Update: 850 W. Diversey in Lakeview Sells
We chattered about 850 W. Diversey in Lakeview in April 2008.
Here’s the info:
Unit #3: 2 bedrooms, 2 baths, 1500 square feet
- Sold in March 2003 for $325,500
- Sold in July 2004 for $355,000
- Was listed for $424,900 (parking included)
- Assessments of $141 a month
It was in the “hot” category of being priced under $450,000 AND it had parking.
Thanks to the tipster who sent me the sales info on this unit.
Unit #3:
- Total days on the market: 142
- Last listed at $424,900
- Closed in April 2008 for $412,000
Have to love to see appreciation in old Lincoln park. Even on the busy less attractive streets.
So, Stevo, one down, 19 to go. You’re not exactly rushing that list of gainers to us.
Many people here thought this wouldn’t sell near the askingprice because it was on the busy street. But apparently, a buyer thought otherwise.
For everyone out there wondering, there ARE units selling. Some that we’ve chattered about recently have gone under contract. As soon as I get some closing prices, I’ll post about them.
When the news is good there are no posts, but when the news is bad the post pile up.
Anon – My statement was right on but do your own research.
valasko said “When the news is good there are no posts, but when the news is bad the post pile up.”
You have that mixed up. The inevitable return to affordability is good news. However, most posters here still seem to have some pity for a foolish buyer like this who apparently is deluded enough to believe that “it is a good time to buy,” “real estate always goes up” and “its different here.” Just don’t count me among them.
Like I have said many times before, there will be knife-catchers all the way down. I mean, what else can explain the many buyers still willing to close on their new downtown condo purchases in spite of the obvious?
G – You rock. Love your posts, but, I think everything is bad in Real estate, but it is not the end of the world.
PS: Good “news'” is only marketing spin….
G- Just stirring the pot, I am fairly bearish on real estate, but most of the people on this site are praying for realestate to go down to unrealistic levels. They think that this is they way to afford a property that is out of there price range. Affortablility is buying a place where your mortgage is 2-2.5x gross salary, not hoping that your 500k deam house goes down to 200k which is what you can afford.
“The inevitable return to affordability is good news.”
G, it’s good news if the market levels off for 3 or so years to let incomes catch up with prices (we are about halfway back to normal based on that metric), but it’s not good if we have the bottom drop out of housing. That would cause a recession which would lead to lower wages and even let “affordability.”
D
G, One other thing…. your favorite line regarding knife-catchers.
A knife catcher in economics is a term for a purchaser of a good at a point when the price of that good is declining sharply in value. I don’t beleive there is any proof that Chicago housing is declining sharply in value.
Valasko,
The Case-Shiller index for Chicagoland is declined around 2% per month in each of the three months in the first quarter of 2008. This was an acceleration from a 1% decline per month for each of the last three months of 2007 that made up the first quarter.
2% may not be sharply in value when you compare it to other asset classes such as stocks, consider how heavily leveraged people are in real estate vs. other asset classes. The higher the leverage the more amplified your gains AND losses are. The ‘average’ purchaser who put 5% down on a home or condo around Christmas was underwater by St. Patty’s day.
corrections:
“This was an acceleration…that made up the fourth quarter”
This is a huge unit and it’s interesting and attractive. Being on a busy street could just be a plus, because many people want the “buzz” and bustle of a true urban nabe. If they wanted quiet, they might go to the burbs, which sort of have the edge in that department.
The price sounds like it is not too far out of line. The features of this unit really are exceptional.
Having said all that, I’ll still say I hope the prices in general drop a little further, and I don’t mean harm to those who bought at the highs of the decade. It’s just that I want to buy something comparable to my rental at a price that relates to the rent I’m paying. I don’t feel feel that paying a substantial premium over my rent for a place equal or inferior to what I now enjoy very cheaply, just to “own” the place, represents an improvement in my life or financial prospects.
“When the news is good there are no posts, but when the news is bad the post pile up.”
I got something to say…check out them mortgage rates today:
http://bankrate.com/
DB said “That would cause a recession which would lead to lower wages and even let “affordability.”
Lower real wages are already happening and the process you mention is underway.
Valasko said, “I don’t beleive there is any proof that Chicago housing is declining sharply in value.”
I think you just answered my question of “what else can explain the many buyers still willing to close on their new downtown condo purchases in spite of the obvious?”
“G on June 13th, 2008 at 5:09 am
Valasko said, “I don’t beleive there is any proof that Chicago housing is declining sharply in value.”
I think you just answered my question of “what else can explain the many buyers still willing to close on their new downtown condo purchases in spite of the obvious?””
That’s awesome!
G – Let’s all run for the hills. Housing is crashing, wages are declining, and the Russians are here.
Who ever would have thought that a US dollar could buy you nothing in a UK Sterling store. At least it burns nicely and can be used for scratch paper.
That’s awesome Steven!. Go get ’em!
S***** H*itman said
“G – Let’s all run for the hills. Housing is crashing, wages are declining, and the Russians are here.”
You really believe that foreigners won’t SAVE the market?
You can’t save this market. The return to affordability is inevitable.
a friend of mine just bought this place. she absolutely wanted to live on a busy street so she could step out of her front door and be in the middle of things. its a great place from what I can tell. any thoughts on whether she paid too much?
Stevo:
“My statement was right on but do your own research.”
You said that you could show us 5 winners for every loser. We showed you 5 losers in the $2mm+ SFR 60614 market (and two winners) and you give nothing. We show 5 (or more–don’t remember) losers in 60614 condos, Sabrina gives us one winner, you say “I’m not going to play my own game”.
I don’t want research, I want you to put some facts behinod your bluster.
The unit went under contract in summer 2007 after 13 days on the market – a very short marketing period. Maybe it was a good deal at the time.
At the very least the 2007 buyers put in new stainless appliances and a beige marble or ceramic kitchen backsplash (as opposed to purple). They did some painting in more neutral tones.
Shows what some clever painting and relatively inexpensive upgrades can do.
G… again, what’s up with the personal attacks? Are you really that insecure that you need to “creatively” masked out Steve’s name to create a childish remark?
I think the lowest this could’ve sold for in the next few months (if this were to last) would be around 400ishK. Hence, I believe 412K is a decent but slightly high price compared to everything i’ve seen in 60614 for this type of unit (275/sf). The big price appreciation, in my opinion, is more due to the very cheap price sold in ’04 (maybe the finishes are very poor to explain the low cost per sf?)
Jim, do you even realize how hypocritical your last comment was?
G…
hypocritical? perhaps… sorry if I have offended you. I still think it was childish.
I do think you have a lot of good points along with a lot of posters here. I may disagree with some things, but that’s just part of the discussion.
I just don’t understand why you need to resort to name calling like that. I think you and others have already make the point that Steve has not backed up his own claims with hard facts.
Sabrina,
You say “many people here” thought it was overpriced. I just reread the original post, and I got no such impression. Sure, there was the usual snark, but as far as I could see no one said anything about it being badly overpriced. In fact, I would say most ppl on this site (despite what certain complainer types with initials like SH and DB say about what “90%” of the ppl on this site believe) think that neighborhoods like LV and LP will not suffer as badly as other neighborhoods. Not as much run-up in prices, so, if priced reasonably (that is, at about 5% appreciation per year), won’t get hammered. Sure, if people badly overpaid in 2006, and then are looking for 50% appreciation two years later on top of that, yeah, they’ll get nailed. And a few of the units you highlight are just such cases. But this one?
The sellers priced it within reasonable striking distance of about a 5% appreciation rate from the last purchase price 3 years before, which itself seemed like a pretty reasonable price. And that’s what they got: 3% below their asking. I say, “Good job, sellers. Would that others heeded your lesson.”
“The sellers priced it within reasonable striking distance of about a 5% appreciation rate from the last purchase price 3 years before, which itself seemed like a pretty reasonable price. And that’s what they got: 3% below their asking. I say, “Good job, sellers. Would that others heeded your lesson.”
Would it make a difference if I told you that the this place sold for $261,500 new in 1998? $412,000 – $262,000 = $150,000 / $262,000 = .057% x 10 years = 5.7% apprection a year.
Following the same trajectory and your logic, 5.0% appreciation a year means that 6 years from now, in 2014, the house will be worth $535,000.
??????????? I do these simple calculations to show that the arbitrary 5% per year may have some basis in history but past history does not equal future performance.
hd:
I think your math is wrong–isn’t it 4.7%/year for ten years? 1.047^10=1.58 1.58*262=413.96. Makes your point stronger.
A more reasonable (and more historically accurate) 3.5%/year gets one to $369k from the $262k in 1998.
homedelete — nice work on those “simple” calculations. you’re clearly a real expert when it comes to asset appreciation
No my math is fine you don’t compound interest when you do real estate transactions.
You take the $ amount of the apprecation and compare it to the original selling price i.e.
$100,000 in ’98 to $200,000 in ’08 = 100% appreciation divided by the number of years = 10 = 10% a year
$100,000 in ’98 to $150,000 in ’08 = 50% appreciation divided by 10 years = 5% a year.
$100,000 in ’98 to $300,000 in ’08 = 200% appreciation divided by 10 years = 20% a year.
But LV and LP have had more like 5% appreciation long term, not 3.5%. And homedelete, of course you compound the interest. Where else would it go?
I’ll be honest; I cannot find a definitive source that says you use simple or compound when calculating appreciation with real estate. I’ve always used simple but if someone can show me a source that says to use compound then I’ll admit I’m wrong and change my ways. I figured that real estate doesn’t produce interest like a bank account does so there’s no reason to reinvest imaginary gains. It’s like a stock that you make a 100% return on at 10% a year; unless the stock pays dividends that are reinvested, its a simple calculation.
Compound would make my argument stronger but like I said I’ve always used simple and no one’s ever questioned it but that doesn’t necessarily mean that I am using the correct calcuation.
“Lower real wages are already happening and the process you mention is underway.”
Actually, through the first quarter median wages were up enough to offset the increase in unemployment. Anyways, why would you be applauding lower wages and a recession? You are like the Democrats routing for us to lose in Iraq, you are so emotionally invested in a housing decline that you can’t hear any contrary evidence. Pathetic!
Homedelete,
Of course you use compounded rates! If you invest $100k for ten years at 10%, compounded annually, you would have about $259k after a decade. To double your money over a decade, you’d need about 7.2% annual appreciation. The “rule of seventy-two” is a good rule of thumb to use when estimating appreciation rates. Simply divide 72 by the interest rate and that tells you how many years it will take to double. So 72/10 equals 7.2 years to double.
D
But what’s compounding about imaginary paper real estate gains? If I invest $100,000 in a bank account the bank pays me real interest and if I choose to reinvest that interest then I get the benefits of compound interest. But with real estate it’s not like it pays you interest so what are you really reinvesting? In a sense you’re reinvesting the prior year’s appreciation and compounding it. You can’t really figure the compounding gains until you realize the sale while with a bank account (or an IRS lien) the amount compounds daily and you have a liquid number that doesn’t require a reverse calcuation.
I don’t know it just doesn’t sound right to me but like I said show me a reliable source (other than your word) that says I’m doing it wrong and I’ll change.
I’m sorry, this isn’t even worth discussing, you obviously don’t know the first thing about finance.
D
re: Interest: I was going to write a long response, then I wrote something snarky–now this: remember this isn’t a cap rate calculation, it’s an ROI, which is calculated as compounding with stocks, too. But that’s my last on this.
k–“But LV and LP have had more like 5% appreciation long term, not 3.5%.”
Exclude the period after 2002. Don’t cherry pick time periods. Adjust for high inflation from 1970-1984. Is the real gain more than about 1 to 1.5%/year? Inflation over the past decade has been about 2%–thus, 3.5% compounded is actually pretty generous.
Hey deacon–we agree about at least one thing.
Anon: I agree with you about the appreciation of LV and LP. Remember, LV wasn’t exactly trendy in the 1980s. And the Chicago market, as a whole, was flat for a big portion of the 1980s.
Housing appreciation, even in the best neighborhoods, is far less than what most people think it is because their perception has been skewed by the returns of the last few years (same when people thought they could get 18% every year in the stock market because of the incredible bull run of the 1980s and 1990s.)
Kenworthey: No area of real estate has sustainable 5% appreciation rates long term. That would mean property increases 332% every 30 years. In the long-run there will be reversion to the mean.
I suppose we could differ in our definition of long-term. But if you think Lincoln Park and Lakeview are going to be 10% higher two years from now be my guest and buy.
At the end of the day LP and LV have to be (somewhat) competitive with surrounding areas. This doesn’t mean they will have the same lower $/sf as Bucktown/Wicker Park/Uptown, but rather the disparity shouldn’t be too great or the substitution effect will narrow this.
Anon, I was not adjusting for inflation because I, like the seller, was discussing nominal terms, not real dollars. But yeah, I was just estimating on the LP/LV. My understanding is that where usual long term appreciation on real estate is about 1% above inflation or about 4% (which makes sense in this country as an average: inflation at 3% and population growth at 1%), some areas obviously do better than that long term because they have more people wanting to move there (again long term) above and beyond simply average population growth. I was giving LV/LP a 1% bonus for that desirability, which makes 5%. And I’m pretty sure I’ve read here and there that that number is about right for steady, desirably areas (meaning excluding for general bubbles and extended housing recessions, which lower/raise all boats).
Anyway, what I was mostly trying to say is, the unit being discussed in this post? Maybe a bit overvalued by the new buyer, but not by a ton. We’ve seen occasional (admittedly very occasional) knife catchers on this board paying 25% and more above 2005 prices. Relative to that, this seller wasn’t being way too greedy, and this buyer wasn’t being way too naive.
As for the compounding issue, I’m sure homedelete was confused because I was using the wrong term: I said “interest” when what I meant was “appreciation.” At the same time, for someone who claims to working in the industry as homedelete does, he/she is making pretty damn basic mistakes. Not knowing how to calculate rate of return on investment is one, but he/she also was conflating “real” and “nominal” in an earlier post, and a seeming misunderstanding of how to adjust for inflation/estimate what a return to mean would be in another post. In short, even though I doubt anyone was taking very seriously homedelete’s prediction of a “50%” drop in prices… I can’t help but wonder exactly what screwed up calculus he/she is using to get there. (Likely, none, and just relying on a “feeling,” which is just as indefensible for a bear as a bull.)
“(Likely, none, and just relying on a “feeling,” which is just as indefensible for a bear as a bull.)”
In total agreement…
“You can’t save this market. The return to affordability is inevitable.”
I just want to make a point about “afforability” that G/Homedelete (same person) doesn’t seem to understand- Chicago is dirt cheap compared to many other major cities. San Fran, NYC, Boston and others have all sustained median income/price ratio’s SIGNIFICANTLY above Chicago’s for decades. Even if average incomes are a bit higher there, the median pricing in San Fran in much much higher vs. Chicago than incomes are. My point is that Chicago is already extremely “affordable.” Chicago has an inventory overhang and too much short-term supply, not an affordibility issue. That’s why homes are more likely to move sideways for several years than they are to collapse in a market like this- people simply aren’t as stretched here are they are in, say, San Diego, particularly when you are talking about downtown/northside.
D
Deaconblue,
Never though of it but I believe your right- G and Homedelete are the same person. I wouldn’t waste my time replying to their comments.
DB, you cannot in sincerity believe that G and homedelete are the same person. G may be cranky, but he is incredibly well-informed, and backs up his claims with solid analysis and evidence.
“G/Homedelete (same person) ”
First of all, this is so not true. I personally think that G’s comments are about 10x more witty and scathing as my comments. I don’t know who G is but ask Sabrina and she’ll tell you that our posts come from different IP addresses.
“I’m sorry, this isn’t even worth discussing, you obviously don’t know the first thing about finance.
D”
I don’t have an MBA but I have a JD. I think we’re all confusing terms here. We should be using the the concepts of ‘compound annual growth rates’ which is what you are doing and I’ll use ‘average annual growth rates’ for my calculations. Both are correct.
Everyone here who claims to be an expert should spend five minutes and read the Return on Investment section of Wikipedia so we can get our terms correct so we can make sure we’re discussing the same thing.
Finally, I am a housing bear. I see things on a daily basis that many of you don’t. I’m not special but it’s just the nature of my job. I see the tens of thousands foreclosures that are causing the collapse of the real estate market. Foreclosures have made some people in my office very rich. I see the REO files pile up on the desk of the person in the next office over. I see the finances of the debtors who stretched themselves beyond their means to buy a home. Sometimes I help them file bankruptcy to save the house or in some cases to help them lose the albatross around their neck. So when you sit here and tell me that Chicago is affordable I ask you to tell that to the average household of our city that makes $60-$70k per year. I want you to look the average person in Chicago in the eye and tell them that there’s nothing wrong with the real estate market and say we’re near the bottom. Tell them that they just don’t make enough money to buy a home in the area because you think the real estate market has bottomed out. Their finances couldn’t afford housing prices during the boom and they sure as hell can’t afford housing even withe 10% Case-Shiller price drop. The business world has people like Robert Toll saying the real estate market is in a DEPRESSION and he knows more about real estate than all of us combined. What’s going on right now in real estate is unprecedented – I repeat – Unprecedented. I know this is the internet and people have a right to their opinions but some of you just plain don’t know what the heck you’re talking about.
I encourage many of you read Lucid Realty’s report on Chicago appreciation (complete with graphs.)
The Truth about Chicago Area Housing Prices
Gary has posted comments on this blog in the past.
From January 1987 to December 1998 price appreciation was 3.7% per year in Chicago. (This was before the boom, obviously.) From 2001-2006 there was five year appreciation of 51% (for the entire time period.)
“G/Homedelete (same person) ”
“First of all, this is so not true. I personally think that G’s comments are about 10x more witty and scathing as my comments. I don’t know who G is but ask Sabrina and she’ll tell you that our posts come from different IP addresses.”
Response:
Correct.
G and homedelete are not the same person.
And the last thing, if real estate is so affordable, why are there record number of foreclosures in Cook County; You said that Chicago is more affordable then the coasts yet we have the same problems as them? check out this link:
chicagobusiness.com/cgi-bin/news.pl?id=28177 and explain this to me. Explain to me in your expert opinion why this is happening if housing is so damn affordable??? All I hear is “things are different here” when all the evidence to the contrary is that things aren’t different here. This was pretty much a nationwide bubble and it’s going to be a nationwide crash, LP and LV included.
Homedelete – The foreclosures are due to people over paying in less desirable neighborhoods. It is also do to people refinancing at prices that far exceeded actual housing levels. Fraud (some way or another) probably caused 30% of the foreclosures out there.
“Fraud (some way or another) probably caused 30% of the foreclosures out there.” Is that your opinion based upon your experience with fraudulent deals or a figure you pulled out of thin area?
homedelete — an example of why simple interest can’t be right:
Assume 10% per year *simple* appreciation.
Case A: I buy a property for $100K. In 10 years, it should be worth $200K.
Case B: I buy a property for $100K. In 5 years, I sell to my brother for the fair value of $150K. In 5 more years, it should be worth $225K.
It can’t be correct that these final values are different.
If appreciation is calculated like compound interest, the two final numbers will match. (10% compound appreciation will result in a value of $259K, and I’d sell to my brother at $161K. $161K*1.61 = $259K)
Have you ever been to the 28th floor of the Daley Center? That’s where all the Cook County foreclosures are heard. I am there often enough but I’m not one of the mill attorneys who are there every day. Did you know that the Clerk of the Circuit Court used to assign foreclosures to the general Chancery Judge? Did you know that two years ago the Clerk of Court created a separate foreclosure division just to handle foreclosures? There are a number of judges that hear only foreclosures cases day in and day out, 5 days a week. Do you know that it takes months to get a motion date in the foreclosure section of the Chancery Courts because they are so backed up and far behind due to the sheer volume of foreclosures? There are literally 10’s of thousands of homes all over the county that are in foreclosure that haven’t even hit the REO market. Did you know that they call out the address of every property in the courtroom before the enter the default order? If you sat there for an afternoon you would hear addresses from all over Cook County, Barrrington, Inverness, Chicago, Evanston, Oak Park, Homewood, COuntry Club Hills, every suburb in the county. Have you ever been to the 8th floor to see the long lines of people standing in line to file their appearance (to purposely delay entry of the foreclosure judgment up to 6 months or longer in some cases) – its so naive to say the foreclosure crisis is because people overpaid in less desirable areas; it just shows that you really haven’t explored the various areas? have you ever seen a loan modification agreement presented by a bank to a guy in foreclosure? The one that crossed my desk the other day gave him a great deal – it wiped out $17k in interest, tacked on $5k in principal and lowered his interest to 4%. But the catch was that it was only for 3 years. Then the terms reset to the 6-month Libor + 4.05% – at a payment which I know based upon his finances will again put him in foreclosure – because that’s what got him there in the first place. he lives on the northside in a desirable northside neighborhood too.
I concede that point. Thank you for pointing that out.
“Kevin on June 13th, 2008 at 8:07 pm
homedelete — an example of why simple interest can’t be right:
Assume 10% per year *simple* appreciation.
Case A: I buy a property for $100K. In 10 years, it should be worth $200K.
Case B: I buy a property for $100K. In 5 years, I sell to my brother for the fair value of $150K. In 5 more years, it should be worth $225K.
It can’t be correct that these final values are different.
If appreciation is calculated like compound interest, the two final numbers will match. (10% compound appreciation will result in a value of $259K, and I’d sell to my brother at $161K. $161K*1.61 = $259K)”
Steve…. homedelete is correct foreclosures are happening in all areas at all income levels, no area is insulated from this problem.
People at all income levels took on more debt then they could afford, or signed a loan that they didn’t understand.
Yes simple interest is wrong for calculating total holding period return. This does NOT make anyone using it on here an idiot only not as informed. Simple interest is just as good as TPHR/compound interest for shorter term investments. If you’re not a millionaire with mutual funds or a business owner chances are the differences won’t matter in your lifetime. This is an error it would take HD all of 10-30 minutes of learning to rectify. Us MBA types lets take off our arrogant caps and admit its NOT A BIG DEAL (for an intelligent person to learn).
a lot of people took on more debt than they could afford, such as your typical over-HELOC’d owner, but, another piece of the puzzle is that people were trying to do what they’ve always done – buy housing. The 51% increase quoted by Sabrina (quoting lucid realty quoting Case-Shiller) really put a strain on household finances. Then factor in the other necessities of which have all increased costs such as health insurance, gas, food, education, and the like, and for many people there isn’t any money left at the end of the month.
Well, I’ve been posting a little much lately, I probably overreacted a little when someone says Chicago is affordable because it’s not as expensive as San Diego. If I said ‘housing is affordable’ to a home debtor (not investor or speculator) in foreclosure I would probably be shot or decked in the face. Go to the 28th floor of the Daley and listen to the stories of pro se defendants telling the judge like it is. Every story is different and some are more sympathetic than others but the common theme in every courtroom is that they couldn’t afford their housing payment, causing them to fall behind, and now they’re being foreclosed on. For the last 80 or so years foreclosure law was a stolid and quiet little niche area of law but today it’s one of the most active areas in the courthouse. Foreclosures used to happen because the debtor died and the estate couldn’t pay the housing and no one bothered to sell it; or someone got really sick and was out of work for a long time; divorce used to be near the top of the list. Today it’s “I cannot afford my mortgage payment.” Blaming the debtor for paying too much is only half the problem – the reason they borrowed so too much was to pay in the first place. Its like the time old dilemma of which came first, the higher housing prices or the borrower taking out too much money???
I think I’ve posted too much – I’m starting to wear myself out – have a good weekend everyone, you’ll hear from homedelete again sometime next week.
I don’t know why foreclosure’s are so high in this area, but it’s not because housing prices are astronomical here. If you look at the greater Chicago area, the median home price is one of the lowest of any major city. For example, the median family income in Chicago (based on wikipedia) is about $47,000, while in San Fran it’s $67,000. However, the median home/condo in Chicago is only $283k while in San Fran it’s about $650k. Some cities carry permanently higher home/income ratio’s and Chicago’s is very low compared to others.
Anyways, as my post mentioned, I was particularly commenting on downtown Chicago. There are a lot of people making a lot of money in Chicago and downtown prices simply are not high at all compared to other cities. Any housing downturn will be because of an oversupply, not because folks can’t afford the condos. If you are waiting for a “return to affordability” then go out an buy now because Chicago is very affordable! As for your experiences at the foreclosure office, your view may be skewed if you are constantly seeing the worst case scenario. There are clearly people struggling out there, but it’s not because housing in Chicago is too expensive.
D
D- I think your trying to give homedelete a heart attach. Comparing different regions affortablity index is comparing apples with oranges I think the point or question that needs to answered in this. What was the chicago affortablity index in 1970,80,90 and 2000, has it gone up stayed the same or gone down. Maybe G who does a great job analyzing things can research this. Also there are other factors at work such as regional job growth, lack of land to develope, etc.
G and Homedelete you may not realize than I am on your side of the table in regards to home appreciation, valuation, etc. We differ on that you guys believe that it going to fall off a cliff. My personal opionion is that the housing market will continue a slight decline, stablize and will have a below average appreication rate for probably 15-20 years. Anyone who thinks that real estate appreciation is going back to pre-bubble levels forget it, we will probably not see those type of returns in our lifetime. If your looking for an investment vehicle look something other than housing. If you looking for a house to live in for a long period of time and not as a way to get rich, go ahead and buy that house.
No area is immune to the housing situation. My community (median household income of over $100,000) has foreclosures and short sales. For sale listings have doubled since last year.
I believe most of the blame should be placed on the federal government. Lax or non-existent regulations, a costly war, and unrealistically low interest rates added up to a perfect storm.
If you have a great apartment, keep on renting. Ask your parents to fund your 401K contribution so that you can take advantage of your employer’s match. Parents love the rate of return and know you cannot spend the money on frivolous matters. Or ask them to fund your Roth IRA (if you are below the income limits). 401Ks allow you to borrow money and Roth IRAs allow $10,000 to be used for for a down payment on a house after five years. Better to leave retirement funds alone, but also a wise way to save money.
What does the war have to do with housing prices? I blame the government for encouraging financial institutions to loan to people who they didn’t want to, just to increase the homeownership rate. I think the ratings agencies are the most to blame, if they hadn’t rated all the subprime as AAA, a lot of this debt would never have been issued.
D
War is good for the economy. Time to bomb Iran so we can pull out of this housing slump.
McCain 08
Blame what or who you want but in the end it is the human greed that at some level we all possess that causes the ebbs and flows.
It is the banks and the governments who you should blame. 100%
Homedelete:
What do you do for a living? Sabrina has my email. (I am a lawyer also.)
Hawk – You are kidding right?
An interesting thing in human behavior is people will spend more if they can borrow to purchase it….why do you thing all the retail stores promote borrowing, no money down type deals all the time. Same with housing. It used to be banks were conservative and looking out for their own interests since they held the loan on their books….once that ended the whole system got out of whack and the low income earner (or really those without any gainful employment for that matter) could get a mortgage….Combine that with rising prices due to this new housing “demand” and people could borrow at 6% and get a 12% return so they bought as much real estate as they could which caused a further shortage….the cyclical nature of housing is primarily due to the time delay for supply to increaase (planning a development, etc.). The whole thing got messed up and it will take 7 years to shake out. In real dollar terms, home prices will never return to the peak prices of this housing bubble.
Steven Heitman said “It is the banks and the governments who you should blame. 100%”
LMAO. Certainly can’t blame those sweet and innocent realtors and buyers, can we? Are they just victims?
I work at a smaller of the mid-sized firms and I do real estate, litigation, corporate and a bunch of other stuff. Yeah that’s pretty vague but I don’t really want to get any more specific on some random blog. But when I say that I have familiarity with trends in the real estate market I mean what I say.
Homedelete is an expert on $800 per month studio apratments. How is the studio market in and around Chicago?
LMAO. Certainly can’t blame those sweet and innocent realtors and buyers, can we? Are they just victims?
You can blame the buyers but then again people in general are not smart and will purchase all that the banks will lend them. I don’t understand why you would blame realtors. Our job is to help prospective buyers view all available listings. It is not our job to play finacial consultant and tell our clients how much of their monthly salary they should spend. We don’t tell people to buy homes, they come to us to gain access to the market.
The banks pushed undesirable risky loan programs on the public and sold them to Wall Street. This was not an accident but a very direct way (regardless of the known risk) to make a lot of money. It eventually got out of control and the bottom fell out. We are now all paying the consequesnces.
“Homedelete is an expert on $800 per month studio apratments. How is the studio market in and around Chicago?”
LMAO! How many sales have you closed this year Steven? With the 50% drop in sales on the north side over the last two years that means you and your Realtor(tm) friends are hurting real bad. Most of your mortgage broker buddies have already gone bust. The real estate paralegals in my office have already been retrained in other areas. Guys like you can’t send over the deals anymore. Have they repo’d your Lx330 yet, Stevie boy? Let me guess – things are different for you, right?
Not everyone who defaults on a mortgage is greedy or ill informed. Most defaults are due to illness, divorce, death, etc. The New York Times has chronicled many of these stories. Mortgage companies have foreclosed when payment was not received, but also because they claimed that payments were not received (when they actually were). Fees and more fees typically get added on (sometimes for tens of thousands of dollars), making it impossible to become current and homeowners quickly sink into a negative mortgage situation. The last five years has seen a steady increase in creative financing due to the unregulated area of mortgages and financial companies that lack the regulations banks have. Most of the greed is from the business side.
Homedelete – Sales are down in my areas (40% from 2005) but I am doing just fine. Thanks for being concerned. The slow down in sales only leave me to believe 1 thing… sales will be higher in 2009 and 2010. You see in Lakeview, Lincoln Park, and the Gold Coast, people only stay in their homes for 3 – 4 years before moving on and moving up. Most th epeople in these areas are young professionals and as they progress int heir lives (promotions, marriage, ect) they sell their condos and purchase something larger. You can’t keep a successful professional in a 2 bedroom 1100 sq ft condo for too long. They always move out and move up.
I am very excited for the next 2 years. As soon as the credit markets settle down business will be back to normal. You see the people buying in my areas can afford and should be able to qualify for financing. Right now it is even difficult for them which should not be the case. It will work itself out…
40% is a heck of drop, especially for supposedly immune areas like LV and LP….and if a 40% drop isn’t setting off sirens and raising red flags in your head, maybe you lay off the kool-aid down for a second and rethink this foolproof business plan of yours. Especially when you say, “Right now it is even difficult for (young professionals to get financing) which should not be the case.” The reason it’s difficult is because banks don’t pimp out alt-a option arms and no income verification loans anymore. Toxic loans enabled our friends like the 26 year old paralegal to buy $360,000 condos in Lincoln Square and now that toxic loans are gone until the next century the demand for those condos are gone.
“Sales are down in my areas (40% from 2005) but I am doing just fine. Thanks for being concerned. The slow down in sales only leave me to believe 1 thing… sales will be higher in 2009 and 2010. You see in Lakeview, Lincoln Park, and the Gold Coast, people only stay in their homes for 3 – 4 years before moving on and moving up. Most th epeople in these areas are young professionals and as they progress int heir lives (promotions, marriage, ect) they sell their condos and purchase something larger. You can’t keep a successful professional in a 2 bedroom 1100 sq ft condo for too long. They always move out and move up.
I am very excited for the next 2 years. As soon as the credit markets settle down business will be back to normal. You see the people buying in my areas can afford and should be able to qualify for financing. Right now it is even difficult for them which should not be the case. It will work itself out…”
Homedelete – I did not mention ATL-a style loans. I said very qualified people struggling to get financing is not right. People who are qualified for a loan should be able to get a loan. This is a short term credit crisis that will work itself out.
Others areas in the US have already dropped off significantly. Why do you think Chicago’s prime neighborhoods are so immune so far. Why do you think prices will not hold up as they have?
There is something to be said about the demand to live in certain areas of Chicago. That demand is what is helping our better neighborhoods hold up. It is not changing but only getting stronger.
Real estate is just like the stock market. You can look at the market as a whole but you can’t take the market’s performance and attribute it to certain sectors. The market has been flat or down for the past 8 years but certain sectors are up over 100% (energy stocks, ect). The US real estate market may be down 5% – 10% over the past 3 years but you can’t attribute the averages to specific neighborhoods or even cities.
You can keep hoping for a crash in Chicago real estate prices but it is not in the cards. Certain neighborhoods will perform better than others. It’s a fact…