Where’s the Hot Market? Another Reduction at 3236 N. Seminary in Lakeview
We’ve chattered about this 2-bedroom at 3236 N. Seminary in Lakeview twice in the last six months.
See our June 2013 chatter here.
It came on the market in April when it was hot, hot, hot.
The top-floor unit was originally listed for 18.7% higher than the 2010 purchase price, at $469,000.
Why not?
Condos were selling for a premium again.
If you recall, at 1200 square feet, this unit has cathedral ceilings in the living room and master bedroom and a deck off the back (but no roof top deck.)
The kitchen has maple cabinets, stainless steel appliances and granite counter tops.
It has the other features that buyers look for including central air, washer/dryer in the unit and garage parking is included.
After several reductions, it’s now listed just $4,000 above the 2010 price.
What happened to the “hot” market for 2/2 condos?
Jenny Ames at Coldwell Banker still has the listing. See the pictures here.
Unit #3: 2 bedrooms, 2 baths, 1200 square feet
[unordered_list style=”bullet”]
- Sold in December 2000 for $369,000
- Sold in April 2006 for $437,500
- Sold in July 2010 for $395,000
- Originally listed at the beginning of April 2013 at $469,000
- Reduced
- Was listed in late April 2013 at $449,000
- Reduced
- Was listed in June 2013 at $429,000
- Reduced
- Currently listed at $399,000
- Assessments of $130 a month
- Taxes of $6956
- Central Air
- Washer/Dryer in the unit
- Garage parking included
- Bedroom #1: 16×12
- Bedroom #2: 10×11
[/unordered_list]
The market remains pretty hot in River North and Streeterville. But in Lincoln Park and Lakeview, there is a definite cooling.
If you look around, there are still quite a few properties listed under the last purchase price (whether that was 2010, 2008 or 2005.) Not everyone is making money yet.
Also, you can see the slowing on similar units in the same building. Take a look at 1550 W. Cornelia in Southport. There is a penthouse 3/3 on the market that listed at $725,000 in early August. It just reduced to $699k.
http://www.trulia.com/property/1048576686-1550-W-Cornelia-Ave-503-Chicago-IL-60657
The original list price should have resulted in a sale, right? The “sister” unit- also a 3/3 with similar finishes on the penthouse floor- just sold on 8/19 for $730,000.
http://www.urbanrealestate.com/property/1550-W-Cornelia-Unit-501-Chicago-IL-60657-6CEBXMS2XKOXK.html
What’s this one finally going to sell for? Why aren’t they getting as much as the other one?
Some properties are still selling within days depending on location and features. But it’s definitely slowed.
You’re going to see strong sales for September because of contracts previously entered into. However, contract activity is dying down a bit. I think contracts will still be above last year but probably in the single digits like last month. New construction SFHs are very hot. So are 2 – 4 unit buildings. I’ll be posting an update on Monday with all the stats.
And the Case Shiller index is up 22.3% from the March 2012 low. Admittedly this includes the effects of seasonality but still.
River North is indeed hot hot hot. Businesses sprouting up everywhere and obviously the high end rental towers are the reason for that. I fear that we will be priced out of the neighborhood when we are ready to move, whenever that will be. (need to find a place to move too first lol) I’ve had a few offers already that seem ridiculous to me, and my place isn’t even on the market but they are from investors who are looking to rent it out… crazy if you ask me, hopefully it keeps up, I don’t see why it wouldn’t wtih the current momentum in the area
“What’s this one finally going to sell for? Why aren’t they getting as much as the other one?”
501 has 2 parking spots, 503 only has one, and I think that 501 is on a better corner of the building (appears to be SE, away from Ashland, rather than NW, right on Ashland).
I went to see this place when it was @ $429K. It was completely average in every way. Everything nice you see in the listings photos is actually a furnishing, the unit itself is pretty bland. The cabinets, the appliances, the moldings and trim, etc… plus in August it was not staged.
I can tell from my lowly iphone apps that inventory is way up… I am fully expecting prices to retreat over the winter as supply increases and mortgage rates raise. I’m sure other people are looking at the summers out of control 20% price appreciations and thinking the same thing.
Are double digit increases in sales normally maintained year over year over year?
“Are double digit increases in sales normally maintained year over year over year?”
It depends on local employment, right? It pretty much happened from 1992 – 2006. See the 3rd graph here: http://ChicagoHousingStats.com
But it’s not going to happen in a stagnant or declining employment environment. Although employment in the Chicago area did decline from 200 – 2003.
“I’ve had a few offers already that seem ridiculous to me, and my place isn’t even on the market but they are from investors who are looking to rent it out… crazy if you ask me, hopefully it keeps up, I don’t see why it wouldn’t wtih the current momentum in the area.”
Listen to what you are saying!
OMG.
Yeah- when “investors” start making offers on units that aren’t even listed- it’s a danger sign. (In full disclosure, my father sold a condo near on an island off the coast of Florida in 2006 to someone who knocked on his door and said, “I have cash.” I told him he’d be INSANE not to take it so he did. And we all know what happened after that.)
The percentage of investors buying in the large metropolitan areas isn’t normal. It’s only going to end one way: badly.
We’ve reached the peak of this cycle’s price increases- and also probably the sales increases. Rising interest rates and rising inventory will impact sales going forward.
“We’ve reached the peak of this cycle’s price increases”
Are you saying this is the top in terms of price, or that we just won’t be going up 25% a year anymore?
“and also probably the sales increases”
Same question as above.
“Rising interest rates and rising inventory will impact sales going forward.”
What rising rates? What rising inventory?
WHAT RISING INTEREST RATES? Hrm?
Mortgage rates have plummeted over 10% this past month
“Are you saying this is the top in terms of price, or that we just won’t be going up 25% a year anymore?”
That’s correct. Do you really think we’re going to go up another 25% within the next 12 months? With no increase in incomes? You can’t get blood from a stone. In fact, you can already see the properties that have overpriced sitting and sitting there (at least on the north side.) It’s pretty obvious how much the market has slowed now.
Sales will also slow as rates rise. We’ve already seen that and rates didn’t even hold at 5%. Rates have pulled back- for now- but they can’t and won’t stay this low. Rates must go back to a normal level. The Fed (remember them?) MUST end QE. They’ll be doing it soon (just waiting for the Congress to stop being suicidal.) We’ve never had rising prices AND rising mortgage rates. Maybe this time will be different.
This market is dominated in many locations by investors (certainly that is true downtown- but even in some neighborhoods.) It’s still not anywhere close to being “normal.”
“What rising inventory?”
We hit the low in inventory months ago. It’s still low though so it sucks to be a buyer. I was looking at properties in New Orleans the other day and was shocked to see not a single house/condo available in some of the Uptown neighborhoods. Wow. Crazy.
All right. I just posted the data in a new forum topic for September. Inventories have not bottomed but contract activity is definitely slowing – it just hasn’t shown up in the sales numbers yet.
“That’s correct. Do you really think we’re going to go up another 25% within the next 12 months?”
No, and I already told you that a number of times. But you are confused on how decreases in percents work. If prices only go up 3%, then it doesn’t mean prices are down. Just because the rate of increase goes from +25% to +3% isn’t a bad thing/ The “normal” market is back. 3-5% a year.
“Rates have pulled back- for now- but they can’t and won’t stay this low.”
why not? Pretty sure the interest rate futures have already priced in the tapering… do you see explosive GDP or wage growth? I don’t! I’ve been saying here that rates will be low for a long time, Bill Gross just hopped on that wagon, its only a matter of time until more and more people realize that this downtrend in rates isn’t going to change for a very very very long while
“why not? Pretty sure the interest rate futures have already priced in the tapering… do you see explosive GDP or wage growth? I don’t!”
Nope. Haven’t priced in tapering. That’s the whole reason the Fed decided NOT to taper. They’re trying to force interest rates back down because they saw the slowdown even 5% was having. Yes- sadly- the American economy cannot even handle 5% because prices are STILL too high for the average American. So the 10-year plunged down to 2.6%. That’s not nearly low enough to really do anything to help the housing market though. The Fed would have to get them closer to 2% to do that and that’s not likely to happen with them to taper in just 4 or 5 months.
When the Fed finally does taper we should see the 10-year back up in the 3.25% to 3.5% range. That would put mortgage rates back up over 5%. Again, like I said, sadly, most people aren’t affording the $400,000 2/2 condo with rates above 5%.
“The “normal” market is back. 3-5% a year.”
No- the “normal” Chicago market is 1-3%. That is it! People’s perceptions have been completely skewed by the last 10 years. Housing underperforms all other asset classes and has for the last 100+ years until the housing bubble of the last 10 years. And when we have prices jumping like they have the last year- again- people think this is “normal” when it’s the furthest thing from it.
You really need to check out Chicago pricing from 1990-1997/1998. I post a lot of these prices here on Cribchatter with the properties. It was common to buy something for $200,000 in 1990 and sell it in 1996 for $215,000.
In case everyone needs a reminder- real estate is actually one of the worst “investments” you can make (as far as returns.) Over the last 100 years it has completely underperformed both stocks and bonds. It is NOT a wealth creator. In fact, over huge stretches of time, it sucked to own something. The last 15 years has skewed people’s perceptions about what housing really is.
If we went back to 1-3% every year, year in, year out, perhaps people wouldn’t be buying $600,000 2-bedroom condos in Lakeview. But the lesson of the housing bust still hasn’t been learned which tells me there is plenty of more pain to come.
From 1987 – 2000 the Case Shiller index rose by about 3.7% per year, which is about the rate of inflation – and the rate of inflation is about what Case Shiller determined that home prices rise at historically. So it covers your maintenance costs and your property taxes and makes a small contribution to your mortgage interest costs, but not major renovations. But housing should not be viewed as an investment anyway.
“No- the “normal” Chicago market is 1-3%”
You realize we both have “3” in our normal definition, right? And I should have said “the beginning” of the normal market. We aren’t just going to go from +25% to +1%. I think this year will be 5-7% or so. Then 4%. Then 3%. Then 2%. Etc.
“In case everyone needs a reminder- real estate is actually one of the worst “investments” you can make (as far as returns.)”
You are forgetting about the rent savings in your return calc if this is a primary residence. The investment isn’t just what the value increases. It’s also about what costs you saved.
No. I’m talking about Robert Shiller’s excellent 100 year chart about what real estate prices REALLY do (and how messed up the last 10-15 years has been.)
Real estate is awful long term. It’s a money suck. Heck- my parents just put their house in the burbs on the market (multiple offers the first day) but they’re going to get out of it what they bought it for 5 years ago- AFTER doing the following:
1. Putting in a kitchen island with granite
2. New stainless refrigerator
3. New deck on the back
4. New “outdoor kitchen”
5. New master bath- completely redesigned
6. New vanity in the guest bath
7. Repainting every single room
8. New hardwood floors on the main level
9. New front door
10. New landscaping
I could go on and on.
It’s insane how much they spent on that house. They’re losing money when they sell it.
Did they enjoy living in it? Sure. It was fun. But they need to downsize now that all the kids are out of the house.
Oh- and if they DIDN’T do all that stuff? It would be sitting there on the market not selling and for sale at a much lower price. There are other houses in their neighborhood where the homeowners are older and retired who haven’t updated in 20 years. They’re screwed, basically.
“but they’re going to get out of it what they bought it for 5 years ago”
Ha, they bought a house in 2008? Where were you to stop them?
“Real estate is awful long term. It’s a money suck.”
Lol yeah, if only we could live somewhere for free or maybe even get paid to live somewhere! Sometimes I wonder Wtf you talking about
“It’s insane how much they spent on that house. They’re losing money when they sell it.”
But how many of those things are things that increase the value of a home:
1. Putting in a kitchen island with granite: BARELY
2. New stainless refrigerator: NO
3. New deck on the back: NOT IF ITS A REPLACEMENT
4. New “outdoor kitchen”: NOT REALLY
5. New master bath- completely redesigned: SOLID PLUS
6. New vanity in the guest bath: NO
7. Repainting every single room: NO
8. New hardwood floors on the main level: MAYBE, IF THE OLD WERE REALLY BAD, OR CARPET
9. New front door: POSSIBLE, DEPENDING ON HOW BAD OLD WAS
10. New landscaping: NOT REALLY
They effectively spent a ton of money on ‘lifestyle enhancement’ upgrades and repair/replacement, rather than things that increase ‘value’ of a home.
” They’re losing money when they sell it.”
That’s largely because of when they bought it. People who bought a year ago are and will be in good shape.
As for Robert Shiller’s chart…that’s what I was talking about. Basically he found that housing appreciates at the rate of inflation, which is consistent with what I found in Chicago with it’s 3.7% annual rate of appreciation pre-bubble. It all comes down to the rent vs. buy math. Buying a house is a hedge against rent inflation with some tax benefits thrown in and the ability to do with it what you want vs. the flexibility of renting.
Is Sabrina trying to drive commenting traffic back to this poorly redesigned website by becoming anti-clio?
“Is Sabrina trying to drive commenting traffic back to this poorly redesigned website by becoming anti-clio?”
I’m retiring- don’t you get it? Wake up. Read the forums and the comments. I’m not trying to drive “traffic” and never have. I could care less.
If you want to know what I think about the market- I agree with this housing analyst.
http://www.bloomberg.com/news/2013-10-07/a-lonely-housing-bear-predicts-a-big-fall.html
I don’t think Chicago will drop 20% in the next 12 months but if the rest of the country is dropping, you can be sure we’re not exactly going to see price increases in Chicago either.
58% of all existing home sales were all cash so far in 2013? OMG. That’s worse than I thought. We’re so screwed when they stop buying (and they already are.) He’s also right that new home sales tell you the tale because those are NOT investors. Those are real buyers and it really slowed down when rates rose.
But who knows what the Fed is going to do. If the shutdown/debt ceiling is bad enough- they may have to “up” their buys instead of taper. How ironic would that be?
“. Putting in a kitchen island with granite: BARELY
2. New stainless refrigerator: NO
3. New deck on the back: NOT IF ITS A REPLACEMENT
4. New “outdoor kitchen”: NOT REALLY
5. New master bath- completely redesigned: SOLID PLUS
6. New vanity in the guest bath: NO
7. Repainting every single room: NO
8. New hardwood floors on the main level: MAYBE, IF THE OLD WERE REALLY BAD, OR CARPET
9. New front door: POSSIBLE, DEPENDING ON HOW BAD OLD WAS
10. New landscaping: NOT REALLY”
You are INSANE. But you don’t know their house so I forgive you.
The deck was rotting- had to put a whole new one on and extended it. The bathroom vanity? You don’t know it (so you’re forgiven) but if putting in a duel sink $3000 vanity doesn’t “improve” a bathroom, then I don’t know what does (but, of course, you could have thought I was talking about a $100 stupid white ceramic vanity.)
They completely updated the ENTIRE house. They got almost NONE of the money back. It wasn’t “lifestyle”- except maybe the painting. It’s things buyers look for in a home right now.
But you know what they say about remodeling- you almost always lose the money on it! ha! ha! Even kitchens and baths are only good for like 70% of what you put in it.
This is why a house is a money suck. Everyone always is like, “that $50,000 kitchen is an ‘investment'”- um…no…it’s NOT.
You buy a house to live in- and that is IT. But the last 15 years have trained us to think otherwise. And the last 5 years have not wiped away the real estate obsession. If it had- NO ONE would be buying a 2/2 condo who was 28 years old and just married (knowing full well the baby was just 1 to 2 years away.) It would be financially foolish to do so. Yet every day I see these condos listed. And yeah- many are STILL losing money even if they bought 3 years ago and prices have gone up in the last 12 months.
Fools!
“Ha, they bought a house in 2008? Where were you to stop them?”
Why would I want to stop them? They got SOOOOOO lucky. They were attempting to sell a big McMansion house in another suburb just as everything was crashing and burning in the economy because they were desperate to downsize then too. I thought they were doomed for sure (this was just a few months before Lehman but things were NOT good) but then this crazy buyer stepped forward with an offer (I couldn’t believe it- was he nuts?) and I told them to do whatever it took to sell and get the h*ll out of that bigger house. They were sooooo lucky the deal went through.
They got a decent deal on the house they are now trying to sell because that seller had been transferred to Denmark and the economy was already in trouble and just wanted to get the heck out of there. Obviously, if they had waited to buy in 2009- they would have gotten even better deals- but it is what it is.
They actually DID rent after they sold the McMansion house because a house flipper in their other suburb was caught with 3 unsold homes and wanted someone to just live in them (was worried about break-ins etc.) They lived in one rent free for 3 months until the Denmark-house closed. That house flipper lost all 3 houses to foreclosure a few years later.
They are selling again only 5 years later (after doing all that work on the house) because now everyone has totally moved out and their health is such that they need a different layout and other things. Otherwise- they would have been there my suggested 10 years (and might not be losing all the money they put into the darn thing.)
Life DOES happen. You can’t always plan for these things. But in 2008- they got SOOOOO lucky. Oh- prices in their old subdivision crashed by like 40-50% due to foreclosures after they moved out of there. They would have been really, really screwed. They would have been stuck in that big McMansion all this time. Like I said- so lucky.
“58% of all existing home sales were all cash so far in 2013? OMG. That’s worse than I thought.”
Do you think most homes are bought in cash at the bottom or top?
“They got almost NONE of the money back. ”
You are confused. They likely got some of the money back. They lost money on the price they paid for the house.
Example:
Pay 400k for a house near the top of the market
With no improvements, that house now worth 350k 5 years later.
If they did 75k of upgrades, and sold it for 400k, they would actually be getting back 50k of their improvements.
“Do you think most homes are bought in cash at the bottom or top?”
Blackstone and others stopped buying over a year ago. Unfortunately all the other idiots who are late to the party continue to buy in. Lol. What a disaster. When they ALL stop buying (because the numbers don’t add up- if you only would read the article, chuk, you’d see that the latest buyers are overpaying by 25%-35% in Las Vegas with the same thing happening in Florida now too. They used to not buy anything over $200,000 there but now they’re buying up to $300,000. Rents don’t cover their costs. I couldn’t make up this stuff even if I wanted to. What a comedy of errors we’re living through.)
So we continue to have all cash buyers. What’s the “norm” in something like that? 5%? 10% of all sales? ha! ha! I’m laughing in my dinner.
When they go away- what’s the market? (which is what this guy is arguing.) There is NONE. That’s why new home sales plunged when mortgage rates went up because they’re not paying all cash for new homes. They’re “normal” buyers- not investors.
Oh- and there is also a lot of talk that these smart investors are all leaving the Las Vegas/Phoenix/Florida markets (no deals now) and coming to- of course- Chicago! Welcome investors. Welcome.
“You are confused.”
No YOU are confused. This is like the argument “who cares if I lost $100,000 on my sale because the house I’m buying next is cheaper now too.” LOL. Remember that justification from 3 years ago? ha! ha! I’m cracking up.
Your bank account is $100,000 lighter. Your net worth is $100,000 lighter. My parents bought the house for $250,000. They put in $60,000. They are selling it for $300,000. Once they pay their realtor and all the other garbage- they LOST MONEY. IT IS OUT OF THEIR BANK ACCOUNT. THEY CAN NO LONGER TAKE THAT VACATION TO HAWAII BECAUSE THEY NO LONGER HAVE THAT $20,000.
What don’t you get?
Sure- if they didn’t do the $60,000 in improvements, maybe they sold for $210,000. Maybe they lost even MORE money that way. But either way- they’re losing money.
“People who bought a year ago are and will be in good shape.”
Really? I’m not so sure. I see examples of plenty of people who bought in 2010-2011 who are trying to sell right now- still losing money. Listed for below what they paid just 2 and 3 years ago (and some examples of people who are able to get more as well.)
Gary- if you check the suburbs there is just total devastation out there still. Wow. I can’t believe it sometimes. And these are good suburbs with top 25 high schools. HD could confirm this as he’s familiar with some of these suburbs. I’ve seen some sellers who bought in 1999 for $500,000 listed at $535,000 right now. Wow. Even WITH the recent price increases- still going to lose money. After 14 years and after buying pre-bubble.
Yikes. It is still really, really bad out there in many places. The GreenZone may have bounced back but the rest of the Chicagoland area- not so much.
“What don’t you get?”
I don’t get how you can be so confused.
“Sure- if they didn’t do the $60,000 in improvements, maybe they sold for $210,000. Maybe they lost even MORE money that way. But either way- they’re losing money.”
In other words, they DID get some of their improvement money back. Thanks for making my point for me.
Your parents problem wasn’t so much that they did the improvements. Their problem was that they bought near the top.
“Yikes. It is still really, really bad out there in many places. The GreenZone may have bounced back but the rest of the Chicagoland area- not so much.”
And probably never will. That is why it is called the “GreenZone”.
“Sure- if they didn’t do the $60,000 in improvements, maybe they sold for $210,000.”
So, you are saying they did 60k in improvements, and got 90k more for the house as a result. What was your original point again?
By the way- Oaktree, one of the early buyers of distressed homes, is trying to get out of some of them. They also stopped buying a while ago. Smart!
http://finance.yahoo.com/news/exclusive-oaktree-group-sell-u-170845506.html
American Homes for Rent, on the other hand, just did a public offering to raise another $800 million because the home buying must continue, right? Because there are so many deals out there and rents only go up.
“By the way- Oaktree, one of the early buyers of distressed homes, is trying to get out of some of them.”
Why do you think they bought them in the first place? To hold for 30 years? Why would anyone be surprised they are selling after getting 25-50% gains?
“And probably never will. That is why it is called the “GreenZone”.”
Arlington Heights will never bounce back? Barrington will never bounce back? Highland Park will never bounce back? I’m not talking about Lockport here. Pulease. It’s just total destruction in great communities in top 25 school districts. It makes me think we’re seeing a big change in what the Millenials are able to buy. A lot of the houses are over $500,000. There just isn’t the cash (for downpayments etc.) for the next generation of buyers to get into these houses at these levels.
Your parents problem wasn’t so much that they did the improvements. Their problem was that they bought near the top.
No- chuk. See my other message. They got a pretty good deal because the other seller had been on the market for awhile and had to leave to go to Europe. They didn’t buy at the top by any means. Not as great as if they had waited another year though.
They lost money. It sucks. So why does everyone love housing so much? When they lose money on their stocks they hate them and refuse to buy them. It’s so fascinating to see an obsession still in full swing.
Oh- and on Oaktree selling- what DOES that mean Chuk? Come on. You’re an expert on the big market players. You know all. If all the smart private equity guys are now “quietly” trying to sell- doesn’t that mean that we’re at a top? That we’ve seen the gains and they are getting out while the getting is good?
Of course it does.
This housing market is going to be changing in a big way in the next six months. Maybe I’ll have to run CribChatter from overseas next year after all- since it could get really interesting again. I want to see inventory pick up though.
“So, you are saying they did 60k in improvements, and got 90k more for the house as a result. What was your original point again?”
You know what my point was. Can’t take it that I was right and you were wrong. As usual.
By the way- we don’t know what it would sell for without improvements. Buyers want move in ready. There’s is the only house in their area that has gone under contract within a week in the last 2 months. It’s beautiful though. Buyers will pay for that. Everyone else in their neighborhood is seeing just total devastation. It’s truly shocking. So they spent money, and lost money, so they could sell easily. Everyone else will lose money too- but bigger amounts- and it’s taking a lot longer to sell.
Some houses in their area have been on the market over a year. Yes- overpriced- but still. It’s just awful in lots of areas if your house isn’t pristine.
“They didn’t buy at the top by any means”
Then why is it worth $210k 5 years later (after a 25% increase in prices)?
“You know what my point was. Can’t take it that I was right and you were wrong. As usual.”
Your point was that they didn’t get anything back for their improvements. That point was 100% wrong. As usual.
“Oh- and on Oaktree selling- what DOES that mean Chuk? Come on. You’re an expert on the big market players. You know all. If all the smart private equity guys are now “quietly” trying to sell- doesn’t that mean that we’re at a top? That we’ve seen the gains and they are getting out while the getting is good?”
No. We’ve seen the easy money. Which is all they wanted. They aren’t in it for 3-5% a year gains. So they get out, and turn their properties over to people that were too afraid to buy at the bottom. That’s the price they pay.
It’s like this in any market. When the stock market tanked to 666, who do you think stepped in to buy? Average Joe investor? No. People like Buffett that made billions. The big players are the ones who buy the bottoms and stabilize the markets.
“It’s like this in any market. When the stock market tanked to 666, who do you think stepped in to buy? Average Joe investor? No. People like Buffett that made billions. The big players are the ones who buy the bottoms and stabilize the markets.”
But the average investor isn’t buying 500 houses en mass from Oaktree. Those are STILL the professionals. American Home, with its $800 million in cash, is STILL the professionals.
But I agree with you- that the 20% appreciation (or whatever) is long gone. Why would they want to hold onto thousands of houses in a flat to 1-3% housing market? They can make WAY more money somewhere else. Oh- and rents aren’t likely to go up much more either (can’t get blood from a stone.) So what’s in it for the next buyer then? Stupid investment. The appreciation is done. Buyers now will go back to making inflation. Which isn’t any kind of “investment.”
But that’s the thing about Blackstone and all of the early guys. They ALL have to sell at some point- right? Who do they sell thousands of homes to at these levels? That was always the question in this whole thing. We’re about to find out.
It’s so fascinating now. You can see what’s about to happen as clear as day (unless the Fed starts buying $100 billion to $125 billion a month and really crushes those bonds back and brings back record low mortgage rates.) Then they can put off the day of reckoning a little while longer.
“Then why is it worth $210k 5 years later (after a 25% increase in prices)?”
Because the suburbs haven’t seen 25% appreciation Chuk. And neither has Chicago.
” So what’s in it for the next buyer then? Stupid investment. The appreciation is done.”
Most people don’t buy real estate as an investment. They live in it. I agree that over time, real estate is a poor investment if you aren’t living in it.
According to Case Shiller through July of this year (this was in September’s release)- Chicago condos are still 23% below peak. How bad did it get? I think it was like 33% below peak at the worst of it. Gary could confirm this. So that would indicate appreciation on condos of just 10%.
“And neither has Chicago.”
Sure it has. I’m up close to 50% on both of my purchases in about 1.5 years. What % do you think Chicago is up since March 2012?
If Chicago saw appreciation of 25% in the last year- EVERYONE would be selling. And clearly, they are not. And how are all those people who bought 2 or 3 years ago losing money? But they are.
Huh.
What a mystery.
“So that would indicate appreciation on condos of just 10%.”
Umm. No it wouldn’t… Basic math.
“Chicago condos are still 23% below peak. How bad did it get? I think it was like 33% below peak at the worst of it. ”
p.s. your numbers are wrong too…
“Sure it has. I’m up close to 50% on both of my purchases in about 1.5 years. What % do you think Chicago is up since March 2012?”
Since March of 2012- probably about 10%. But that excludes foreclosures/short sales. So what I mean is- you bought a normal property in March 2012 and you’re trying to sell 18 months later. You might get 10% more. Depends on location blah, blah, blah.
“Chicago condos are still 23% below peak. How bad did it get? I think it was like 33% below peak at the worst of it. Gary could confirm this. So that would indicate appreciation on condos of just 10%.”
Here, I’ll let Gary confirm it for you:
“People who bought a single family home at the lows of March 2012 (I managed to hit it just right but I’m not one to brag) are up on average 22.3% and condo buyers in that same time frame are up by 28.3%.”
So, what is it you were saying again about being right “as usual”?
Also- if prices were up 25% in 18 months there would be flippers all over the place and I can count on one hand the number I’ve seen in the GreenZone (and flipper is defined as someone who buys the property and re-lists it without doing ANY renovations.) I’ve seen rehabbers/renovators getting quite a nice bit of appreciation- but the flippers have been absent (more or less.)
So that tells me it’s not worth it to buy the $400,000 2/2 in River North and attempt to sell it two months later. You wouldn’t make enough money to do it. And you’re also not making enough money a year or 18 months later. They could easily have bought that, rented it out for a year, and re-sell. And there just aren’t those properties listed.
“But that excludes foreclosures/short sales.”
Why in the world would you do that? Why don’t you exclude 0% down interest only sales from the bubble prices too then?
“Also- if prices were up 25% in 18 months there would be flippers all over the place”
Again, you are confused. Only a small % of people bought at the bottom. Just because prices are up 25%, doesn’t mean that everyone bought the bottom. Those people (like myself) are indeed looking to flip. You are mixing up stats. Yes, prices are up 25%. No, not everyone is up 25% from where they bought.
“But the average investor isn’t buying 500 houses en mass from Oaktree.”
No. But 500 people are buying 1 house.
“I see examples of plenty of people who bought in 2010-2011 who are trying to sell right now- still losing money. Listed for below what they paid just 2 and 3 years ago (and some examples of people who are able to get more as well.)”
Of course, But I said that people who bought a year ago are in good shape. Not 3 years ago.
“if you check the suburbs there is just total devastation out there still. Wow. I can’t believe it sometimes. And these are good suburbs with top 25 high schools. HD could confirm this as he’s familiar with some of these suburbs. I’ve seen some sellers who bought in 1999 for $500,000 listed at $535,000 right now. Wow. Even WITH the recent price increases- still going to lose money. After 14 years and after buying pre-bubble.”
I’m very familiar with this. These homes are incredibly outdated. Nothing has been done to them in 15 years or more and if anything was done it was cheap. That’s the downside of housing. It has to be periodically updated to hold it’s value but if it otherwise appreciates at the rate of inflation then that pays for it.
So, what is it you were saying again about being right “as usual”?
I’m always right. But you know that by now.
But you’re the GENIUS. I’m just the dumb woman who runs this blog. That’s how you think- right Chuk?
p.s. your numbers are wrong too…
“Chicago condos are still 23% below peak. How bad did it get? I think it was like 33% below peak at the worst of it. ”
Which ones? Not the 23%. I got that off another blog who has been tracking these things for years. But I’m too lazy to look up how far we fell from the peak. Was it 40% then? 50%? This is condos. You tell us Chuk. You know all.
“Why in the world would you do that?”
For the same reason you don’t count them in a comp.
My god man. If you’re up 50% in just a year or two on your condos- SELL THEM! What are you waiting for? A sign from above? The smart money is all selling. Oak Tree and Blackstone are selling. Do what they do. You yourself said that prices will only go up 3%-5% a year. What’s the point of owning then?
Take your money and run. The smart money is getting out.
Why aren’t you?
“Chicago condos are still 23% below peak. How bad did it get? I think it was like 33% below peak at the worst of it. ”
Probably got that from me. From my last Case Shiller post: “However, that still leaves single family home prices 25.5% below the bubble peak and tracking 21.0% below the long term trend line while condo prices are down 22.5% from the peak.” At the worst SFH prices had fallen 39%.
“Of course, But I said that people who bought a year ago are in good shape. Not 3 years ago.”
Right now- that could be true. But maybe not next year- when rates will be higher. Or the year after that. Who knows? I think that’s stupid to say (sorry Gary.) You have NO WAY of knowing if someone who bought 16 months ago is in “good shape.” No way at all. Just like someone who bought in 2010 or 2011 with the tax credit didn’t know either. Maybe they thought they were in pretty good shape too. Turns out- they weren’t.
Neither do I know if they won’t be. We’re both simply guessing. Anyone who says otherwise- is lying.
“I’m very familiar with this. These homes are incredibly outdated. Nothing has been done to them in 15 years or more and if anything was done it was cheap.”
You can see this in Chicago condos too. If you bought that condo 10 years ago- my gosh- it’s completely out of date already (and I’m not being sarcastic.) You think you can live there with those nasty white counter tops and white tiled bathrooms and sell it with NO renovations and expect to make money? Of course not. You’d better update it if you want any appreciation.
This is what I mean by a money suck. You won’t get the money back you spent on updating that bathroom.
“Again, you are confused. Only a small % of people bought at the bottom. Just because prices are up 25%, doesn’t mean that everyone bought the bottom. Those people (like myself) are indeed looking to flip. You are mixing up stats. Yes, prices are up 25%. No, not everyone is up 25% from where they bought.”
Plenty of people bought in the last 18 months. They are ALL up anywhere from 25% to 0% (if they bought last week)- according to you. Why aren’t they all selling? There were THOUSANDS of sales in that time period in just Chicago alone. Even if you just got 12% of that. Say you missed the bottom by a bit. There have got to be a couple of hundred who can do Redfin and use a low cost brokerage to keep transaction costs down. Why not grab the 8% or 9% gain and run with it?
Only- I’m not seeing that at all. I haven’t seen any flips of this sort. Why not?
I presume it’s because of the greed factor too. Prices are surging- so they must keep surging for forever. That’s why no one is flipping. They’re waiting for the next 25%. This could very well be their thinking.
Like I said- fascinating market. It will be even more fascinating in the next crash.
“Take your money and run. The smart money is getting out.
Why aren’t you?”
1) I don’t believe prices are going to fall like you do
2) The 2br that I rent out costs me about $1300 a month. It is rented for $2250 a month. So, that return is on top of any potential price appreciation. Having said that, there is still a good chance I will sell this one.
3) The 1br that I occupy costs me about $700 a month. It would cost me $1400 a month to rent this same unit. Therefore I am saving $700 a month. That too is in addition to any return.
I’m also considering selling the 1br and using the 2br instead. I didn’t get into this originally for the purpose of investment. But when I found 2 deals that I couldn’t pass up, I decided to buy both.
“Which ones? Not the 23%”
Sabrina, even if both the 23% and the 33% where correct, your third number (up 10%) would be wrong.
Simple example using 100 as peak– bottom would be 67, now would be 77, which is up ~15% from the bottom.
“Sabrina, even if both the 23% and the 33% where correct”
The 33% is not correct. 40% is the correct number. Which yields a 28% increase off the bottom.