We Love Authentic Lofts (with private rooftop decks): 1701 N. Damen in Bucktown
This authentic brick and timber loft at 1701 N. Damen in the heart of Bucktown is one of those buildings that was converted in the early 1990s, back when lofts were meant to be big and spacious and have things like spiral staircases to rooftop decks.
Since we love authentic lofts AND private roof top terraces, this unit is basically nirvana.
Here are the room sizes:
- Bedroom: 16×11
- Living room: 25×11
- Kitchen: 16×10
- Rooftop deck: 15×10
David Bailey at Baird and Warner has the listing. See more pictures here.
Unit #301: 1 bedroom, 1 bath, no square footage listed
- Sold in May 1993 for $134,500
- Sold in April 1997 for $177,000
- Sold in October 1999 for $210,000
- Originally listed in September 2008 for $325,000
- Reduced a few times
- Currently listed for $299,000 (includes the parking)
- Assessments of $285 a month
- Taxes of $2862
- W/D in the unit
- Central Air
- Fireplace
- Private rooftop deck
Seems like a reasonable ask-price to me, but I don’t know the neighborhood well. But what train is it “one block” from? I can’t see it on google maps.
Great location, good guts (loving the loft and the rooftop!), needs a kitchen and bathroom renovation.
The blue line is 1 block south (near the 6 corners of Damen, North and Milw). This is the heart of Wicker Park/Bucktown.
Wow i love this unit… how much would it cost to heat this bad boy in the winter???
Nice Deal!
Too bad it’s only a 1 bedroom…
It’s a nice looking place but $325,000 for a one bedroom loft is crazy, just as $299,000 is slightly less delusional. I think this a good price for a single person who wants a 1 bedroom loft in the middle of the nightlife, today, is probably $230k to $240k, with comps selling in the 190’s and 200’s (including roof deck) by 2011 or 2012.
The seller needs to take a serious look at the competition:
http://www.coldwellbankeronline.com/CustomModules/Properties/PropertyDetails.aspx?SearchID=2139288&PropertyID=756218&RowNum=2&StateID=19&RegionID=0&IsRegularPS=True
http://www.coldwellbankeronline.com/CustomModules/Properties/PropertyDetails.aspx?SearchID=2139288&PropertyID=750171&RowNum=5&StateID=19&RegionID=0&IsRegularPS=True
Why would I pay them 300k for a dated kitchen/bathroom, when there are brand new, nicer units in the area and my mortgage would cost $100 more a month?
How many bartenders or servers that live in Bucktown can really afford this? Maybe because its Bucktown & not WP there might be a yup who ventures west of the river and picks this up.
I dunno though 300k is a bit much…maybe 270k.
The price went up ~7% from 93 to 97 and from 97 to 99. Their current ask is ~4%/year since 99. Apply the 4% back to the 97 price, you get $283k, to the 93 price you get $252k. Seems like a reasonable range.
Reverse Stevo’s formula, the $299k ask implies rent of $1620/month as the “break-even” point. Would you pay $1620/month to rent this place?
If there’s one place in the city where sellers won’t be getting $300,000 for a one-bedroom of any kind, it’s Bucktown. This asking price would be more reasonable in River North, but only if the seller were willing to negotiate.
It will sell to some knife catcher at $275, even though its probably not worth any more than $250.
Back in the day this was considered Wicker Park. It is one block north of the Mil/North/Damen intersection. Also if this were a newer conversion it would have been a 2/2 crammed into the same space.
“its probably not worth any more than $250”
Sonies is calling inflation-adjusted 1993 prices for (un-updated) BT condos. Which is roughly, what, 2002 nominal prices?
Overpriced IHMHO, but great location. I say $250 max and even that seems a bit much for an outdated 1 bedroom/1 bath.
Bob on January 23rd, 2009 at 12:07 pm
“How many bartenders or servers that live in Bucktown can really afford this?”
I know a lot of people who live in Bucktown/WP that are not bartenders and servers. Most of which work in corporate america and commute to the loop.
“$250 max and even that seems a bit much for an outdated 1 bedroom/1 bath”
If the kitchen and bath were updated, does it have any hope at anything close to $299? What would it really cost to spiff up the K & B? $30k?
“Sonies is calling inflation-adjusted 1993 prices for (un-updated) BT condos. Which is roughly, what, 2002 nominal prices?”
Yeah, so? 🙂
Sorry, I thought it was a two bedroom….
A solid kitchen and bath update would probably be about $30k. $7k-10k on bath and could be up to $20k on the kitchen.
A person that could afford a $300k one bedroom would need to make about $80k at least with a 20% down payment to not have to worry about stretching affordability. Corporate types making $80k+ per year usually don’t want to live in a unit that looks like a rental when you are buying, particularly at this price point. If I am going to live in a place that looks like a rental, I am going to rent. I am thinking $250 list price may get some serious looks and people are going to discount it for having to do the upgrades themselves. Most newer stuff at that price point will be updated.
So, Edu, are you saying that ~$30k spent could make this a reasonably appealing place at $299k ask (probably ~$280-290k closing price)? Rather than a $250k ask, with a ~$230-240k close?
Bucktown/Wicker Park is the perfect location for a professional. Where else can you get free and easy street parking, 20 minute door to door commute to the loop/office, and a plethora of restaurants and bars. I moved from lakeview to this area and love every minute of it. Its exactly what I am looking for, but the price is too high. I’d consider taking it at $250k, especially since garage parking is not a necessity in that area.
$230k – $240k is about what a guy who makes $80k a year or a couple that makes $80 a year can afford to pay given the necessity of convential financing and a downpayment.. technically he could probably ‘afford’ to pay more but then he’s not exactly getting a deal now, is he? Everyone wants deals now they don’t want to live paycheck to paycheck to afford the mortgage. Factor in student loans (which qeveryone
Adjusting for inflation is a handy baseline but it’s not entirely predictive. Personally my salary has never tracked inflation and then this year with the recession my income has been less; how’s that reduced bonus figure working into your CPI calculation??
$230k – $240k is about what a guy who makes $80k a year or a couple that makes $80 a year can afford to pay given the necessity of convential financing and a downpayment.. technically he could probably ‘afford’ to pay more but then he’s not exactly getting a deal now, is he? Everyone wants deals now they don’t want to live paycheck to paycheck to afford the mortgage. Factor in student loans (which lots of young people making $80k a year have) and possibly a car payment too.
Adjusting for inflation is a handy baseline but it’s not entirely predictive. Personally my salary has never tracked inflation and then this year with the recession my income has been less; how’s that reduced bonus figure working into your CPI calculation??
I was suprised by this thread. This is as good a location as any in Chicago. Pete, I think you are a little behind the times. A one bedroom loft in bucktown is actually more desireable than most highrise/midrises boxes in River north for young working profs.
What 80k/year single loser would want to live in WP or BT?! I can see the happy service sector couple pulling down 80 bones wanting to live here as there are many like them. But if you’re single and not into the tats and piercings (which most corporates aren’t) head east of the river.
De-gentrification is gonna be a b____ for WP & BT is my guess. I’ve got my popcorn ready.
I agree completely with LG. I’ll take a thriving neighborhood with easy parking and transportation over a high-priced River North condo any day. Plus, $300k doesn’t get you much in RN, from what I’ve been seeing.
Hipster couples make 80k in the service sector? That’s way over the median in Chicago of $55k for a household of two.
“What 80k/year single loser would want to live in WP or BT?!”
I’ve known lots of them, but usually making more than $80k.
Anon, even if the kitchen were updated, I still think $300k would be a bit much, but not entirely unreasonable given the A+ location/neighborhood and nice outdoor space. I think emotionally, buyers are going to balk at paying $300k for a one bedroom even it were upgraded and even if all the numbers may say it is reasonable. Buying a home isn’t entirely about the numbers. It is a very emotional purchase and in the current market, $300k just seems like a hell of a lot of money for a small one bedroom. It is on the cusp of the price point where the trixie/chad professionals will want two bedrooms and requires a two income household to afford easily which is why I think it will probably ultimately sell in the low 200s.
“Reverse Stevo’s formula, the $299k ask implies rent of $1620/month as the “break-even” point. Would you pay $1620/month to rent this place?”
Honestly, I think you could rent it for that much. I was looking for large one bedrooms in this neighborhood about a year ago, and this rent seems fair in comparison. Anything cheaper than $1600 in the heart of Bucktown/WP was going to miss something major, like parking or outdoor space.
For me, too, this is a great location. Easy commute downtown, access to the Kennedy, tons of restaurants, dog parks, etc. I looked at many properties in the neighborhood, but ultimately rented in Logan Square where you can get a lot more for your money in a less-congested neighborhood.
Btw, just had lunch with a friend who lives just north of the city and has two rental properties – – one kept as a rental intentionally, the other he couldn’t sell and thus is renting out. He’s owned the first in Lincoln Park for twelve years. He was making a profit until the assessments went through the roof. He’s now breaking even. He’s taking a monthly loss on the second property, in Roscoe Village. He is only renting it because he couldn’t sell it for a profit two years ago when he moved his family to the burbs. He even agreed to lower the rent rather than lose two good tenants, because he’d be losing even more if the property sat empty for one month. He’s hoping that in 2-3 years, he’ll be able to at least break even (I kept my mouth shut). I don’t feel too badly for him, though. He has a great job and a beautiful big house. In other words, he’ll be fine, even if he is losing some every month!
“A solid kitchen and bath update would probably be about $30k. $7k-10k on bath and could be up to $20k on the kitchen.”
Edumakated,
In todays market, you could redo the kitchen and bath with very nice finishes for well under $30K. Contractors are BEGGING for work and you can get some great deals on materials since no one is buying the stuff for new developments. Done smartly, I would say $15K could really do a number on the Ktichen and Bath.
“I agree completely with LG. I’ll take a thriving neighborhood with easy parking and transportation over a high-priced River North condo any day. Plus, $300k doesn’t get you much in RN, from what I’ve been seeing.”
We just signed a contract on a 2/2 in RN bigger than this place and much newer, within walking distance from both of our jobs. And the transportation where we’re going to be at is far better than anywhere i’ve seen in the city. I’ll enjoy the extra 1.5 hours a day added to my life from not shlepping on the bus to and from lakeview every day @ 45 minutes a pop. 5 minute commutes… awesome. Living in Bucktown, not so awesome…
HD: “That’s way over the median in Chicago of $55k for a household of two.”
Yeah, and ~20% of Chicago residents live below the poverty line and can (now, in 2009) be readily discounted from the potential buyers of a $250k+ condo. You love to trot out statistics when they support your point, but dump on them broadly when they don’t.
50% of the city makes over the median;* that’s 1.4 million people, around 500,000 households. I think that there are moer than a few who make $80k+. And less than 50% of the households in Chicago are homeowners. This simply isn’t going to sell to a “median” buyer, ever.
*Currently $60,300 for a two-person household ($52,800 for 1-person), Chicago dept of housing reporting of federal stats.
It would sell at 200-225k right now. Of course, lower the longer you wait.
Anyone else think the dims. don’t stack up? the kitchen and deck are roughly the same size yet the deck looks twice as large as the kitchen… Plus the living room and kitchen are in the same “room”. if the tiles on the fireplace are 1 ft squares, the MAX length of the room is 20 ft which would make it 11 feet wide. therefore the kitchen is 10/11 ft wide and 16 ft long. however it doesn’t look that long. you think they are double counting SQFT? My work blocked access to the RE website so I can’t really compare… any thoughts?
Bob, you obviously do not have a clue. My buddy works in the “service” sector at one of most expensive and nicest restaurants in the city and doesnt even make $50k/year. Also, it sounds like you live in a bubble. Go check out wp/buck on a summer weekend and you’ll be eating your words…
Thanks for pointing that out, anon (tfo). The “median household income” is not the relevant issue. Instead, it’s the “median household income *of homeowners*” which is a larger number. How many people own instead of rent? Nationally, I know it’s around 65%-ish; I imagine it’s the same in Chicago. And that 65% is not normally distributed across income; it is more concentrated towards the high-income end of the curve.
I wish we did know that number (that is, the median income of homeowners), because then our discussions of 2.5 or 3 X median income would have a little more traction.
ALso, if i’m looking at the pictures correctly, the place is 11′ wide? How the hell is the living room 25′? Unless they count the space all the way to the door next to the fridge, but then they say the kitchen is 16’x10′. O.o What is up with these measurements? And if these measurements are the truth you got
160 sqft kitchen
176 sqft bedroom
275 sqft livingroom
and lets just say another 300 sqft for bathrooms and hallways and you have a 911 sqft place
perhaps they are counting the 150 sq. ft. deckspace that you can only use for 6 months out of the year, but even still that’s nearly $300 a sqft in BUCKTOWN!
I said 80k for hipster households is a lot of money. 55k is the median. You’re looking for an argument that’s not there. I don’t know where you’re going with this. I’m making fun of hipsters just like Bob. Chill man, chill.
i would take a place in bucktown over a small 2/2 in RN (e.g. 630 n franklin).
HD, what is your definition of a hipster household? just curious.
A small 1/1 in bucktown? To each his own I suppose…
not necessarily, but the 2/2s in 630 are terrible. i know someone who owns one….
K: “Nationally, I know it’s around 65%-ish; I imagine it’s the same in Chicago. And that 65% is not normally distributed across income”
As of 2007, metro-wide, it was ~69%, down from ~70% in ’05. The City proper is less than 50%, but not by much, so call it 50% until the ’10 census is complete.
And, yes, especially in the city, there are a meaningful number of high-income renters. But also, there are a meaningful number of “low-income” people who own their homes either b/c they bought them when they were very cheap or they have substantial assets, but little income (which should be everyone’s ultimate goal).
Can someone explain to me the whole “update the bath and kitchen” thing? Am I supposed to be changing out my kitchen and baths every 10 years at like $15-30k a pop? No way I could afford to do that. Single woman, one income? No way.
I dunno about you folks, but I grew up in a house where we still had the furniture my parents got when they married, and I’ve still got the dining room set in service in my own house today. “Update” the kitchen in my experience meant, “replace the fridge, it’s finally died”.
I guess I really don’t understand treating homes like fad fashion statements. I like my fashions classic and timeless, thanks! And, if I were shopping for a place, I’d rather do the updates myself, than have something someone else chose that would reflect their tastes more than mine.
” if I were shopping for a place, I’d rather do the updates myself, than have something someone else chose that would reflect their tastes more than mine.”
No doubt, but if you are comparing two places–one, like this one, with 15 yo cabinets and fixture and another, basically similar, with almost brand new cabinets and fixtures, which would you pay more for? And remember that many (if not most–I’d say 60-70%) buyers want a basically turnkey place, unless they’re getting a serious deal. It’s much the same as a parking space–there’s definitely a market for the places w/o updating/parking, but it’s a smaller market and they are much more likely to demand a lower price.
I don’t really have a definition of hipster household, just two people with lots of tats, an attitude and probably originally from some midwest farm town.
“just two people with lots of tats, an attitude and probably originally from some midwest farm town”
Most of the folks I know who I would call hipsters fit no more than one of those categories.
“not necessarily, but the 2/2s in 630 are terrible. i know someone who owns one….”
Well that’s your opinion, your person you know might not have a good unit as there’s only really one good side with a view. It was a good value to us at the price we paid for a starter home so whatever.
logansquarean,
Thats because you are a prudent and sensible person. I think far too many people on here who talk about redoing all kinds of rooms watched one too many an episode of ‘Flip This House’.
The boom is gone, the bubble died, any “investment” in upgrades will have a negative ROI. Once people finally realize this the rehab craze might finally, finally, be behind us.
You don’t have to update your kitchen & baths frequently, nor do you have to get top of the line everything. However, keep in mind that 15 years from now people will be saying the same thing as they are on this site about your place.
it isn’t like this place just has an old refrigerator. It is significantly out of date and not what people expect when the are buying a place. Renting is one thing, buying is different.
By in large, buying a home is emotional for a lot of people. I have seen people not buy a place just because they don’t like the paint colors. Bad decorating and out of date appliances and features can limit the appeal factor to buyers.
“15 years from now people will be saying the same thing as they are on this site about your place”
… even (or, perhaps, especially) if you put in top of the line everything yesterday.
As another point in response to L-S’s question: This place has perfectly fine kitchen and bath for someone looking to customize or as a rental. The asking price is as if it’s fully updated (and exactly what the buyer would want) and to be o/o. The difference b/t the asking price and what it is perceived to be worth is more than the cost of an update; while it probably still wouldn’t sell for ask with an update, it would bring in a different pool of potential buyers who would be more likely to pay a premium for a turnkey up-to-date condo.
Well done and sensitive remodeling never goes out of style and can last many years. I’ve seen 30 year old St. Charles kitchens look better than brand new kitchens.
I visited this unit. It is horrible. Looks like it has been vacant for at least a year. The counter top on the kitchen island has been broken in half. The bathroom in about 2 inches lower than the rest of the condo. You actually have to walk up three flights of stairs, then go outside, and then come back into the condo unit. Awesome location, but horrible unit. And the window screens are all ripped up.
So wait… may be a dumb question, but:
Private Rooftop as in this is used privately by the entire building?
Or private rooftop as in this is the unit’s private deck?
“Lauren on January 23rd, 2009 at 11:57 am
The seller needs to take a serious look at the competition:
http://www.coldwellbankeronline.com/CustomModules/Properties/PropertyDetails.aspx?SearchID=2139288&PropertyID=756218&RowNum=2&StateID=19&RegionID=0&IsRegularPS=True
http://www.coldwellbankeronline.com/CustomModules/Properties/PropertyDetails.aspx?SearchID=2139288&PropertyID=750171&RowNum=5&StateID=19&RegionID=0&IsRegularPS=True
Why would I pay them 300k for a dated kitchen/bathroom, when there are brand new, nicer units in the area and my mortgage would cost $100 more a month?”
Lauren – I vote for your post as dumbest of the year. congrats! Who lists Humbolt Park and Sount Wicker Park comps the competition for a loft in a perfect Bucktown location? I am not saying it is worth the listing price but at least your post is really bad.
HD – Bucktown is not a “median income” type neighborhood. Oaklawn is a “median income” type neighborhood where you should find “median income” people. In bucktown, you will find people that make lots of money. I would guess that the average 33 year old home owner makes around $80k – $100k. Sorry, if you want “median” people you will have to find a “median” neighborhood.
What di you thinkt he average guy makes who lives in Ford City? The “median”?
How’s the SHill’s call of buyers returning in January going?
I hope everyone is getting their offers in before inventory depletes. They ain’t making any more and they only go up so buy now or be priced out forever.
Hey G – That is sort of true. The new starts will be so low in 2010 – 2014 that those who own and sell in 2014 may be looking very smart down the road. Thos that have to sell today are no looking so lucky.
The one certain in everything is… don’t expect the expected and don’t assume you know what you are talking about. 4 months ago it seemed oil was running low and the price would continue higher until we created alternative energy. How quickly things change. As optimistic as people were on energy going forward they are equally pessimistic on housing. The masses are always wrong or else we would all be rich. Expect the unexpected in the economy and in housing. What do you think will happen if we come out of this recession in late 2009 and are faced with rapid inflation? What do you think will happen if there are no new housing starts for 2 or 4 years combined with inflation across the board? Will prices go up or down?
Will the people who buy today and low prices look smart or dumb for going against the grain and buying a property at a reduced price? How did the masses do in 2006 and 2007 with their purchases? It seemed like the right thing to do as everyone in the media and at the water cooler was convinced housing would go up for every. Now we have the exact opposite where everything you hear and read is negative. See a pattern? When everyone was buying in ’05 and ’06 the smart thing to do was to sell. Sometime in the next 12 months while everyone is selling the smart thing to do may just be to find yourself a nice new home.
Don’t ever forget how easily convinced the general public is. Play the other side and it pays off 9 times out of 10.
I think a poster like “g” is a perfect example. Anytime someone with limited knowledge is so convinced about an outcome you can bet the exact opposite will play out. Sorry G
“The one certain in everything is… don’t expect the expected and don’t assume you know what you are talking about.”
I completely understand why the SHill would adopt this approach.
“How did the masses do in 2006 and 2007 with their purchases?”
Only slightly worse than those who bought in 2002-2005, and probably earlier, before the bottom sticks around for years.
There will be no housing cost inflation without commensurate wage inflation.
The SHill’s desperation to encourage knife catchering is hilarious.
G — Are you surprised anyone in a position to benefit financially would argue/support any other position than “buy”? 🙂
With respect to this unit, I went and saw this place several months ago and it is extremely tiny. The listed dimensions can’t possibly be correct. Aside from that, it’s a decent loft with outdated appliances/finishes. The lack of updated features didn’t phase me at all (I’m a DIY with NO expectation of return). This unit is not worth anywhere near 300K — most likely worth ~240K.
“I think a poster like “g” is a perfect example. Anytime someone with limited knowledge is so convinced about an outcome you can bet the exact opposite will play out. Sorry G”
Amen to that! G isn’t even able to come up with any evidence to support his answer!
“I completely understand why the SHill would adopt this approach.”
What an empty, meaningless statement! I love how G just calls names and then never explains himself.
“There will be no housing cost inflation without commensurate wage inflation.”
If the economy picks up and hiring starts to get better in late 2010, which would be typical, you could see inflation of all kinds, including wages.
You guys are all babies (age-wise) compared to me. If you make your real estate decisions for the long run (keeping in mind that TIME REALLY FLIES), most of you will be proven right, no matter if you think things are going up quickly or slowly, or whether this neighborhhod or that neightboood is good at the moment. However…..– many people, when they start to raise children — want nothing to do with educating them in the City of Chicago, and end up heading for the burbs (I did that, and now it’s time to return!) If your nests grow, you are going to want to get the hell out of the City, so don’t overextend your real estate investment!
Big IF. Late 2010 looks like wishful thinking. In Abelson’s column in today’s Barrons (think I quoted him last week too) he discusses an excellent Reinhart & Rogoff paper “The Aftermath of Financial Crises”.
“They cite three defining elements of the aftermaths of severe financial crises. First, asset markets of just about every kind suffer a bruising and prolonged battering. On average, for instance, real housing prices plunge 35%, and the agony stretches out over six years, while equity prices lose a whopping 55% over roughly 3½ years.
Second, output and jobs take it on the chin: The unemployment rate shoots up (again, on average) 7 percentage points over four years. Meanwhile, gross domestic product suffers losses averaging more than 9%, but — scant consolation — it happens more quickly, typically in two years or so.
Third, the real value of government debt tends to explode, shooting up an average 86% in the major post-war slumps. Reinhart and Rogoff contend that the huge swelling of such debt owes not, as commonly believed, primarily to bank bailouts and handouts (see, the banks aren’t even very good at raiding the Treasury). What really kites government IOUs, they say, is the drastic shrinkage in tax revenues generated by faltering economies and the “often ambitious countercyclical fiscal policies aimed at mitigating the downturn.” (A timely, obvious example is that $825 billion stimulus package the new administration has its heart set on.)
Here’s a link to the paper.
http://www.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf
Turd: “If the economy picks up and hiring starts to get better in late 2010, which would be typical, you could see inflation of all kinds, including wages.”
Steve said: “As optimistic as people were on energy going forward they are equally pessimistic on housing. The masses are always wrong or else we would all be rich.”
Steve: That’s the funny thing. In the Chicago area, people are NOT pessimistic on housing. I still see speculation all over the place. I still see people eager to buy – even when “the media” is telling them that prices are going to go lower. I still have people telling me it’s “always” better to buy than to rent- and asking me why I’m still renting.
There’s still pressure to buy, buy, buy. That’s not pessimism.
Additionally, many sellers still believe that this spring the market will turn. Those who are slightly more pessimistic believe that in 2 to 5 years, the market will have recovered and housing will be off to the races again.
In this week’s Barron’s there’s a piece talking about how 25% of millionaires believe real estate is a good investment right now. Is that pessimism?
Conversely, I hardly ever meet anyone who wants to invest in the stock market- especially now. People only believe that stocks go down and that you can’t “make money on that.”
The bottom is hit when no one wants to invest in that asset class. By that definition, we are far from the bottom in housing- and close to it in stocks.
There’s little fear among buyers of housing in the Chicago area. Many think they’re getting a “deal” but they don’t believe that prices will continue to fall all that much.
Sabrina – 4th qrt volume, and January so far, came in at roughly 20% of the avg of 2003- 2005. 20%! If people are still buying please let me know where they are so i can give them a call 🙂
Sabrina – 4th qrt volume, and January so far, came in at roughly 20% of the avg of 2003- 2006. 20%! If people are still buying please let me know where they are so i can give them a call 🙂
Anyone of this board rent in Lincoln Park? Let’s hear the great deals everyone is getting and then see if buying would be the better move. Over the long term renting is a waste of money. That is 100% accurate.
Juliana, with the number of talking heads that share their “opinions” on the market on the internet these days, anyone can find an “expert” who can reinforce their world view. As for this article, I’ve read it and it brings up some good points. The problem, though, is that most countries that have had financial crises have been small, emerging markets. The US still has the world’s reserve currency, so are the experiences of Argentina circa 2001 and Thailand circa 1998 really that relevant to today’s American economy?
desteve,
I hope your are right. If that is correct in a mere half decade I’ll be able to afford a house of my dreams in the city. 😀 It seems like a ways off for me at my unadvanced age, but you are correct. Stick it out and play it for the long term.
I agree with Steve in a broader sense that being a contrarian can pay dividends long term. However we haven’t really seen a large correction in Chicagoland RE. Condos are only down 6% from their peak and the overall index is only down 15%. Steve value buying generally implies much lower prices off the peak in my view.
Err..overall Chicagoland index is only down 10%. That would be akin buying the Nasdaq at 4,500 in 2000.
Also Juliana I am skeptical of academic studies at this point predicting doom and gloom. Show me something published in 2007 or earlier in some sort of academic journal or anything that predicted this. I agree that it will get worse but I don’t think we will see 12%+ unemployment.
Sounds like they are jumping on the bandwagon at this point. Also its so early in the crisis no serious academic of finance would really choose to analyze this crisis as history has yet to be even halfway written. It looks to me like an 11 page paper an undergrad could write for their final to be honest.
Just because the dollar is the world’s reserve currency doesn’t mean the fed is going to be able to do anything to stop deflation. Great interview here on this topic.
http://www.marketoracle.co.uk/Article7939.html
Turd:”The US still has the world’s reserve currency, so are the experiences of Argentina circa 2001 and Thailand circa 1998 really that relevant to today’s American economy?”
Barry Ritholtz discusses the paper in his blog today too. In fact he refers says “Note that we have discussed the fine work of R&R previously”. But yeah, you probably know more than he does too. I don’t pretend to, so I keep reading.
http://www.ritholtz.com/blog/2009/01/the-aftermath-of-financial-crises/
Bob:”Sounds like they are jumping on the bandwagon at this point. Also its so early in the crisis no serious academic of finance would really choose to analyze this crisis as history has yet to be even halfway written. It looks to me like an 11 page paper an undergrad could write for their final to be honest.”
“4th qrt volume, and January so far, came in at roughly 20% of the avg of 2003- 2006. 20%! If people are still buying please let me know where they are so i can give them a call ”
Steve: The world does not revolve around Lincoln Park. Prices haven’t come down enough there for the speculators/investors to be buying. But believe me, many people are having no trouble pulling the trigger in Logan Square, Bucktown, Wicker Park and other areas (mainly on foreclosures but not always.) Some foreclosures are going under contract within an hour of listing- sight unseen.
Is that fear? Is that a bottom? Doesn’t sound like it to me.
In November, when the markets were tanking, I didn’t exactly see investors rushing in to buy stocks- even though many good companies with solid balance sheets were trading at sometimes 10 year lows. They were too afraid. THAT is fear.
We are in the middle of the bottoming process but still have a long, long way to go.
Sabrina – Again if you really knew how this was going to play out you would be a better economist than 99% of the ones we hear from on Wall Street. I appreciate your speculation but you saying Lincoln Park has further to decline is just as accurate as if I say it will appreciate. The bottom line is where will prices be in 5 years from now?
“But yeah, you probably know more than he does too. I don’t pretend to, so I keep reading.”
Juliana, as I said before, you can find an “expert” to qualify ANY opinion right now. If you really want to evaluate a market analyst, look at their motives. Barry Ritholtz writes a great blog, but his motivational is to get people to read it, so he tends to have extreme arguments. Also, the idea that the fed can’t stop deflation is completely unknown and you can find many, many opinions on either side of the argument that are all equally convincing and, likely, wrong.
It seems to me that if you can buy in a new construction building at a discount right now, you’ve got to like your chances 5 years from now. You will still be in the newest unit in the city when the market eventually recovers!
I haven’t seen one credible argument on how what the fed is doing will have an impact on inflation. I have provided many on why its not working. Do you have some? Here’s another blog I read that argues against it.
http://globaleconomicanalysis.blogspot.com/
Turd:
“Also, the idea that the fed can’t stop deflation is completely unknown and you can find many, many opinions on either side of the argument that are all equally convincing and, likely, wrong.”
Steve: Yes, I’m a better economist than 99% of them. All you have to do is read history. Whenever an asset bubble collapses, it doesn’t come back for decades. The NASDAQ is the perfect illustration and is behaving exactly as it was predicted it would behave after the bubble burst.
How LONG the downturn lasts is the unknown. 5 years from now we’ll be lower than today in LP. Don’t know when we’ll get there but when we finally hit bottom we’ll stay at the bottom for many, many years.
Sabrina, with all due respect, why in God’s name should we give you any credibility?
“The NASDAQ is the perfect illustration and is behaving exactly as it was predicted it would behave after the bubble burst.”
Who predicted? Predicted what? This is total BS! You have no idea what you are talking about and haven’t presented a shred of evidence to support your silly claims.
Juliana, if you honestly haven’t seen any articles about current inflation risks, then you obviously have barely read anything and are too ignorant to judge the credibility of the articles you are reading. Do yourself a favor and google “inflation” on google news and do some research.
Sabrina – If you feel comfortable comparing a tangible asset like real estate, to an intanfible asset like internet stocks, then I wish you luck. Better head back to econ 101 with comments like that 🙂
Sabrina – You are again really showing your ignorance with finance and housing in general. Are you suggesting that incomes will decline for years and years to come. You mentioned decades before we would see a recovery. You do know that housing prices are based on income levels, right? Are you suggesting that people in the future will make much more money but housing prices will decline? Please expalin your theory here because it really makes no sense.
Housing is not a stock. The demand for purchases or rentals is directly linked to the employment picture and income levels. There is not a scenerio out there where the economy recovers but housing and rental prices fall continuously. If there is, please educate me…
Check out STeve Heitman’s facebook. My gawd is he one ugly pug!!!!
Yeah, I thought so. You obviously don’t read much. lol, good luck.
Turd: “Juliana, if you honestly haven’t seen any articles about current inflation risks, then you obviously have barely read anything and are too ignorant to judge the credibility of the articles you are reading. Do yourself a favor and google “inflation” on google news and do some research.”
The SHill reeks of desperation. Or, is that the Turd I smell?
Have either of them ever offered a shred of evidence for their claims?
“If people are still buying please let me know where they are so i can give them a call” The SHill is hilarious. I hope he was planning on that “$350K a year” continuing throughout his “career.” Considering all the insults the SHill has hurled at homedelete over pay levels, I believe HD will make more this year.
Karma (or hubris nemesis for you classicists) is a bitch.
Oh G – Don’t cry for me little guy. I shall be fine…
“Yeah, I thought so.” Thought what? Are you unable to search google news? Here are two articles from the first page of results:
Treasurys fall as inflation expectations grow
1 day ago
NEW YORK (AP) — Longer-term Treasury prices have fallen for five straight trading days — indicating that investors are starting to bet on inflation despite the slumping economy.
http://www.google.com/hostednews/ap/article/ALeqM5gXJkHBkXwQWtPp4EaKg_ly_7cM_AD95T4EF80
Here is another from page one:http://www.istockanalyst.com/article/viewarticle/articleid/2980195
People like you who blindly believe any article they read, without considering the motivations of the writer, are exactly the kind of people that get slaughtered by the markets, and deservedly so.
G, while you were busy calling names, you challenged me to provide evidence for my claims. What claims, exactly, have I made that you would like evidence for? I haven’t made any claims, it’s Sabrina and Juliana who have much claims based on shaky, or no, evidence.
G – I can support my claim that historically real estate increases by inflation, plus or minus demand for a particular neighborhood. I will not supply proof for this but you can look it up just about anywhere.
Oh, my other claims was that real estate might go up or down based on what happens to income in the next 5 years. Do you want support for this one as well? Oh, how about the one where I said buying is better than renting in the long term. Don’t know if you want proof for this one but it goes hand and hand with th ewhole inflation thing from above.
Anything else?
What names?
” As optimistic as people were on energy going forward they are equally pessimistic on housing. ”
Proof?
I can’t believe SteveO is pushing for a lofty RE valuation on this one as it is outside the sacred LP/LV.
StevO these hipster hoods are gonna come down man. Sorry if you own there but you should’ve followed your own advice!
“What names?” You call SH Shill all the time. Name calling is the refuge of weak minds.
“these hipster hoods are gonna come down man”
I think that one block north of division/milwaukee is more just a “hipster hood” at this point. It’s not like this is in west town or near the United Center or something.
I meant to say MORE THAN just a hipster hood.
“You are again really showing your ignorance with finance and housing in general. Are you suggesting that incomes will decline for years and years to come. You mentioned decades before we would see a recovery. You do know that housing prices are based on income levels, right? Are you suggesting that people in the future will make much more money but housing prices will decline? Please expalin your theory here because it really makes no sense.
Housing is not a stock. The demand for purchases or rentals is directly linked to the employment picture and income levels. There is not a scenerio out there where the economy recovers but housing and rental prices fall continuously. If there is, please educate me…”
Wow- where to begin?
A real estate bubble, like the one we had for the prior 5 years, indicates a decoupling from fundamentals in that asset class.
Did incomes matter in 2005 when you were buying? No. It didn’t even matter if you had a job. Heck, they were giving out loans to dead people.
So- as this all plays itself out- eventually we’ll return to “fundamentals.” But we’re not there yet. The froth has to come out of the system.
How long will this take? No one knows. But real estate is slow to bust so it will take years.
And incomes continue to decline, Steve, so I don’t see how real estate will be going up anytime soon. 6% of employers have cut salaries already- the highest level since the government started keeping records in 1974. And that doesn’t include employers who are freezing pay.
The income to buy ratio is still out of whack all over the city- as is evidenced by posters on this site who are simply looking for an “affordable” bungalow in a north side neighborhood such as Old Irving Park for less than $300,000. The incomes don’t support the housing prices (not yet.)
Housing will behave no differently than every other asset class after a bubble bursts: it will be a depressed asset and a poor investment for decades (see 1920s Florida housing bubble- and bust; gold bubble and bust from 1980-2002; Nasdaq bubble and bust circa 2000-to the present).
“Housing will behave no differently than every other asset class after a bubble bursts: it will be a depressed asset and a poor investment for decades”
The idea that the Chicago housing bubble is comparable to the Nasdaq is sheer lunacy, I can’t believe you could even say that. When bubbles burst, the market always returns to trend and generally over corrects to the downside. The size and duration of the correction depends on how far above trend the bubble took us. The Nasdaq bubble was so far beyond what we experienced in Chicago housing no one with any knowledge would compare them. Look at Shiller’s work and even he isn’t predicting what you are. Housing has come significantly back towards trend and the while the near-term outlook is certainly not good, to say that it will take “decades” to recover is simply absurd.
Juliana, since you don’t know how to use google, here is another link on inflation potentials: http://www.zealllc.com/2009/biginf.htm
Turd said, ““The NASDAQ is the perfect illustration and is behaving exactly as it was predicted it would behave after the bubble burst.”
Who predicted? Predicted what? This is total BS! You have no idea what you are talking about and haven’t presented a shred of evidence to support your silly claims.”
In November 1999, Warren Buffett predicted, in Fortune Magazine, that the markets would return about 4% over the next 17 years. That was 4 months before the NASDAQ started its collapse.
I also really recommend you read Manias, Panics and Crashes by Charles Kindleberger. It lays it all out there. Bubble history just keeps repeating itself.
Kindleberger died a few years ago in his 90s. It’s a shame he didn’t live to see this bubble fully burst. His last interviews are a good read though.
What does Warren Buffet’s prediction on the “the market” have to do with the Nasdaq? When Buffet is talking about “the market” he is talking about the Dow or the S&P500. Whether you agree with him or not, which I did and do, he wasn’t talking about the Nasdaq. You are out of your league, Sabrina, you are just talking gibberish.
By the way, I’ve forgotten more about market panics than you’ll ever know (which isn’t saying much).
The problem here is Sabrina and Julianna are trying to turn an opinion into a fact. This exchange is not about being “right.” History can serve as predictors to the future but that is all it is.
You can cite articles but remember they are just another’s interpretation of events limiting the perspective.
No one is arguing that the economy is strong and RE value is increasing today. The only truth I have seen in this exchange is
“you can find an “expert” to qualify ANY opinion right now” and “Over the long term renting is a waste of money.”
Although I enjoy reading other’s interpretation of the current state of the economy as it relates to RE, it is humorous that you think you are “right.” Do not confuse opinions and viewpoints with facts.
This board seems very defensive and since no one is defending the truth (the unknown future) I can only assume you are defending a distorted illusion of yourself.
Lastly, RE provides our basic needs (safety and shelter) and is a very personal decision involving a multitude of factors. To give someone advice knowing nothing about their situation is absolutely irresponsible.
Hi Bob – “I can’t believe SteveO is pushing for a lofty RE valuation on this one as it is outside the sacred LP/LV.
StevO these hipster hoods are gonna come down man. Sorry if you own there but you should’ve followed your own advice!
”
I don’t live there and never claimed any valuation on the property.
Sabrina – Here is the point you are missing. Housing is an asset that can’t be ignored. People have to live somewhere and as long as rental prices increase over the next 10 years so will housing. Now I agree there are certain buildings / areas that were dramatically over priced, and like the Nasdaq will never recover. However, if you take areas like Gold Coast, River North, and Lincoln Park, as long as you have demand to live in the area, you will have housing and rental rates that follow incomes. With your scenerio, we all will make more money in ten years and real estate and rental rates will come down. Wouldn’t that make the very best units in Chicago that much more affordable to people like G? Wouldn’t we all be fighting over the very best units.
My monthly housing expense is right around $4,000. I could turn around and rent my place (even today) for $5,000. If incomes are higher 10 years from today, what will fair rent be for my home? Are you arguing that the rental rate for my home will decrease even as incomes increase?
Just curious Sabrina…
“Over the long term renting is a waste of money.”
This is not always true either. For someone who purchased a home during the height of the bubble with exotic financing (IO and/or ARM) they probably would have been better renting the same home, even over the long term. If renting is cheaper than owning a comparable unit and the renter saves the money…isn’t it better to invest the money over the long term? Even putting it into CD’s will net you 3% a year.
“My monthly housing expense is right around $4,000. I could turn around and rent my place (even today) for $5,000. ”
I hope you never have to test your lofty rental valuations in the market. *Most* households that can afford to pay $60,000 a year in rent can afford to pay $60,000 a year to buy. I suppose if you rent to professional athletes, rich heiresses or drug dealers your assumptions might hold water but then again in this market there are a lot more landlords than tenants.
“as long as you have demand to live in the area, you will have housing and rental rates that follow incomes.”
You mention ‘demand’ but forget to mention ‘supply’, of which there is a lot of right now. Supply is outnumbering both demand and incomes. It’s going to take years if not decades to sort through this mess.
You know what they say about opinions, they’re like a******s, everybody’s got one. That being said, I think it’s extremely naive to look at the state of the world’s economies today and say that real estate pricing will come back anytime soon. I say many years, Sabrina says many decades, others are waiting for a spring bounce. That being said, I’ve never lived in a time where the economy has sputtered out as quickly as now and quite frankly I’m terrified what’s around the next corner.
“The problem here is Sabrina and Julianna are trying to turn an opinion into a fact.”
No, the problem here is that those who need a RE market recovery can’t handle the fact that those who have been correctly predicting the downturn all along are calling for much further declines.
The only change is that the needy no longer deny a decline has begun, and they have replaced their mantra of “who could of known” to “nobody can predict the future.”
A legend in your own mind…
Turd: “By the way, I’ve forgotten more about market panics than you’ll ever know (which isn’t saying much).”
And this is a truth…in your opinion? IMO the “truth” at this point is cash is king, don’t take on debt. So buying real estate now is a BAD idea. JMHO!
VB: “Over the long term renting is a waste of money”
“as long as you have demand to live in the area, you will have housing and rental rates that follow incomes.”
Except for during bubbles, of course.
Turd, I admit I have a few tried and true blogs I am into. Barry Ritholtz, Calculated Risk, Russ Winter, Naked Capitalism, Roubini, and a few others. Not so much random googling as you do. But financial geniuses such as yourself don’t need to be bothered with the more established sources.
Turd:”Juliana, since you don’t know how to use google, here is another link on inflation potentials:”
Yes Turd- Buffett was talking about the NASDAQ and the silliness with investing in companies where competition would take them out (as competition took out most of the railroads, airlines etc.) So he predicted that the irrational exuberance of the prior 18 years (of the Bull market) would be replaced with irrational pessimism in the next 17 years (was his time table.)
And lo and behold that’s exactly what we’re seeing now! Golly gee.
How did he know that? Because he watches history (and has lived through the cycles.)
History tells us that bubbles, when they burst, stay depressed for a long, long time. People (i.e. “investors”) become fearful of that asset class. Hence, why an entire generation of Americans refused to invest in the stock market for decades after the Great Depression and why many of them refused to take on any debt (including home mortgages) because of the incredible foreclosure rates of that era.
Debt was “bad.”
We are again staring into another asset bubble bust. What will be people’s reaction? What happens when you lose 20%, 30% or 40% of your “investment” in something and years pass and there is no indication it’s “coming back”?
I wonder…
Granted, the reaction will be far worse for those in, say, inland parts of California where entire cities are in the process of being wiped out of any of their equity. There will be generations there who will never want to buy housing again.
It’s unclear what will happen in the Chicago area. The declines haven’t been nearly as bad (or as fast) here. But there are numerous homes you can now buy for about $30,000 to $50,000 in the Humboldt Park area. It’s been awhile since we’ve seen that.
I’d live here.
As some posters have said having homes in HumboldtPark for 30-50 to even 100K doesn’t mean much for other more desirable areas. Except that the, income levels, who got shafted with bad loans will have a place they can afford with the new rules.
Again like the other side says prices will come to more realistic levels for all communities even desirable
This doesn’t mean they won’t start rebounding as soon as the economy get back on it feet.
Food for thought: What other major metro area in the world has valuations like Chicago, I think NONE.
PS, like the site and blog, but everybody needs to chill out a bit.
Yes with a name like Wicker I bet you surely would. But can you _afford_ to live here? I have a decent comfortable salary, but 300k..thats a stretch even at low six figures.
If you’re in the market for a 300k 1/1 there are much nicer buildings available with state of the art amenities, probably even in Bucktown. But I’d keep an eye on craigslist Wicker you might get a great deal on renting here in the near future 😀
And Buffett doesn’t just watch history. That guy is ancient. He was around when Moses dropped the third tablet containing commandments 10-15.
“but 300k..thats a stretch even at low six figures.”
C’mon, Bob. IF you have the $60k for DP (yes, a fairly big if), then a $300k home on low-six-figures salary isn’t a stretch–if you think so you either (a) haven’t run the number at current rates (sub-5% for 30-yr fixed), or (b) are seriously, seriously risk averse.
Now, buying the wrong place for $300k (either not somewhere you want to live for 5-7+ years or someplace that’s only worth ~$250k, like this one or sompleace that needs meaningful work) is still a bad idea, but a $240k mortgage is NOT, NOT, NOT a stretch on $100k+.
anon(tfo),
I should’ve clarified. I meant a 300k mortgage. 2.4x annual income with 20% down I don’t think is too much of a stretch. However I am a fan of Robert Kiyosaki’s ideas and he recommends no more than 2x if you want to build wealth. With rates at historic lows though maybe 2x is a bit too conservative.
“Robert Kiyosaki”
He got rich writing books, not buying real estate. Take him with a block of salt.
some of the comments on this unit, along with the “general” comments on BT and WP are ridiculous. Get out from under your rocks, east of the river is not THE place anymore.