We Love Authentic Lofts: Timber and Skylights at 2650 W. Belden
We love authentic lofts that are huge rooms of space and this 2-bedroom loft at 2650 W. Belden in West Bucktown/Logan Square fits the bill.
This duplex timber loft is 2000 square feet, has 18-foot high ceilings in the living room and has great skylights.
It’s also been reduced $39,100 since June 2008.
Laura Pentecost at @Properties has the listing. See her website here.
See more pictures here.
Unit #315: 2 bedrooms, 2 baths, 2000 square feet
- Sold in December 1996 for $201,000
- Sold in June 2002 for $350,000
- Originally listed in June 2008 for $439,900
- Reduced
- Currently listed at $399,000 (parking is $15,000 extra)
- Assessments of $454 a month
- Taxes of $3807
- Central Air
- Washer/Dryer
- Skylights
Now THAT’S a loft.
That’s a pretty sketchy part of town. No wonder its trying to sell for $200 a sq ft.
Sketchy? Nah. there’s some sketchy stuff going on south of Milwaukee over there, but it’s more, um, shabby than sketchy.
Nonetheless, you can walk to the el from there, which is like a block and a half away, as well as some decent restaurants, a new hipster bar on California, and soon we’ll have a brew pub up Milwaukee as well. Kennedy is way easy to get to, too.
I’d call this a good location for folks who need a lot of space but have no kids. It’s not an especially kid-friendly area. And the space is huge, but it’s just a simple box, with no character. It may be a timber loft, but it looks like lots of empty to me. $399k for lots of air? Don’t think so.
I think this southwest Logan Square/ Palmer Square area, with its proximity to Bucktown/WP and great Blue Line access, has significant upside potential over the next 5-10 years. But this place is priced as though it was already “there.” $300K would be a realistic price for now.
Correction — southEAST Logan Square.
I love the skylights in that bedroom. Throw in the parking spot and I think the ppsf is reasonable. I think this will sell at or near ask.
2,000sf with that much high ceiling space probably really gives the impression of a massive space in person.
Oh if its Logan Square strike my comments. I thought this was WP/BT without checking the maps. Yeah $200/sf in Logan Square is a stretch IMO.
I looked at this unit a few months ago. What is not clear from the photos above is that the entire second floor is open to the first. It is really a loft overlooking the first level. This unit does have an entire wall of windows that face south, so natural light floods the entire space. There is also a pretty good view of the distant skyline.
The second “bedroom” must be accessed from the master bedroom – there is no hallway. The rooms are arranged side by side on the second level. There also is not a real second bathroom. There is a closet with a toilet in it off the second bedroom, but the bathtub and sink are inside the second bedroom. That’s right – there is a bathtub inside the second bedroom, sitting in a corner. It was a very strange space.
I loved the amount of space and the wall of windows, and the location is actually pretty great, but a lot of work would have to be done to make this place practical for living. That said, the ceilings are about 20′ high, so there is plenty of room to add-on to the second level and create another bedroom and a real bathroom.
The building is a true old loft building. It has a great feel to it.
I guess it depends on how the sun hits, but I’d think it would be hard to sleep with skylights that big in the bedroom, unless you like to get up at the crack of dawn.
Dude don’t buy ANYTHING west of Western Ave.! How many times does this need to be repeated?
Reminds me of Hansel’s loft in Zoolander but without all the cool stuff.
Yawn. $400k for a loft in a sketchy/shabby/gentrifying/nondescrit area…that’s so 2005.
Working evenings, I think I’d need a sleep mask to be able to sleep with those skylights above me.
I’m sure you’d have no problem getting one of the locals to spray paint those skylights if you really needed them to.
“That’s right – there is a bathtub inside the second bedroom”
maybe they used this as their bed. I mean you get to kill two birds with one stone. A nice washing, while getting a little shut eye.
“Sonies on February 5th, 2009 at 4:29 pm
I’m sure you’d have no problem getting one of the locals to spray paint those skylights if you really needed them”
Once again, Sonies is such a racist sleaze ball. Sabrina, can we cut this person off the site?
Where exactly did I make a racist slur? K thanks, go away now. Reason I said it is because I have a friend who lives in that area and the side of his house gets tagged all the time.
What does this do to housing in the next 10 years?
“We have the Austrian school — the school of rational expectations, monetary schools. And in the U.S., we have a totally new school, and it’s called the Zimbabwae school. And it’s founded by one of the great leaders of this world, Mr. Robert Mugabe. He has managed to totally impoverish his own country. And that is the monetary policy the U.S. is pursuing. If something is going wrong, print. If it doesn’t get fixed print more. If it then goes even worse, print more.”
Faber sees hyperinflation as a possible consequence of the loose monetary stance the U.S. is taking, though he doesn’t believe that they are there yet.”
I don’t believe that is StevO making that post. But if so all I can say is wow me and Stevo are completely on the same page regarding economic philosophy.
In truth Zimbabwe’s predicament is not driven by Keynesian economics however K-economics shares the same outcome.
I could go into it much more and did, but deleted it as its beyond the scope of this blog. But read up on Rhodesia.
During periods of high inflation, hard assets, like housing hold their value (in real terms) relatively well. One thing is for certain – you’d rather own that rent during extremely high inflation.
I think most people – def Obama – understand that the current fiscal and monetary policy in the US isn’t sustainable. However, heavy government intervention is necessary at this point to avoid and all-out depression – otherwise the cycle of job losses -> consumer fear/less spending will get out of control. Anyway, it’s not such a bad time to print money, given that most forces are leading towards deflation in the short term, and deflation would be a nightmare with all of the debt we’ve accumlated.
WOW! I think that place is a steal at that price. There are so true loft spaces like these left in the city. You can find a lot of soft lofts… half walls, 12 ft ceilings,… yuck.
That location is not that bad. It’s one of the few areas that are still seeing new restaurants and shops opening within walking distance. Move this loft in a more trendy area and probably jack the price up 50-75K. That’s a lot more to pay just to say you live in a trendy area.
I wish I was in the market for a new place to live.
I would like to hear Sabrina’s opinion on inflation and whether renting or owning is a better bet? I love people talk with such conviction they they know the future will unfold. The truth is no one knows what is going to happen. Inflation could run at 20% annually after the the economy recovers. That means a 20% increase in rents year over year. Would you rather lock in a long temr housing payment today at 5%, or the roll the dice and allow landords to dictate your housing expense.
Seems like a no brainer from my end. Buying a house takes all the risk out of futre housing expenses. Renting is like being in vegas. You might lose and you might win, but it is a gamble. Of course I am talking about people who plan to sta int he same place for more than a couple of years…
What happens to the assesments during the 20% inflation times, especially in the full service buildings with doormen, pool and other overhead? Also, what happens to real estate taxes?
Bob:
If you think we’re headed toward hyperinflation, why are you so down on owning property? Not taking a position one way or the other, just seriously curious.
BTW, that post was completely consistent with Stevo’s other posts (at least this week, when he’s kept the insults to himself)–he’s bullish on housing b/c he expects substantial inflation in the near-to-mid term, which is perfectly consistent.
Linda – I am not a big fan of high rise living. Essentially high rise living has a rental component to it where you are paying for a lot of common space and amenities. If you choose to live in a high rise obviously a portion of your housing expense is vulnerable.
If you live in a single family your only risk is real estate taxes. If you live in a historically protected area your real estate taxes are frozen and you essentially have no risk. Regardless, you have your pants down and are fully exposed as a renter.
I don’t pretend to know what the future holds. I look to history to make my predictions on the future. History shows that owning a low maintenance home is a very nice hedge on future inflation. Especially when you can lock in a 30 year fixed at 5%. That is my opnion and I am sticking to it…
In addition to the security, inflation hedge, ect on owning, how does it feel as a renter to know that you are paying people $15k in tax credits to buy a home? $15k in your pocket at tax time, 30 year fixed at 5%, how can anyone who plans to be in their home for 4 plus years possible believe renting is a better option? Look at the rental rates in the area you plan to buy and be sure you purchase at a similar housing expense. It is a no brainer…
“$15k in tax credits”
??? Explain, please. Unless you mean as a result of ~$40-50k in deductions, then I understand (but a “tax credit” is still something else).
I don’t know whether we’re headed for hyper-inflation. Japan didn’t experience that and its a lot easier to talk on TV about future economic predictions than accurately predict them.
I think StevO is right in that a house can be a great asset hedge but it all depends on the price you pay for it. I plan to go long on a SFH in about 4-5 years time as he is spot on on the increased risk of condos (some SFHs have HOA dues too but its for nice things like landscaping that I place more of a value and likely less risky). Sooner if my income increases and prices come down more, but saving up for 20% of a McMansion takes time.
I’m not against owning real estate under any circumstances. I just think the incentives will keep growing and prices will keep falling until the market stabilizes. It would be hard to justify not buying a nice big house if we see 3.5% mortgage rates as some are predicting, provided one qualifies. 😀
ANON – Welcome to today’s world. The senate passed a new %15,000 tax creit for all new home buyers. This is a non-refunable tax credit that can be claimed on your 2009 and 2010 taxes.
“The senate passed a new %15,000 tax creit for all new home buyers.”
Yeah, yeah. That’s a one time thing (and not for “new” home buyers; any home buyers). And it still needs to make it through conference. And it’s stupid, as “stimulus”. And if they don’t limit it to primary residence only, I’ll be surprised and *more* disappointed.
I thought you were talking about a recurring “credit”.
You have to pay that $15k back over a period of 15 years however… So its more of a government tax loan.
It is for all buyers on principal residences and DOES NOT have to be paid back. The buyers will be thanking the renters for their savings…
Google it. It passed the senate and will be included in the new stimulas plan. The 4% interest rates failed and will not be part of the plan.
Stevo’s right, Sonies. As currently attached to the Senate version of the bill, it’s a (non-refundable) one-time tax credit, with no future obligation, for 10% of the purchase price, up to $15k, for any home (primary residence only? Stevo says yes–I don’t know either way, so I believe him).
The non-refundable part is important, b/c you have to be paying more than $15k in federal income tax for 2009 (or 2010) to use it–with is an after-dedcution income of about $90k for Married Filing Jointly, or about $75k for Single–which means gross of over $100k.
It is for principal residences only and the credit can be carried over to 2010 should you not be able to fully utilize it in 2009. As long as you buy a home over $150k you get $15k in cash for the purchase. Paid for by you, me, and all the renters in the country…
Oh really, so when does this take place? I’m closing in late march of this year and I qualify for the $7500 FTHB “tax credit” that has to be paid back. God damn facist government!
Tax credits for six figure earners, fantastic. If anon(tfo) is right about his summary of this bill, it only reiterates my belief that congress doesn’t know WTF they are doing with regards to the economy and this will be protracted.
Also this bill will likely help the housing markets that need it least (areas with low cost housing). Its not going to do much in California or Florida where 150k is a pittance, but could definitely help out low cost areas.
Don’t worry Sonnies. It is for any purchase in 2009 so you will qualify. Where is your broker when you need him?
Steve, I have to say, this is the first time I have ever really agreed with you…
“It is for any purchase in 2009 so you will qualify.”
Not in the current langauge, Steve. It’s for one year after passage of the bill.
“could definitely help out low cost areas.”
But for a couple in Ohio buying a $150k house, if they gross $60k and have two kids, they’re barely paying any income tax. They’ll get little benefit. $60k-personal exemption-standard deduction-child tax credits can’t equal more than about $3k in taxes, so that’s the cap on their credit (and there’s no carry forward, AFAIK). It most helps someone grossing $150k+, who isn’t likely to buy a sub-median house wherever they live, but who would get the full $15k benefit.
Anon – That is why I like it so much. It helps my potential clients…
To hell with the Ohio couple, they aren’t pulling their weight in taxes.
Bob – I disagree with you. The purpose of the bill is to jump start the healthy areas of the housing market that have been negatively impacted by the Flordia and The Cali’s.
This is not bouy housing prices but to get those on the fence to go out and buy something within their means. It is to help the areas that are fairly valued yet struggling because of the uncertainty in the markets. Places just like a lot of neighborhoods in chicago…
Amen Bob!
I’m sick so lazy today, and even more easily confused than usual.
Isn’t it a tax credit against gross income (say, reducing income of $100K to 85K?) If so, won’t it stil help if you are making $50K?
I don’t know whether we’re headed for hyper-inflation. Japan didn’t experience that and its a lot easier to talk on TV about future economic predictions than accurately predict them.
Hyperinflation is a very difficult thing to achieve when you are in a country where the average citizen believes that the central bank is only temporarily acting irrationally. If you believe that once the crisis is over they will go back to being responsible, you are not likely to engage in the panic required for hyperinflation to really work. Many people will continue to save money, many people will continue to invest, etc.
Another difficulty is the ability of the people to replace those in charge if inflation gets ridiculously painful. Zimbabwe doesn’t really have that option. The US and Japan does. You can point to Weimar Germany but keep in mind that Germany was being crushed by WWI reparation payments. It was already ridiculously painful for the citizens.
I don’t think we’ll have hyperinflation, but I am split on whether we will have high inflation or some amount of deflation. Housing can be a good hedge against inflation, but I have real doubts about the effectiveness of the hedge in this upcoming economic cycle. We currently have way too many homes than are needed. It’s going to be hard to push prices up all that much.
It is a direct tax credit. Cash in pocket. Esstentially if you buy this year you can change your w-4 from 0 to 10 and have nothing withheld for the year. This of course as long as your tax liability is $15k or less.
Steve, does this affect adjusted gross income or is the credit applied on the back page of the 1040? I’m just wondering about states like Illinois and Indiana where state taxes are based on your federal AGI.
I don’t know that one.
No that would be a tax deduction.
If what they’re saying is true and its a tax credit, thats the government throwing money at you directly. No fancy formula involved and it makes your refund checks quite large. Basically its uncle sam paying for up to 15k of your house purchase.
“does this affect adjusted gross income or is the credit applied on the back page of the 1040”
It is NOT (as currently in the bill) an AGI adjustment; it is a “page 2” tax credit.
That is, it directly reduces the amount of tax you are required to pay. If you look at a 2008 1040, it would be a component of Line 55 (totalling tax credits from Lines 47-54) which directly reduces Line 56, which is total tax due. So, if you’re Line 56 for 2008 is less than $15k, and your 2009 return looks exactly the same except for the “house-buyer credit”, then you would not get the full $15k credit, as it is a non-refundable credit (as it is currently in the bill).
If you need to increase your taxes to take advantage of it or max it out just pull some money out of your 401k or IRAs.
Here’s some links for those that want to read about the (up to) $15K tax credit themselves. And, yes, you get a check and can take it to closing for any purchase of a primary residence and does not need to be paid back.
http://thomas.loc.gov/cgi-bin/query/z?c111:s.253:
http://isakson.senate.gov/Amdt_106.pdf
http://isakson.senate.gov/press/2009/020409housing.htm
Frankly, I think isn’t so much a “home buyer tax credit” as it is a “home seller’s welfare payment.” I’m guessing the government is trying to stop the bleeding on home price slides and I don’t see it being a huge benefit to buyers since after expires one year after it’s enacted home prices will slide down roughly $15 – and where does that leave you??
“If you need to increase your taxes to take advantage of it or max it out just pull some money out of your 401k or IRAs.”
Um, isn’t that contrary to your usual views? Aren’t you one to point out that spending $100 on mortgage interest to save $30 on taxes is economically irrational? I mean, if you “need” to make a penalty withdrawal to buy the house, then sure, but otherwise, how does that make sense? You net out $0 with that strategy. You could use it to offset taxes from converting a regular IRA/401 to a Roth IRA/401, and that would put you ahead.
It *could* make sense to take cap gains on assets you didn’t otherwise intend to sell and it *would definitely* make sense to regonize income early, if you have the ability to manage income timing. But that’s totally apart from paying penalty taxes to use up a tax credit.
anon(tfo),
Well yes you are correct. But as a tax reduction strategy someone who is not fully utilizing the credit and is not maxing out their 401k would be wise to up their 401k contribution and then take early withdrawls until they maximized use of the credit. That way they can lower their effective federal tax on a portion of money to 10% (401k penalty), which is likely larger than their marginal tax rate.
Legally evading taxes is so much funner than illegally but I suspect we’ve put the other readers to sleep, so.. 😀
err “likely larger” should’ve read “likely lower”
Steve-
http://www.prlog.org/10177629-15000-home-buyer-tax-break-us-stimulus.html
If house is no longer used as primary residence, or sold, the repayment is accelerated. The credit is for taxpayers who’s gross income is between $75,000 and $95,000 ($150,000 to $170,000 for joint fillers) The credit must be repaid in installments over a 15 year period. Repayment would begin two years after the year in which the credit is claimed.
Also, please find me a 1/1 in River North w/ washer/dryer inunit, granite, and hw floorsthat would match 1100/month in mortgages, taxes, assessments, etc. (regarding: Look at the rental rates in the area you plan to buy and be sure you purchase at a similar housing expense. It is a no brainer…)
http://www.citizen.com/apps/pbcs.dll/article?AID=/20090206/GJNEWS02/702069909/-1/CITNEWS
Although the Act is labeled as a credit, it actually is a loan that will have to be paid back to the government starting in the second year after the credit is claimed. It is payable over a term of 15 years.
Isn’t the tax “Credit” more like an option ARM? get 15K free to spend on anything when you buy and after 2 years, you get the pleasure of paying back an extra $500/month (or whatever it is) for 15 years
“If you need to increase your taxes to take advantage of it or max it out just pull some money out of your 401k or IRAs.”
Don’t do that… you pay a 10% penalty for early withdrawal, in addition to income taxes. Unless of course you’re over 62.5 years old.
edit; $85/month
Lol!
As it turns out its not a credit afterall its just a congress sponsored interest free loan. Yeah no thanks congress I didn’t get to where I am today making 75-95k by being stupid.
These guys on capitol hill are such tools. They caused this mess with: mortgage interest deduction, creating and implicitly backing Fannie & Freddie, FHA, financial deregulation, allowing the Fed to lower rates to real negative rates after 2001, etc. And now they think throwing nickels on the tracks in front of a slow moving trainwreck is going to get renters to jump on the tracks?
What a bunch of arrogant tools on capitol hill is all I can say to all this sausage legislation they think will magically not make this a full blown economic depression.
Does anyone have the actual text of the bill? We are hearing a lot of different things. That press release you posted, ChiGuy, was very unclear.
Hate to say it, but “told you so” (at 10:21 am today)
Not that I’m not going to take advantage of it. I’ll take some of that money and zero out my credit cards and spend the rest on a new bathroom or tempurpedic bed or somecrap like that 🙂 I’ll gladly let the government finance me 15k for $83 a month starting payments in 2011!
Why buy a house now for a $15k tax credit when I can buy it next year for a $100k price break? For those who say prices won’t continue to go down, list one reason why not.
Regarding inflation, I fail to see how home ownership gives you all that much protection. Sure, your mortgage payment won’t go up (if you didn’t get an ARM), but what about taxes, insurance, taxes, assessments, taxes, maintenance costs, taxes and other expenses renters don’t pay and that landlords may or may not be able to pass on to the renter?
I can either put money into an overpriced, depreciating house or put more towards my 401k which will be used to buy already depreciated assets. What ever will I do?
good call Pete:
Why buy a house now for a $15k tax credit when I can buy it next year for a $100k price break
Thank you for all who attempted to explain the tax credit//deduction/rebate/15-year loan to me.
This thing is insanity:
1) why would the gov’t encourage people to take a 15 year loan?
2) who would want a 15 year loan, except maybe people going under, who at this point wouldn’t be able to quaolify for a loan anyway.
if the only people buying these days are responsible and well qualified, then i imagine this “credit” having absolutely no impact on the level of home purchasing.
as I see it:
all the people on the fence come out of the woodwork and buy houses for 2-3 months to get the 15K break. after 3 months, all the people who are capable of buying who wanted to buy have bought. for the next 9-12 months housing continues to fall. So, the people who jump in early get a 15K loan and a house, which potentially could drop 15K in value over the next 12 months..
For a small segment of the population it might reduce the APR of their mortgage up to 10%. The single high-earner in Ohio who wants to buy a 150k place. But again, its such a small segment it will accomplish nothing.
Congress is incapable of effectively implementing a solution to the problem for two reasons: 1) they caused the problem via their various legislations to encourage affordable housing and 2) there is no solution at this point other than protracted economic pain.
This goes along nicely with the thread from yesterday about Fannie Mae making eligibility easier.
Now, instead of the banks making no-doc/no-income ver. loans, now the government gets to make these same loans. Hurry, hand that mcdonalds “chef” a 15K loan so he buys a house!!!! I guess either way we would pay for it.
Welcome to the liberal world, where people are too stupid to make decisions for themselves, so the government decides for you… and the government is just as stupid as the stupid people. Stupid!
The WSJ real estate blog sez we’re all wrong in at least one fact of the proposed tax credit:
http://blogs.wsj.com/developments/2009/02/06/home-buyer-tax-credits-price-tag-35-billion/
Key points:
-Does NOT need to be re-paid (different from existing $7500 plan)
-No income restrictions (different from existing plan)
-can be claimed over two tax years (different from existing plan)
-Primary residence only
-Non-refundable
-Estimated Cost? $35 Billion. (WAY different from existing plan)
Pete,
I never said wouldn’t go down or housing was a good investment in the short term… I just said in periods of high inflation owning is much better than renting, and it is (I can’t even believe there would be a disagreement on this).
The primary reason owning performs well in high inflation is the price of the home will basically track inflation – hard assets tend to be the only things that hold their real value in periods of high inflation. Look at the period of double digit inflation during the late 70s and early 80s – housing also had double digit appreciation also – smaller appreciation in real terms… Additionally, b/c the capital gains from a primary residence aren’t taxed (up to $500K in profits for couples), it can perform much better than TIPS or gold which are specifically designed for high inflation.
You keep repeating taxes… yes taxes will go up with inflation and with housing appreciation – probably lagged by a couple years b/c of the reassessment cycle, but your entire rent payment will go up with inflation, which is much larger for a comparable place. You say it as though there is doubt whether your rent will go up with inflation – first, rent is a large component of inflation… it will track it, second, as housing prices and mortgage rates jump b/c of inflation, rent will have to.
Most recent existing home sales figure (SAAR): 4.74 million
Most recent new homes sales figure (SAAR, quite depressed): 331k
Assuming all of these people could qualify for all of the $15,000 tax credit, there was no provision for repayment, and the tax credit did not stimulate home sales beyond their current level, the cost of the program would be around $76 billion per year. Obviously those assumptions aren’t realistic, but anon (tfo)’s cost is only 45% of this figure.
Hmmm…
“anon (tfo)’s cost is only 45% of this figure”
Not my cost. As reported by the Wall Street Journal. The initial estimated cost, as estimated by the sponsor’s office (or someone) was $18.9 Billion. I think they either (a) forgot to include some limitations or (b) are estimating the $38B cost as the 2009 cost, with another $38B in 2010 (which is your $76B split over the two tax years in which it will mostly be claimed)
The original $7500 credit/loan was for first time buyers only.
Just trust me guys, I am right.
“I would like to hear Sabrina’s opinion on inflation and whether renting or owning is a better bet?”
Steve- Sabrina doesn’t factor in things like inflation or appreciation. She just compares expenses over a month to prove renting is best.
“Just trust me guys, I am right.”
You mean about this: “I don’t know that one.”?
But seriously, Stevo’s more right than most of the rest of the stuff here about it–which is mostly conflating/confusing the existing $7500 tax credit/loan with the proposed (but NOT approved) $15000 tax credit.
Note, however, that the House has apparently (haven’t confirmed) proposed an amendment to limit it to (1) stale new home inventory (building commenced in 2007), (2) owner-occupied units, with long (i.e., 12+ month) delinquencies, and (3) REO. This would (a) limit the cost and (b) be more likely to have a focused stimulating effect.
http://www.usnews.com/blogs/the-home-front/2009/02/06/the-15000-home-buying-tax-credit-6-things-to-know.html
Great so now the proposed bill has killed all pending housing activity until it is passed.
Here’s my opinion. I think deflation is a more likely scenario. And with high unemployment, which I expect to continue despite the stimulus package, I would prefer to be mobile and able to relocate to where a job could be found. I would put that much higher on my criteria than missing out on the next real estate bubble or worrying about my rent going up.
Madfly/Steve:“I would like to hear Sabrina’s opinion on inflation and whether renting or owning is a better bet?”
anon (tfo),
Didn’t mean to suggest they were your numbers — just thought they were oddly low.
Chris–
s’okay, just like to clarify sources. If I’m pulling something out of nowhere, I try to acknowledge that.
I find it funny that Sabrina thinks this housing credit will have a minimum impact on the housing market, but then again what would you expect from miss negative?
I have had about 10 calls just today with questions and excitement.
“Here’s my opinion. I think deflation is a more likely scenario. And with high unemployment, which I expect to continue despite the stimulus package, I would prefer to be mobile and able to relocate to where a job could be found. I would put that much higher on my criteria than missing out on the next real estate bubble or worrying about my rent going up.”
Fair argument, but Sabrina doesn’t even consider anything outside of monthly expense. If you believe the market is going down or flat, then don’t buy. If you believe the market is going up, assuming you don’t sell short-term, then buy. That’s all. Everyone here loves math an statistics, but it really doesn’t have to be that complicated.
“I find it funny that Sabrina thinks this housing credit will have a minimum impact on the housing market, but then again what would you expect from miss negative?”
My Husband and I moved here in August of 2007 and I have been shopping for condos ever since. I have watched properties drop by $100,000 and more. I have seen hundreds of properties come on the market in buildings that are ammenity rich and just what we have been looking for. I am watching interest rates drop almost on a daily basis. And yet, none of these circumstances has made us buy now and you think a $15,000 will do the trick? Until real estate hits bottom and starts actually selling again, there will always be some sort of incentive offered by politicians to people like me. If I have seen prices drop %15-%20 since August of 2007, what will I see if I hold out a little longer? I am willing to wait and a $15,000 tax credit won’t make the slightest difference.
I think deflation is baked in the cake but wtf do I know. I think the stimulus package will temper the rate of deflation but its inevitable. Everytime somebody goes BK or stops paying their credit cards or mortgage that income stream dries up effectively destroying money. The trillion or so of stimulus will offset the deflationary effects of debt destruction but this ship is going down like the titanic.
Thank you Tricia you helped proved my point about deflation being baked in the cake. Buying has slowed down and everyone is waiting until an uncertain future date when homes/boats/cars/etc will be cheaper. Japan has been playing the ‘why buy today when it will be cheap tomorrow’ game for 19 years. We’re totally f’d and deflation is most definintely assured.
HD,
This year, S&P said it expected the national average inflation rate to range between 3.7 to 4.2 percent. By 2010, the agency said inflation rate would stabilize at 4.2 percent to 4.7 percent.
I think that I will rely on S&P estimates over speculation of posters on this site. But in the end its all an educated guess.
hd,
Not necessarily. I don’t think most Americans, or at least ones who never lived through the GD, really have the capacity to save on any large scale. We’re not Asians who have a savings rate in the double digits and always have.
No way your median American is capable of deferring their consumption on something for years on end if they are able to afford it. Their mind just isn’t programmed to think longer-term about money.
“S&P said it expected”
Ha. S&P* also said they expected
Bob they will have to defer gratification when they don’t have access to credit.
valasko, S&P makes educated guesses probably using stats more than intuition and anecdotal evidence (like me) but it is definitely a stat to take into consideration. HOever, I just don’t see inflation happening anytime soon. I don’t know what is going to go up in value, or what input is going to go up in value to cause price increases. Devaluing the dollar could do that for imported goods but as the dollar goes down so does everyone else. WE’re not the only country to pass a large stimulus plan – most other western courtries are too. Ours is just bigger because we have more citizens and a larger GDP. But i’m of the opinion that no amount of spending will help reinflate the million dollar real homes of genius of california. But what do I know? Everyone’s got an opinion..
Let me ask everyone on this board – is it looking like you will make more or less money in 2009 than 2008? less than 2007 too??? Steve? We should also ask the CA state employees about Furlough Friday and ask them how they feel about making less money, or the 14,000 emerson electronics employees laid off today… no demand no access to money = price decreases and wholesale deflation. Not disinflation but straight up deflation. i’m leaving work now
“the 14,000 emerson electronics employees laid off today”
That’s based on a report of a statement made on a conference call that they “may” layoff “up to” 14,000 in the next 8 months.
“no amount of spending will help reinflate the million dollar real homes of genius of california”
True, but tell us again how the purchase price of homes works into the “inflation rate”? Not that it isn’t an issue for actual budgets, but is it a direct “inflation” component or not?
Also, one (unmitigated) postive about stalled or decreasing CPI–the future deficits of pension plans and social security will look smaller with no compounding COLA driving up benefits.
Bob,
“We’re not Asians who have a savings rate in the double digits and always have.” – 2 of the big 3 in Asia, Japan and Korea, have had their savings rates fall over the last 10 years to under 3%.
“I don’t think most Americans, or at least ones who never lived through the GD, really have the capacity to save on any large scale.” That’s exactly the point – the US has gone through an extended period of high growth and cheap financing, so are less risk-averse and tend to spend more. The current generation will likely have higher savings rates. Much of the spending has been very good – the US spends a higher percentage on education, r&d than almost any industrialized nation, which has aided high growth for decades.
“2 of the big 3 in Asia, Japan and Korea, have had their savings rates fall over the last 10 years to under 3%”
And China is going to implement a health care system to try to get people to save **less**.
“True, but tell us again how the purchase price of homes works into the “inflation rate”? Not that it isn’t an issue for actual budgets, but is it a direct “inflation” component or not?” – no, but rent is.
“no demand no access to money = price decreases and wholesale deflation. Not disinflation but straight up deflation.” – Obviously, current economic conditions tend to cause deflation, but one of the goals of the current monetary and fiscal policy is to cause a controlled level of inflation. It’s a tough balance, however, as consumer spending tends to affect inflation in the short term, and monetary and fiscal policy tends to be longer term. So, once the economy begins to bounce back, they will probably scale back/reverse some of the policies to not cause extremely high inflation over the following 10 years.
You would think this is the first recession the US economy has ever suffered through. The others did not cause longterm deflation, if any at all. I know we all think we know the what the future will bring but I tend to look to treasuries to gauge what inflation will be. All treasuries have been trneding higher for the past 4 -6 weeks. You all live in the now while the markets are always looking forward a good 6 – 12 months. I trust the markets…
Owners’ equivalent rent, the fictional housing component of the CPI, failed to accurately account for inflation during the boom and in will fail to accurately account for deflation on the way down. The CPI is the best figure we have but it’s sort of BS. Funny how the core figure excludes ‘the volatile categories of food and energy’ but for years the price of these volatile only went up.
But that’s neither here nor there. I look to what happened to Japan after their asset bubble: they lowered interest rates to zero, created zombie banks and spent plenty of yen on stimulus and construction projects. Do you think it worked? Sure there are some differences between US and Japan and our economy will have a different reaction but they’re the best example of we have of a post-industrial economy after a large asset bubble. We’re already experiencing disinflation (i.e. the slowing down of inflation – see recent PPI and CPI figures) it’s just a question of whether the CPI will reflect deflation. But look around you – prices of many things are not just holding steady or slowing price increases, they’re actually decreasing. Housing, food, commodities, energy…It’s getting cheaper, dollars are getting harder to come by. DOn’t believe me? Try asking your employer for a raise…see how difficult it will be to squeeze money from their turnips b/c the money just isn’t there.
I think the major disagreement is whether the stimulus plan will create hyper-inflation like many have argued or whether it will merely temper the deflation all ready occurring. I don’t know about you guys, but I don’t exactly trust the self-proclaimed masters of the universe much further than I can throw them. If the masters of the universe were so smart then why are we in the predicament we are in now?
“True, but tell us again how the purchase price of homes works into the “inflation rate”? Not that it isn’t an issue for actual budgets, but is it a direct “inflation” component or not?”
“Housing, food, commodities, energy…It’s getting cheaper, dollars are getting harder to come by” And HD, how much were the items you listed up in the past 3 years? This is a simple leveling off process HD, not the end of all. Why are Iron ore prices heading back up? Why are treausries headed higher? Why is gold almost at $1,000? My gallon of milk is a lot more expensive then is was 5 years ago and I don;t see the price coming down.
Steve,
“You would think this is the first recession the US economy has ever suffered through. The others did not cause longterm deflation, if any at all.” This recession is different, as it isn’t a simple inventory cycle recession, but “rooted in a severe credit squeeze and a fundamental readjustment in consumer demand” (http://www.marketwatch.com/news/story/economy-free-fall-fourth-quarter/story.aspx?guid=%7BD87827B0-F739-42A7-A123-AEB36F40D99B%7D). This all points towards a longer and more severe recession. Additionally, it corresponds with a significant loss in wealth and changes in consumer spending, both have a strong deflationary effect.
Treasuries do not and are not meant to track/predict inflation. Short term t-bills mostly predict fed rate decisions – which, most definitely, can vary wildly from inflation. Longer treasury notes and bonds are much more complicated, which include 1) predicting longer trends in fed decisions 2) inflationary effects 3) buying/selling pressure relating to supply/demand (e.g. investors recent flee to safety, fed buying treasuries, china floating their currency).
Milk is coming down in price b/c grain is much cheaper than it was a year ago and it also costs less to transport and chill it.
I’m not saying it’s the end of all, you’re putting words in my mouth. I’m saying it’s deflation. Inflation is not a guaranteed phenomenon.
This is a simple leveling off process HD, not the end of all.
You may be right. If it starts looking that way, I will be looking to short the dollar, probably using the UDN ETF. I already own the TBT, betting on higher treasury rates. If I really thought real estate were going up, I’d get into the URE ETF, but I don’t see anything that is making that look like a good bet. In any case, I wouldn’t be getting into an illiquid asset and actually buy more real estate at this point. If and when there is a recovery, I think it will be very slow and I won’t need to hurry to buy my farm to see me through Great Depression Part 2. In any case, for now I try to be as liquid as possible, so I can respond quickly. Its nice there are so many vehicles to do so.
Heitman: “And HD, how much were the items you listed up in the past 3 years? This is a simple leveling off process HD, not the end of all. Why are Iron ore prices heading back up? Why are treausries headed higher? Why is gold almost at $1,000? My gallon of milk is a lot more expensive then is was 5 years ago and I don;t see the price coming down.”
Inflation is virtually guaranteed, in my view. We’ll see inflation before we see any material deflation. The pricing tendencies always push upward, and unless there is a huge overabundance of supply of consumer goods — which there won’t be because the producers are laying off workers and cutting production goals,while the population continues to grow — prices will tend to inflate, not deflate. Look at real estate pricing. Despite having to pull back to address market conditions, the tendency is always to price higher and higher, regardless of what is happening in the marketplace. That’s why a nice house will still cost you > 1/2 million. When I was growing up, only the very rich had houses valued at mor than $100,000. Now how likely is it that we’re headed back to that level? Not at all. While we may see as much as a 20% pullback, the inflation we’ve experienced over the last 25 years will never relent to rolling back to unprecedented levels of prior decades. So, this is all just temporary, and if you buy on a pullback, you can let time be your aid to future appreciation and growth, I am sure. If you’re a flipper, you will reap what you sow.
Does anyone know if the proposed tax credit would apply to a multi-unit (like a duplex) if its owner occupied?
desteve, we’re not going to back to $100k houses but I think we’re looking at deflation for the near future. How else do you explain japan? we’ve already had our inflationary period it was called 1998-2008 now we have a few years to sweat it off with deflation. I used to be pretty strong in the inflation camp but lately, meaning over the last few months, I’ve moved into the deflation camp. Inflation is built into a fiat currency system but it’s not guaranteed that we’ll have inflation every year….if we turn into zimbabwe or weimar german then of course all bets are off, but I’m looking at squarely at japan for a rough idea of where we’re headed.
I mean $100k houses for the rich like you said above…
desteve you should also take into account demand destruction, people are buying less, spending less, and learning to live without. THey can’t buy the same things as before now that they don’t have access to crazy credit. Demand is being destroyed for major purchases “why buy today when it will be cheaper tomorrow” and that’s deflation…again I keep saying Japan but they’re a modern example of what happens when an assst bubble burst. The feds keep talking about getting credit flowing again but the problem is that nobody wants to lend money to people with bad/fair credit … and thoise are the people who helped fuel the credit system over the last few years. (subprime anyone?) those with good credit save and don’t need as much credit … ah, who knows what’s going to happen, back to work on this saturday afternoon for me
HD is right that there is strong deflationary pressure caused by credit and consumer spending tightening, but deflation would be crippling for our economy right now, so the government will try to fight it… I think it’s really tough to predict how it will play out.
juliana – I agree about deciding to buy/rent based on lifestyle, and was not predicting extremely high inflation, nor was I saying to buy. I was just trying to answer the question, saying that high inflation makes buying better than renting.
Why are you all so certain we won’t go back to $100k houses in neighborhoods on the north side?
I’m not saying specifically LP or Lakeview. But a tipster just sent me a listing for a 3/2 bath condo in West Town now listed for $95,000. (yes- a foreclosure.)
Who’s to say SFH prices won’t drop to $100k in Jefferson Park or Albany Park or Rogers Park?
fullhouse,
Only if you finance it. In high-inflation environments there are ways to hedge out your inflation risk these days (ie: TIPS) to take care of that if you’re talking about paying cash. For financing if you have a fixed rate loan it is one way to come out ahead if pricing remains stable.
Also consider the risk of owning in high inflationary times: the government’s response in the 1980s has been to jack up interest rates, causing house prices to crash.
The housing as a good inflation hedge is a moot point these days because anybody can hedge out their inflation risk with TIPS.
Bob,
As I stated earlier, TIPS actually lose money in real terms during high inflation because of capital gains taxes, and housing can perform much better. Additionally, you really can’t leverage on TIPS, b/c the cost to borrow makes it infeasible, so you wouldn’t be hedging your rent risk, but rather be protecting the actual money that you bought the TIPS with.
“Also consider the risk of owning in high inflationary times: the government’s response in the 1980s has been to jack up interest rates, causing house prices to crash.” – Don’t know what you’re talking about… home prices in the US appreciated at an average of over 7.5% from the mid 70s to mid 80s, without a single negative year.
http://mysite.verizon.net/vodkajim/housingbubble/
In terms of house appreciation they did not always keep up with inflation in the mid-70s to mid-80s as the chart indicates.
And the US is heading back to real house prices of 150k from judging by the chart as well. It appears the past decade was an anomaly not to be repeated.
They were still overall positive in real terms during the period of high inflation, and would have performed much better than TIPS, net of taxes… it is completely wrong to say house prices “crashed”, and doesn’t address the fact that the cost to borrow makes it prohibitively expensive to hedge rent with TIPS.
Seriously, though, I can not believe there is a drawn-out disagreement on whether renting or buying is better during high-inflation, financially-speaking. I suppose I am wasting my breath (or typing), so if you still disagree, we’ll agree to disagree.
Um…we just lived through a period of high inflation (even if the CPI doesn’t register it) – $5.00 gas; nearly doubling of housing prices in Chicago, tuition went through the roof for education; food prices shot up (doubled in many cases); the price of commodities increased; grains, milk, soybeans, the price of health care marched upward relentlessly, pretty much everything went up in price more than the standard 2-3% the feds like to target…
financially speaking only the flippers made money. Virtually everyone else overpaid compared to rent.
“Seriously, though, I can not believe there is a drawn-out disagreement on whether renting or buying is better during high-inflation, financially-speaking. I suppose I am wasting my breath (or typing), so if you still disagree, we’ll agree to disagree.”
Wow, did you just make up your own computation for inflation? I’m really done with this thread now…
You’re not done yet fullhouse….
http://www.shadowstats.com/
“Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting.”
http://www.shadowstats.com/alternate_data
“Note: The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here, reflects the CPI as if it were calculated using the methodologies in place in 1980. “
inflation you say? ask the 7.6% unemployed (actal number including discouraged>15%) if they will take a lesser paying job.
Ask the baltic dry index.
Ask banks who won’t make loans even though uncle sam holds a gun to their head.
Ask Japan….
oh and hows’ that $150 oil?
real anectode: last week saw 3 places which have dropped >100k (in one case >200k) in last month. Yes, I am an idiot for even looking but I am a cash buyer and my cash gives me aniemic returns, so I’ve decided to eliminate rent once and for all.
“Why are you all so certain we won’t go back to $100k houses in neighborhoods on the north side?
I’m not saying specifically LP or Lakeview. But a tipster just sent me a listing for a 3/2 bath condo in West Town now listed for $95,000. (yes- a foreclosure.)
Who’s to say SFH prices won’t drop to $100k in Jefferson Park or Albany Park or Rogers Park?”
Let’s see Sabrina – $100,000 SFH finance at 5% with 20% down would leave about a $300 per month interest payment. Add the taxes (1%) and we have a $380 per month housing exp. Can’t wait for those nickel candy bars to come back as well…
We have $300 per month housing it is in Cabrini Green.
“real anectode: last week saw 3 places which have dropped >100k (in one case >200k) in last month. Yes, I am an idiot for even looking but I am a cash buyer and my cash gives me aniemic returns, so I’ve decided to eliminate rent once and for all.”
Don’t worry about rents. They should be down to less than $100 per month real soon. That is according to Sabrina…
sartre,
If you’re looking for a quick arb opportunity also check out taking out a low interest HELOC on the place for 80% LTV. Right now they can be had for 2.6%. After the tax deduction you’re looking at a 2% loan. This can be invested in a close to 4% CD. Depending on how much $ we’re talking about it may or may not be worth the effort, but if so could provide an extra couple k in income a year.
Steve,
If this bubble taught us anything its that housing prices don’t always correlate to the rental yields. This is glaringly apparent today when I include multi-units and duplexes in my MLS searches and they are priced WELL below SFHs or condos.
Bob – Financing is gone for multi units which explains pricing coming down. Yield is yield margins increase and decrease based on preceived risk. Financing will come back and when the fog clears yields will again be king…
Close SH but no cigar:
$80k at 5% is $430 with principal payment plus taxes let’s say $80 plus insurance let’s say $40 which is $550 per month. Let’s say the buyer has so-so credit so they get charged 7.5% interest and the payment is $560 plus $40 plus $80…which is $680. $680 per month plus incidentals like maintenance, repairs, water bills…probably totals about $800 per month which is pretty equal to rent for a 2 bedroom. Of course the $800 a month house won’t have granite countertops or a second bathroom with a rain shower but you get the point. Now that’s what I call a bottom of the market on the northside like jefferson park, avondale, etc, all northside neighborhoods.
The southside has yet to hit bottom yet but check this out:
http://www.trulia.com/IL/Chicago/60629/#for_sale/60629_zip/price;a_sort/
Over 100 single family homes for under $100,000 in 60629. Yeah its southside and the north will always be different I suppose but it’s pretty interesting to see how the other half lives.
HD check out Humboldt Park, which, the last time I checked, qualified as the “north side.”
40 homes priced under $100,000 with the cheapest being $18,500 (but I’m not saying you could actually live in some of them- as many look like they need serious work.)
Live cheap in Humboldt Park. Wonderful area where your life expectancy is 2 years. I could sell you some cheap desert property if you are interested. You can also get some cheap rentals in Cabrini Green.
Humboldt Park? Steve, can you find me a deal? Life long dream to live there? I will pay up to $1.
What Cabrini Green are you talking about Steve? It’s been torn down and in case you haven’t noticed- it’s not exactly “cheap” there.
Funny- lots of people live in Humboldt Park- many for their entire lives (which are longer than 2 years- let us hope.)
The fact is- you can now buy a piece of property on the North Side of Chicago for only $18,500.
bob, thanks for the advise, but since uncle sam taxes me in the top bracket, 4% really translates to 3%. 750k at 3% translates to 22.5k a year, thats still less than my rent etc…
again anectodal, but “higher end” is starting to see capitulation since jumbo financing seems all but dead. Cash is king again…
bob, I missed your original statement about HELOC, great idea!
“What Cabrini Green are you talking about Steve? It’s been torn down and in case you haven’t noticed- it’s not exactly “cheap” there.”
I am sure you can still try to get a cheap place in one of the three high rises that haven’t been torn down on Division between Halsted and Larrabee.
and yes, I am joking. just point out that Cabrini isn’t all gone yet.
“Humboldt Park, which, the last time I checked, qualified as the “north side.””
Nope. Maybe “northwest side” for those areas north of the park; much of the Humboldt Park ‘hood is Near West Side (to me, at least). North Side is, generally, east of the river/North Shore Channel. West of the river is NW side.