We Love Private Rooftop Decks: 2151 N. Southport in Lincoln Park
This 2-bedroom unit at 2151 N. Southport in Lincoln Park has what many condo owners covet: its own rooftop deck.
The unit also has 4 skylights, south and west exposures, and a wood burning fireplace. It has central air and an in-unit washer/dryer. The only thing it appears to be missing is deeded parking.
It’s listed just $5,000 over the 2002 purchase price.
Is this a deal?
Stephanie Cutter at Coldwell Banker has the listing. See pictures of the big rooftop deck here.
2151 N. Southport: 2 bedrooms, 1 bath, no square footage listed
- Sold in April 1996 for $164,500
- Sold in June 2000 for $243,000
- Sold in December 2002 for $316,000
- Currently listed for $325,000
- Assessments of $360 a month
- Taxes of $3163
- Central Air
- In-Unit Washer/Dryer
- No Parking
- Deck: 17×15
- Bedroom #1: 14×11
- Bedroom #2: 11×10
- Living room: 28×12
- Kitchen: 12×9
Odd layout. 1 bath. No parking. Price isnt totally out of line but I’d consider this more of a 1 bed + den with the 2nd bedroom being 11×10.
No deal!
I kinda like it, but just one bath (and a rather plain one at that)? yeah, no deal 🙁
As I’m sure Steve would point out, this is way too far from the park and zoo to be prime LP. No parking is tough, obviously, but likely priced in already. The deck is a great addition, but it’s not very large. I would still think this’ll sell not too far off list, though. For those willing to actually buy a small 2/1 (why not just rent?), seems ok to me.
Another dishonest realtwhore..
Per the listing:
“Parking Space: 1”
and then in the text:
“There is rental and easy street parking in the area.”
Okay, so it comes with one parking space AND easy rental and street parking in the area? Because I’m sure if the “Parking Space” field includes easy rental and street parking there would probably be more than one space available.
Gosh some of these idiots must assume most buyers are as dumb (or dumber) than them.
In fact this dishonesty is so blatant is there any place I can report this?
I’d like to report this one to the IAR or other governing/administrative body if possible. I’m sure it was an “honest mistake” and not intentional to make this come up on targeted MLS searches that include a parking spot.
Its crap like this that diminishes the value of targeted MLS searches.
“this is way too far from the park and zoo to be prime LP”
Nevermind that, it’s far too close to the carwash and the 7-11 on Clybourn to be “prime LP”.
you guys hate everything. I say Deal at asking price.
yeah no parking and all but you are walking distance to all your shopping needs, you are on the forth floor, lots of natural light! come on its a good deal.
lol at the bathroom, the home depot special. its the same bathroom as my basement bathroom i redid last summer. same color same pedestal sink same color/size tile, same fricken light fixtures and same layout. my medicine cabinet is bigger. and i bet i did it cheaper (got most of the stuff at the HOBO)
lol heeheheheehehehe its seriously my basement bathroom.
Think of how much more spacious the living/dining room would be if the seller put those 3 million prominently displayed CDs on an ipod…
I like the unit and the outdoor space. Holy CD collection
A year and a half ago I ran some numbers to try to determine how much a private rooftop deck was worth in LP/LV. All my comps were bubble era. My conclusion was $75-100k. I guess that makes this a screaming buy!
Debatable analysis aside, I agree with Groove on this one. Someone will pay near ask for this and not be so wrong.
Anyone know if you’re the only “private deck” up there? Do you have full rights to the whole roof? A lot of places will have a “private deck” when its just a fenced off portion of deck. So you have your own PORTION of deck, but there are others up there. Whats to stop you from taking over the whole roof if you are the only one up there? From the photos, it looks like only a small portion is decked off.
PS, dont let the map fool you, the walk from fullerton to this place is pretty significant. Not something I’d like to do every day in the cold weather.
I don’t quite understand why the owner didn’t use more of the roof.
Here’s another example of the “worst block” in my opinion — this Southport address is not all that great as someone else pointed out. And with the movie theater, Bally’s, Starbucks… good luck street parking.
Jon, my guess is “a” is right about this — the owner likely has roof rights to only a portion of the deck.
3 blocks north w/ 2 baths, sorry no granite countertops. $1,500 per month. Closer to Fullerton.
http://chicago.craigslist.org/chc/apa/1329058364.html
Not a bad place but no parking is an instant DQ.
My bad, 1 bath, not 2.
“homedelete on August 25th, 2009 at 2:45 pm
3 blocks north w/ 2 baths, sorry no granite countertops. $1,500 per month. Closer to Fullerton.
http://chicago.craigslist.org/chc/apa/1329058364.html”
LOL. Are you billing that as comparable to the property in question?
I, too, believe its a comparable property.
Congrats on your mastery of the obvious, bradford.
Yes, I am comparing the two. It’s three blocks north, it’s a 2/1, it has no parking, it’s closer to the el, it looks like conversion, and it rents for $1,500. The P&I on 2151 is around $1,500 a month, but it’s the taxes and assessments that make renting a better value. And the closer walk to Fullerton too.
“Yes, I am comparing the two. It’s three blocks north, it’s a 2/1, it has no parking”
If you’re going to compare, you should read the listing … CL rental listing sez:
“Free laundry room
Parking included”
And, it’s not nearly as nice, but it shouldn’t be–the apartment you buy **should** be a lot nicer than the apartment you rent.
“easy street parking in the area”
Hahaha good one…
And yes from Southport to the el its a half mile hike but I swear it seems a lot longer than that when you actually do it in the wintertime.
I’d guess this is about 1k sqft too not including the rooftop deck. No parking is the killer though, where’s trixie and chad supposed to park their Jetta/3 series at?
“Bob on August 25th, 2009 at 2:56 pm
I, too, believe its a comparable property.”
Of course you do. You live in $700 a month squalor.
Ostentatious displays of wealth like rehabbed kitchens and bathrooms, and a private roof deck have no value for you.
homedelete are you taking into account the 40% tax benefit when you say the P&I on 2151 is $1500 a month?
If not I’d bet that could make up for the taxes and assessments (since you get a tax deduction for taxes as well).
bradford,
You’re the only one on here who believes the present value of granite countertops and stainless steel appliances equates to 100k+ of present value of cash flows.
But you were never that good at maths huh?
Didn’t we discuss that the tax benefits are overrated in the last thread?
http://www.youtube.com/watch?v=rCZRqH7sRyA
“kp on August 25th, 2009 at 3:10 pm
homedelete are you taking into account the 40% tax benefit when you say the P&I on 2151 is $1500 a month?
If not I’d bet that could make up for the taxes and assessments (since you get a tax deduction for taxes as well).”
hd,
Trying to explain basic math and taxes to the high-valuation crowd is like trying to explain heiroglyphics to a dog.
Actually, I don’t believe that Bob, but reading comprehension surely isn’t your strong point.
I’m merely pointing out the fact the two properties are NOT comparable.
^^^^
Yeah one has parking and it happens to be the cheaper one. The other one claims to have parking in the listing but upon reading the text you find out it doesn’t and it was the realtor being dishonest and trying to pull a fast one.
Please, keep shouting your mouth off and showing your ignorance. I live in the equiv of this apartment except it’s on the NW side, closer to the el, has street plentiful street parking yet it’s not in the congestion they call LP. My rent is more than $700 and no my apartment is not squalor. My apartment is a hell of a lot cheaper than flushing my money down the toilet as the real estate market tanks just to say I’m an owner and have granite countertops. Meanwhile I’m keeping my powder dry.
“Of course you do. You live in $700 a month squalor.
Ostentatious displays of wealth like rehabbed kitchens and bathrooms, and a private roof deck have no value for you.”
HD he was talking about my apt and I get a kick out of it when he needs to delude himself as to my living situation to feel better.
😀
“Trying to explain basic math and taxes to the high-valuation crowd is like trying to explain heiroglyphics to a dog.”
This from the guy throwing around 2d derivatives w/o thinking it thru said to the guy who’s arguing that a principal payment isn’t an asset transfer b/c it’s a sucky investment.
$325k is too much, but it’s probably the right listing price and they’ll get something near it.
HD,
calm down bro you seem hostile, lets go to Smoque for some food then to McNameras for a few brew then to city news for pornz that should relax ya.
“keeping my powder dry”
A phrase that is as overused and past its prime as jumped the shark.
“Perhaps a series of audible clicks and grunts coupled with simple hand gestures”
I’d go with heiroglyphics, bradford.
“Bob on August 25th, 2009 at 3:21 pm
HD he was talking about my apt and I get a kick out of it when he needs to delude himself as to my living situation to feel better.”
I have only your own posts here on this forum to judge your position. You stated that your rent is $700.
With more details perhaps we could evaluate you differently, but when you post that you live in a $700 a month apartment and complain that every property on this site is overpriced, what conclusion do you want the reader to draw?
homedelete, not overrated (whatever that means?) and certainly not insignificant.
For sake of argument look at your monthly nut in these two different cases.
No tax benefits:
P = $100
I = $1400
Taxes = $500
Assessments = $350
TOTAL = $2250
With tax benefits:
P = $100
I = $1400*.6 = $850
Taxes = $500*.6 = $200
Assessments = $350
TOTAL = $1500
And I wasn’t even trying to get the numbers to match up with the rental above. If anything I’ve probably overpriced this by assuming ~2% taxes.
So yeah, I don’t know about the last thread but I certainly don’t think that the tax benefits are overrated when it reduce the monthly nut by one third… if you want to argue that you aren’t getting the time value of your down payment (although you are building equity) or that house prices will go down, or whatever else that is fine. But don’t say that the tax savings don’t matter.
“This from the guy throwing around 2d derivatives w/o thinking it thru ”
No the numbers may have been slightly off but the underlying point still stood. The rate of the rate of delinquincies in Illinois is getting worse.
“who’s arguing that a principal payment isn’t an asset transfer b/c it’s a sucky investment. ”
On an underwater mortgage thats a -100% investment. If you are interested in these sorts of investments or even ones that outperform this let me know. I can invest your money for you in a wide variety of things that yield anywhere from -99.9% all the way up to +.5%.
bradford,
My rent is $930 a month and includes parking, unlike this property which does not. My rent also includes internet and cable, which this listing also does not.
Its so squalorous I can’t find the internet or cable jacks among the rat feces or cockroaches. LOL!
kp,
You don’t take into account losing the standard deduction and let me ask you this: do you think the median buyer of this place is in the 40% tax bracket?
In fact, can you show me one person in the US who is in the 40% federal tax bracket?
So, basically, you are saying that you lied or were mistaken when you claimed that your rent was $700 in a previous post?
Shall I locate it?
Kp’s math is a little too simple (it doesn’t take into account loss of personal exemption), but his gut is right. My personal experience = tax benefit is real. It largely depends on your rate. Is your income high enough that you receive the benefit at the highest rate for all your interest payments? If so, then it adds up quickly and it makes your “real” housing cost much less than your actual monthly payment. Not to mention the tricks many people pull with home equity lines. I.e., I have several friends who paid for their cars and their non-deductible student loans with their home equity lines. Now those are also tax deductible. Renters can’t do that.
Go ahead and locate it bradford, I know the details and believed I covered them. I won’t do it for you again.
do it bradford, do it!!!
Sonies refers to it here: http://cribchatter.com/?p=7239
“Sonies on August 3rd, 2009 at 9:27 am
But it sure beats a $700 a month studio in Lakeview…”
I’m still searching for the original post…
tax benefits are overrated for the folks who keep their money under the mattress and use 1040ez.
I like the rooftop deck and skylights and the layout appears pretty functional for such an old building. The lack of parking and one bath hurts it, but if it had both it’d be a $350K listing. All that aside, I’d be willing to pay $300K if I were planning on living alone for the next few years. I bet it sells between $300-$310K.
you guys are missing one HUGE aspect of ownership;
when something breaks who is gonna pay to fix it…not the renter.
i know you can monetize it into the monthly nut but maintence and upkeep are a big factor in owning. even if its a condo.
Rough numbers for me: about $30k in interest+taxes per year. At 33% = about $10k in tax savings. If I took the married/joint deduction it would have been $10.9k at 33% = $3,597. Net these out and the tax savings from the home comes to $6,500, or $540 per month. That pays for my real estate taxes. (The real value is slightly higher since I get to take other deductions when I itemize, which means you can’t deduct the entire value of the personal deduction from the mortgage benefit.)
Please check out my youtube post above regarding tax write offs and the like.
“tax benefits are overrated for the folks who keep their money under the mattress and use 1040ez.”
“Is your income high enough that you receive the benefit at the highest rate for all your interest payments?”
And not so high that you lose the benefit to the phaseout of itemized deductions and/or AMT.
“you lied or were mistaken when you claimed that your rent was $700 in a previous post”
bradford–I think he was backing out the equivalent cost of parking/internet/cable or something; I expect you will be disappointed or, at a minimum, relying on hairsplitting.
“In fact, can you show me one person in the US who is in the 40% federal tax bracket?”
Not yet. Just give Obama a couple years. Maybe we’ll see a 60% tax bracket…Of course the interest deduction will be capped at the 28% tax bracket because “rich” people (people who make $79k) don’t deserve any tax breaks.
I’ll confess to simplifications and I’ll even confess to over inflating to make the math easier. But you can rerun the numbers however you like and it doesn’t change the fact that the savings is real.
Assuming Illinois keeps it flat 3% tax rate (having moved here from California I love it, top rate in CA is 9.3% once you hit $90k) which I hope, but really don’t think will happen, it still doesn’t take much for a two income couple to end up in the federal 28%, or even the 33% bracket. Still call the total 30% if you want to be conservative.
With a 30% marginal rate you are still talking $1690 a month instead of $2250, a 25% savings. And unless you aren’t doing much to keep track of what you can itemize you don’t lose that much when you “lose” the standard deduction since you then can deduct so many other things.
anon(tfo) you still get a mortgage interest deduction if you hit the AMT (although if Obama gets his way that might change of course).
I think that mortgage interest and charitable giving are the only deductions you can itemize with the AMT though?
in a more typical situation, this property is $1,800 a month Interest + Taxes in the 28% tax bracket with the standard deduction nets about $1,680 savings. If I were to rent up the block I could save that in just a couple of months as compared to owning. Properties are still overpriced and no amount of cheerleading is going to change that.
“#J on August 25th, 2009 at 3:48 pm
Rough numbers for me: about $30k in interest+taxes per year. At 33% = about $10k in tax savings. If I took the married/joint deduction it would have been $10.9k at 33% = $3,597. Net these out and the tax savings from the home comes to $6,500, or $540 per month. That pays for my real estate taxes. (The real value is slightly higher since I get to take other deductions when I itemize, which means you can’t deduct the entire value of the personal deduction from the mortgage benefit.)”
“anon (tfo) on August 25th, 2009 at 3:52 pm
bradford–I think he was backing out the equivalent cost of parking/internet/cable or something; I expect you will be disappointed or, at a minimum, relying on hairsplitting.”
OK. Link?
“you still get a mortgage interest deduction if you hit the AMT”
Yeah, but you need to net out the effect somehow, and you DO lose the property tax deduction.
“OK. Link?”
Haha. You’re no Tom Sawyer, my friend.
You want it, go get it. I find the search feature on the CC to be inadequate and have no interest in wading thru google results.
valasko,
Anything wrong with trying to get apples to apples comparisons here?
After tax cash flows of owning vs. renting I think is pretty relevant. And given the tax benefits need to be accounted for correctly to do the comparison, I think the nuances of them are very relevant. In fact they were covered by a renter in a prior thread that HD linked to. Imagine that!
J–heloc flexibility is aside from the analysis of after tax cash flows for a place to live. Yeah it might allow some savings on other debt but we can’t know without quantifying. Lets quantify, assuming these properties are comparable.
“Properties are still overpriced and no amount of cheerleading is going to change that.”
Okay, HD, here’s something for you to gnaw on–take this apartment and the one up the street. Say that this one would sell for 100,000 New Dollars (once the economy crashes, the USA defaults on its debt and we need a new currency), what would you pay for the rental, as a principal residence? It’s less, I would think, but how much less? 5%? 20%?
Assumptions: 100k Gross Income, Single, no dependents, 20% down, 5% mortgage
Expense Own Rent
GI: 100000 100000
Ill Tax + FICA: -10650 -10650
Fedtax: -20698 -19102
Mortgage Int Ded Adder: 3640 0
State Inc Tax Adder: 840 0
20% Downpayment Invested 2% MM: 0 1365
Total CF After Taxes: 73132 71613
Rent 0 -18000
Mortgage -16748.83 0
Asssmnt: -4320 0
Prop Tax: -3163 0
Insurance: -1000 0 (assumption of 1k)
CF After Living Cost: 47900 53613
Is the ‘upgraded’ place with no parking worth an extra $5,712 per year (thats 476/month)? Hmm..pay an extra $475 per month to lose a parking space but have an in unit w/d? No.
homedelete, just because you think property values are too high (A) doesn’t mean that the tax savings don’t matter (B). I think you are getting your arguments a little confused.
Argument B:
Reducing your month nut from $2500 to $2000 because of tax savings doesn’t matter!
Here you are wrong. It does matter, we can quibble over what that does re the standard deduction, what the marginal rates are etc. Sure. But the more money you make the more this becomes a very real amount of money.
Arguments A:
$X a month is way too much cause I can rent for $Y, you are a bunch of idiots!!!!!?!?!?
That may or may not be, but you have to make sure that you are calculating what X is appropriately first before you try and compare it to Y.
Did anyone actually go an visit the two properties….. you guys just love to argue. who cares….. As I mentioned a million times realestate is dead….. if you want to make money look elsewhere. You guys love to waste hours on this stuff. Some people wish to rent other wish to own, lets leave it a that.
“But the more money you make the more this becomes a very real amount of money.”
True. However I doubt the owner or potential target market of this place makes enough to worry about the AMT or to get a 40% deduction on their interest payments. The bubble inflated properties of all segments, even those where the ATCF analysis shows it doesn’t make sense.
Bob: WTF??
“Fedtax: -20698 -19102”
Why lower tax for the renter?
“Insurance: -1000 0 (assumption of 1k)”
Even if the renter doesn’t have insurance, a condo owner is (a) getting structure coverage thru the assessment, and (b) paying much (most?) of his premium for coverage that a renter might want as well.
Bob, you are completely right.
The degree to which the tax savings matters varies and isn’t going to be OMG HUGE for the buyer of this property. However, it will still be real money and I just get frustrated by people on here who just want to ignore the tax implications of owning property altogether (whether it be this place at $300k where the savings is something, but not huge, or a $1MM place where you are talking about much much larger amounts of savings).
Homedelete — I wasn’t commenting on this place or some imaginary buyer for this place. Only commenting on my own situation. For me, the tax break is real. I have no idea who would buy this place. It’s not for me, but that’s more about location than price, features, lack of parking, etc. Different people buy for different reasons. That’s one of the things people on this site just don’t get. Too many people assuming that their personal preferences / their personal financial situation = the market. Just not true. And “the market” will turn around. The blood on the streets is already being mopped up, so those who didn’t buy have already missed the bottom. I don’t advocate trying to time a bottom, but the doom and gloom on this site is just foolish.
Condo owner insurance is like $250 a year, not sure how much additional to that for the whole building costs in your assessments, but you should factor other things like life insurance if you’re married or have kids too..
I can’t answer that question, anon(tfo), I can’t tell if you’re being sarcastic or not. The fact of the matter is that if this were such a deal it would under K by now. Investors and 1st time home buyers are everywhere looking for ‘deals’ and ‘deals’ get ‘snapped’ up quickly. If this were a deal it’d already be gone.
“#anon (tfo) on August 25th, 2009 at 4:12 pm
“Properties are still overpriced and no amount of cheerleading is going to change that.”
Okay, HD, here’s something for you to gnaw on–take this apartment and the one up the street. Say that this one would sell for 100,000 New Dollars (once the economy crashes, the USA defaults on its debt and we need a new currency), what would you pay for the rental, as a principal residence? It’s less, I would think, but how much less? 5%? 20%?”
I’ll remember your prediction and remind you of it this winter when the Chicago CS index hits new lows.
“The blood on the streets is already being mopped up, so those who didn’t buy have already missed the bottom. “
kp, ownership tax savings are real money, but they aren’t at great as the savings to be had by a comparable rental.
The fact of the matter is that the real market is in a depression, and even though the freefall is over, the depression continues. A handful of properties that sell for ‘deals’ set the comps and all other properties need to return to this level. Better deals are yet to come as nicer properties sell for last quarter’s comparables. The 2002 price is nice but look the jump between the ’00 and the ’02 price. The comps for properties like these are heading back to 2000 pricing. $253k with 20% down at 5.125% is about $1,100 per month plus $600 taxes/assessments for a total of $1,700 a month is comparable to rent three blocks north. Proclaim the bottom all you want but at least I have a criteria and calculations for what I perceive to be the bottom as opposed to just calling the bottom because the # of sales K’s is up 7.2% MOM.
And with the tax benefits (a couple hundred a month, if that, as shown above) buying for once might actually make more sense than renting, if this were to return to teh 2000 price. But of course there are the intangible benefits of owning, like bragging to your friends and co-workers that you own. Priceless.
“The fact of the matter is that if this were such a deal it would under K by now. Investors and 1st time home buyers are everywhere looking for ‘deals’ and ‘deals’ get ’snapped’ up quickly. If this were a deal it’d already be gone. ”
I’m trying to take the “it’s such a deal” (or not) out of the equation of “comparable” properties–>you are saying this is comparable to the rental–sure, it probably is, but the rental ain’t as nice.
Would this rent for more than the CL rental? Maybe not, esp. b/c of the parking, but it *juat* *isn’t* the same to rent as it is to own, no matter how often you repeat it (and I say that even tho I can’t imagine buying an apartment unless I were physically unable to do stuff like yard work). And if the rental is “worth”–as a purchase proposition–20% less than this unit, then this is really close to annual cashflow parity at ~$310k.
homedelete,
Ok that is fine and I think we agree then. I don’t have a dog in the rent/own fight right now. I just get bothered when people throw around numbers and dismiss tax savings as inconsequential.
For a really bad example that may not at all be true…
Say that the rental value of this was $1500. I’ve got no beef if you want to say that you shouldn’t buy at this price b/c that’ll cost you $2000 a month for “ownership”. I’d just be pissed if you said it was $2500 a month because you refused to factor in the $500 tax savings.
Oh man, homedelete, did we actually end up ending a flame war on cribchatter by coming to an agreement?
*shudder*
Everyone talks about tax savings, but no one talks about opportunity cost of equity (assuming 20%). Both of these items should be considered in an accurate analysis.
“Why lower tax for the renter?”
The tax row isn’t bottom line taxes. Its just taxes before itemized deductions. They lose the standard deduction so it shows on that row as 28% * 5700 = 1,596 higher for owner. But itemized deductions result in $4,500 savings.
I did try to put in the opportunity cost of the equity downpayment but realized later that might be a bit too high at 2.1%. Thats the highest money market fund I could find but after tax in this bracket its 1.5%, pushes it closer to owning by only $40/month though.
Basically this is just one scenario. Unfortunately in our society your tax situation is going to have a huge impact on your real cost of housing, and ultimately what you can pay. In fact as much of an impact as your top line income.
Anywho its $380 a month difference when we factor this in and adjusting for insurance using Sonies claims (+750/12). Closer than I thought.
For someone in the right tax situation this could be CF positive. Maybe a 130k or 150k income household.
“Anywho its $380 a month difference”
And that’s assuming that some mook pays asking price.
Matt Garrison makes a great point:
“no one talks about opportunity cost of equity (assuming 20%)”. Having $75k to $150k tied up is a cost. Are people assuming that the appreciation after broker/listing closing fees will be equal to the alternative investment with that tied up money?
I’m glad we agree, kp. Prices are moving in the right direction, $5,000 above the ’02 price is a great start. The 2006/07 asking price would have been well into the $400’s which we all know is craziness.
I know there are people who prefer to own but it can’t be said that it’s a better financial decision to do so. Notice I said financial decision, not investment.
I will repeat, I have nothing against owning, nothing at all, I just don’t think it’s very wise purchase less than 3 years into the bursting of the largest property bubble this country has ever seen.
I will buy when it makes sense, when I don’t have to throw disproportionate percentages of my income to ‘own’ when a comparable property is cheaper to rent. The right property will come along, at the right price in the right neighborhood and I’ll buy. I’m not expecting the world or the nicest house on the block for a song, but I do expect a simple bungalow for a reasonable price, somewhere i can afford as if there was never a bubble.
These days it is not much of one given the low interest rate environment we’re in. The highest yielding money market account you can get that is FDIC insured is around 2.3%. After taxes thats around 1.5%. 1.5% of $75,000 is $1,125 per year. It is something, but again not much.
If you’re willing to sacrifice liquidity you can get up to 3.5% on five year CDs, but after taxes this probably washes with your after tax mortgage rate and you’re better with a bigger down payment (both are illiquid).
Sure you could gamble your money in the equity market or other investments but given their not risk free thats beyond the scope of the rent vs. own comparison.
The opportunity cost of safe money in a nation with a zero interest rate policy, as ours is now, is very low. In Japan they need to hire celebrities for advertising campaigns to consumers to buy government bonds and the returns have a low limit of 5 basis points, or 0.05%.
For starters, you are including principal payments in your mortgage payments. Principal payments are not an expense.
Second, this place would rent for more than the place HD found on craigslist. You would not have a problem renting this place for 1600-1700. Especially with the roof deck. People in Chicago go nuts for roof decks. Who knows.
Call it 1650.
Guess what? It is cheaper to own.
Expense Own Rent
GI: 100,000 100,000
Ill Tax + FICA: -10650 -10650
Fedtax: -20698 -19102
Mortgage Int Ded Adder: 3640 0
State Inc Tax Adder: 840 0
20% Downpayment Invested 2% MM: 0 1365
Total CF After Taxes: 73,132 71,613
Rent: 0 -19800
Mortgage Int Expense: -13000 0
Asssmnt: -4320 0
Prop Tax: -3163 0
Insurance: -250 0
CF After Living Cost: 52,399 51,813
Some of you might want to check out the New York Times Rent v. Own calculator that is linked in the blog roll as well (if you want to figure out if it’s better to rent versus owning.)
Yes- the calculator isn’t perfect. But you can adjust the parameters and if you do an “advanced” screen you can add in things like the assessments etc.
Plugging in the numbers being thrown around here (with a 10% downpayment) and the calculator is telling me in 30 years it will NEVER be better to own this property versus renting it at $1500 a month.
For some insight into how skewed rental prices are compared with sales prices in Chicago- check out the listing for 160 E. Illinois #1206. It is a 2/2 listed at $523,000 or you can rent it for $2200 a month.
Just goes to show that minor changes can easily throw the balance either way. Even the difference of 1.5% vs 3.5% on the opportunity cost of the down payment.
You just can’t make blanket statements that one is better than the other.
We’ve worked up a relatively complete rent/own analysis but I can’t help but notice that there has been no mention of a time frame for the owners to stay in this house. All cash flow comparisons have been for the first year only. You have to look at start to finish for a real comparison.
Transaction costs (closing, commissions, taxes, etc.) in and out have to be added to the cost of owning. But over 5-7 years more money will be applied towards principal and comparable rent will go up, working in the favor of the owner.
Then the big wild card is whether or not we will see any appreciation over that time frame. Most here seem to think no; I personally think flat to +20% is most probable.
There’s also likely to be changes in tax rates and the tax benefits of owning, but at that point we’re just making guesses.
We could continue adding variables, but I think if someone buys this for $310k and lives there for 5-7 years they will be OK.
I agree. If you use the calculator it allows you to adjust for appreciation in both ownership and renting. So you can see the difference if you get, say, 5% a year in owning or 1% in owning versus 2% a year increases in renting.
The downpayment and mortgage rate all make a huge difference as well.
But plugging in various different numbers that were “reasonable”- including a 3% yearly appreciation on the unit, and it still told me that it was never better to buy this property.
Also, as Matt points out, the opportunity costs of buying are huge (between the transfer tax, other fees, realtor fees etc.) You’re going to have to live in it a long, long time to make up that difference (unless prices start appreciation at 5-10% a year again or something.)
I should have refreshed before I posted since Sabrina did address many of my points, and I agree that using most reasonable parameters it is still never better to buy.
Actually changing the return on investments from 5% to 2% and tax rate from 20% to 28% makes buying better after 20 years. With 3% annual appreciation buying is better after 7 years.
I think the biggest thing this tells us is our analysis is very sensitive to small changes in certain variables, as their effects compound over time.
That’s some selective math above that contains major calculation errors, that when corrected, will favor renting.
First of all, $100,000 gross (single and married) will more often than not put the taxpayer into the 25% tax bracket not the 28% bracket.
You also need to give the renter the standard deduction of $11,400 at 25% if you’re going to give the owner the mortgage interest deduction.
You failed to address transfer taxes, realtor fees of 5% and maintenance to the owner, but not the renter.
And most importantly, if you paid $3,750 in principal during 2009 (even though its not an expense) but your condo is worth only $310,000 in 2010, is it really cheaper to own? Where did those principal payments go? That’s right, they were flushed down the toilet, and it will take a long time for them to reappear. That asset transfer might exist on paper but it will disappear when it’s time to sell.
And if you want to sell after 7 years like these folks, and realize zero appreciation, did the 2002 purchase price really make it worth it to own?
To me it seems the 2002 price was a bubbly price; the current owners gave the previous owners more than 30% appreciation in 30 months. The current owners are getting zero appreciation in 84 months. In retrospect, it was probably cheaper to own for the ’02 seller than the 02 buyer, but the ’02 buyer 7 years later has gotten hosed.
But what is it worth to brag to friends that you ‘own’ a 2/1 in Lincoln Park?
It is priceless.
Would you have given this same advice to the current owners? They pay $316k and lived there 5-7 years and will they be OK after they sell for less than their purchase price AND have to give the buyer credits, pay transfer taxes and realtor fees?
“We could continue adding variables, but I think if someone buys this for $310k and lives there for 5-7 years they will be OK.”
I was advising the 1996 and 2000 owners. They love me.
matt..”Everyone talks about tax savings, but no one talks about opportunity cost of equity (assuming 20%). Both of these items should be considered in an accurate analysis”
I always had that as an expense in my spreadsheets. Heitman told me that it is not an expense and his 8 year old daughter confirmed this so I now removed such silliness. Actually I also had monthly pmts accumulating a time value of money which i was able to remove also since my analysis of i/o loan rate difs reverse engineered to compensate for this tvm I was informed made no sense either.
secondly… everyone is leaving out one HUGE factor in straight line rent vs own. RISK!!!!! I put forward year real estate price risk at about +2.5/-15%
Leaving that out is just foolishness although I think certain people here pound that factor in so regularly that they do not need to mention it. I will rescind this as being important should Heitmans 8 year old instruct me to so as such.
I find the parking crap on this one and the whole notion of separate parking sale (especially when it is not even a separate PIN) to be a shameful piece of RE behaviour that is intended to deceive buyers, obtain inaccurate MLS hits and produce misleading closes/LP’s. I reported a rule violation on MLS on this listing. I’ll post back when i get a response.
Those tiki-torches on the deck make me nervous…..dangerous fire hazard. They should be outlawed in Chicago.
neo, that is good to here.
Is that something that anybody can do (I doubt) or do you have to be a realtor to report these sort of deceptive practices?
In fact lying about parking is probably the most common and annoying problem I have when looking at listings, way before my other gripe of people not listing and/or lying about square footage.
“Plugging in the numbers being thrown around here (with a 10% downpayment) and the calculator is telling me in 30 years it will NEVER be better to own this property versus renting it at $1500 a month.”
To be fair Sabrina, there’s no way in hell this place would rent that cheap, try $1800+ a month, maybe even 2k to some sucker.
A lot of you (well, mostly Bob and homedelete) are missing the point.
People buy things, including homes, for reasons other than numbers. I.e., it may be cheaper to rent a sleeping bag if you go on a camping trip, but most people will buy their own. Why? Because they want to. Same with lots of things. Cars, tuxedos, ladders, etc., etc. We buy things when it doesn’t “make sense” financially. We could rent, we could lease, but we buy because we want to own. Ownership has an intrinsic value. And, of course, renting is often a pain in the ass.
This same issue applies equally, and in many ways more forcefully, to home ownership. Bob and homedelete like to make fun of people who buy (particularly people who buy in Lincoln Park) as only doing so so they can brag to their friends. I think that is a silly and immature way of dismissing a decision that everyone (including our parents and their parents) come to for their own reasons.
This is more than touchy-feely drivel. This “irrational” aspect of the home buying decision works on both sides of the market. I.e., because people are often willing to buy things for a price over and above what they could pay to rent, the market selling price will not always correspond to your calculations on rent v. own. You can do the numbers all day long, and say it doesn’t make sense . . . And it may not make sense to you . . . But that doesn’t mean it doesn’t make sense to thousands of other people with means (i.e., the market).
Don’t believe me, I highly recommend the novel “Independent People” by Halldor Laxness. A beautiful book about what drives a person to not want to rent anymore.
“(particularly people who buy in Lincoln Park)”
Where have I criticized LP buyers (other than the 450+k condo segment which I criticize citywide)?
If anything I think that neighborhood is going to retain values relatively well compared to other hipster (WP) or newly created corporate hoods (west loop, south loop).
J:
You are pissin in the wind…
You just have to accept the fact that anyone who bought a home is a sucker. You should be able to own a 3 bed/2 bath in Lincoln Park for $150k. Any price higher than that it is because someone got funny money financing and they are on the brink of financial implosion because there are only about 5 people in the entire city who make more than $100k per year.
Why buy a Rolex watch when a timex does the same job?
Sonies:
Because you can…
kp,
unfortunately it’s just a piece of functionality in the MLS program so not sure a non-realtor could report specific listings easily. there are ways you could report direct to the Chicago Association of Realtors but the practice is so widespread you’d need to make it more of a blanket complaint i think
J, I get your point, that people are irrational and will pay extra for the privilege of owning. But it’s that very same mentality – the drinking the kool-aid mentality – that significantly contributed to the largest real estate bubble the country has ever seen. So many people drank the kool-aid that you’re peddling, the ‘intrinsic’ value of owning, that they were willing to do ANYTHING to get into a home: no money down, toxic mortgages, 55% DTI ratios, etc…and that drove up the cost for everyone else who legitimately wanted to buy. Of course now we know better that too many people drinking too much kool-aid causes the market to crash; and people like these owners are getting ZERO appreciation over 7 years because of the actions of everyone else drinking the kool-aid. Our parents chose to own because it was cheap, affordable, and it gave them a stable place to raise children, and in time, they would own the property. Someday we’ll return to that mentality because the ponzi scheme of buying, holding for 7 years, and then selling for PROFIT are nearing an end, as the unfortunate kool-aid drinkers of 2151 N. Southport are painfully understanding. (They overpaid, see above. They paid 1% appreciation per month to the previous owner, and that was in 2002! The bubble has been around for a while…)
“people are irrational and will pay extra for the privilege of owning … So many people drank the kool-aid that you’re peddling, the ‘intrinsic’ value of owning”
No, that’s not the point J is making. You don’t exhibit any sense of getting it in this post.
He’s not peddling anything about whether or not any given person (or 100s of 1000s of people) overpaid–his point is that paying somewhat more than renting isn’t irrational, isn’t kool-aid drinking and isn’t about a PROFIT(!!!).
Thanks, anon. I put “irrational” in quotes for a reason.
“Our parents chose to own because it was cheap, affordable, and it gave them a stable place to raise children, and in time, they would own the property”
well stated, and our parents believed in community and fighting to make it better. which is lost in this generation.
i still believe owning is a better LIFE choice not a FINACIAL one. i love my red kool-aid
No, I get what you’re trying to say, and again, it’s called ‘drinking the kool-aid’ and that’s the only irrationality at play here. I’ve re-read your post and I feel I you’re drinking the kool-aid too.
Of course you’re saying that people buy when it ‘doesn’t make sense’. And when there is a mania/bubble, like we’ve just had, and everyone starts making decisions that ‘don’t make sense’ … well…we have the real estate depression that we have now.
I’ve got nothing against owning, nothing at all, but when you overpay for a 2/1 in LP (and pay 1% appreciation per month) and correspondingly drive up the price for every other comp in the area…they deserve no appreciation. Maybe these owners are saying “WOW, owning was awesome and well worth it” but Im sure their attitude will change when they walk away with little or no money from the closing table. There are consequences for irrational behavior, not just for the buyer, but for the market as a whole.
“This is more than touchy-feely drivel. This “irrational” aspect of the home buying decision works on both sides of the market. I.e., because people are often willing to buy things for a price over and above what they could pay to rent, the market selling price will not always correspond to your calculations on rent v. own. You can do the numbers all day long, and say it doesn’t make sense . . . And it may not make sense to you . . . But that doesn’t mean it doesn’t make sense to thousands of other people with means (i.e., the market).”
Great points J. If everyone spent only in prudent financial ways, why would anyone have a wedding for example; spend $60k (or much much more, minus the ring) for something that can be achieved at city hall for $50? Yeah, tell that one to your bride. Hell, Paris as we know it today wouldn’t be Paris as we know it today if vanity and unnecessary spending hadn’t played a huge role in the redevelopment of the city over a 100 years ago. Ever been to Moscow and witnessed what prudent post revolutionary architecture looks and feels like? Tell your bride you’re gonna honeymoon in a Soviet block hotel and skip the Place Vendome.
But HD is right in that this bubble of steroid laced money changed the ‘true’ values of property in this area. Why not pay $1mm for a 3/2 condo off Wrightwood and Ashland? I mean it’s not like you really have anything to loose as you don’t have any real skin in the game, and as long as the Ponzi keeps moving along, so will the new owner…. to the burds when the kids come.
LP will will hold up just fine when the dust of this mess settles. Thing is, this Southport condo isn’t LP; just because some realit-whore says it is (and includes ‘parking’ for that matter), doesn’t make it true. Just another example of twisting the facts and numbers while the prudent wait patiently in line for the real deals.
Jay, I’ve been to both Paris and Moscow so I know what you’re talking about; but this isn’t about spending money, it’s about drinking the kool-aid and saying “it’s OK to overspend/splurge because it’s real estate and it just doesn’t make sense,” .. when they should be saying “buy what you can afford to pay and don’t be stupid about the largest purchase thus far in your life.”
No HD his analogy is right in that the only way to get the girl is to own real estate and if you don’t you might as well live in a Soviet flat. lol
There’s some soviet flats on sheridan that I’m sure you could pick up real cheap! 🙂
Jay, $60k wedding??? Hahahaha, now that’s a waste of money. I once had a semi-wealthy girl tell me that if spent less than $10k on a ring I was on a ‘budget’. Again, I have to laugh. Corporate marketing at its best, gotta love DeBeers “A diamond is forever.”
$60k weddings?? 10k rings??? LOL Both combined cost me about 15k and it was a drunken blast with 6 hours of open bar!
“buy what you can afford to pay and don’t be stupid about the largest purchase thus far in your life”
They priced this to take a loss. Maybe they bought what they could afford to pay and it wasn’t “stupid” for them. It’s entirely possible to lose money on an acquisition/investment that is *not* stupid. Hell, your millionaire relatives *could* suffer a loss on their cds.
The (all-too-numerous) chuckleheads who “paid” $1mm+ with incomes of $100k or bought 7 units in the same building intending to flip them all are a different story.
“as only doing so so they can brag to their friends.”
J some context here. During the boom when I would ask people my age where they lived some would say where. Others would offer up that they OWNED at such and such place, even though I hadn’t asked.
Its not just about bragging to their friends, its also about these people equating home ownership with an additional step into adulthood and as a status symbol of having taken that step.
Its common on this board as you see some who still try to look down on renters in some way. I find it laughable really as I know most would trade places with most of us renters if given the option. I know if I was underwater I would.
The mortgagors are still offering up this info. Just the other week I ran into a gal who bought a 1/1 in Wrigleyville. Now she’s living with her BF in a different 1/1 and renting out the wrigleyville place. I felt bad for her but still curious why she would offer up she is a mini RE baron in this environment as I’m sure its not an enviable place.
“Its common on this board as you see some who still try to look down on renters in some way. I find it laughable really as I know most would trade places with most of us renters if given the option.”
Seriously? Most *on this board*?
“why she would offer up she is a mini RE baron in this environment ”
Because she’s an oversharer? Because she doesn’t find it stigmatizing? Because it’s something to talk about?
When I drive past the Drake on a Saturday night and see the ballroom full, I assume it’s a massively expensive wedding. No problem if that’s what you want and can really afford (or actually if the parents can afford it). Point is, if you remove want from need, all of us would be living in cinder block studios with a shared bath – flush the toilet comrade! Vanity has its place, always has (Paris) always will (Barneys), but somehow its funding changed and there lies the problem.
When I bought by house in LP (yes, the real LP and I have a beef about what’s called LP… I had to actually work to live here, not just move the line), it was 20% down, brutal qualification interview, all at 11.5%. Everyone around you went through the same process, and it kinda vetted the area – it made the neighborhood in which you were making the BIGGEST financial purchase of your life… solid. Plus, because most of the real LP is historically protected from tear downs, you were pretty certain neighborhood life would remain constant, and for the most part it has. Enter the bubble, you know, I’m not even going there as we all know what happened. Like Joe Kennedy said before the depression, when the shoe shine boy starts giving you stock tips, it’s time to get out of the market.
I added up the other month what I have into this place as I crossed the 20 year mark… purchase price, 20 years of property taxes, renovation costs, price to maintain, utilities, my vanity (does anyone really need a $70K kitchen?)… and give or take, I’m even (didn’t include tax deductions while I had my note, and not the realit-whore fees if I sold today).
Best or worst decision of my life? How knows who cares. I lived within my means (as most did as there weren’t as many ways to break the RE ‘rules’), paid off my note years ago (you’d be amazed how fast the principle drops when you pay a little extra each month), and I still enjoy the neighborhood… the real LP that is.
you see Jay, you and I agree on one thing: the bubble messed everything up. The LP of today isn’t the same LP as it was 20 years ago. If I was entering the market today to buy and it was like it was 20 years I don’t think I’d even waste my time posting on this board.
Wow I don’t miss all the bickering on this site! I bought (within my means) and it feels good. Here’s hoping for a bottom.
“If I was entering the market today to buy and it was like it was 20 years I don’t think I’d even waste my time posting on this board.”
You mean, everything like it was 20 years ago? When you would have had a household income of maybe 1/2 what it is now (I know what lawyers made then, too)? And the more “constrained” areas that were decent to live in?
HD you are preaching to the choir. But… when I bought 20 years ago my house was $470K, and that was in NO way a deal at the time for a place this size, and at 11.5% interest… are you kidding me? That bordered on the insane, or a least my friends thought so. The big thing about this area was that it was already a solid neighborhood (for the most part). If were looking at the Lathrop or Wrightwood neighborhoods (now called LP), you were buying because they were a deal not because of their location, everyone knew they were subpar areas…. nice in their own way, but very b-list. When those areas exceeded authentic LP prices and the line was moved by bubble Chads/Trixies with their tear downs funded by zero interest loans, it was time to find another shoe shine boy and get out of the market. Didn’t anyone see this coming???
you know what I mean anon(tfo) – prebubble pricing.
Well Jay nowadays you probably have a paid for palace if you spent 470k back in the day. The people buying these McCrapBox condos I don’t think are going to be content going into their old age staying there, especially if they are in pre-family formation mode when they buy.
At the end of the day, unlike you, they may have a paid for McCrapBox condo. Also, unlike you, if they decide to sell anytime in the near future it appears they probably won’t break even.
Actually Bob, not really. 2200 sq ft, not a palace by any stretch of the imagination, but solidly built in a blue chip area (the palaces were fetching about $700K back then). Even if I could have afforded that much I wouldn’t have done it based on my income, as the taxes, space (gotta fill it up with furniture), utilities, cost to maintain, etc., would have killed you even back then.
I see the McCrapbox construction being carved up into even more multi-unit dwellings, and the fools who bought them…. too bad.
“you know what I mean anon(tfo) – prebubble pricing.”
Well, sure, if I could have 2009 income and 1989 house prices, I’d love it, too. Let’s also wish we could have 1963 pricing for Ferraris, so I could buy a 250 GTO for $18,000 (nb-$126k in ’09 dollars).
Too Much, Too Soon
relative, anon(tfo), relative … undoubtedly it is a good thing that this unit is priced only $5,000 more than the 2002 price and headed lower.
“Let’s also wish we could have 1963 pricing for Ferraris, so I could buy a 250 GTO for $18,000 (nb-$126k in ‘09 dollars).”
Oh Anon.. can I PLEASE have some of the stuf you are smokin with that one… nice warm fuzzy thought… glad to see your head is in the right place….
“Oh Anon.. can I PLEASE have some of the stuf you are smokin with that one… ”
Original US retail price*, my friend. Now, maybe Enzo wouldn’t have let you or me near one of his precious cars, but that’s access not cash.
*as they say, you can look it up. Also may see claims of $23k. Either way, we both wish.
Oh Anon.. I know exactly what it cost.. That is my absolute favorite car of all time… I shake my head at any idiot that picks up da Bentleys or Aston Martins or even worse the Lamborghini over that sweet sweet stallion… vrroommm vroom.. you made my night. And a trip to Maranello is heaven!
Or move back to the late 50s and get a 410 Superamerica for $16,800.
Or two gullwing 300SLs and a couple grand left over, for the same money.
You are killing me. I remember driving out to the beach on Long Island in the late 80’s and passing a dealer that had a very beat up ’55 gullwing for way under 10k, and calling my dad that night to ask if I could get it for my first car. The other one I asked for was a ’65 DB5. I will never forget his response “what are you going to do with a car so old, it’ll just brake” Instead I got a Toyota Supra for 3 times the price and current value of $0. I still haven’t forgiven my dad for that.
About to be under contract
“I will never forget his response “what are you going to do with a car so old, it’ll just brake””
So, your dad didn’t really believe in manual labor? The right answer to that is always “if you think you can keep it running; and if it’s broken, you can’t borrow my car”.
Speaking of 250 GTO’s I saw one on a flat bed yesterday headed towards the gold coast… lucky bastard!
And LOL Ze, that gullwing would be worth a LOT of money today 🙁
“what are you going to do with a car so old, it’ll just brake”
Isn’t that one of the things that cars are supposed to do?
“Or move back to the late 50s and get a 410 Superamerica for $16,800.”
To hell with your guys ‘refined’ tastes. Howabout move back to 1969 and get a Dodge Charger Daytona or a 1970 Plymouth Superbird for like $4k. Much higher ROI too than any of the cars and purchases/resales listed above.
“About to be under contract”
I love your nickname on here as its perfectly correlated with your credibility.
I’d rather have a Hemi ‘Cuda for 4k because today they’re worth 400k….
“Howabout move back to 1969 and get a Dodge Charger Daytona or a 1970 Plymouth Superbird for like $4k. Much higher ROI too than any of the cars and purchases/resales listed above.”
So, using the last major GTO sale of $28,000,000 (rounded down), you are saying that a ’69 dodge charger daytona sells for MUCH more than $2,385,000? Seriously? b/c I find $500k as the top end.
I doubt that transaction took place..or if so its an outlier and not representative of market pricing for those.
“I doubt that transaction took place”
Fine. Peg is at $10mm, which is an established, actual price for a number of Ferraris of similar vintage and rarity in the recent past. $2,385,000/2.8 = $851k. Where are there Chargers trading for “much more” than $850k? Or were you just talking out of your a$$?
u guys should settle this on car talk
yeah guys this is greatly inappropriate considering that this place on southport has no parking
Ask price of 850k and I bet it sells within a year.
http://www.lostnthe50sclassiccars.com/nfile/69H/69H.html
“Ask price of 850k and I bet it sells within a year.”
Is that the new math, where $850k is “much more” than $851k? And, of course, we all know that *everything* sells for the asking price, or more.
anon(tfo),
I am curious why you are quoting yourself. A search of “much more” on this thread shows that most instances lead back to you. Taking lessons from The Groovester lately?
8:47: original reference, no quotes
9:37: “much more” -anon(tfo)
10:35: “much more” -anon(tfo)
Perhaps some decaf is in order?
And that GTO is more of a fantasy: you couldn’t afford it back then and you surely can’t afford it today. Most middle class families could’ve afforded my example back in 1970, so its much more relevant.
err…”much more” relevant.
Shorthand, dude, and translated as well, b/c I shifted from your ROI “hypothesis” to actual dollars. And quotes not b/c I’m quoting something specifically, but rather, quote-unquoting your initial conjecture.
You said “Much higher ROI”; I quantified the dollars involved. If I said (this time *actually* quoting myself, and using brackets to show the cahnge from the original):
“you are saying that a ‘69 dodge charger daytona sells for [much higher ROI] than $2,385,000?”
I think that is less clear, as it is mixing a percentage with a dollar amount–parallelism being important to clarity, imo.
And this was all in the original context of digging on HD about today’s salaries and yesterday’s prices for homes, so your “much more relevant” isn’t.
Plus, you’re totally dodging the point, of this back-and-forth now, which is that you pulled something out of nowhere and I called you on it. No biggie, but you’re acting like Stevo–the evidence is against you so you change the focus.
Read some of Mish’s articles about salary deflation:
http://globaleconomicanalysis.blogspot.com/2009/03/wage-deflation-sets-in.html
globaleconomicanalysis.blogspot.com/2009/08/deflation-hits-porn-industry-canadian.html
“And this was all in the original context of digging on HD about today’s salaries and yesterday’s prices for homes, so your “much more relevant” isn’t.”
“Read some of Mish’s articles about salary deflation”
Mish, as with all forecasters on a good run, looks prescient right up until he doesn’t. He predicted the bubble–wow. He’s saying things are bad–wow. Brilliant, brilliant stuff. His company has 5 fund strategies and only 2 of them are doing well enough to show the charts on teh front page. He has a lot of smart stuff to say, and presents a ton of useful data, but he’s really only as good as his last 4 quarters.
And, notwithstanding the list he presents there, salary cuts do not *necessarily* equal “wage deflation”, esp when 13 of the 14 examples are in 2 industries, one dying and one fairly broader-economy dependent, and the 14th in an industry *totally* dependent on the broader economy.
And, HD, I was just jumping off from your (vague, I thought) post to say something funny. And it entertained Ze, so I’m happy enough with the result.
Yes HD, our wages are going to deflate back to 1905 levels based upon some charts didn’t you know? The end is near, nobody is ever going to get a raise, or get hired again! Nobody makes any money in Chicago, everything is bought on credit!