Update on Some Popular Properties Still On the Market
Here’s an update on a few properties we’ve recently chattered about:
1647 N. Sedgwick in Old Town went under contract within a week of listing in June. But it fell out of contract and is still on the market a month after it was first listed.
Unit #3: 2 bedrooms, 1 bath, dining room, private rooftop deck
- Sold in January 2000 for $220,000
- Currently listed for $419,900 (garage parking included)
- Assessments of $150 a month
- Taxes of $3916
- Sudler Sotheby’s has the listing
1814 N. Lincoln Park West, after six months on the market, finally budged on price- reducing $24,000.
Unit #4: 3 bedrooms, 2 baths, 1 car parking
- Sold in November 2000 for $595,000
- Sold in October 2004 for $710,000
- Was listed in June 2008 for $799,000
- Reduced
- Currently listed at $775,000
- Assessments of $350 a month
- Rubloff still has the listing
The sellers at 229 E. Walton in the Gold Coast who tried FSBO and then switched to an agent (and raised their price) have now reduced $25,100.
Unit #11W: 1 bedroom, 2 baths, 1200 square feet
- Sold in October 2000 for $220,000
- Sold in March 2001 for $235,000
- Sold in August 2005 for $255,000
- Was listed FSBO in early 2008 for $310,000
- Withdrawn FSBO in May 2008 after threatening to list it with an agent for $375,000
- Re-listed with an agent a week later in May 2008 for $375,000
- Reduced
- Currently listed at $349,900
- Assessments of $519 a month
- Koenig & Strey has the listing
The jokers at 229 E. Walton are one of my personal favorites. Any wagers on how long it takes to return to the FSBO price?
I think they received an offer of 250K but didn’t negotiate.
It might take quite awhile. The owners are threatening that if they don’t get a deal inked by labor day the price goes up another 25k. Their time is too precious so you better make an offer or the ransom just goes higher.
😀
yep and if you still don’t budge, they will start punching holes in the wall and start tearing down their unit one appliance at a time….oooh, I am shaking in my boots….mommy!!!
***sigh*** no one will bother listening to me as no one likes being told (including me) that their world-outlook is wrong (such is cognitive dissonance).
but as we near Fall and the end of the selling season, prices will come down as the loss you know is better than holding an empty home over the winter.
if you are a seller, please, please consider taking the loss now and avoid dealing w/the worry/stress over the winter.
sincerely,
just another anonymous opinion.
As much fun as it is to assume all these sellers are idiots, I feel obligated to stick up for them just a little bit. I think a lot of people have accepted that they might just have to stay put if they can’t get what they want for their places right now. Yes, it’s funny to watch them try to do a FSBO, then increase the price with an agent, then reduce that price. And I’m not saying anyone should “threaten” continued price increases if you don’t buy soon…especially when the place has already been on the market for a while. But in the end, if they’re not desperate to move, what’s so wrong with trying a FSBO, then listing with an agent for more, then making a reduction? I’d love to sell my place if I could break even right now, and a year from now I might try a FSBO on craigslist for a bit, then list with an agent and make a reduction or two if I can afford to. But in the end, I don’t absolutely HAVE to move and it’s not worth it for me to put my place on the market at a price that’s a huge loss on what I paid.
Danny,
The sad reality is that its not that these sellers are idiots. Its that they timed the market horribly wrong and bought near the peak and can’t afford to come off their asking price without bringing money to the table (which due to lax lending they don’t have). This is basically anybody who bought a place between 2005-2007 and maybe even late 2004 as well.
Thats obviously the case with the seller who tried doing an FSBO for a cheaper price here then raised under the guidance of a realtor. The sad reality is most of these underwater folks who need to sell would probably trade places with an idiot any time these days.
The only ones that will take it on the chin are those that absolutely HAVE to move. If you can weather the storm and stay put a good five years, you’ll be fine. But this blog doesn’t highlight units that are currently being lived in so all the units here have a high opportunity cost for being vacant.
I have 3 friends that decided to sell their unit, then rent and took there time before buying a new place. So if these people are taking a similar approach they will and can wait to sell their unit. To be honest, in this market you would have to nuts and buy a new place before you sell the old one. I think there are many people using the approach in this environment.
“But this blog doesn’t highlight units that are currently being lived in so all the units here have a high opportunity cost for being vacant.”
Bob: Not sure what you’re referring to here.
Crazy as it sounds, I would say about 70% of the units I look at on a daily basis have no furniture in them (and it’s NOT because they’re new construction.) Frankly, the people have either moved out or were investors.
It’s pretty striking actually (even with single family homes.)
It leads me to believe that “demand” is far, far below the actual supply if we truly have this many empty units. We are going to have excess inventory for a long time.
In this actual post- all three units are currently being lived in. But that’s an oddity given what’s on the market.
Sedgwick is underc ontract for the past 10 days.
“It leads me to believe that “demand” is far, far below the actual supply if we truly have this many empty units. We are going to have excess inventory for a long time.”
…which bolsters the theory that this boom produced far more houses than households.
Sedgwick is an awesome unit even though it is a 2/1. Whoever gets this place can throw parties all summer and cover thier annual taxes and association fees easily… I admire the person who has this place under contract right now! Wish I had 420 to buy this joint… no pun intended.
I need some schooling here from you guys. I bought a large (1100 sf) 1 br 1.5 ba condo in a mid-rise (19th fl of a 24 story) bldg in River North (new construction) in 1999 for $240K (included $30K in upgrades and $18K for deeded parking in bldg). I see similar units, albeit on lower floors, now selling for $325-$340K (parking included), which, to me looks like an increase of about 35% in 9 years. How can these folks in similar areas think their places have doubled in value in that time? Is it because they rehabbed them? If no rehab took place, are they in about the same situation?
John 2,
Good question! 🙂
35% appreciation in 9 years implies about 3.5% annually, compounded, which in nominal terms seems plausible. (real appreciation is usually in the 1.5% annual range)
Your 35% appreciation is plausible for River North — the Case-Schiller index estimates a 50% increase for all of metro Chicago from Jan 2000 to April 2008, and nice areas probably increased less than marginal ones.
Also, note that the properties on this page have not sold at the noted prices (and have usually been sitting for a long time). 1814 LPW is asking for about a 30% premium over 2000 while 1647 Sedgwick is asking for a 90% premium (but I understand that Old Town is much nicer than it was in 2000 — the unit itself doesn’t look remodeled since then).
The most comparable unit to yours (of these three) is 229 W Walton, was asking for a 40% premium as a FSBO and it didn’t sell.
For someone paying cash for a home, 3.5% annual appreciation is keeping up with inflation, so a real return of nothing, but you’re preserving your principal and have a place to live that only costs you condo fees and taxes (I’m guessing close to $1,000 a month combined – better than renting? I think so.)
For someone financing with borrowed money does it make sense to pay 6.5% interest to carry an asset that’s increasing in value by 3.5%?
“For someone financing with borrowed money does it make sense to pay 6.5% interest to carry an asset that’s increasing in value by 3.5%?”
Depends on the equivalent rent. If the annual rent (in excess of dues and taxes) is 3% of the purchase price, you’ll break even. If the rent is higher, you will be profitting.
If dues and taxes are half of the rent (high?), breakeven happens at a rent multiplier of 200.
Don’t forget mortgage interest deduction. A person who borrowed at 6% and pays about 30% tax, has a real rate of interest on the loan of about 4%.
Kevin,
I’d like to know where you got the source for real appreciation in the 1.5% range. Over the long run (decades) real appreciation should be close to zero.
There is nothing fundamental about real estate valuations that dictates that over the long run it will become more valuable. Of course it will rise (and fall) in nominal terms to keep pace with inflation and according to supply and demand, but expecting 1.5% real gains over the long-term is huge stretch.
Yeah but the benefit to the borrower is only the amount ABOVE the standard deduction of $5,350 which doubles to $10,700 if the borrower is married.
I didn’t provide the 1.5% real appreciation estimate (David did).
I wouldn’t defend it, either. Schiller has data that shows that real house prices were essentially unchanged (at 110% of 1890 prices) from World War II through 1997, except for brief excursions to 120% of 1890 prices in the 1970s and 1980s. As of 2005, we were up to about 200% of 1890 prices.
See http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html
homedelete,
Yes, it presumes that someone is already itemizing because their other deductions exceed the standard deduction. For someone making in the mid-to-high-100’s, the market for most of the units on this page and on this site, this should be true. If the person is itemizing anyway, then they get the full value of the deduction.
Bob,
If the population grows at about 1% a year on average, then the value of real estate should grow at about the same rate, reflecting additional demand. 1.5% is probably too high, but 1% is about right–and I think the historical Case-Schiller numbers reflect that.
WOW. Thanks, guys. I am really learning alot from all of you. Yes, my condo fee and taxes equal about $700 a month. I’ve always thought that, at best, condos keep up with inflation (unless you are pioneering, and, while I am not far from what was Cabrini, it is hardly pioneering here). Thanks, again.
Kenworthy — that population increase logic should apply to most goods, driving up the prices of food and everything else. Bob’s question was aimed at the claim that real estate prices should grow 1.5% *faster* than everything else (a 1.5% real return over inflation).
The Case-Schiller index (the commonly reported one) reports nominal changes relative to 2000 prices (normalized to 100) and covers 1987 to the present. They show about 2% per year (average) appreciation from 1987 to the late 1990s.
The Schiller numbers I linked to before (from his /Irrational Exuberance/ book) report real changes relative to 1890 prices (normalized to 100) and covers 1890 to 2005. They show no appreciation from 1947 to 1997, and less than 0.1% annual appreciation from 1890 to 1997.
“For someone making in the mid-to-high-100’s, the market for most of the units on this page and on this site, this should be true.”
Keep in mind that the average household income in Chicago makes in the 50’s, including lakeview and the LP, and only in a handful of suburbs does the average household income get into the 100’s. I know lawyers at mid-sized firms and accountants in the Big 4 who don’t make $100k a year. If you combine two professional incomes you get over $100k a year but that’s not everyone situation. And sometimes the wife stays at home after the first kid or two, and then more often than not, the family moves to Naperville where they get more bang for the buck. In short, there are waaaaaaaaaaaaaaaaaaaay too many units marketed to the $100k+ crowd but not enough people making that kind of money, especially in this economy. Even BigLaw only hires about 600 attorneys a year in the Chicago market. yeah that’s right – 600 attorneys a year in Chicago.
Based on the 2006 American Community Survey (from the Census Bureau), the estimated income distribution for households in the Chicago “urban area” is:
4.9% over $200K
4.9% $150K-200K
13.4% $100K-150K
With just over 3 million households, this is about 150K households above $200K and another 150K above $150K. So, roughly 300K households in the area could possibly afford a $500K home.
Chicago proper has 8.9% of 855K year-round workers above $100K income — about 76K individuals. The 7th Congressional District, covering the Loop area and points west, has 188K year-round workers with 17.4% earning over $100K — about 32K individuals. $100K per year is probably enough to afford a $300K house using reasonable financing.
That is not many people — 32,000 in Danny Davis’s district (vaguely North to Cermak and the lake to the Tri-State). This includes about half of Lincoln Park, all of River North, the Loop, much of the South Loop, and close-in suburbs like Oak Park. 32,000 people to fill all of the $300K+ condos and homes in the area.
For reference, the Chicago urban area stretches from Wisconsin almost to Michigan and covers about half of Kane, Kendall, and Will counties (including Plano and Joliet, for instance). It is smaller than the Chicago MSA but excludes largely rural areas.
Kenworthey,
Population increases will not translate into real price appreciation of RE in the longer term. That is because for real estate in Chicago there are (almost) perfect substitutes: you can move a little ways away.
What could cause one time price runups are people deciding to spend a larger percent of their earnings on housing, or jobs becoming more concentrated in the urban core. However even these aren’t likely to have much of an impact in the longer run.
A 1.5% per year real price growth for Chicago real estate means that since 1950 people would be spending 2.4x more of their monthly budget on housing. This hasn’t been the case.
Its tougher to disentangle this effect from shorter term market fluctuations however. As interest rates and supply-demand can have a huge impact on the market as we’ve seen.
I wanted to see 1647 Sedgwick, but it went under contract before I could look at it. Did this deal (made 7/1/08) fall through also?
Sorry for the confusion on 1647 Sedgwick.
It went under contract within a week of listing in June and then fell out of contract.
The info I looked at a few days ago showed it still available but apparently it again went under contract last week.
So it is again under contract. We’ll see if this one closes.
Not quite perfect substitutes, Bob. The farther out people go, the farther they are from Chicago, which means a different set of public services, different lifestyle, different jobs, etc. They may be similar, but the only place to buy Chicago real estate is Chicago proper.
Not having read Shiller’s book, I don’t know if my criticism should b pointed at him or at people who cite his info. The concept that the “fair” price for a home is somehow tied to the 1890 price of a home is predicated on one concept: Mean reversion. I’d argue that the basic economic problem of scarcity blows that concept to shreds.
In 1890, there was literally limitless land for people to settle. This was still essentially true in the 40s and 50s as the car made living in Winnetka only marginally different from living in Lakeview. There’s a limit to this level of substitution, though. With suburbs sprawling past Aurora now, potential buyers have to weigh the benefits of DeKalb (1890s prices) versus more expensive but closer-in areas (above 1890s prices).
Also, inflation isn’t the only factor affecting asset prices (not just homes, but stocks, commodities, raw land, etc.) Personally, I think nominal GDP is a better metric since it literally represents “keeping up with the Joneses.”
JC,
Perfect enough substitutes at the margins. The old adage about RE always going up because “they aren’t making any more land” is wrong on so many levels. People aren’t flocking to Chicago if the latest census estimates are any indication.
Guess where most job creation is? Its not centered around the urban core but rather in the suburbs (De Kalb county is particularly strong in this region). The myth that city real estate should and will continue to command a significant premium to suburban living or even close ring burbs is about to be put to the test. No Aurora is no substitute for Chicago, especially if you work downtown, but there are plenty of jobs in Aurora.
Let’s not forget those poor indians who sold manhattan for a bucket of beads. Over the long term, urban areas should see faster real appreciation than suburban areas. Rising energy prices will also reduce the attractiveness of low-density living.
The people who are happy living in Aurora should stay in Aurora. That place blows…
Homedelte – The average houshold income for Lincoln Park is over $200k. Not sure where you get $50k. All the attorneys I know make well over $100k. You boss must be feeding yout his info to make you feel better about yourself.
I never said anything about real estate always going up – that’s a line somebody made up years ago to get their client to make their decision more quickly.
What sets prices isn’t population growth or rental parity or historical prices, but rather supply and demand, and to some degree, the availability of substitutes. If there’s a big demand for housing in Chicago (for whatever reason) and there isn’t an adequate supply, prices will go up. At this point, people will seek substitutes. When substitutes are imperfect (I wanted Chicago, but all I can find is DeKalb) or preferences, i.e. demand, changes (My job is in Aurora; I want Aurora now), the pricing scheme will change to reflect it.
I’m not making any claim that the Chicago should sell at a premium to other markets, but I don’t buy into the idea supply & demand 1890 = supply & demand 2008, or that perfect substitutes for Chicago don’t stop until you reach the Pacific.
Steve,
median income is more relevant to begin with and unless it tripled in the past 5 years you are pulling numbers out your butt.
“Homedelte – The average houshold income for Lincoln Park is over $200k. Not sure where you get $50k. All the attorneys I know make well over $100k. You boss must be feeding yout his info to make you feel better about yourself.”
ha! Stevie Boy has been drinking all afternoon ’cause the RE biz has been slow lately. Anyway, the 50k figure comes from the census. How do you know that the lawyers you know make over $100k? Did you ask them? Did you look at their tax returns? Or did you assume that they make over $100k a year because they own an $800,000 house and drive a BMW?
There is very little difference between one suburb and the next. They all have the same chains, big boxes and subdivisions. There are a handful of suburbs with some history or wealth but for all practical purposes they’re mostly the same. If I blindfolded you and dropped you off in the middle of a suburbs you wouldn’t be able to tell me if you were in buffalo grove, mundelien, homewood or orland park. The only way to differentiate them is the proximity from the loop. But for many suburbans residents it doesn’t matter. My aunt in Cary says she visits Paris more often than she visits chicago.
So for your Aunt, Cary is a perfect substitute for Chicago, since both are places in which you can live. She shouldn’t pay $500,000 for a 1100 sq-ft condo.
For other people who want a short commute to the Loop or a walk everywhere lifestyle, Cary is not a perfect substitute, nor is Homewood, Lincolnshire, etc. Those are the people who have to either change their demands or pony up the $500k.
JC,
Nobody need pony up the 500k. Instead they can pony up 2k/month in rent and pocket the difference. 😀
It’s not so much a question of whether some locations are more valuable than others, some clearly are. That does not mean, however, that the prices of those locations necessarily continue to increase at above average rates. I realize this is a tautology, but those that increase significantly in value will have higher appreciation and those that don’t will not, or will decline. I’m not that versed in Chicago history but there seem to be a lot of areas that have gone through very marked declines, as well as appreciation.
Where the suburbs (at least the ones without distinctive features) are different is that there is so much buildable land that it would seem difficult for them to appreciate too much. Certainly some acquire more cachet than others. One constraint on prices has to be how much it costs to build a new house, which depends on the costs of construction, permits, etc.
People live and work all over the suburbs and the city. The three major factors are commute, price and lifestyle. Location is just another word for lifestyle. Most suburbs are the same and the commute from one suburb to the next is pretty similar. If you live in Plainfield and commute up I-355 to Oak Brook that’s no different than living in Glenview and commuting to Schaumburg. The box stores sell the same crap.
Further, the market WAY overshot demand for the “short commute to the Loop or a walk everywhere lifestyle”. Look at the empty buildings in the south loop and everywhere else in the City. Because the live/work/walk lifestyle is a fantasy enjoyed by an elite group of high income earning professional who live in a handful of neighborhoods on the northside. This is Chicago, not Europe. Our suburbs sprawl and our roads are mostly in good shape. In fact, there lots upon lots of vacant and abandoned housing on the south and west sides of the city. The former residents left and moved to the ‘burbs steadily over the last 50 years. Until they start moving back and taking the bus, they’re going to remain in the suburbs and drive everywhere. Often city folk, and I’m guilty of this myself sometimes, forget that the suburbs spread 30 miles in every direction from the loop (except east) and there are plenty of ‘good’ jobs out there for everyone. Call me when Motorola, Allstate, Walgreens, Sears, International Truck, BP, Lucent, and others abandon their suburban campuses for downtown highrises, and gas is $12.00 a gallon, and then maybe you’ll be on to a trend.
Don’t we have a blog about the burbs we can send Homedelete to. Talk about a burbs lover… I bet he is a regular customer of TGI Fridays, Red Lobster, and BUDS bar. I love strip malls as much as the next guy but come on guy, appreciate the city for what it is. The word “Schaumburg” makes me cringe, while the same makes Homedelete all happy inside.
HD,
Are you really trying to argue that there is no difference to the typical person between living in Plainfield vs. Oak Brook? No wonder you are a lawyer who makes less than six figures, you are a moron.
D
Well said Deaconblue. Homedelete makes about what he should.
Homedelete now has been called a “moron” by more than 1 person. This officially means he is a moron.
He might do better if he stopped posting on the internet all day and actually worked.
D
i want some of the weed Heitman is smoking. Some people adapt to a changing world. He obviously was left somewhere at the back of the bus.
“Don’t we have a blog about the burbs we can send Homedelete to. Talk about a burbs lover… I bet he is a regular customer of TGI Fridays, Red Lobster, and BUDS bar. I love strip malls as much as the next guy but come on guy, appreciate the city for what it is. The word “Schaumburg” makes me cringe, while the same makes Homedelete all happy inside.”
Enough with the Red Lobster and TGIF.
There’s a TGI Fridays 20 feet from the Mag Mile in the middle of supposedly the most exclusive shopping district in the city.
And there used to be a Red Lobster in River North but they shut that down recently. Not too long ago there was talk of an Olive Garden going into River North as well.
The city IS the suburbs in many, many ways. And vice versa.
Let’s stick with chatter about housing please.
Oh Stevie boy I attended a closing today and I was secretly hoping that you were the realtor for the buyer but you weren’t; and I was disappointed. I can’t wait until I meet you someday. I would love to put you in your place in a forum outside an anonymous internet chat forum…How come when I search Steven Heitman on google I can’t find you anywhere? Are you affiliated with ReMax or Prudential or what? Do you by any chance have a realtor license in FL? Are you and Deaconblue the same person? the bantering b/w you and him seemed awfully strange, kind of like you were talking to yourself…
“He might do better if he stopped posting on the internet all day and actually worked.
D”
Touche.
HD – Goofle “Mr. wonderful” and you will see my picture and may recognize me at your next closing.
Put me in my place??? I can just hear your rant now about how we all should not be buying real estate. I bet your client would appreciate it as well.
“They show no appreciation from 1947 to 1997, and less than 0.1% annual appreciation from 1890 to 1997”
LOL Come on man, National averages over the past 100 years have absolutely nothing to do with the price on condos in LP.
Regarding the average income figures some are saying, Chicago is a big city that includes a lot of low income people skewing the averages. I did a quick check of 60622 and in the past 6 weeks 18 condos sold for over 500 and few SFR’s for around 900. Not as many as past years but somebody is still buying. They are not all stupid knife catchers as some like to call them. They just have more money than you and want to live in a better place.
Is there a surplus right now? For sure. But that does not mean prices will drop precipitously. If people can’t at least get their money back or something like 2005 prices they just won’t sell. Unless of course they absolutely have to.
A lot of folks here seem to be rooting for a the “foreclosure tsunami” that will throw families out in the street so they can jump in scoop up their dream house for a song. Ain’t gonna happen. Chicago is not Vegas or Sacramento. The only way prices get that low is for a prolonged recession/depression in which case you will be probably be out of a job and still not able to afford the property even at at 50% off.
We’re already in the middle of a foreclosure tsunami.
Where have you been?
The people buying the expensive homes don’t necessarily have the money; they have good credit and an interest only alt-a ARM jumbo loan. That’s not wealth that’s just having a slightly higher income.
“Is there a surplus right now? For sure. But that does not mean prices will drop precipitously. If people can’t at least get their money back or something like 2005 prices they just won’t sell. Unless of course they absolutely have to.”
How long do you think home debtors will live in their underwater homes that they bought with 100% financing? 10 years? 15 years? Or will the market come roaring back next year?
Homedelete – You are really not a smart man. The world has not stopped turing.
Rates are back down to 6% of a 30-year. 5/1 ARMS are at 5.25%. Oh the pain is going to kill us all.
Wake up and smell the opportunity. Or in your case, you a real job!
“Steven Heitman on July 9th, 2008 at 8:36 am
Homedelete – You are really not a smart man. The world has not stopped turing.
Rates are back down to 6% of a 30-year. 5/1 ARMS are at 5.25%. Oh the pain is going to kill us all.
Wake up and smell the opportunity. Or in your case, you a real job!”
You are a goof. That’s why you got a job as a realtor instead of getting a real job. You know, a job requires an education and/or a skill set. Maybe you should wake up an smell the coffee – the party is over.
You don’t like what I have to say so you mock me. The fact of the matter is that in Chicago sales are way down, prices have begun to fall, foreclosures are sky high, inventory is too, ARMs are reseting, and you’re saying that a 6% mortgage interest rate is going to save us all? Ha! You really are a fool!
Rates may be back down guys, but that’s not addressing the problem. The problem is the down payment required. Most lenders now are demanding at least 15-20% down plus closing, and this even for high credit scoring clients.
Did anyone notice INDYMAC yesterday froze all new home mortgage lending on liquidity concerns?? Here’s a very large national home mortgage company and they’re saying no to ALL new customers, good credit or not.
No sir, this pig is still playing itself out and there’s still a meltdown shaking out. Buy now and think you got a great deal. Then watch the market drop another 5-10% in 2009 and whoala, suddenly you’re upside down on your mortgage. The banks see this. That’s why the they’re requiring such high down payments. It doesn’t take a genius to see that…
Sabrina,
How about we start a “Hall of Shame” archived thread for our favorite sellers who just don’t get it?? I know that’s most, but I’m talking about the really stellar stand outs. 1814 N Lincoln Park W for instance has provided me with some good laughs over the past months.
I love seeing these things just sit and sit and sit empty, plus its always nice in the heat of the summer to see pictures of snow covered real estate : )
JanetG,
IndyMAC wasn’t exactly a national mortgage lender. While they may have loaned nationally, their target market was Alt-A loans in Southern California. Not to say that their demise is good news for the Chicago real estate market, but rather that they probably did little lending here.
HD – I think a “real job” would be defined by how much money you make. That is why we all go to work each day right?
Here’s the latest mls closed sales data for attached single family in Lincoln Park (area 8007):
June 2008 111 closed (-41% YOY)
2nd Q 2008 300 closed (-41% YOY)
1st Half 2008 476 closed (-39% YOY)
homedelete are you a home owner?
Where is this data from?
“Where have you been?”
Looking at the data, watching the fed, following the bills going through congress, etc…
I don’t see a tsunami in the areas this blog seems to be concentrating on. Check 60610, 60613, 60614, 60622 and 60640 for yourself:
http://interactive.chicagobusiness.com/foreclosures/zipcode/2008/?zipcode=60610
Sure, things are bad in Roseland but is anyone on this blog really interested in moving there?
“The people buying the expensive homes don’t necessarily have the money; they have good credit and an interest only alt-a ARM jumbo loan.”
According to bankrate.com, unless you have %20 down, those loans are no longer available in Chicago. At %5 down and full doc something might be available but the rates look pretty bad.
“How long do you think home debtors will live in their underwater homes that they bought with 100% financing?”
Probably not very long. But what percent of northside households does this represent? Does anyone have a reliable data source about this?
Steve,
Or maybe how happy you are at it. I walked away from mine when no number that anyone could write down on a piece of paper made it worth going anymore.
I swear you and HD crack me up… bet you guys would actually get along and have fun if you met up for drinks.
RR, what is your link supposed to be showing?
Do you think the changes in loan terms you acknowledge might impact sales relative to recent lending policies?
TS, I subscribe to the mls.
IB – I don’t go to Schaumburg so having a drink with HD is out. Quality of work life and money are the drivers. This is why I left my desk job
Maddy- No, I’m not a homeowner. Not in this market; I rent.
RunnerRunner – I don’t know if that data exists but anecdotally among homebuyers since 2002 it’s a lot. Look at the POE street example from the other day – three of the four units were 95% financing and above.
HD – Have you ever been a homeowner? Do you like your landlord?
you sure have a lot to say about home buying for a NON homeowner. this is a buyers market… why rent? that is tossing money down the toilet. with all the GREAT deals out there, why would ANYONE be a renter? bad credit, no job? you can pay less and have something to show for it. now is the time to get the deals. and they are out there.
HD-what is it that you do for a living to pay your rent?
You can’t make this stuff up, folks.
Here’s a little more of the latest mls closed sales data for attached single family residences.
Lakeview (area 8006):
June 2008 242 closed (-20% YOY)(-26% YOY2005)
2nd Q 2008 595 closed (-27% YOY)(-34% YOY2005)
1st Half 2008 957 closed (-22% YOY)(-29% YOY2005)
Lincoln Park (area 8007):
June 2008 111 closed (-41% YOY)(-46% YOY2005)
2nd Q 2008 300 closed (-41% YOY)(-44% YOY2005)
1st Half 2008 476 closed (-39% YOY)(-45% YOY2005)
Near North (area 8008):
June 2008 260 closed (-19% YOY)(-30% YOY2005)
2nd Q 2008 715 closed (-18% YOY)(-33% YOY2005)
1st Half 2008 1,302 closed (-16% YOY)(-41% YOY2005)
maddy–
BRILLIANT satire.
I work in the RE industry as an attorney. Not full time real estate but enough hours a year to know what the hell I’m talking about. I’ve never been a homeowner. Not a good decision for me to buy a house while in school. My landlord is a great guy.
No takers on my “Wall-o-shame” idea??
Oh, rejection makes me soooo sad 🙂
Homedelete – I have been a homeowner 3 times in the past 10 years and pocketed $280K in equity along the way. Did you save that much renting homedelete? No I am not including the current equity in my home.
Good for you Steven. You are the flipper-extraordinaire.
“RR, what is your link supposed to be showing?”
It is a link to a page on chicagobusiness.com that allows you to enter a zip code and see foreclosures. There are like a dozen in 60622, two in 60614, two in 60657, etc…
“Do you think the changes in loan terms you acknowledge might
impact sales relative to recent lending policies? ”
There is no question that easy lending terms helped drive up prices. There is no question that removing buyers requiring those loans reduces demand. What is not obvious is how much this affects Northside sales prices.
Where I disagree with the bears is the extent slow sales and foreclosures will lead to declining prices in the Northside. I don’t think we will see much change in the coming year because people will either get the price they want or they will stay put, unless they absolutely have to move.
I also think the rent/own spread will decrease but by rents increasing, not the price of ownership dropping.
For your sake I hope you declared that $280k as income on your tax return…capital gains.
Hi Runner,
Check trulia – there are lots of lis pendens (not that many foreclosures yet) in great parts of town,including 60611, 60614 etc; including recent “good” conversions – and I am not talking about conversions by certain companies…
I would have to say the risk of all these banks being completely insolvent (technically they almost all already are) and losing freddie and fannie to use as a backstop can make this real ugly, real soon, real fast…
IB —
If that happens, the only thing that will have any value will be ammo and distilled water.
All banks becoming insolvent along with Fannie and Freddie isn’t going to happen.
Curious,
I am not saying it is going to happen, I am saying that if you move all level 3 assets back onto the books of these banks they ALREADY are!!!!
Fannie and Freddie won’t go insolvent. The government couldn’t allow them to fail in that sense. Instead their equity will likely be wiped out and their bondholders will be rescued by all of us taxpayers. They just control way too much of the securitization market so after a bailout look for more regulation.
No idea how much a bailout would cost..I’ve seen estimates all over the place but we are getting close to that time.
hd:
Stay away from the tax advice, unless you get a basic understanding first.
Given what we know about Stevo, 3 sales in 10 years could be (1) tax free (
HD – I have a CPA so no I did not declare my profits as capital gains.
RunnerRunner said – “It is a link to a page on chicagobusiness.com that allows you to enter a zip code and see foreclosures. There are like a dozen in 60622”
Data below is from Realtytrac.com for 60622. I know that it isn’t the most accurate but, to say there are only a dozen forclosures in a given zipcode seems awfully low.
Does anyone have access to accurate data?
Search Results in 60622
1,349 Properties match your search.
Pre-Foreclosure
805 Properties
Auction
203 Properties
Bank-Owned
280 Properties
Govt Owned
0 Properties
FSBO
25 Properties
Resale Homes
36 Properties
If Fannie and Freddie just slow down their purchasing a bit this house of cards will collapse. The non-conforming mortgage market is essentially dead — the big firms there are all reduced to servicing and creating new conforming loans. Countrywide, Indymac, most other alt-A and option ARM specialists are gone.
The only places still originating mortgages to keep are small banks and credit unions — most of whom also have large non-performing commercial mortgages that are putting pressure on the entire enterprise.
If Fannie and Freddie stop buying mortgages for even a week to deal with a bailout, things will go badly.
Kevin – Fannie & Freddie are the government. You think the fed will bail out Bear Sterns but not keep Fannie & Freddie above water? There will be no down time for these two…
Selling your home? Capital gains 101
“Finally, while technically there’s no limit on the number of homes you can sell and thus reap tax-free gain, each sale must be at least two years apart. That still leaves you room to make some money on several properties. You can sell your residence this year, pocket any gain within the tax limits and buy a new residence. Two years later, you can do the same thing, again and again every two years.”
Steve,
Technically they are not the government but private companies chartered with government backing, the terms of such backing are actually rather confusing and narrowly defined which could make this real interesting. So if the government has to come in and borrow more money (since we are, as a country, already borrowing away) what the heck do you think that would do to interest rates. You can put only so much lipstick on a pig.
I’m sure you did it totally legit. To letter of the law. He’s the flipper-extraordinaire.
No Homedelete – I did what most professionals do downtown. Buy a small place, then get a raise and move to a bigger place, then get a raise and get a bigger place, and so on and so on. And no I have not lost any money nor has my most recent home declined in value. It all works out if you know what you are doing. The 1st condo I bought back in 1999 ($195,000) just sold for $340K last week. I sold it for $270,000 back in 2003 and wish I would have held on.
Sales have fallen drastically, foreclosures are up significantly and lending requirements have tightened severely. Yet some still believe prices will not fall.
Go figure.
Sales in the area I work are back to 2004 levels. Lending standards tightened for 1st time buyers with little down payments. Not much of a concern in the better neighborhoods. I understand there is a headwind but nothing more.
What areas would those be? Here are some mls sales totals relative to 2004.
Lakeview (area 8006):
June 2008 242 closed (-7% YOY2004)
2nd Q 2008 595 closed (-25% YOY2004)
1st Half 2008 957 closed (-18% YOY2004)
Lincoln Park (area 8007):
June 2008 111 closed (-40% YOY2004)
2nd Q 2008 300 closed (-34% YOY2004)
1st Half 2008 476 closed (-35% YOY2004)
Near North (area 8008):
June 2008 260 closed (-37% YOY2004)
2nd Q 2008 715 closed (-36% YOY2004)
1st Half 2008 1,302 closed (-29% YOY2004)
Are you saying that you’ve lived in 4 condos in 10 years? Doesn’t the law require you to spend a certain number of months in the home as a primary residence?
HD – Yes “The LAw” requires you to be in each for a period of 2 years. I am beginning to feel sorry for you…
I feel sorry for you. Moving every 30 months must be exhausting.
ugh… homedelete… can’t you just leave it to G?
“Kevin – Fannie & Freddie are the government. You think the fed will bail out Bear Sterns but not keep Fannie & Freddie above water? There will be no down time for these two…”
Even the government can’t turn that much money around that fast. The FDIC can reopen a small bank over a weekend by having a bigger bank buy the pieces. Bear wasn’t on solid ground for about a week — they were able to get enough backing (JPM $2 plus $30B Fed) over a weekend that they could close existing trades, but they weren’t in a position to make new trades until the revised offer (JPM $10 +$1B plus $29B Fed). There isn’t any single entity with enough liquidity to take over Fannie or Freddie, so I’d expect it would take at least a weekend before they would have enough backing to close their Friday commitments, and probably a week before they would be able to make any new ones.
It took more than a week before money reached LTCM in 1998 — LTCM went to the NY Fed on Sep 18 for help, the 14-bank bailout consortium was formed on Sep 23, but the money wasn’t supplied until Sep 28.
If Fannie or Freddie need a bailout, the mortgage market will essentially stop dead for a week. That will throw off a lot of closings, as few lenders have the capacity to hold onto conforming mortgages for longer than it takes to sell.
Kevin,
The difference is the Fed wasn’t really prepared for either the LTCM or Bear Stearns bailout. They essentially had zero notice for those. You better believe they are actively monitoring Fannie and Freddie and readying to step in with backstops if need be. Its not like either going insolvent would be completely unforeseen at this point.
The thing is compared to banks Fannie and Freddie play by a different set of rules. Not only are their capital adequacy ratios laughable but look for the Fed to even abolish those.
There’s something else I noticed about the steep decline in mls sales of Lincoln Park attached single family residences. We are at pre-bubble era sales totals.
Year – June – 2nd Q – 1st H
1997 – 144 – 413 – 619
1998 – 156 – 438 – 686
1999 – 135 – 393 – 628
2000 – 135 – 390 – 637
2001 – 142 – 356 – 561
2002 – 138 – 403 – 619
2003 – 167 – 431 – 670
2004 – 186 – 452 – 727
2005 – 205 – 540 – 863
2006 – 163 – 439 – 679
2007 – 187 – 511 – 780
2008 – 111 – 300 – 476
G,
Is that for a specific zipcode or is it based on street boundaries?
Those numbers suck.
Bob,
Did you say that Fannie and Freddie are GOING insolvent?
Ha ha!
(Also, been following their stock prices this week? I’m stocking up on distilled water and dried beans and rice.)
TS, it is based on mls area 8007 for Lincoln Park. The boundaries are North Ave to Diversey, Lakefront to the river.
Kenworthey,
If they were a private company Freddie Mac would already be insolvent by now (it has negative shareholder equity as of March). Fannie mae wouldn’t be far behind.
Its been chattered about weeks ago on this board that Fannie and Freddie’s stock certificates aren’t worth the paper they’re printed on. It wasn’t me who made this prediction at the time, but it was fairly accurate.
But the shareholders are the only ones to get the short straw here: the government absolutely cannot afford for the bondholders to be shorted or the companies to immediately cease their business activities. So a bailout is imminent. This is why both are still able to borrow relative cheaply: the bond market believes they aren’t a going concern risk.
If any firms are too big to fail its these two. This doesn’t mean the equity holders can’t lose their shirt though. The bailout of these two is going to make Bear Stearns 30B look like pocket change.
Oh, and those numbers don’t suck if you desire to purchase in Lincoln Park in the future. As long as you are not selling there, that is.
I don’t subscribe to the MLS so I can’t compete with G’s. Moreover I have a full time job (which is something Steven doesn’t have right now) so I can only make quick posts here and there . But none of this really matters anyway; Steven’s and DeaconBlue’s constant barrage of insults and personal attacks has gotten so annoying that its taken the enjoyment out of posting here. Which is too bad too, cause the assholes always wreck it for everyone else. I will derive much enjoyment when your rx 330 get repo’d.
hd:
You dish it out, too, so I’d put getting on your high horse in the same category as offering tax advice.
Good point. Though I have to say, “they are too big to fail” has always sounded suspiciously similar to “real estate always goes up.” Call me a pessimist (or an optimist, depending on how you look at it), but I think there is a nontrivial possibility that the Fed might let the chips fall where they may. (Though the retraction on the accounting “change”–basically making the GSEs follow the same rules as everyone else–puts more credibility on your prediction than mine.)
Also, good point re: the 1% real growth on real estate. I hadn’t thought of it that way (i.e. comparing % of income paid to housing of people in the 1950’s versus today). I was just trying to rationalize what I thought Shiller had found: 1% real appreciation. That isn’t the case? He found that all increases over the last 100-200 years were accounted for by inflation? (Yeah, yeah as a national average, with some local exceptions blah blah blah.)
K: “nontrivial”. Non-zero, probably, but the cascade of problems from Freddie or Fannie failing would be so much worse than the failure itslef and so much more expensive than a bailout.
“[Shiller] found that all increases over the last 100-200 years were accounted for by inflation?”
If you look at the chart (linked somewhere above), the real (i.e., inflation-adjusted) price of a “standard existing house” (whatever exactly that is) which was 100 in 1890 was approximately 110 in 1997 and had never been above about 125 before 2000. I’d suspect the +10% was largely a result of the generalized improvements and size-expansion of the stock of “existing houses”
anon, how about the study of the Holland house? That’s the one I’d seen before. Do you know what I’m talking about? And if so, was THAT one higher in real terms?
Bailing out Fannie or Freddie is going to take a lot more than the government can provide on their own. In April, S&P reported that a bailout of either would add enough debt to the US to drop the government bond rating from AAA. Given that the government is borrowing 10s-100s of billions every month net, especially in summer (lower tax receipts), even a tiny shift in bond rates could hurt substantially. If any of the debt is callable, things could be that much worse.
The Fannie/Freddie business model requires continual access to capital, so a credit downgrade could precipitate a crisis with no warning. Even if bailout plans are in place in advance, it will take time to move that much capital (or credit) without triggering any other downgrades or other actions. The FDIC and SEC will probably limit how much banks and mutual/pension funds can contribute to a bailout, and ratings agencies will also provide some limitations.
For the record I was not offering tax advice; Steven said
“Homedelete – I have been a homeowner 3 times in the past 10 years and pocketed $280K in equity along the way. Did you save that much renting homedelete? No I am not including the current equity in my
home.”
Which I understood to mean that he is flipping houses one at a time; I said that I hope he put the gains on his tax return, I was insinuating that he was cheating on his taxes; to which responded that the tax code subsidizes his flipping, to which I said only if you live in the home for two out of every five years.
Kevin, yes, it’s no win. No bailout, goodbye housing. Bailout, goodbye dollar. Thus the distilled water, beans & rice. And I’m only 90% kidding… 🙁
Ken,
I said they are technically insolvent… and take a looka at todays auction it was Ugly as can be for them. Bondholders are crapping now also.
Sometimes, I think this blog, and Sabrina/homedelete/Steve Heitman, are what Phil Hendrie decided to do to amuse himself after his radio show went off the air. Phil=Sabrina, obviously. But who is the insane guest, and who the outraged caller?
K: “the study of the Holland house?”
You mean the Amsterdam neighborhood (Herengracht), with a 300+ year history? I’m not paying to read the original Eichholtz article, and the summaries I’ve read are all over the place about what the real growth in prices (pre-2000) was, but I haven’t seen anything suggesting more than 0.5% real growth, and my take on the reporting is that it was more like 0.2-0.25% (after-inflation).
Kenworthey — that part of why I’m certain rates are headed up. If either GSE slows down, the supply of mortgages will drop enough to drive rates up. If we see a bailout, the inflation rate will spike and drag rates along.
Slowing sales are helping the issue somewhat — if mortgage production dropped to the point where one GSE could deal with securitizing those mortgages, then the other GSE could focus on deleveraging itself. But that requires a lot of coordination and probably some heavy backing of the more-leveraged GSE.
“But who is the insane guest, and who the outraged caller?”
I’m obviously the outranged caller and Steven is the insane delusional guest!
“Now on the line, calling directly from his underground-bunker-studio-apartment-rental-in-Uptown, it’s Homedelete!”
G, why do you subscribe to the MLS? You are certainly not a real estate broker, so why the heck would you have access to it?
D
Hey at least the cash I save from renting goes to my bottom line, instead of paying interest and making some banker rich! Based on comparable condos in my building, I’m saving 1,600 a month. That’s not chump change. Oh I’m gonna have a fat downpayment when the market reaches bottom in 2011 – I may even pay cash for my bungalow! Who’s laughing now, bitch?
Okay now I am convinced that not only is Homedelte a moron, but he is also a complete dork! Our tax deductible interest is dumb but the $1,600 he pays to the guy who owns his condo is somehow smart. $1,600 in rent gets you a 1 bedroom in any of the better neighborhoods. Nice job HomeDelete! we need people like you to pay taxes on 100% of your income. Where is all this income stashed away? The market? You are losing money faster than someone who purchased in the South Loop. At least their loss is tax deductible…
You can’t even do basic math, so I won’t try to explain to you that you haven’t taken into account tax write-offs or leveraged appreciation. Even though simply math and finance clearly elude you, I’m SURE that you will be able to pick the bottom of the real estate market. You are just like the people who never bought into the stock market after it crashed because they kept waiting for the DOW to hit 5,000 and it never happened. If you think it’s a good long term move to buy a “bungalow” in cash then all the power to you. One day, when you have a real job, you’ll realize that there is value in owning a home and not all of us care about the measly savings you may or may not realize from renting.
D
BTW,
The only person laughing, bitch, would be the any girl unlucky enough to be dating a lawyer who can only afford to rent a one bedroom “bungalow.”
D
Steve,
Losses on real estate primary properties is NOT deductible.
IB – The I & T is what I was getting at
Oh you guys are such morons. And Deaconblue, both my SO and I are attorneys. We have *very* comfortable incomes. Only my SO and I and the IRS see our AGI at the end of the year, and let’s say that that you don’t know what the hell you are talking about. Because if you did you would shut the hell up. Despite the ‘goof’ you think I am I manage to squeeze a decent buck out of my employer. And my SO does too. The world is a crazy place, huh? Ha, if you only knew, if you only knew….
Secondly, a home is a place to live and not an investment. You goofs drank the kool-aid, went to Trump’s seminars, bought homes with no money down, and I’m sure you made a few bucks over the years. I don’t doubt that Steven made $280k (although I’m sure that’s slightly exaggerrated). But in case you haven’t noticed, the party is over and flipping properties is much more difficult than it was in 2006.
Like I said above, I’m SAVING $1,600 a month vs. owning, including all the tax benefits (which can somtimes be negatated by the cost of home owners assessments, special assessements and insurance). The only people losing money are the condo owners in my building, watching their beloved equity disappear into thin air. Quite frankly I have no desire to tell you what I do with my savings b/c you’ll just make some stupid and snide comment anyway. I feel confident enough in my investment decisions that I don’t need to have them judged and ridiculed by a couple of Realtors(tm). Ha!
And as far as bungalows go, they were good enough for the previous 3 generations of American families and they’re good enough for me. There are some really stately two-story and extra large bungalows in Ravenswood Manor, Irving Park and Forest Glen, and elsewhere around the city. It’s just too bad that during the recent boom they’re selling for over $500,000; I’ll let knifecatchers like you buy them as ‘investments’; I’ll buy one when the price has dropped sufficiently….
I forgot to say that most of the condo owners in my building don’t have any equity because they bought with 100% financing like so many foolish people did during the boom. Virtually every one of them is underwater by this point. The few grand a year in tax benefits in no way offset the signficant loss of equity they’ve suffered, no matter what kind of Enron math you use.
Homedelete- If they purchased with 100% financing then how did THEY lose any equity? How are THEY underwater, seems to me just their bank is.
I wish I bought with 100% financing, I would just walk away from the place I am trying to sell.
“I wish I bought with 100% financing, I would just walk away from the place I am trying to sell.”
True, true. Me, I wish I would have bought a condo with 100% financing, waited a few months, HELOC’d as much as I could with a countrywide option arm loan and used the MEW to pay off my student loans. Then I would default on the mortgage after 1 year, live in the condo free for the next year or year and a half, save a bundle of cash and then send the keys to the bank. In the end I could have paid off my students loans, saved a lot of cash during the foreclosure process and be debt free. The only hit I would take would be to my credit report but since I’d have my spouses credit everything would be OK. However, there are so many obvious reasons why I didn’t do said scheme, but, in the back of my mind, I wish I would have done it.
Holy cow HD! I wish I had thought of that scheme.
Credit is repairable after a number of years, plus what would we all rather have? Good credit and no money or bad credit but a mountain of cash? Student loans aren’t disgorgable under bankruptcy protection, but home debt sure is. And bankruptcies and foreclosures are wiped off after 10 years I believe, sooner in some states.
I applaud people that thought of and followed your scheme: the dumb foreign investors, hedge funds and pensions who bought these toxic MBS securities need to do a massive wealth transfer to our country.
Yeah, and furthermore, I would have negotiated with the foreclosure lawyer to enter the language “no personal deficiency” into the foreclosure judgment. Even if the bank figured out years later that I paid off the education loans the no personal deficiency part would be too old to vacate and it would stand.
A lot of people did that same plan but instead but BMW’s and pools and granite countertops. I think paying off student loan debt is a much smarter idea.
but I didn’t do this because I would lose my good reputation and probably be viewed by my peers as a scumbag; and in this profession, reputation is really all anyone has. Clients and firms come and go but your reputation will follow you everywhere.
homedelete,
Unfortunately in your circle you guys are all too adept at scouring public records and finding dirt out. For the rest of us, you needn’t tell anyone your financial dealings and can keep it mostly secret.
I consider myself pretty adept at money matters but your idea had even the best of ’em beat. I would definitely be willing to trade a few hundred points in FICO score to have Deutsche Bank pay for my rent for a time and grad school education 🙂
Since deaconblue and Heitman think that its always better to own due to the tax advantages, I have a great investment proposal for them. Send me $1000 every month and I’ll send you back somewhere between $250 and $350. That’s essentially the kind of return you’re getting for your mortgage interest deduction. How exactly is this better than renting, if you can rent for about half of the monthly expenses that owning the same property would cost? Especially in a market with depreciating home values?
hd:
You also could (emphasize could) earn yourself a negative record with the ARDC. So, you could have a public record as a scumbag.
HD,
You are so easy to get riled up, I think it’s precious.
D
P.S. The fact that you feel that you have to prove yourself to a bunch of people on an anonymous message board is sad, you may want to talk to someone about that.
Deaconblue,
In HD’s defense his comments on here are far more sophisticated and value added than yours. You are nothing more than an anonymous housing bull cheerleader with far less insightful comments than Steve Heitman. Yes I said it.
Thanks for your opinion, Bob, I’ll be sure to give it the consideration it deserves. If you’d been on this board for more than two weeks, you would have read many, many long discussions that I’ve had with people like G. After awhile, arguing with idiots who only know what they read in the newspaper that morning get’s dull so I don’t feel like having the same conversation over and over again.
D
“arguing with idiots who only know what they read in the newspaper that morning”
Ah, now I know that this is the real DB. I’d begun to have my doubts–too much of the banter with hd was actually based on ridiculous things he had posted.
Homedelete – Great plan on the mortgage fraud. do yout hink you are a little late to the party. Half the foreclosures out there already pulled off what you just thought of today. I have to say that you are about 2 years behind the curve. This includes your stance on where the real estate market is.
After a long long debate, I have concluded that you are a moron!
Pete – Who would buy a place that you could rent for half the monthly expense? I don’t think anyone here that argues for buying ever suggested such a purchase. The cardinal rule is a purchase should be roughly 20% more than renting. The 20% captures the tax savings and potential for leveraged appreciation.
PS. Homedelete – you already are a scumbag. You will be paying those student loans for 60 years with your current salary. Talk about bad investments:)
Rent until you are blue in face. Someone needs to pay my mortgages down on my rentals 🙂
More than likely they’re not even paying your mortgage interest – not to mention taxes, assessments, general maintenance costs, and closing costs on both ends.
I’m sure they’re thanking you every day that they can rent your place at a fraction of what it would cost to actually own it.
Sales have fallen drastically, foreclosures are up significantly and lending requirements have tightened severely. Yet some still believe prices will not fall.
Housing bulls “Steven Heitman” and DB cannot offer a single supportable argument why they won’t.
It is obvious to all.
But people like Heitman and Deaconblue are the only ones keeping the market from collapsing…
Of course, I’d just as soon they throw in the towel so things can bottom out and we can start clearing the deadwood and REOs.
Steven asks: Who would buy a place that you could rent for half the monthly expense?
Pretty much anyone who buys any Chicago real estate at today’s prices and tries to rent it out. This would exclude a handful of places, like extremely run down foreclosures or homes in bad neighborhoods. And only if they can be bought for nearly nothing and rehabbed cheaply. Look at the average $300,000 condo on the market. Do you think it would rent for $3000 a month?
“Look at the average $300,000 condo on the market. Do you think it would rent for $3000 a month?”
But, Pete, Stevo can still get 100% financing at about 6%, so that’s only $1500/month in carrying cost. Sure, taxes and assessments bump it up to $2k, but we’re talking about prime LP here, so that’s not crazy rent.
(HA!)
$2K rent for 1000sqft or less (1BR?) in Lincoln Park? I didn’t realize that rents had bubbled that badly…
The “(HA!)” was supposed to be the sarcasm siren, but I guess it didn’t have the intended effect.
anon — I saw the sarcasm sign, but it seemed that your comment could be read as almost plausible. Unless the reader knows the LP market well, they might be thinking that $300K could be a smallish two BR, where $2K is reasonable. Thus, I doubled-down, emphasizing just how little $300K buys there.
Anon – What $300,000 condo costs $3000 per month? What are you smoking?
The place I bought this past year costs me $4,500 (fully amortized, taxes, insurance) per month and would easily rent for $4,500 – $5,000 per month.
Steven — so you are getting no return on your capital (either your downpayment or your monthly expenses). And, you have to eat any repair costs or vacancies. Sounds like a deal for your renters.
Why even address such fictitious posts? Since he’s unwilling to share the details of his purchase, he can just change the parameters to circumvent your argument. You cannot beat Steven in his own fantasy world.
Steven is beyond hope (buying the NAR party line, complete with Kool-Aid), but maybe we can prompt other people to consider whether an investment in real estate is a good idea now. There are a lot of costs to being a landlord (or even an owner-occupant) that are overlooked in most basic rent-own calculations.
Stevo–“would easily rent”
So, it’s not rented. Or it’s rented “below market” for some unknown reason.
Stevo–“What $300,000 condo costs $3000 per month? What are you smoking?”
I was quoting Pete who raised the question. If you want to challenge the assumption behind Pete’s question, you got it backwards (as usual)–the question is why you need $3k in rent to cover expenses on a $300k condo. I’ll leave that one out there for others.
one more thing Stevo–I’m still waiting for those 20 winners in LP. You don’t actually have them, do you?
Steven Heitman is a myth.
The rise he gets from everyone is pretty funny though.
“Steven Heitman is a myth.”
I’d argue caricature.
He provides a counter-point even though he is a jerk-off. Otherwise we’d all be preaching to the choir.
IndyMac is done? How do you know that? It hasn’t hit the wires yet.
I haven’t seen anything official (or necessarily credible) on IndyMac.
CalculatedRisk isn’t reporting anything yet, but the occasionally reliable Implode-O-Meter is reporting that IndyMac offices in Pasadena are under FDIC control. See http://ml-implode.com/imploded/lender_IndyMacBancorp_2008-07-07.html
Indymac has been done for a few days. Just because the FDIC didn’t show up guns blazing and fire all the mgt doesn’t mean they’re not done.
They were ordered to cease new lending Monday. Due to their size it was a FDIC takeover-lite so as not to induce panic.
“SAN FRANCISCO (MarketWatch) — IndyMac Bancorp said late Monday that regulators have told the lender it isn’t “well capitalized” after failing to raise new capital.
The company said it has agreed to a new business plan with regulators which includes halting new mortgages to shrink its balance sheet and improve capital ratios. It will also cut 3,800 jobs, bringing staff levels to roughly 3,400. “
The difference is subtle, but on Monday Indymac was claiming: “Thus, our core business model will include (1) Financial Freedom, one of the largest reverse mortgage lenders in the Country; (2) a top ten mortgage loan servicing operation, with a solid retention production unit; and (3) a Southern California retail bank branch network, including 33 branches and roughly $18 billion in deposits, of which over 96% is fully covered by FDIC insurance.”
The rumor today (and presumed FDIC announcement any time now) is that item (3) has been shut down officially. Now it is a full takeover, not just the lite model.
Bob–
Didn’t work! I’m panicking!
Actually, not really. I haven’t touched my index funds, let alone 401(k) etc. But… sure has been a rough, rough ride. And I haven’t taken off my seatbelt yet….
“Housing bulls “Steven Heitman” and DB cannot offer a single supportable argument why they won’t.
It is obvious to all.”
Is that a haiku? G, you still haven’t answered why you subscribe the MLS even though you aren’t a realtor.
D
DB, he’s an industry consultant. He’s said that several times. Maybe he has a license (probably does, in fact, they’re easy enough to get) and just doesn’t work as an agent.
Also, what difference does it make? These boards are completely anonymous. Why would you ever take anyone’s claims about who they are, what they make, what they do for a living, etc. seriously? You are only worth the contributions, analysis and arguments you make, and on the credible evidence to which you can point. On those criteria, G is probably the single-most valuable poster on this board.
He’s an “industry consultant?” I don’t buy it. The only reason you think his comments are insightful is because you don’t follow this stuff very closely. He hasn’t presented a single original thought, he is just regurgitating housing bear bullets points from articles on the internet that any of us could have access to. I’d bet a months salary G is some junior sales assistant in a realtor’s office. He never made any money during the boom and he’s jealous of the people around him that did. His unusually formal writing also seems like someone trying to sound more mature than he really is. I bet he’s a 22 year old who lives in a basement in Wrigleyville.
D
Nobody will take your bet because nobody cares. People can evaluate the value his postings on their own. And, for that matter, yours.
It’s sad to see how easily impressed ignorant people are. I guess that’s what got us into this mess in the first place.
D
DB,
I changed my mind. Your argument finally convinced me. You had me halfway at “I bet he’s a 22 year old who lives in a basement in Wrigleyville,” but calling me ignorant really just put me over the top.
Thanks!
Why lie, i am all to proud to admit I am sitting at home sadly scraping resin from the bowl of my bong watching 5 year arms pop 3/8ths today 🙂