This 4-Bedroom Greystone Has Been Reduced $340K: 932 W. Wolfram in Lakeview
This 4-bedroom vintage greystone at 932 W. Wolfram in Lakeview has been on and off the market for 2 1/2 years.
In that time period it has been reduced $340,000.
The house is now listed $75,000 under the 2006 purchase price.
Built in 1888, the greystone still has many of its vintage features intact including original Fret woodwork, built-ins and stained glass.
There are 2 woodburning fireplaces.
The listing says the kitchen is “new” with stainless steel appliances and silestone counters.
3 out of the 4 bedrooms are on the second level with the fourth in the lower level along with a family room and a second kitchen.
Built on a 25×124 lot, it has central air and a 2-car garage.
It is, however, located just a few houses away from the Brown/Red/Purple El lines.
What price will it take to finally sell this house?
Joseph Metzger at Prudential Rubloff has the listing. See the pictures here.
932 W. Wolfram: 4 bedrooms, 4 baths, 2 car garage, no square footage listed
- Sold in December 1993 for $265,500
- Sold in May 2006 for $960,000
- Originally listed in October 2008 for $1.225 million
- Reduced numerous times
- Currently listed for $885,000
- Taxes of $11,329
- Central Air
- Bedroom #1: 19×12 (second level)
- Bedroom #2: 14×10 (second level)
- Bedroom #3: 10×8 (second level)
- Bedroom #4: 11×8 (lower level)
- Family room: 50×11 (lower level)
- 2nd kitchen: 10×9 (lower level)
I was in this one a long time ago. The el was a show stopper. Very loud when it went by. Can’t understand why anyone who would have this kind of money would want to live that close to the el or would pour that kind of money into upgrading the house in the first place.
I bet the increase in property values throughout the city would pay for an investment in quieter public transportation. Huge swaths of the city are uninhabitable by most people’s standards.
“I bet the increase in property values throughout the city would pay for an investment in quieter public transportation.”
I agree. I often wonder why Chicago’s antiquated ‘EL’ doesn’t run on rubber wheels like the trains in DC, Paris… The current transport system needs to be replaced from the ground up.
LOUD
When peak oil arrives (if its not already here!) all land near public trans will sell for a premium. The time to buy this property is now at this price. There’s never been a better time to buy than now.
Re:homedelete
I agree with your general thought, but I think that will make properties within a 4-5 block radius go up – but not properties right along the train tracks like this one – because ironically there will be more el trains as people move to using it more often for transportation – so this house will be even louder.
“There’s never been a better time to buy than now.”
Yesterday! You had to buy YESTERDAY! I’m in a panic!! I put in an all cash offer for 200% over list, and sent the offer in using a hooker, and yet the broker wouldn’t even call me back!!! Should be 5-6 other offers in at 300-400% over list! Idiots, Idiots, You are all children and idiots!
gringo – you are being sarcastic – but there is a lot of truth to what you are saying – good deals (and not even great deals) are being snapped up. Brokers/realtors are incredibly busy right now and most WON’T return phone calls because they are so incredibly busy!!!
When has the City of Chicago invested anything meaningful in the CTA?
I find this odd, since the City of Chicago is the biggest beneficiary of the CTA.
clio – made a minor edit:
Brokers/realtors are incredibly busy right now and most WON’T return phone calls because they are so incredibly lazy!!!
It’s spring buying season. They are SO incredibly busy. ha! ha!
Yeah- like they are every year.
If they’re so incredibly busy, why was no one at the open houses (except for me) I attended over the weekend? Why is nearly every property I watch for this website sitting and sitting and sitting?
I have seen fewer price reductions in recent weeks, however. Sellers are clearly thinking this is “it” for them and they can hold onto whatever price they’re at and make a sale. We’ll see.
What would someone pay for this house- even WITH the EL?
$600k? $700k?
What is cheap enough to get someone to bite?
Remember, we chattered last year about this Southport cottage that was right on the EL.
http://cribchatter.com/?p=9405
It did not sell. But this house is much bigger and at least it’s not right ON the El as the bosworth house.
“If they’re so incredibly busy, why was no one at the open houses (except for me) I attended over the weekend? Why is nearly every property I watch for this website sitting and sitting and sitting?”
I think it’s because you’re focusing on the ones that sit and sit. However, there is an element of truth to what Clio says (though the truth is not quite as extreme). If you are looking for really high quality properties at a good price you are not going to find them – the bid/ask spread problem.
Good example that I’m still scratching my head over: http://lucidrealty.com/homes-for-sale/Chicago_Near_South_Side/condos_townhomes/47-W-15TH-ST-unit-F/
Supposedly this had 29 showings on Saturday and already has 4 offers on it, the highest of which is $500K. I don’t get that one – if it’s true.
To clarify, that example is not a high quality property. But it’s an indication that some homes mysteriously sell quickly.
But Gary- that’s a foreclosure. Sure, we’ve seen investors swarming those. But the “normal” properties? Not so much. People want a deal.
Of course I’ve seen a few things selling right away in the prime neighborhoods. But that is normal and to be expected. I never said nothing was selling. It’s the spring buying season.
Perhaps people really ARE trying to buy before the interest rates skyrocket (which they are soon to do.) S&P just downgraded US debt about 20 minutes ago. It’s only a matter of time before our borrowing costs rise- and probably sharply higher.
I’ve also seen townhouses in Lakeview selling pretty quickly. People still want the townhouse under $450,000. But the others priced higher are still sitting.
The pricing strategy on this place was ridiculous. “Hey, a major finanical crash is occuring because of (among other things) problems in the residential home market. My place must have appreciated by 25% in 2.5 years!” My bet is that it goes in the high 600’s. Most of this is just from general price declines, but also buyers seem to be having a “flight to quality” and the El noise is going to be a bigger negative now than back in 2006.
“It’s only a matter of time before our borrowing costs rise- and probably sharply higher.”
I agree with this.
HD – Do you seriously believe that rates are going to be as low as they are now when you eventually buy? You and Sabrina both agree about the direction of home prices but I find it interest how you have strikingly different viewpoints on where interest rates are headed.
It’s that conforming price range. Anything above conforming is difficult to sell, for many reasons, but the two most important reasons are 1) tighter lending standards for Jumbos and 2) income are not high enough to support a large market above and beyond the conforming range. Sort of funny how the $400,000 mortgage works fairly well with up to $150,000 HH income. If you go above $150,000 HH income that’s well into the top 10% of all income in the country and probably close to that for the Chicago area (maybe even higher)!
“#Sabrina on April 18th, 2011 at 7:39 am
I’ve also seen townhouses in Lakeview selling pretty quickly. People still want the townhouse under $450,000. But the others priced higher are still sitting.”
I guess the real question is, what would it cost to do a high-quality noise abatement/insulation project to avoid all the crazy noise from the el? I have no idea – could you do anything useful for $100k?
I heard that the tax forgiveness on the loss from a short sale/foreclosure will be expiring at the end of this year. Do you think this is going to lead to a mass rush to list/close thread properties before Dec 31?
Chris M: Sorry to get into macroeconomics here, but as long as the government is willing to lend money practically for free, then interest rates will remain low. The US dollar can be created at will, with impunity, at the push of a button. How much should it cost to borrow something that costs nothing to make, exists only on the balance sheet of a bank, is lent by the government practically for free and is flush around the world? Not very much, not very much at all. People want to borrow less (as show by MEW #’s, mortgage loan apps, consumer credit minus student loans) and they have to keep interest rates low to stimulate demand. Raise interest rates and it all comes crashing down with the ARMs and higher borrowing costs, which again, reduces demand, which means a return to lower interest rates. Interest rates are just a way to adjust for risk, not reflective of the cost of funds.
“HD – Do you seriously believe that rates are going to be as low as they are now when you eventually buy? You and Sabrina both agree about the direction of home prices but I find it interest how you have strikingly different viewpoints on where interest rates are headed.”
“But Gary- that’s a foreclosure. Sure, we’ve seen investors swarming those. But the “normal” properties? Not so much. People want a deal.”
But my point is that some of these foreclosures are not deals. That one for example – in my opinion. So there is still some frothiness in the market. Maybe it’s the PERCEPTION of a deal?
Now that is woodwork! Pitty about the location.
Yep.
Not to mention, no need for actual dollars to enter the economy via the US Treasury, it all happens by magic now.
This says a lot, from http://en.wikipedia.org/wiki/Money_supply#United_States:
“When the Federal Reserve announced in 2005 that they would cease publishing M3 statistics in March 2006, they explained that M3 did not convey any additional information about economic activity compared to M2, and thus, “has not played a role in the monetary policy process for many years.” Therefore, the costs to collect M3 data outweighed the benefits the data provided.[15] Some politicians have spoken out against the Federal Reserve’s decision to cease publishing M3 statistics and have urged the U.S. Congress to take steps requiring the Federal Reserve to do so. Libertarian congressman Ron Paul (R-TX) claimed that “M3 is the best description of how quickly the Fed is creating new money and credit. Common sense tells us that a government central bank creating new money out of thin air depreciates the value of each dollar in circulation.”[23] Some of the data used to calculate M3 are still collected and published on a regular basis.[15] Current alternate sources of M3 data are available from the private sector.[24] However, some would argue[citation needed] that since the Federal Reserve has even less control over the fluctuations of M3 than over those of M2, it is unclear why this number is relevant to monetary policy.”
“The US dollar can be created at will, with impunity, at the push of a button. “
“with impunity” … well worded
“Maybe it’s the PERCEPTION of a deal?”
Exactly – – so much about real estate is psychological. If people would just understand that – things would be a lot clearer to them.
clio – was your residency in medicine or psychology? Because you talk about psychology all the time yet you seem to know very little about it.
“Because you talk about psychology all the time yet you seem to know very little about it.”
oh – I have LOTS of experience. Remember, I have an ex-wife and several ex-girlfriends!!! Also, I have seen many psychologists/psychiatrists my whole life. In addition, I have been required to take many self-improvement/anger-manageent classes which are all “taught” by psychologists – so yes, I am very involved/experienced with the filed of psychology and psychopathology.
How about psychotherapy? Have they been giving you shocks again?
“How about psychotherapy? Have they been giving you shocks again?”
I WISH!!!
“Now that is woodwork!”
Half the house is stark white walls with brown trim, the other half is white trim with Benjamin Moore or Pottery Barn-color off-whites. It’s a tough decision what to do. People don’t want to paint the brown trim, yet they probably will want to paint the walls off-white or some color. Then the rest of the house has white trim and it doesn’t match. I don’t know what I would do.
Not too sure about there being psychology residencies (unlike psychiatry), but in any event, speaking of the psychology of real estate…
I was walking eastward on some street in central Lakeview the other day, about a few blocks north of Belmont. I would say that approx 50% of the properties had a big “for sale” sign prominently displayed. All were newer looking buildings (2/2-looking places, and duplex buildings). It felt like the whole street was for sale. The experience told confirmed for me a couple of beliefs: (i) things are still looking very bleak in central Lakeview for anything other than TH’s or SFH’s and (ii) “for sale” signs are a terrible idea (psychologically speaking, what does an abundance of “for sale” signs say to prospective buyers?).
Chris M and HD: listen to the second half of the Jim Rickards interview at kingworldnews for info about interest rates. There is no way the Fed is stupid enough not to foresee the issues, and they’ll never let UST go no-bid after QE2 “ends” and no way they’ll let interest rates skyrocket. They must be aware of this potential doomsday scenario and they’ll never let a spike happen, says Rickards.
At least they were able to save what appears to be most of teh trim on the first floor. God knows how many countless homes had the gorgeous trim painted off-white during the 1950’s. Its sad to see that and then think of all the work that must be done to strip that paint and restore the trim.
re Trim
should the trim match on all floors and rooms? It looks “bi-polar”, ha ha….
Jim Rickards seems to have the same outlook as Peter Schiff.
I though Peter Schiff was one of those goldbug types who predicts a crashing UST and dollar. I know when UST rallied (interest rates fell) during the 2008 crisis, this was the opposite of what Schiff predicted. Schiff always predicts that people will eventually short UST, but thus far they’ve been a flight to safety instrument instead. Maybe not after today though!
The Fed doesn’t set the tax policies which ultimately determine whether the government is run like a tight ship financially-speaking.
Who do you think was instrumental in the financial industry’s near-collapse & subsequent “socialist” taxpayer-shoring up?
Greenspan, Reich, etc. all knew the housing market couldn’t indefinitely put off the tech bubble, yet they kept kicking the can down the road. When Greenspan bit his tongue and endorsed Bush’s idiotic tax cuts while the USA embarked on two wars he forever killed any remaining credibility he might have enjoyed.
True capitalism does not equal “spending your way to prosperity” on disposable consumer goods, and this is where the USA is at in 2011.
“There is no way the Fed is stupid enough not to foresee the issues”
There is nothing wrong with tax cuts. Taxes should be cut — for everyone. Spending on our gargantuan Fed Gvt. needs to be cut across the board, but good luck getting welfare & entitlements cut and good luck getting warfare cut. Two of the most powerful lobbies in America are AARP and Israel Lobby. This is why gold is at an all time high today, again. No hope in sight for any fiscal responsibility, and more taxes will not spur the economy higher.
“Also, I have seen many psychologists/psychiatrists my whole life. In addition, I have been required to take many self-improvement/anger-manageent classes”
Pure gold! Everyone needs to book mark this comment for future reference. It explains so much*
*Just kidding, Clio.
(shrugging shoulders)..and me still sittin here all by myself not feelin this dollar thing…
“Not to mention, no need for actual dollars to enter the economy via the US Treasury, it all happens by magic now.”
Problem is the dollars aren’t entering the economy, they are sitting in reserve balances.
I’ve seen speculation now that the fed may be selling treasury puts to keep rates down. If that’s so, gotta wonder who is buying them?
Think of properties along the el as part of the “sound wall” for the surrounding neighborhood.
That kitchen is a crime against humanity. Couldn’t they at least stain the wood to match the window frames and the wood work? Bathrooms are pretty bad too as are the fire places. When I saw the exterior I was all excited but the interior is in need of a good 200K rehab. I think this place is a good 150K over price assuming nice properties in the hood sell for 800K plus.
“I’ve seen speculation now that the fed may be selling treasury puts to keep rates down. If that’s so, gotta wonder who is buying them?”
Who’s buying puts on US treasuries? Who wouldn’t want to bet on falling bond prices? As Sabrina has pointed out before, they’ve been in a bull market for decades.
“I’ve seen speculation now that the fed may be selling treasury puts to keep rates down. If that’s so, gotta wonder who is buying them?”
Why wouldn’t people buy them?
“Why wouldn’t people buy them?”
Because who would want to bet against the fed’s unlimited resources?
The Fed doesn’t have unlimited resources…unless you mean the ability to print money is a “resource”.
“Because who would want to bet against the fed’s unlimited resources?”
Juliana, it will be converted to a volatility trade and not a directional trade. Buyer won’t care if it goes up or down.
I’ve noticed a few of the properties I’ve been watching which went into contract briefly have since come back on the market, relisted at higher prices. For example:
http://www.redfin.com/IL/Chicago/1509-N-Campbell-Ave-60622/home/13290586
What do you attribute this to?
I’ve also noticed a feeding frenzy over everything at the lowest price points, bidding wars and multiple rounds of highest and best offers.
actually, they are entering the economy in some perverted trickle-down fashion as bonuses to the now-triumphant banking and Wall Street chieftains.
“Problem is the dollars aren’t entering the economy, they are sitting in reserve balances.”
“At least they were able to save what appears to be most of teh trim on the first floor. God knows how many countless homes had the gorgeous trim painted off-white during the 1950’s. Its sad to see that and then think of all the work that must be done to strip that paint and restore the trim.”
Agree that painting hardwood should not be done. Restoring painted woodwork is easier if it was done badly and no sanding was done and the old finish was not removed.
Milkster those places were probably short sales that the bank ultimately didn’t accept. Second time around I think you have a much better shot.
“Juliana, it will be converted to a volatility trade and not a directional trade. Buyer won’t care if it goes up or down.”
Zerohedge equates that with buying protection from AIG on CDO books.
“However, unlike back then, when entities like Goldman were sure to be bailed out on their collateral exposure to Joe Cassano, this time around if the Fed does lose control of the long end, and the Fed ends up experiencing first tens, then hundreds of billions of P&L losses should rates jump by 1%, 2%, 3% or more, then all bets would be off, and everyone left holding Treasury protection, i.e., the bet opposite to that of the Fed, would end up with with a big, fat nothing as the monetary regime finally fails, fiat is dethroned, and alternative monetary systems are implemented.”
But that could never happen, I guess.
I too have seen a frenetic feeding frenzy around everything at the lowest price points. It goes back to that cash investor and distressed sales being 40% or more of the Chicago market. There are people out there who think these are deals and plan to buy and hold, or rehab and resell. There’s slim pickins’ at these low price points in many neighborhoods. I’ve also noticed that the spring bounce has slowed down a bit; lots of contract signings in Feb/March/early april but seems to be slowing down a bit now that the lowest priced properties are all under contract.
“I’ve also noticed a feeding frenzy over everything at the lowest price points, bidding wars and multiple rounds of highest and best offers.”
“S&P just downgraded US debt about 20 minutes ago. It’s only a matter of time before our borrowing costs rise- and probably sharply higher.”
sabrina, S&P downgraded the “outlook” not the actual rating… which is really nothing since they could revert to stable at any time, if they actually downgraded US debt to AA overnight the dow would tank at least 2000 points, so I don’t see that happening
now with the costs of borrowing rising, that we can agree with
“now with the costs of borrowing rising, that we can agree with”
Don’t fight the fed.
as of 1:17pm EDT
TBT is down in price: 01:33pm EDT 36.43 -0.26 -0.71%
the fed is trying to create inflation… eventually people will stop wanting negative real rates of return for their investments
“the fed is trying to create inflation… eventually people will stop wanting negative real rates of return for their investments”
I agree. What this means is the Fed will make real interest rates negative, so that people will move their cash into something else (i.e. invest or spend) and that will get money flowing, assets shuffled, velocity up and voila! the economy is stimulated. By creating an environment where inflation is rising (i.e. higher prices) and savers are earning zero percent (Fed keeps rates down), people have no choice but to put their money to use somewhere….this will stimulate economic activity, so says the Fed.
Sonies is right S&P did not cut the U.S.’s rating.
I think our AAA rating has much more to do with politics then actual probability in ability to repay. If Moody’s or S&P were to cut U.S. Federal Sovereign Debt and it resulted in an adverse outcome they know they would come under the crosshairs of regulators to do bad things to them in retaliation.
“….this will stimulate economic activity, so says the Fed.”
Q1 GDP recently revised down to 1.5% at several prominent brokerage houses like Morgan Stanley & RBS Securities. Forecasts of 3%+ GDP growth never materialized and were all smoke and mirrors.
juliana… I’d say under your proposed scenario you are pretty much f’d no matter what you have.
I’m calling a bottom. It was December 31st 2010.
When I first started my search in the summer of 2009, my agent asked me what I wanted. I said I wanted a studio in Lincoln Park for 50K. (The best, most desirable area at a cheap price.) This never happened. Pricing in the GZ has gone down a little, but I’m not seeing any steals.
As a contrast, there are some really cheap properties in the outer neighborhoods, but they often come with a host of problems, so even though they’re cheap, they’re not a steal (i.e. homes in gangland or in need of gut renovation or condos with disintegrated HOAs). I think you need a lot of luck to find your unicorn criteria at a good price.
We’ve been bouncing around the bottom since summer 2009. Back then, there were some cheap things which sat on the MLS for a long time with no takers. Now it’s like if something cheap hits, if you don’t get a bid in at full asking price or higher that same day, you’re cut out of the process.
I would not say we arrived at the stage G was hoping for where homeownership would be more affordable for everyone. Clio was right. Most owners have skin in the game and don’t have to sell, so they are hanging on. Even the distressed properties in the shadow inventory have been trickling onto the market here and there with no meaningful impact to most people on this website who are looking to buy.
I think prices are going to start heading back up. We might bounce around at the bottom a little while longer, but there will be no massive firesale on the blue chip nabes. Even Logan Square which a lot of people are iffy on has pretty much held its value unless you go west of Central Park Avenue.
“I’ve also noticed a feeding frenzy over everything at the lowest price points, bidding wars and multiple rounds of highest and best offers.”
Just wait until you see a frenzy of short sales then next year. As unless congress acts the gain from a short-sale being non-taxable expires on 12/31/2012.
“juliana… I’d say under your proposed scenario you are pretty much f’d no matter what you have.”
Same conclusion i had. Counterparty risk is everywhere.
“I’m calling a bottom. It was December 31st 2010.”
Let me borrow those rose colored glasses then. When QE2 ends, interest rates might rise. There are fewer non-farm jobs in the US than in 1998. New graduates career plans are derailed as there aren’t many openings for entry level unless you know someone.
“juliana… I’d say under your proposed scenario you are pretty much f’d no matter what you have.”
I was bored at work a few years ago so ran a regression of the yields on U.S. Treasuries. It had a pretty good R^2 showing a decline if you picked the peak of the 80s as a starting point and showed treasury yields hitting 0 somewhere around 2014.
Thing is only time the Fed significantly raised in the past we had the S&L crisis (every other business cycle rates never returned to their highs of the previous business cycle). This time we’re already in economic doodoo so any significant increase in rates would be catastrophic.
“Let me borrow those rose colored glasses then.”
Hi Bob –
But investors are making money buying and flipping right now. Maybe not in the GZ, but someone’s buying those houses out in the neighborhoods.
The US is divided now, either people have assets (which are being inflated) or they don’t. So we may have hit a bottom in the better neighborhoods where people with assets choose to live. All bets are off for neighborhoods where people who have no financial assets are forced to live. See what Marc Faber said on CNBC (fast forward to 6:55) about why the rich like inflation of asset values and prices, he stupifies the hosts who don’t like what he’s saying: http://www.youtube.com/watch?v=WX6Z2xA-Y08
“But investors are making money buying and flipping right now. Maybe not in the GZ, but someone’s buying those houses out in the neighborhoods.”
Not many investors. Some surely, but some are losing money. That’s like saying certain stocks are going up right now even though the Dow is down 20 today…duh.
Also a lot of those purchases are via the FHA which is government sponsored. When 40% of all purchases are people with only 3.5% down I don’t consider those transaction arms length/smart money.
Also calling December the bottom is very foolish, IMO. We had a bad winter, if you’re really going to call a bottom this year it should be in February or March.
I’ll admit I’m looking in a price range where I’m scraping the bottom of the barrel. Basically everything from 0 – 75K on condos and 0 – 200K on houses. But I noticed a huge uptick in bidding activity the week after Christmas.
All I know is in Avondale I’m seeing a decided uptick in my definition of housing stability – dumpsters related to people doing major rehab work on houses.
I could care less about temporary flips in housing prices, what I care about is seeing people actually maintaining & improving their properties, as admittedly-vague a datapoint as that is.
Widespread deferred depreciation is cold, icy death to a neighborhood’s stability. People fixing up their properties is contagious, though – it’s the old “keeping up with the Jones’s” thing.
I disappointed in you all. Haven’t you learned anything? 40% distressed and cash buyers and you think this is inflationary? Bottom feeding frenzies and this is driving asset prices up? Millions in the shadow inventory and millions more who will try to sell at inflated prices when the bull RE market returns and you’re calling a bottom? Today’s youth has 1,000,000,000,000 in student loans, more than the total outstanding credit cards among all age groups and this will inflate housing prices? My oh my.
Milkster – I’m not going to call a bottom on prices, but I’m willing to call a bottom on affordability…I believe housing affordability (considering both prices and mortgage rates) may have hit bottom in October 2010. I wouldn’t be surprised if prices fall some more, but I don’t think that monthly mortgage payment will fall below what it was in late fall of last year.
Simple question: what is going to happen to all the overpriced property languishing on the market? With this asset inflation will they just magically sell at their wishing prices? I’m just not seeing it.
The GZ SFH buyer is someone who likely has a net worth (or parents with a net worth), said net worth which is being inflated by the stock market via QE etc. Therefore these people have money to invest in good locales like GZ, Oak Brook and the other high-end suburbs, and prices will stabilize unless the whole asset inflation scheme crashes. Good locations are probably well correlated to stock indices.
The people with no assets, like most of Chicagoland, and even the 1/1, 2/2 GZ condo buyers/sellers, etc. will see those housing prices continue to fall.
My opinion is based purely on anecdotal evidence. I’d be curious to know what other CCers who are actively pounding the pavement looking for properties think.
Icarus? chuk_dot_com? Clio? miumiu? Annony? Anyone else I missed who is actively combing the MLS ads every day?
The onslaught of shadow inventory never came. Maybe in Englewood, but none of us would live there.
“Today’s youth has 1,000,000,000,000 in student loans, more than the total outstanding credit cards among all age groups ”
Please cite sources. Student loan debt is 900B. Credit card debt is $800B. Yeah it’s more but its not $1T yet…you’ll have to wait for summer or fall for that figure.
“The onslaught of shadow inventory never came. Maybe in Englewood, but none of us would live there.”
So because it hasn’t come on the market yet it went away? The owners solved their financial distress? Or because the bank didn’t act expeditiously they will never act?
“I could care less about temporary flips in housing prices, what I care about is seeing people actually maintaining & improving their properties, as admittedly-vague a datapoint as that is.”
I see this too, but my take on it is that there are a lot of people sprucing up their places with an eye on putting them on the market in the not so distant future. Not desperate yet, still hoping for some firming up of prices before they put their place on the market, and hoping the improvements they make will tempt somebody other than bargain hunters.
Fed is punishing savers with negative real interest rates, where else would you put $200K today? Cash is out of the question, stocks are very risky, might as well put it into housing downpayment/equity in a good location and live in it and enjoy the benefit. it should be safe there.
Mish has a posting about student debt today.
“Please cite sources. Student loan debt is 900B. Credit card debt is $800B. Yeah it’s more but its not $1T yet…you’ll have to wait for summer or fall for that figure.”
http://globaleconomicanalysis.blogspot.com/2011/04/education-bubble-student-loan-debt.html
Dan – I thought you were bearish on housing. Either you’re being facetious in your post or you believe it’s better to put money into a real asset than have cash sitting in a back account losing real value. The latter echoes PermaBear.
I am starting to think we’ve bottomed (in the good locations) and that inflation will roar. I think the stock market is maxed out, so I could see someone with financial assets plowing some of that instead into more equity for a well-located house, second home, or something like that. I used to totally agree with HD about the market, but have shifted somewhat due to thinking through the scenario above. What do you think of the rationale?
homedelete-
I believe that our market is starting to change, but you seem to be mired down in your own rigid beliefs.
Housing has never been ‘cheap’, and owning has never been ‘easy’. There have been, and will always be high barriers to ownership for working people.
On my block it’s a few people who have bought the properties you describe. Might be a generational-gap thing, I’m thinking some of the older folks have no interest/ability in overseeing major rehab work.
“I see this too, but my take on it is that there are a lot of people sprucing up their places with an eye on putting them on the market in the not so distant future.”
In what timeframe? Too many people are IMO overly-obsessed with the publicly-traded quarterly timeframe.
Housing should be a long-term asset.
“What do you think of the rationale?”
“I would not say we arrived at the stage G was hoping for where homeownership would be more affordable for everyone.”
I never “hoped” for anything. Homeownership is more affordable for everyone. That should give an idea of the accuracy of Milkster’s other opinions.
“What do you think of the rationale?”
I agree with the rationale. And, as I’ve pointed out before, some of the most prominent bears on the housing market have recently purchased property, largely due to cheap money which, I believe, could get more expensive very suddenly and unexpectedly.
“My opinion is based purely on anecdotal evidence. I’d be curious to know what other CCers who are actively pounding the pavement looking for properties think.
Icarus? chuk_dot_com? Clio? miumiu? Annony? Anyone else I missed who is actively combing the MLS ads every day?
The onslaught of shadow inventory never came. Maybe in Englewood, but none of us would live there.”
You are correct, Milkster. I’m no longer combing the MLS every day (having purchased in the fall of 2010), but I certainly did so from around the early 08 through late last year, and continue to casually monitor things. It’s been about six months since we purchased, and (i) I don’t see any indication that our place would be less expensive today (i.e., I can’t find any comps that I would expect to close at our purchase price or lower) and (ii) I still can’t find a rental that would meet my Unicorn Criteria for less than the monthly costs of the place we purchased.
“http://globaleconomicanalysis.blogspot.com/2011/04/education-bubble-student-loan-debt.html”
“Today’s youth has 1,000,000,000,000 in student loans” != “Student Loan Debt Passes Credit Card Debt, Expected to Hit $1 Trillion”
Expectations are different than ex-post reality. Many people in real estate had the expectation that things would be as they always were so paying a ridiculous sum for housing made sense. HD is guilty of the same sort of logic when he makes bearish statements like this. Heck HD I fully expect to marry a Victoria’s secret model.
Student loan debt likely still below $1T
http://www.davemanuel.com/2011/01/25/us-student-loan-clock-will-soon-pass-900-billion/
you can throw all the money in the world at it but without demand imbalance prices may not blink. Housing has been left out of the asset buying spree and i see no reason it joins yet. HD is correct, until u see wage growth with a return to 3* income atandard… Housing in the US remains the red headed stepchild.
Rigid beliefs? Hahah! Close your eyes and simply ignore all the problems and of course you’ll find a bottom. This is as the CS index is double dipping!
is anyone here going to have a 2011 w-2 higher than their 2005/6/7 w-2? Except finance?
Chris M: I also guess that while I think a gerald celente type crash & double dip might be coming, some black swan event, I guess I’m also sick of waiting for it, maybe it’s just market observation fatigue, but I’m starting to think these Fed c*cksuckers just might be able to patch this thing up and we’ll plow along for another ten years, and if we do, it’ll be with inflation so people won’t want to be in cash, so housing might be a decent place to put some cash, esp. if it works out for someone who can at least enjoy living somewhere they like.
“The onslaught of shadow inventory never came.”
What do you think caused all the low end price drops already?
Where do you think the still increasing GZ foreclosure filings/auctions will go?
Bob, do you know anyone else your age who paid off their loans like you have? How do you think that will affect housing prices for those woth debt?
“Housing has been left out of the asset buying spree and i see no reason it joins yet.”
Maybe it now has joined in, or will, and Dec 2010 was the bottom?
Milkster I’m also seeing prices rise, and somewhat decent places going under contract pretty quickly. We’re scraping the barrel a bit too with our budget, and I suspect that most of the places we’d be interested in go before we even get to see them (which interestingly was the situation when we bought overseas in 2001, you had to get that lucky call from an agent prior to listing and bring the best offer on day 1, which was how we ended up way overpaying for a place we didn’t even love and we’re still repaying the loss on sale 4 years later).
One of my economic indicators that things are improving is that stuff that was growing stale for the past couple of years in Humboldt Park – (not a highly desirable neighborhood, especially west of the Park) – is going into contract pretty quickly these days.
HD-
Case Shiller is only marginally helpful, and you know that. There is no Chicago Green Zone Case Shiller index. Anyway, CS is at roughly 2001 levels. Take that as a victory!!
On a percentage basis, home prices and 30 year mortgage rates are down alot more than most W2s are down over the last 2 years.
Jennifer –
Don’t worry. Just set your ceiling and do not give in to pressure to go any higher. It’s hard for me not to get emotional sometimes because you can really fall in love with a sweet house, but you have to be completely factual and think dollars and cents.
If people see properties they like, they should make a lowball offer first. If it’s a condo make sure you read through the HOA meeting minutes and financials. And 100% of the time, get a property inspection. Never buy anything where they will not agree to a property inspection. You might have to agree not to have it written into the contract as a contingency, but they still have to let you do an inspection before you put any earnest money down.
“There is no Chicago Green Zone Case Shiller index.”
But there should be one.
“If people see properties they like, they should make a lowball offer first.”
I’d be careful with this. I routinely “low balled” sellers, but only if I knew the seller would seriously consider that offer. Typically was the case with estate sales and foreclosures. You need to be a little more strategic with the typical seller, unless you know for certain that they need to sell and fast…i.e., divorce situation, pre-foreclosure, etc.
‘Where do you think the still increasing GZ foreclosure filings/auctions will go?”
G, I would love to know the answer to this question! Although not technically in the GZ, I’ve been in contract limbo on a short-sale condo in Uptown since July 2010. There is still no word back from the bank.
And yet the next generation of buyers steadily took on more student loan debt.
Remember that a $500 household student loan payment reduces buying power by approximately $90-$100k in the 28/36 debt rations. There’s only so much money in a budget and if $500 is going to Aunt Sallie then there’s $500 less per month to Aunt Fannie/Uncle Freddie..and that means purchasing power has been reduced significantly…
“#TB on April 18th, 2011 at 1:07 pm
HD-
Case Shiller is only marginally helpful, and you know that. There is no Chicago Green Zone Case Shiller index. Anyway, CS is at roughly 2001 levels. Take that as a victory!!
On a percentage basis, home prices and 30 year mortgage rates are down alot more than most W2s are down over the last 2 years.”
If you close your eyes and tap your heels three times, it’s like those foreclosures along with the shadow inventory and the little/no money down GZ buyers from 2000-2008 will have all disappeared.
“‘Where do you think the still increasing GZ foreclosure filings/auctions will go?””
“And yet the next generation of buyers steadily took on more student loan debt.”
wage inflation is coming next and that will save the day! just kidding….
“Remember that a $500 household student loan payment reduces buying power by approximately $90-$100k in the 28/36 debt rations.”
Actually, a $500 student loan payment, assuming no other debt, has no effect on the 28% housing payment ratio with an annual household income of $75,000 or greater.
At $75,000 gross income per year, the monthly gross income is $6,250. 28% of that is $1,750 and 36% of that is $2,250, a difference of $500.
“Bob, do you know anyone else your age who paid off their loans like you have? How do you think that will affect housing prices for those woth debt?”
No. And I’m not arguing with your basic premise I’m just saying it’s best to compare apples to apples (events that have happened).
Also in reference to your question I’d like to poke a hole in one of CC’s main tenets: that anyone who has a good income is responsible with their money. I know people that make more than me my age that still have debt, still get collections notices and what not.
100k+ income does NOT mean someone is responsible to own real estate. Many people in this income range have other vices/hobbies/habits that consume a significant amount of their income (be it high maint girlfriend, gambling habit, drug habit, sailing hobby, etc). The CC peanut gallery doesn’t seem to touch on this much (perhaps precisely because RE IS their hobby), but we aren’t the broader population.
Yeah Chris M but a mortgage payment could be up to 36% assuming no other debt – meaning the borrower could buy more house with a larger monthly payment. But with student loan debt that $500 student loan payment knocks the borrower back down to the 28% threshold instead of the higher 36%.
Regardless, i think its fairly easy to argue that higher levels of nondischargeable student loan debt will affect housing for years to come.
http://www.nytimes.com/2011/04/12/education/12college.html?_r=2&ref=todayspaper
““If you have a lot of people finishing or leaving school with a lot of debt, their choices may be very different than the generation before them,” said Lauren Asher, president of the Institute for College Access and Success. “Things like buying a home, starting a family, starting a business, saving for their own kids’ education may not be options for people who are paying off a lot of student debt.”
In some circles, student debt is known as the anti-dowry. As the transition from adolescence to adulthood is being delayed, with young people taking longer to marry, buy a home and have children, large student loans can slow the process further. “
Bob,
Outside of finance, law, and medicine, there just aren’t that many $100K plus jobs anymore to people under 35. It’s just not that commoon. Student debt is a huge drain on purchasing power as well. Many people will be obligated for their whole lives to the banks, which is exactly what the banks want. Someone will surely pay $800K for this place. It’s a broken system.
All the realtors out there are out hyping their $700K+ properties saying there is tons of interest in them right now, but until there’s significant increases in closings, it doesn’t mean much to me.
I was just in court today for debtors that together gross $9,000 a month or $108,000 a year. Up to their eyeballs in debt, underwater on the house, car payments. no student loan payments though.
“#Bob on April 18th, 2011 at 1:27 pm
“Bob, do you know anyone else your age who paid off their loans like you have? How do you think that will affect housing prices for those woth debt?”
No. And I’m not arguing with your basic premise I’m just saying it’s best to compare apples to apples (events that have happened).
Also in reference to your question I’d like to poke a hole in one of CC’s main tenets: that anyone who has a good income is responsible with their money. I know people that make more than me my age that still have debt, still get collections notices and what not.
100k+ income does NOT mean someone is responsible to own real estate. Many people in this income range have other vices/hobbies/habits that consume a significant amount of their income (be it high maint girlfriend, gambling habit, drug habit, sailing hobby, etc). The CC peanut gallery doesn’t seem to touch on this much (perhaps precisely because RE IS their hobby), but we aren’t the broader population.”
“Yeah Chris M but a mortgage payment could be up to 36% assuming no other debt – meaning the borrower could buy more house with a larger monthly payment. But with student loan debt that $500 student loan payment knocks the borrower back down to the 28% threshold instead of the higher 36%.”
I understand your point. But if I’m not mistaken, 28% is the benchmark cap for the mortgage regardless if borrower has other recurring debt or not. Of course, even though this is the commonly cited benchmark, it is still possible to get approved with higher ratios.
Chris M: fha is 45/45 with a 720 FICO iirc (But these change all the time) and 41/41 with a lower fico.
The other thing we’re forgetting here is that a household paying $500 a month for student loans (which is 2x the national individual average of $250 a month amortized over 10 years) means that – all things being equal and no other debt – the borrowers have $500 less per month to save for a down payment. No wonder FHA 3.5% down hot money is such a large part of the first home buyer market. Aunt Sallie’s got her hand in ur pocket.
With a conventional loan and 20% down, I believe you can still get approved with a DTI of up to 50%.
What lender is that? No wonder why there’s such problems in the real estate market today. 50% DTI says it all.
Maybe it now has joined in, or will, and Dec 2010 was the bottom?
My thoughts are that asset appreciation is occurring not as a matter of US demand but more from currency debasement, foreign demand with all these extra dollars, and those extra $’s not distributing themselves evenly.
And if I am going to bet on continued asset price inflation, much like with 2 cars on a track, if my bet is both continue forward, I want the one that’s been going 150mph over the one that’s been doing 10mph.
“What lender is that? No wonder why there’s such problems in the real estate market today. 50% DTI says it all.”
I heard that from a loan originator at Guaranteed Rate. But, honestly, it’s Fannie/Freddie that set the guidelines, so I would think other lenders could offer the same. Obviously being able to qualify for a loan at 50% DTI and being able to afford 50% DTI are completely different things.
It’s actually easier to afford 50% DTI at a higher income because you have more income that is disposable for discretionary spending. Maybe a single person who travels 100% of the time for work and is on per diem basis all the time could afford 50% DTI. All their vacations are paid for with travel points as well. Other than that, you’d need significant family money to do that and draw off of in order to survive. I’d also assume a 0% contribution to any potential retirement savings if at 50% DTI.
“What lender is that? No wonder why there’s such problems in the real estate market today. 50% DTI says it all.”
I would think the subset of those who are able and willing to put 20% down AND go for a 50% DTI is infinitesimally small.
Typically high DTI folks are leveraged to the hilt and with a low down payment would be my strong suspicion.
Here’s a trick Dan. This is a big part of what I see.
There are 1,000 dollars and 1,000 BrReals with a fictitious exchange rate of 1.00. Essentially you have 2,000 US equivalent dollars. Only product in the world is 1000 units of oil. So oil is equivalent to US$2.00 a unit.
Difference is my demand deposit rate is 11.5% in Br and (for convenience) .00 in the U.S. So if exchange rate stays at 1.00 in a year you have
1,000 US units
1,115 Br units convertible to dollars at 1.0
So now you have 2,115 US units for 1,000 units of oil. Price goes to $2.11..
I just debased the dollar keeping everything looking the same to 99% of the U.S. population!
Truth is worse since.. the exchange rate moved 10% this year making the BrReal worth 1.10 so you have 1,000 Units still in the US, and convert the 1,115 units of reals to $’s for 1,225 units or a total of 2,225 $ units still chasing 1,000 units of oil which now cost $2.22 a unit…
Now with all these extra dollars, people here are chasing oil,metals,ags…. but not houses in Cleveland.
houses in Ipanema, as I’ve stated, they are chasing!
Dan: you say that savers will put their money in assets rather than earn zero percent in the banks so we’ll have inflation…not quite – here’s how japan’s savers handled the situation…
http://www.reuters.com/article/2007/07/03/japan-forex-retail-investors-idUST33423920070703
Japan’s office workers, housewives flock to forex
By Masayuki Kitano
TOKYO, July 3 | Tue Jul 3, 2007 5:08am EDT
TOKYO, July 3 (Reuters) – Japanese retail investors play a growing role in the foreign exchange market, with the volume of currency margin trading on the Tokyo Financial Exchange (TFX) jumping 45 percent in June from May, data showed on Tuesday.
Fed up with near-zero interest rates at home, Japanese retail investors — who tend to be office workers or housewives trading online — have been turning to leveraged foreign exchange trading, which allows them to place large bets on currencies with relatively small amounts of money.
Bank of Japan board member Kiyohiko Nishimura earlier this week touched on the rising influence of Japanese retail traders.
“Years ago, it was the gnomes of Zurich who shook the foreign exchange markets. They have now been replaced by the housewives of Tokyo, who speculate in various currencies,” Nishimura said.
The volume of all forex margin trading contracts traded on the TFX, a financial futures exchange, rose to 3,946,942 contracts in June, up from 2,718,622 lots in May, data from the exchange showed.
Trading volume ballooned more than four times from June of last year, and volume in the first six months of this year climbed to 15,096,929 lots, exceeding the total for all of 2006.
Margin traders who sell yen for higher-yielding currencies, as well as Japanese households infatuated with investment trusts targeting overseas assets, have been key factors in the yen’s broad slide this year.
Margin trading on the TFX accounts for only a portion of all margin forex trading in Japan, but their data is often used by market players to gauge the broader trend.
Nishimura said the investors have employed contrarian strategies that have helped to push down volatility in dollar-yen moves. But he added that it was unclear how long this could persist and warned of the possible impact in the event of any major switch.
“A sudden change in their behaviour is likely to shift the direction and the magnitude of trading in many foreign exchange markets,” Nishimura said.
Hampered by Japan’s low interest rates, the yen fell to a record low against the euro of 167.20 yen on electronic trading platform EBS on Tuesday.
Milkster, I see some properties of interest to us reducing prices albeit very slowly say 699K is now 679K or so. There are some good deals in more risky building where developer is more desperate.
Recently a pretty good deal in a very stable building came up, a corner unit with great lake views which is banked owned
http://www.redfin.com/IL/Chicago/233-E-13th-St-60605/unit-1906/home/12645625
But I really want the northern sky line view so we passed on it. I think at least in the sector of the market I am searching in, the prices has not really picked up nor have they gone down drastically recently. So you might be right that we have hit the bottom and are just fluctuating there. However, I don’t feel in a rush and want to wait for the summer to see what transpires. My husband says we should buy and thinks I am being picky for no reason…lol…but he has accused me of that before : )
You guys constantly ignore small business owners. Many of these folks did not even go to school and don’t have school debts.
“Outside of finance, law, and medicine, there just aren’t that many $100K plus jobs anymore to people under 35.”
I have a question for you school gurus. I was googling tuition for schools in Chicago. It seems private schools have tuitions below 18K a year (even ones without religious affiliations). So a family with 2 kids would pay less than 40K in tuition a year. This is not too bad is it (for families with 2 incomes)? So I am a little bit surprised why everyone thinks people have to move to the suburbs to afford kids. Am I missing something?
THe owners of that museum park property paid $667,000 and they put $100,000 down. I think there needs to be a bit more of a price cut than the $505,000 from $667,000.
Of note the previous owners appear to have numerous lawsuits against them all as a result of overleverage.
Yes – you are missing a lot. You see, you live in an alternate reality where paying roughly $40,000 a year in tuition “is not too bad is it (for families with 2 incomes)”. Back in the real world, many people choose to move to the suburbs instead where their children can live the ‘Fast Times at Ridgemont High’ or ‘Breakfast Club’ lifestyle for roughly $4,000 to $12,000 paid via real estate property taxes, and a couple of hundred bucks registration fees.
“Am I missing something?”
Miumiu $40k per year for school tuition is a serious number, even for those with 2 incomes. I have a couple of friends who are married to law firm partners who wouldn’t pay that, one went suburban and the other is in Edgebrook. Even my friends who just bought a $750k place don’t want to pay for private school for one, even though they’re paying daycare for two kids right now.
Take a look on Google Maps at the street views at Lake Forest High School and compare them to any of the $25k high schools in the city. I thought it was a country club the first time I drove past it! (incidentally Lake Forest has some amazingly low taxes).
HD, many people here pointed out that they have 30K plus nannies, so I was thinking paying 35-40K tuition is not a big stretch from that. Of course I understand if people have 4-5 kids then it becomes very expensive. BTW, many of the good private schools with religious affiliations are around 10K a year. All I was saying for two people jointly making over 150K it is still feasible to bring up a family comfortably in GZ. Of course this becomes much harder on single income.
Sure Jennifer. I completely understand the decision to refrain from sending kids to private schools, but if one really wants to live in GZ, it seems to be feasible to me. Also once the kids go to school, I assume it is easier for the mothers to go back to work. Something which is much harder for mothers of younger kids.
“Difference is my demand deposit rate is 11.5% in Br
Truth is worse since.. the exchange rate moved 10% this year making the BrReal worth 1.10 so you have 1,000 Units still in the US, and convert the 1,115 units of reals to $’s for 1,225 units”
so right now the Br is appreciating relative to USD by 10%, and it also is paying 11.5% return for demand deposit on top of that?
How can this possibly be maintained? Can someone open up a bank account at a branch in the USA? Chicago? how about NYC or Miami?
“It seems private schools have tuitions below 18K a year (even ones without religious affiliations).”
What (non-religious) schools? Parker and Latin start at around $22k (with nominal fees, i.e., a couple hundred), then by high school they’re pushing $30k (with tuition in the upper $20’s – oddly enough, high school is just a few grand more than elementary – but with fees of a couple thousand).
And nobody is getting their kid into Parker or Latin in 9th grade, unless they have some serious legacy connections and/or make a significant additional contribution, which, of course, all parents are heavily pressured to do (which isn’t too crazy, seeing as parents at places like Lincoln elementary typically give around $1k per kid per year). It’s my understanding the the admissions door effectively closes after around the 4th or 5th grade.
I don’t know what the Lab or British are charging.
Dan: Everbank CD’s. The catch is timing.
How many kids are in CPS vs. how many kids are in Latin/Lab/Parker/Brit combined?
Thanks anonny. I thought you would know. I checked this one link:
http://www.savvysource.com/preschools/illinois/chicago/sh2737-chicago-city-day-school
I don’t even know what the good elementary schools in the city are. BTW, these schools don’t have discounts for second kids?
“Brazil’s economy is a great example of how US policy drives other nations to ruin as their government attempts to hold down inflation by raising interest rates but then those high rates attract hot money flows from around the World and pushes up the value of the Real. Brazil’s Central Bank attempts to modify this effect by buying Dollars – forced to spend 1.4% of their GDP on this operation in 2010 alone – this is how the US strong-arms emerging markets into buying our debt!”
http://www.philstockworld.com/2011/04/18/monday-monetary-madness-the-dollar-starts-to-look-good/
“so right now the Br is appreciating relative to USD by 10%, and it also is paying 11.5% return for demand deposit on top of that?
How can this possibly be maintained? Can someone open up a bank account at a branch in the USA? Chicago? how about NYC or Miami?”
“It seems private schools have tuitions below 18K a year (even ones without religious affiliations).”
“What (non-religious) schools?”
Tuition for Near North Montessori, which I understand to be well regarded and difficult to get in certainly by later grades, is around $15K I think. Don’t believe it offers high school.
If we take out (a) what I think of as snooty prep schools, (b) religious schools, and (c) montessori, is there anything left? What’s the best that’s not in those categories? I realize (a) is a little subjective.
what are snooty prep schools?
“I don’t know what the Lab or British are charging.”
I think they’re all same ballpark as Latin/Parker, w/o fundraising pressure at British.
found this:
BZF
Tracks This Index: Brazilian Real
Description: WisdomTree Dreyfus Brazilian Real Fund seeks to achieve total returns reflective of both money market rates in Brazil available to foreign investors and changes in value of the Brazilian Real relative to the U.S. dollar.
“what are snooty prep schools?”
Latin and Parker. Prob Lab and British. Dunno what Catherine Cook is like exactly. There are also French and German schools which might interest you. Don’t know what they are like exactly.
“what are snooty prep schools?”
they really don’t exist anymore, the American WASP is almost extinct and in many places has been replaced by the American Jew who doesn’t have the same “noblesse oblige” that the former “snooty” order did, plus many of these schools have gone from being bastions of Western Civ tradition to today being places inundated and overrun with progressive education techniques, a debilitating form of brainwashing focused on emotional, social, physical, and cultural development of students as opposed to, you know…. actual learning. So, they merely recalibrate SAT scores (1995) to cover it all up but info about America’s falling educational scores makes it out in the global press.
Dan the 1995 SAT recalibration was merely the first one. They did it again in 2005 when they changed the scale to 2400.
Oh and standards were further relaxed in 2008 when students could take the test multiple times and only submit their highest score (aligning SAT with graduate school standardized test policy).
Let’s not forget what the progressives in academia did here:
“..in 1990, because of uncertainty about the SAT’s ability to function as an intelligence test, the name was changed to Scholastic Assessment Test. In 1993 the name was changed to SAT I: Reasoning Test (with the letters not standing for anything) to distinguish it from the SAT II: Subject Tests. This change was instituted because of sharp criticism and longitudinal studies showing that the original meaning was no longer accurate; the SAT did not accurately measure what it said it was measuring.[citation needed] In 2004, the roman numerals on both tests were dropped, and the SAT I was renamed the SAT Reasoning Test.”
No citations in Wikipedia for proof behind these progressive presumptions but there is some research to indicate otherwise:
“Frey and Detterman (2003) analyzed the correlation of SAT scores with intelligence test scores.They found SAT scores to be highly correlated with general mental ability, or g (r=.82 in their sample). The correlation between SAT scores and scores on the Raven’s Advanced Progressive Matrices was .483 (.72 corrected for restricted range). They concluded that the SAT is primarily a test of g. Beaujean and colleagues (2006) have reached similar conclusions.”
Don’t leave it to the progressives to try to push their agenda with facts, as this subsequent research has shown.
Miumiu,
Regarding top private schools – it’s hard to get into good school like Latin or Parker, almost impossible to Lab – unless you’re affiliated with UofC. I have friend with 2 kids in Lab – even at Pre-K level most spots are taken by tenured profs children.
Plus parents expected to make additional donations (5K+) per child in addition to tuition.
Catherine Cook doesn’t have HS. Lycee Francais in not really geared towards American kids at HS level. Don’t know anything about German school.
Miumiu – a lot of business owners are struggling too. If it were that easy to make a lot of money owning your own business, we would all be rich.
Also, the fundraising pressure is pretty high at these schools from what I heard – upwards of $1,000 per semester is common, and almost expected on top of tuition.
Wow so even if you are willing to pay, it is still hard to get the kids to good schools. That is super sad (it was already sad that talented kids would suffer because of lack of funding).
I guess after all my husband is right, people think they are improving their lives when they immigrate here but after a while, once you have kids, you need to think about health care costs, and retirement, going back to the old world might make sense.
Absolutely. I was mentioning that some of the most well off people I know are business owners not your typical doctor, lawyer types.
“a lot of business owners are struggling too. If it were that easy to make a lot of money owning your own business, we would all be rich.”
Miumiu, yes, it’s just like getting into Harvard – being able to afford tuition is only one of the prerequisites.
We joke a lot with my husband about sending our kids to Europe at least for the bachelor’s degree to avoid student loans. Plus we’ll have a good excuse to go to Europe more often:).
“I guess after all my husband is right, people think they are improving their lives when they immigrate here but after a while, once you have kids, you need to think about health care costs, and retirement, going back to the old world might make sense.”
Or you could considering buying in a neighborhood with a good attendance area school.
so what is the admission criterion for these good schools? I assume at elementary level if we pay the tuition they should get in and after that if they have high GPAs, speak several languages and we are donating enough it must work right? After all if they have poor academic performance, they don’t deserve to go to a good school which is fair. Also we would make sure to tutor our kids at home as much as we can at least on subjects we are good at.
It’s interesting how everyone seems to think that these houses/condos are so expensive. Take a look at a typical house in the neighborhood where I used to live:
http://www.redfin.com/CA/Atherton/333-Fletcher-Dr-94027/home/1634143
You guys really don’t understand how good we have it here – these prices are extremely low when you consider all that chicago has to offer. Seriously, it is the cheapest “big city” in the world (in terms of real estate).
“We joke a lot with my husband about sending our kids to Europe at least for the bachelor’s degree to avoid student loans. ”
You can’t just move to Europe with a US citizenship and expect to get an education for free. It’s a lot like being an illegal immigrant here and expecting workers comp or unemployment benefits. Doesn’t work like that. If your kid is dual US & EU citizenship different story obviously.
Our kids will be EU citizens. But I still think it hard for them to go there at BSc level or even high school when they have been through US schooling. The university system is so different. Here the undergraduates are spoon fed. There are homework, quizzes, bunch of midterms and then grades are curved. Good luck getting A grades in European or Asian universities with the same performance level.
So much about success is luck, determination, persistence and hard work. Going to Harvard or Stanford does NOT at all automatically give you a “free ride” the rest of your life. It merely helps train you to realize your full potential. People don’t get that – teach your kid to be happy, learn his/her motivations/talents/interests and nurture and guide them to be productive in something that they like. Again, it shouldn’t matter if they go to school A or B. I have seen many of my colleagues from Harvard and Stanford end up much less successful (not just in a monetary sense but also professionally) than other people from much lesser known schools.
Bob,
The kid does have dual citizenship and most universities are still free in our home country (not sure for how long). EU has tons of scholarships for both local and foreign students; even tuition based programs are much cheaper than in US. So we are almost half serious about studying abroad idea.
My kids also have dual US/EU citizenship (well the older will have in 3 yrs). You can’t just turn up in most countries and expect a free college education anymore, you are supposed to have lived at least somewhere in the EU for 3 years prior. Same goes for healthcare now too, at least in the places where it’s still free.
Anyone interested in English language university programs outside of the UK should check out some of the Dutch programs, they have full bachelors programs there taught in English at extremely reasonable prices.
“the American WASP is almost extinct and in many places has been replaced by the American Jew”
Yeah, Even I can’t believe we took over Greenwich, CT
“so right now the Br is appreciating relative to USD by 10%, and it also is paying 11.5% return for demand deposit on top of that?”
Appreciated 10%, yes. Demand deposit 11.5%, yes. Capital chasing yield pouring in here and the textbooks said raising interest rates slows capital.. See why school sucks and economists suck too…
Bank account, Never! Think anyone can just walk into this country, like they can in America!
How long it lasts, I think a few more years.. Basically Dan just wanted to help you grasp how assets can rise w/out demand for it in housing. You look the same but have purchasing power being destroyed, all looks ok, exchange rate can even remain the same, and they tell you your house sold at offer and your getting a pay raise… but gas is now $9 a gallon and no one understands why, but for 7 years I get 10% on your dollar quietly cutting American wealth in half.
Weakening the dollar is far from the panacea it seems to be.
That is very true Clio. My cousin’s son went to a public school and has done very well and just got into Berkeley. She told me even if he gets to Harvard, she won’t send him there as the tuition is so much higher. She thinks, if he is good enough he will make his way to great schools in graduate school. That being said, I think one should try one’s best to align things such that talented kids get the maximum chance at success.
“Simple question: what is going to happen to all the overpriced property languishing on the market? With this asset inflation will they just magically sell at their wishing prices? I’m just not seeing it.”
Hi HD –
Several stale listings I bid on where the owners were not negotiable on the price have been taken off the market. The owners did not have to sell.
Same thing happened to us Milkster or they kept it on the market but rented it out.
“It’s interesting how everyone seems to think that these houses/condos are so expensive. Take a look at a typical house in the neighborhood where I used to live:”
Who cares about Silicon Valley? Seriously? There are thousands of googlers/facebookers/twitters/applers/yahooers/nvidia’ers etc. etc. all trying to live in 10 miles by 5 miles wide. I pity the “normal” lawyers, doctors, teachers, nurses and everyone else trying to live there and own a home.
The smart people leave that place. Chicago is somewhat affordable for a larger city- but not within the realm of Austin or some other places. And it’s more expensive (still) than it used to be in the 1980s/1990s (but so is practically everywhere until the housing bust finishes grinding at prices.)
Tons of people are renting and waiting for the market to “come back.” They are doubling down in real estate (even 20-somethings who can’t sell the original 1-bedroom condo.)
The parents are telling them, “why don’t you just rent it out for a few years and then sell? Why take a loss now?” And sometimes the parents are giving them the $50k to put down on the second property (or else the bank wouldn’t give them the second loan).
So now they own the house in the burbs AND the 1 or 2-bedroom condo in the city which is still declining in price. Oh- but it will “rebound” in a few years.
Meanwhile, they have no other savings whatsoever. No retirement plan. No stocks or other assets. But they’ve got $500k in real estate!
“what are snooty prep schools?”
“they really don’t exist anymore”
Dan- you clearly haven’t ever experienced the east coast where Choate, Andover and the like still dominate the scene (not to mention the NYC prep schools like The Spence School.) They’re alive and well.
That makes sense Sabrina. The risky part of it all is will the assumption that the prices will rebound. There were definitely long periods of time in US history that housing was not a high return asset class. Also this is such a big country with so much mobility, it is hard to predict which cities will be hot in 20 years.
In Chicago, it has historically risen 1% to 3% a year. In the mid-1980s there was also about 5 to 6 years where there was virtually no appreciation (this was told to me from some longtime agents who had been in the business from the 1970s.)
So even if you’re assuming that this is the bottom and we’re starting to rebound.
If you bought the 1-bedroom condo for $200k and it is now “worth” $150k – how long until you get back to $200k?
Without screaming inflation (which would mean higher interest rates- by the way) you’re not getting back to $200k for a long, long time.
So why do the parents all counsel the kids to “hold onto” the asset? People still seem to believe that the last decade was “normal” in real estate- when it was the only decade that was abnormal. And it’s not coming back.
The best part is anyone that doubles down on real estate isn’t going to get any government assistance at all for that second property should it enter distress.
Doubling down on real estate boggles my mind. It seems like the dumbest possible thing that one could do. Burned once, okay I can see that–bad luck.
But to assume: well real estate was priced at X in 2007 and now it’s priced at X-30% so it must be a deal! Seems like a financial decision only a complete idiot could arrive at.
The only rational doubling down strategy that I see is those that _know_ their first residence is going into foreclosure but they want to own a different property before the foreclosure shows up on their credit report. Completely unethical IMO but I try not to get on soapboxes here on CC (unlike clio).
Bob- these aren’t people who are buying the second property because they know they’re letting the first one go.
Gary has talked about this phenomena as well. There are a lot of people who otherwise would be trapped in their condos who are simply choosing to rent them out AND buying the second property with the thought that they can “wait” for it to come back. And, like I said, it’s usually the baby boomer parents who are encouraging this so they don’t “lose” anything. Many times the rent on the first property isn’t even covering the expenses.
“so they don’t “lose” anything.”
People refuse to see realized and unrealized losses as the same thing. Expensive error.
I actually know someone who is in a similar situation with the one property they own. They bought at the peak when times were better. They’ve been underemployed for a number of years and their current mortgage balance is about what the property is now worth (their downpayment and all equity is essentially gone).
Instead of selling the place and downsizing to an apartment that is better inline with their more recent, lower income, instead they’re borrowing each month from the bank of mom & pop to coverage the shortage and their parents are complicit in this because they think it will come back.
It might take another five years before many really stubborn people realize it isn’t bouncing back. I’m pretty sure this person’s parent’s 401ks will be non-existent by then if this keeps up.
People have varying degrees of solvency and varying degrees of stubbornness so this will likely be a slow decline for year after year. Death by a thousand cuts.
“Tons of people are renting and waiting for the market to “come back.” They are doubling down in real estate (even 20-somethings who can’t sell the original 1-bedroom condo.)
The parents are telling them, “why don’t you just rent it out for a few years and then sell? Why take a loss now?” And sometimes the parents are giving them the $50k to put down on the second property (or else the bank wouldn’t give them the second loan).”
Well, this would be us kind of. I am hesistant to post this because I don’t want to be attacked or criticized for what we are doing.
My husband bought a 1br in South Loop in 2007 before we were married (or even considered getting married yet). Yeah, sucks – of course he wishes he could go back and NOT do that. But, as Sabrina said – there is/was a huge guidance from parents about the great investment that real estate was. PS – Our unit is NOT a CMK building.
Anyway, now we’re married (with a dog) and hoping to have kids within the next 1-2 years. We need more than a 700sqft 1 br, so we’re moving. But we’re not going to sell his 1br – we’re going to rent it out (I know, Sabrina is probably shaking her head). Other units in our building have commanded enough rent to cover our full mortgage + assessment amount. We are hoping in 10 years when it’s paid off, it still will and it will become an investment property for us or an in-town for my out-of-town family.
But we have the additional income now to comfortably support this if it is vacant plus an additional rent/mortgage payment with wiggle room. We do have liquid assets in retirement and stock. Why should we put our life on hold and not get/buy what we want now that we no longer ‘fit’ in our 1br? (Oh gosh, I think I’m drinking the Clio kool-aid!!) And Sabrina’s right – both sets of our parents have definitely discouraged us from selling our place, especially with my dad being a landlord before.
Anyway, what would you do? Rent a bigger plaace? Buy a short sale/foreclosure (we have our eye on some 3br in LP and Bucktown for around 350-400k)? Stay put until we have absolutely have to move – we really don’t want to do this – we want room to entertain, easier accessibility to take our dog out and room for guests to stay…
Go easy on me!
http://www.princeton.edu/~kahneman/docs/Publications/prospect_theory.pdf
““so they don’t “lose” anything.”
People refuse to see realized and unrealized losses as the same thing. Expensive error.”
whitecity –
First of all, you need to have more confidence in your decision. It is probably the best. If you are able to cover your expenses with rent, what is the harm? Prices are unlikely to fall much further and WILL start rising (slowly – but surely). Even if you have to pay a few hundred dollars a month to cover costs, you will be better off renting the unit out (think about it – even if you lose 2000/year for 10 years – that is only 20k – (and believe me – you won’t be losing 2000/year in the coming years because rents are increasing and your mortgage will be paid down) – this is a MUCH better scenario than selling at a loss now because the chances are that your condo will have increased by MUCH more than 20k in 10 years. It really is a no-brainer.
yes clio, you are the no brainer
losing money for 10 years is retarded
People here don’t realize the money you can make from renting your units out because they are all relatively new owners with high mortgage payments. Once you either pay off the mortgage or you get to the point where half of your mortgage payment is principal you will see how the renters are actually paying off your mortgage and, in 20-30 years, you will have a paid off unit without putting much money or effort into it. That paid off unit, in turn will have also increased in value. Again, it is a no-brainer – but you have to have staying power and not be such a nervous nellie.
I did this with all of my investment properties (either paid them off entirely or paid off what I needed to break even with rent). Now, they are all on auto pilot. The ones that I have not paid off – are being paid off by the rent I receive. In 15 years, all of them will be paid off (thanks to the renters) and will be worth much more money than I put into them (even if the market doesn’t go up).
WhiteCity- thanks for posting your predicament.
You will get 1-3% a year (once we hit bottom) in a good case scenario. But don’t forget you’ll have to pay any special assessments in your building and upkeep on the unit including new appliances, painting, new carpeting etc.
There are a couple of questions I have.
Do you have enough of a downpayment (and income) for a bank to give you a second loan? I have seen some people who haven’t been able to swing this (unless they had another $100k sitting around.) But, of course, it depends on the cost of the second property.
And if you DO have enough of a downpayment and significant income- why not just sell it for a loss (even if you have to come to the table with cash) and be done with it? You likely will then be able to buy a more expensive property on the new property (no other mortgage hanging around). Or you could rent a few years in a bigger property and build up your savings.
It’s not a good scenario- this is true. There are thousands of condo buyers like yourselves out there. Many are finding out the 1-bedroom condo just doesn’t work after marriage.
But I am reminded of that Crain’s article from a year or two ago about those who bought condos in the John Hancock orginally and lived through the “bloodbath” of the early 1980s condo bust. They still weren’t at breakeven after 10 years. It took many 15 years.
Even if you pay off the condo- what could your money have gone into that would give you a better return over the course of that decade or more?
That’s what you have to ask yourself.
“That paid off unit, in turn will have also increased in value. Again, it is a no-brainer.”
It’s not a no-brainer. What else could they do with the money? Lots of other assets have been much better performers than real estate in the last 100 years. And real estate is likely to really underperform (if history is any guide) over the next 20 to 30 years. Why would you double down in a bear market? There are plenty of bulls in other asset classes right now where you’ll likely make way more money.
“(I know, Sabrina is probably shaking her head). Other units in our building have commanded enough rent to cover our full mortgage + assessment amount. We are hoping in 10 years when it’s paid off, it still will and it will become an investment property for us or an in-town for my out-of-town family.”
The point of head shaking was in 2007 when he bought. You’re beyond it now and trying to make the best of the situation, so no head shaking (I reserve that for current buyers).
But are you serious that you have a 15-year mortgage on the place (inferred from your “10 years when it’s paid off” and the rent covers your full FIFTEEN YEAR mortgage payment, taxes & assessment amounts for this?
If that’s the case it sounds like a pretty good investment. But again it depends on how you’re going to pay it off in 10 years, I am assuming that is a 15 year mortgage.
“We are hoping in 10 years when it’s paid off”
If you’re paying it off in 10 years using the rental income that covers your expenses and you’re not putting any extra payments on that mortgage it’s a good investment. I don’t know why your husband wishes he did not do that as this is a good investment, or I have the facts wrong.
“Our unit is NOT a CMK building.”
CMK buildings get much of the coverage here because there’s so many of them. But there are other buildings showing significant distress in this area as well: take a look at 2000 S Michigan for instance. There are also other buildings seemingly showing NO financial distress at all (1235 S Prairie comes to mind) with NO budge on ask prices over the past few years, so I guess it all depends.
If you’re in a non-CMK building- why not just sell then? Some of them are holding up better than others. Sure- you’re going to lose some money (who isn’t?) but it might not be as bad as you think.
“Anyway, what would you do? Rent a bigger plaace? Buy a short sale/foreclosure (we have our eye on some 3br in LP and Bucktown for around 350-400k)? Stay put until we have absolutely have to move – we really don’t want to do this – we want room to entertain, easier accessibility to take our dog out and room for guests to stay…”
Since I believe interest rates are going to rise sharply- I think if someone is going to sell they should do so as soon as possible (and not wait a few years.) It’s only going to get more difficult to buy- not easier (with rising interest rates, re-tooling of Freddie/Fannie, possible elimination of mortgage deduction).
Does anyone think we’ll see 5% mortgage rates again in our lifetimes?
I tell people to sell- while they still can.
“If you’re in a non-CMK building- why not just sell then? Some of them are holding up better than others. Sure- you’re going to lose some money (who isn’t?) but it might not be as bad as you think.”
Her statements don’t seem to add up to me. I am very skeptical that they are receiving rent from a condo in the South Loop that covers their 15 year mortgage, assessments & taxes. I suspect it’s a 30-year mortgage that’s barely cash-flowing and that’s a BIG difference.
A friend of mine just got a great deal on a unit in the South Loop. While rents are higher than north side hoods north of Old Town I doubt they cover 2007 valuations on a cash-flow basis on a 15 year mortgage (even with 20% down, which in 2007 were the minority of purchases).
If what she said is true she is looking at this all wrong and should congratulate her fiance on being a very savvy investor. Probably one of a handful in South Loop in 2007.
‘homedelete on April 18th, 2011 at 1:41 pm
I was just in court today…’
Seriously man, you post like every 20 minutes, when do find the time to make it to court? I mean, here it is late at night, I’ve worked all day, and I’m finally winding down in my OH hotel room after a late client dinner… and I have to do it all over again tomorrow… and the day after that. But then again, the house in LP didn’t pay for itself.
Seems to me that there are lots of deep Oprah advice giving/bottom calling/fed predicting/undergrad business class bullet-point regurgitating 30 somethings here with plenty of work day time on their hands… but no real skin in the real estate game. Hmmmm, any correlation? I’m just saying.
lol sabrina hate CMK much?
sheesh its not THAT bad
Thanks for chiming in, guys.
Bob – I kind of ramble when I type, sorry if it was confusing.
We haven’t YET bought a new place OR rented our current place out. I’m just saying what I would HOPE would happen if we did decide to rent it & purchase another (again that’s best case scenario….which is why I said we are playing it safe in assuring that we have enough add’l income to cover the mortgage payment should it be vacant for a few months). Also, yes – that would be a BEST case scenario if the rent covered mortgage, assessments, AND taxes. I just said mortgage & assessments. 1br in our building today (approx 30% are rental) get around #1300-$1400 a month plus $100 for indoor parking. Our mortgage amount remaining (recently refi’d to 5.5%) is about $175k – might be a little less need to check the statement. My husband put 25% down when he purchased.
Sabrina, we have about $80k (yes, some was from a family estate sale and the rest is our anual bonus money for the past 3+ years) for a down payment and are approved for conventional mortgage ($417k). However, we are NOT planning on sinkiing $80k into our down payment. I’m thinking maybe half of that to get us to at least a 10%-15%.
“Does anyone think we’ll see 5% mortgage rates again in our lifetimes?
I tell people to sell- while they still can.”
Well, hmmm – does that mean we should also BUY while we still can? Another worry I have. If we sit and rent, are we going to then be in a bad position if interest rates rise and the same house today costs xx more even though the price hasn’t changed?
“Seems to me that there are lots of deep Oprah advice giving”
Get it right it’s Suzie Orman advice giving.
“Well, hmmm – does that mean we should also BUY while we still can? Another worry I have. If we sit and rent, are we going to then be in a bad position if interest rates rise and the same house today costs xx more even though the price hasn’t changed?”
I think you guys need to do some soul searching for what the next move is. You have 80k for a DP which is significant and gives you a lot of options.
“We haven’t YET bought a new place OR rented our current place out.”
The risk is if you buy another place in the city now you own two places in the city, which you might have to own for awhile. Are you _sure_ you want to stay in the city, even with perhaps raising kids? Or if not are you comfortable with being a landlord of a potentially not very profitable investment for multiple units for years on end? Think about this.
If you just want to move within the city to a different place with more space I’d say rent. If you’re going to have kids within the next 1-2 years maybe, maybe buy in a nice school district (there are a few I hear, talk to parents on here) but know that there may very well be better deals in the future and be prepared to deal with that.
Honestly in order of rank I’d: 1) stay in current place until kids come along, 2) if you have to move then rent the place out and move (you can try to sell but its rough out there), 3) move then buy another place in a nicer school district today.
If you stay in current place another ~6-7 years you’ll have more equity on the Sloop condo and able to move. Have more $ saved up for downpayment on a nice place either in the suburbs OR in a good school district in the city and you’ll have a better idea of the market and whether you want to raise your kid(s) in an urban or suburban area.
You shouldn’t be in a rush: a lot of people get the itch to hightail it somewhere once kids come along but really is it a concern if they aren’t of school age yet? No.
In short I don’t see Chicago real estate rebounding above today’s values within the next 6-7 years. Actually I think it will be lower (in real terms).
Jay: have you seen court calls lately? You’ll be lucky if you get out of there in an hour. That’s why God invented blackberries. what else is there to do, listen to the judge set briefing schedules?
I know plenty of people with skin in the game who lost it all. I could care less about your house in lincoln park. That doesn’t impress me.
Jay.. I would think owning a house and not owning one are positions of equal forward risk… actually the renter has more. So if you’re breathing, you have skin in the game.
We’re sending our daughter to a small Lutheran school in Lake View – about $7K after all the add-ons for lunch, piano lessons, clothes, etc.
Happy to pay it. I like the fact there’s some ethical/moral aspect to the education, my wife & I aren’t church-goers, but both went to lutheran grade schools and turned out fine. We only have one kid, and the daycare is almost $12K, so after accounting for summer it will be a break-even, or we’ll be a bit ahead.
I’d like to get her in a public high school if it’s a good one, but private options are fine as well.
“I have a question for you school gurus. I was googling tuition for schools in Chicago. It seems private schools have tuitions below 18K a year (even ones without religious affiliations). So a family with 2 kids would pay less than 40K in tuition a year. This is not too bad is it (for families with 2 incomes)? So I am a little bit surprised why everyone thinks people have to move to the suburbs to afford kids. Am I missing something?”
“I know plenty of people with skin in the game who lost it all. I could care less about your house in lincoln park. That doesn’t impress me.”
HD: How much more could you care less about his house in LP? I kid, I kid.
No but seriously: The folks you know with skin in the game, the ones who “lost it all,” did they have houses in LP?
I’d say that the Corcoran quote from this morning’s thread sums it all up: everybody wants what everybody wants, and nobody wants what nobody wants.
“I’d say that the Corcoran quote from this morning’s thread sums it all up: everybody wants what everybody wants, and nobody wants what nobody wants.”
That is some Kantian syllogistic logic right there. Deep, brau..deep.
“lol sabrina hate CMK much?”
Actually- Sonies- no I don’t. I like many of their buildings. But distress sales are plentiful in the CMK buildings in the south loop so if you’re a non-distress seller looking to sell in one of those buildings, it’s going to be very difficult.
But it’s not as if other buildings in the south loop aren’t also seeing a lot of distress sales as well. The south loop was the “hottest” neighborhood in the nation in 2006-2007 (whichever year it was when it won that designation) and it’s getting hit harder in the bust because of the inventory build-up.