Welcome to 2008: The Year When Things Get Interesting
2008 has only just gotten here and already I’m seeing things stirring in the Chicago real estate market.
In the last week of 2007, I’ve seen a bunch of aggressive price reductions. I’ve also seen a sharp uptick in the number of new listings coming on the market. Will it be that anxious sellers won’t be able to wait until the “traditional” selling period begins- which is usually after the Superbowl?
And the other big story, in the condo market, will be the flippers. Who is able to flip and who will not be able to hold on?
There will be a lot to chatter about this year.
I’m taking the rest of the day off and will be chattering normally the rest of the week.
Happy New Year!
Hey all.
As I have mentioned before, I am looking for a place to live inChicago. Plan in having it for a long time. Any tips on mega-deals will be great. I actually have the luxury of time on my hands. That place on 50 East 26th Street would be great! At the 2006 price of course.
Jason: You should be patient. 2008 won’t be the year of the mega-deals. Those will come in 2009 and 2010 as people get into real trouble and the prices come down further.
In my opinion, there are still too many people buying real estate- even as investments. The real fear isn’t there yet for the true “deals.”
But I have seen some condos selling for at least 20% below the prior sale price.
Hi – new to the site, find it very useful.
Couple questions:
What is YoY
What is a knife-catcher?
Thanks.
YoY means Year over Year as used when comparing statistical data.
Knife-catcher is someone who buys an asset that is depreciating in value…..sort of like someone who tries to catch a falling knife and the blade, gets cut and bleeds.
Homedelete – You were a big cash hounder over the past 5 years right? Was collecting your cash the same as “cathing a falling knife” as the $$ lost 50% of it’s value?
You sit around and brag that you are a renter that puts all his money in a savings account. You do realize that the $$’s you saved 5 years ago are worth much less than they are today? What about stocks? How would you be doing if you invested in stocks 5 years ago? What about real estate? Which has held it’s value the best over the past 5 years? Would love to hear you opinion. Yours too Sabrina…
Steven there is no safe haven, not even real estate. All you can really do is stuff your money into a mattress and pray we don’t become the Wiemar Republic. Plenty of real estate has lost 50% of value too – they’re called REOs that are selling at large discounts. I wish I could you should some specific properties I’ve seen in the last week because the numbers are truly frightening, however, even though they’re not my files I cannot talk about them. However, I can disclose that I know for a fact that TODAY, there was a closing on an REO unit in one of Steven’s hallowed zips at 50% of the prior mortgage balance. I bet if you looked hard enough you could find it Steve, but you would never post that, now would you?
HD – See, when you say something was sold for 50% of what it originally sold for, it means nothing to me. A property has an intrinsic value based on cash flows, yields, and expected returns. Whether someone paid 2X what it was really worth only matters to the bank and to the person foreclosed on. I look at the cash flows of a property and then back into a price that meets the yield I am looking for. If you can buy a property at a 6 – 7% cap rate and then turn around and finance it with a 5.5% interest rate, your down side is extremely limited. Even if rents drop 25% (which is not likely and the exact opposite of what I think will happen – hyper inflation) you are still breakeven. Take this plus the tax benefits of owning investment properties and you really can’t lose. Don’t get me wrong, it is not easy and does take a lot of discipline. The people out there that purchased at $700k property than only supports $3000 in rents should lose there money because they overpaid. The banks from the start should have required the “income approach” to all their appriasals instead of simply sales comparisons. Just because your neighbor over paid does not mean the fair market value of property is justified. It all comes back to investor and cash flow value. There will always be a market for yields, especially when the 10 – year treasury is paying 2.98%.
I am in the boat that believes all this stimulous will cause inflation over the next 5 years. Inflation will kill cash. You have to own hard assets (gold is my favorite right now for the next 5 years) to protect your self from what is coming.
homedelete – thanks for the answers to my newbie questions.
I am looking to enter the realm of homeownership after years and years of renting, with Chicago as one of the leading contenders as to where to buy (I am a Canadian working in Canada, but with a schedule and job that would allow me to live in a variety of locales).
There seems to be a lot of chatter on cribchatter regarding the potential / probable price drop. I was hoping to buy something in the next three months, might it be better to wait six?
Phil, Steven says buy now, I say wait until 2010 and see what the market looks like then. You gotta decide what you think is best.
My “plan” is to continue working in the middle of !@#$% nowhere for five years and live somewhere I really enjoy (I am on a 10 day on, 4 day off schedule) during that time.
There’s no reason I couldn’t pay off (or come pretty close) a condo in 5 yrs, assuming American mortgages work the same as Canadian, ie extra payments count against the prinicple.
So I would prefer to buy sooner than later, to maximize my time in Chicago.
I’d consider renting, but the rents seem awfully high.
Ok, I am sure you were all waiting on pins and needles as to whether I bought in Chicago yet :O) Alright, no you weren’t, but I thought I’d let you know anyway.
Given the global economic crisis and it’s effects on the oil industry here in Alberta, my original plan to live in Chicago and work here has fallen to the wayside.
I’ve been viewing the site anyway, just to see the places, dream of living there in the future, and pick up ideas for any possible renos I could do.
My new place:
http://www.virtualrealtytours.com/servlets/Listing?ListingID=10894&TourType=main.html
There are four separate views in the virtual tour.
Phil
Phil: Those look nice. How’s the market up there? Alberta was on fire only a year or so ago.
It’s become a buyer’s market. Interest rates are low and prices have dropped 5-10%. I read prices across Canada will on average go down 5-10%. Saskatchewan and Newfoundland are going up at least 10%, Ontario and British Columbia going down more than 10%.
The timing was finally right. Former owners had twins and needed a a family home. Place was listed 100,000 less than the assessed value at the top of our bubble.
I still dream of living in Chicago though!
Keep up the good work on the site.