales will go up in those areas once prices come down further.
“So if you think you’re buying with the 3.5% down for the $400k come September- you are not.”
I don’t think this is a done deal — there was just the usual political manuevering IIRC. If so, please provide the backup as I am curious.”
This was part of the stimulus and was extended once already. It expires in September unless Congress or, apparently, the WH, extends it. Do you think either one is going to do so when the middle class is getting hammered? There is no political will to extend this benefit right now especially with Fannie and Freddie both bleeding money (and FHA to start doing so shortly.)
As someone in the article Bob linked to said “no one is entitled to a $720k house”. Yes, I know that is “middle class” housing on the coasts. But the rest of the country doesn’t see it that way.
“It tells me that there are more sales in the neighborhoods that “many of you” would never set foot in- than in the neighborhoods where everyone is desperate to live.”
I am not sure this is true on a per capita basis or, alternatively, per available housing unit basis. Do you have the data to back up the claim? It is an honest question.
“Why? Because the other neighborhoods are overpriced. Sales will go up in those areas once prices come down further.”
Even if your first seemingly unsubstantiated guess is true, it could be that people in GZ neighborhoods can afford their homes so there are fewer foreclosures. As you rightly pointed out, foreclosures are a significant piece of the market. So unless you predict further stress on comparably affluent north side Chicago residents, your conclusion seems on shaky ground, especially with the economy improving for knowledge workers and up.
And to your point that “foreclosures are the market”, what happens when foreclosures are fully absorbed in an improving and inflating economy? Or do foreclosures simply go on forever and ever?
I think a stronger argument is that Chicago as a city is on the decline therefore prices will continue to drop. That would make more sense to me.
“There is no political will to extend this benefit right now especially with Fannie and Freddie both bleeding money (and FHA to start doing so shortly.)”
So you are speculating as to a current unknown yet passing it off as fact?
Foreclosures beget additional foreclosures through sometime called strategic defaults. It’s quite the downward spiral. Really. I see it quite often.
And if the price differential between the GZ neighborhoods (and the residents with seemingly more money) and the other neighborhoods, well, there becomes something of a hedonic situation where the savings can be substantial to move outside the GZ and that in and of itself will keep a lid on GZ prices. Its no stretch of the imagination to foresee this type of situation.
Am I missing something here? Have prices in real estate EVER gone down in the long term? The simple answer is NO – so, if you are in the market for something that you will live in for the next 10-20years, you ABSOLUTELY should buy. True, anything can change in your life, but you HAVE to live your life and not be so scared of every little thing. G and HD are of one mind set and will likely NEVER get rich or get the place they really want to (on the other hand, they will likely never go bankrupt either) – but that is really no way to live. You have to have some balls and courage and go out there and buy your house/home without fear.
“so, if you are in the market for something that you will live in for the next 10-20years,”
Is it 3-5, 5-10 or, as it seems to be the case now, 10-20 years? You’re timeframe within which you scope your argument seems to be constantly shifting, like the whispering wind.
Also very few people live in a property for twenty years. At least in cities which attract a significant number of transients like Chicago.
Why not just stay for 30 years and pay off the mortgage? At least you won’t have to bring money to the table.
“Foreclosures beget additional foreclosures through sometime called strategic defaults. It’s quite the downward spiral. Really. I see it quite often.”
First of all, I don’t think strategic defaulters are caused by other foreclosures. Instead, by the general drop in the RE market in particularly frothy areas.
Second of all, I am not sure the whole story on strategic defaults has been written. It seems to me that many people who strategically defaulted had a second (less than 20% equity at inception), so good luck getting run down on the note. As you know, technically IL is a recourse state, so I’d be curious to see what is happening with firsts. It makes all the sense in the world to go after someone who appears to have wherewithal. Since the concept is often articulated as a “logical business decision”, having to defend oneself against a lawsuit for 10% or more of the PP of your home seems to be a bad bargain.
Reap sow economics will likely have the last word on that one.
Yeah, who lives in their house for 20 years? This isn’t the 1950’s. If that’s the case, many people want to “buy up”, or a couple renting a 2 bedroom apartment will want to buy a 3 bedroom place. HD, you could pay off the mortgage in less than 30 years too. I still see another 10-15% decline overall in the next 18 months.
“Why not just stay for 30 years and pay off the mortgage? At least you won’t have to bring money to the table.”
Or pay it in 15 or less with additional payments on the side. Much better than the guys who blow their liquidity paying it down in large chunks.
Eventually mortgage deductibility will get curtailed, so it makes sense to get the mortgage under a certain level (say 500k if you own a SFH).
Yeah, it’s much better to pay an extra $100-200 per month to shorten the life of the loan than to really hurt your liquidity by paying it down in large chunks, unless you have a big safety fund outside of that. Mortgage interest deductions should be reduced, as now they are subsidizing buying the largest house you can afford. This in turn hurts consumer spending, indirectly, because there’s less cash available to spend. It also lowers retirement savings. Not good overall.
“As you know, technically IL is a recourse state, so I’d be curious to see what is happening with firsts. ”
Pursuing deficiencies is strongly discouraged by judges. Strongly may be too conservative of a word.
Second mortgages vary by lender but in general you can settle in a lump sum for a fraction of the original balance. No 1099 tax ramifications either (thank you W!).
People strategically default because home prices fell, and prices fell because foreclosures inundated the market (along with supply/demand/lending issues) and caused homes to drop. I know people who strategically defaulted specifically because foreclosures on their block were selling for less far money than they owed on their notes.
Even 60646 (sag, edgebrook, wildwood), there are only 9 homes under contract listed above $500,000 with the most expensive listed for $649,000. These are traditionally wealthy places and they can’t sell. Wealthier areas (outside of ELP) are getting hit hard too.
“Pursuing deficiencies is strongly discouraged by judges. Strongly may be too conservative of a word.”
I know you’ve said that but I have heard lenders are pursuing aggressively in situations where wherewithal is deemed adequate. I also heard FICO has a predictive analytic for these types of situations and it is getting used, alledgedly.
“So if you think you’re buying with the 3.5% down for the $400k come September- you are not.”
For some context, prior to March 17, 2008 the FHA limit for a single dwelling in Chicagoland was $271,050. This was also the same month Bear Stearns melted down. Coincidence?
It was our policy makers trying to prop up the house of cards as long as possible, even after those in the finance community knew there were dark clouds looming for housing.
I would love to hear someone speak off the record about the housing bust who used to work at Bear, Lehman, WAMU, etc who knew the extent of the troubles and saw it all come tumbling down. If the government didn’t prop up the housing market during 2009 and early 2010 with their credits, and interest rate measures, the market would have already self-corrected. The pain would have been bad, but much quicker. Now we have this stupid slow fall in 2011, which will probably continue into summer of 2012 for all but the best areas of the country.
For example, say a house sold for $250,000 in 1995, then $290,000 in 2000, then $388,000 in 2003, then $490,000 in 2007, now can’t sell as a short sale for $320,000 in 2011. Kind of sad that the government had such a large part in the huge increase from 2000 to 2007.
I’ve yet to see one of the mills try to collect on a residential first mortgage deficiency. I’ve seen smaller banks try to collect on deficiencies on firsts for investors and commercial notes but never for owner occupied first mortgages.
I’ve seen Citi and HSBC try and collect on seconds; regional banks and credit unions will file for judgments in muni/law on seconds; the investor backed securitized seconds are pretty much worthless paper and I don’t think they’re figured out how to even get that ball rolling yet.
Given the speed at which banks are working through their backlog of foreclosures, the foreclosure judgments expire after 7 years, andI doubt the banks will get their act together before they’ll have the chance to collect on them. And there’s no way these banks are going to spend hundreds of dollars in filing fees per judgment to revive them en mass.
LIke I said though, second mortgages, depending on the lender are different, and YMMV.
For example, you can see that citiimortgage has drastically reduced the number of 2nd note collection cases they’ve filed in the last two years. 2008 and 2009 were very active years with scores of deficiencies filed; but in 2010 and 2011 citimortgage filed only 5 deficiency actions file in total, probably because it’s a complete waste of time and money to do so.
https://w3.courtlink.lexisnexis.com/cookcounty/FindDock.asp?NCase=&SearchType=2&Database=2&case_no=&Year=&div=&caseno=&PLtype=1&sname=citimortgage&CDate=
“Also very few people live in a property for twenty years. At least in cities which attract a significant number of transients like Chicago.”
Before the bust- wasn’t the nationwide average just 7 years? In larger cities with more job transfers, I bet it’s less.
We’ve seen very few properties on Crib Chatter (even single family homes) where they’ve lived in the property 20 years. In fact, I would probably say there have been maybe 10 to 15 properties in the entire life of Crib Chatter where there is someone living in the property for that long. But then, it could just be the properties that are selected for this site. So that might not be a good judge.
Even 10 years seems like a long time for most owners.
What will be the new normal for housing finance in 2-3 years? Assume that there’s no mortgage interest deduction for any marginal amounts borrowed over $500k, no more fannie/freddie, and lower FHA mortgage limits. This is a realistic scenario, especially if the republicans take quite a few senate seats in 2012. Where would the market go?
“Where would the market go?”
Zero.
Zero? Awesome! Houses would be free for everyone!
“Even 60646 (sag, edgebrook, wildwood), there are only 9 homes under contract listed above $500,000 with the most expensive listed for $649,000. These are traditionally wealthy places and they can’t sell. Wealthier areas (outside of ELP) are getting hit hard too.”
Even North Center (as defined by Redfin) there are 30 homes under contract listed at $500k+, with the most expensive listed for $1,675,000. This is NOT a “traditionally” wealthy place and they *can* sell. Wealthier areas (outside of ELP) are a mixed bag.
“Even 10 years seems like a long time for most owners.”
Passed thru ten recently. Our side of the block has 3 new owners (2 in teardowns) in that time, with the rentals all having an owner in one of the units.
most people I know fall in the 10+ category.
this seems potentially like a planning-to-stay-in-Chicago-for-life vs transplant-and-here-only-for-for-work issue?
“Even 10 years seems like a long time for most owners.”
“We’ve seen very few properties on Crib Chatter (even single family homes) where they’ve lived in the property 20 years. ”
It’s called selection bias. Think about it – the majority of houses in chicago are not for sale (probably less than 5%). MANY of the people living in the remaining 90%+ houses have lived there for a LONG time. We just don’t realize it because these houses are not for sale. Do your own experiment and figure out how many new neighbors you have had in the past 10-15 years compared to the number of houses there are…
anon(tfo), 60646 has consistently had the highest median sales price of all chicago neighborhoods. Granted, there are no 1 bedroom condos with drag down the median like most of the rest of the wealthiest areas in the city, but still, this is a nice area with some money and some wealthier residents.
Congrats anon. I’ve been in my place for almost 6 years and I am consistently amazed at how fast time has gone by.
It has been mentioned before, but I think people’s time frames have changed. Also, I believe that seven year statistic reflects both refinancing and moving. However, with rates being so low, I doubt we will see much refinancing and I also think people will be staying in their homes longer. I expect that the average mortgage will be held much longer.
The move up phenomenon may be dead or at least half dead.. I see this happening on both ends of the spectrum. Many first time home buyers are not interested in buying condos or places they don’t feel they can grow into with a family since the odds of being able to quickly (within say 4 or 5 years) move up look bleak. At the other end, many buyers are also shunning the McMansions of the suburbs.
Instead of interest deductions, the government should offer principal deductions. Reward people for paying off mortgages. It would help banks and consumers. We need people to deleverage, so we should encourage it.
“60646 has consistently had the highest median sales price of all chicago neighborhoods.”
Wha? Zip copes =/= neighborhoods.
Ok the forest glen neighborhood which is 60646. Sorry you know what I meant.
“Instead of interest deductions, the government should offer principal deductions. Reward people for paying off mortgages. It would help banks and consumers. We need people to deleverage, so we should encourage it.”
Great idea which I’ve often thought about though tough to implement and seemingly subject to manipulation. You could do it with a phase out on dollars per 5 year period or so. I agree though that is what should be incentivized.