WSJ: Mortgage Insurers Consider All of Chicago A ‘Declining Market’
The Wall Street Journal is talking about the tightening lending standards in today’s issue.
According to the article, the entire Chicagoland area is now designated a “declining market” by 4 out of 5 of the largest mortgage insurers.
That means that mortgage insurers are routinely requiring at least a 10% downpayment to purchase a house, and sometimes more. From the WSJ:
“To put this blanket overlay on my marketplace and say it’s all a declining market, it’s not true,” says David Hanna, managing partner of Prudential SourceOne Realty in Chicago. City neighborhoods such as Lincoln Park and Hyde Park, as well as affluent suburbs such as Hinsdale, still are seeing home prices appreciate, he says.
Mr. Hanna points out the declining-market tag has hit such unlikely transactions as a $1.1 million sale of a home in Wilmette, a well-to-do suburb. The buyer had to come up with an extra 5% down payment.
In another case, a two-unit building in Chicago was ready to be sold to an investor for $449,000, when the required down payment again was boosted. The buyer still is trying to come up with the funds. It turned out that a different investor in that neighborhood had defaulted on seven properties, driving down comparable prices.
Mr. Hanna says such circumstances should be taken into account. “Maybe one project, because of past history, you have issues, but you’re impacting literally thousands of other people,” he says.
Mortgage insurers say the data they receive on home sales aren’t conclusive enough to be more precise in designating declining markets.
Other costs of obtaining a loan are also increasing.
Next month, for example, MGIC plans to charge an annualized premium of up to 0.75% of the loan balance for fixed-rate, 30-year mortgages with a 10% down payment, up from 0.67% this month. The company doesn’t plan to change course anytime soon.
“Housing cycles don’t correct quickly,” says MGIC’s Mr. Zimmerman.
Has anyone heard of mortgage insurers requiring more than the 10%?
Mortgage Insurers Raise Bar [Wall Street Journal, July 15, 2008]
On San Francisco’s housing website SocketSite, they are reporting that Countrywide is now requiring 25% down on jumbo mortgages, which for that area is over $719,000.
What are they requiring here in Chicago for a jumbo?
That 25% requirement includes the City of San Francisco where prices have not declined much and foreclosures are not numerous (yet.)
From WSJ:
Michael Zimmerman, a spokesman for industry leader MGIC Investment Corp., says, “So far, we’re only losing the business that we no longer want to write. The long-term objective of anybody in the housing industry should not be just affordability but sustainability. I think for the last few years, the drive and the focus have been solely on affordability.”
This quote epitomizes the reasoning that should quiet all those people complaining on how stricter standards will worsen the decline in the housing market. This is a healthy dose of medicine that will put houses ONLY in strong and responsible hands i.e. people who won’t default. A side effect will be reduced prices.
But trader,
The individual seller doesn’t and shouldn’t care whether the person the bank gives the loan to is creditworthy. After the loan is originated and the deal closes the seller moves on and is out of the transaction. So it makes sense sellers have this mindset.
What never made sense is that banks had this mindset too during the securitization boom. Unfortunately they didn’t sell all the crap securities they originated.
“City neighborhoods such as Lincoln Park and Hyde Park, as well as affluent suburbs such as Hinsdale, still are seeing home prices appreciate, he says.”
Hmmm.
I really haven’t seen any appreciation in LP. At least not over vs. prices for the last 12-18 mos. What do you think?
That quote was from a realtor shill (redundant, I know.)
This has been the case for about the last two months.
I called National City yesterday and they are not offering fixed Jumbos anymore. Only 5 and 7 year arms. They still offer conforming 80-10 financing for SFRs but, if you are in a condo 80-5 is your only option if you want to avoid PMI.
On a side note my Arm is adjusting and my payment is increasing by approx 25%.
Note that the median price is “rising” in some areas (like Lincoln Park) because of the mix of houses being sold (volume is way down esp on the low end, high-end condo sales just finished, etc.). In reality, prices are probably already dropping even in these great areas and will start to drop more steeply as time goes on.
With in the last week or so. Anyhting with 4 units requires 30% DP, anyhting over 640K is a jumbo requires 25% DP and inteterest rates for Jumbos is in 7.8% range
This pigeon has been coming home to roost for a few years for multi-units, My prediction, everyone who bought a multi-unit for big bucks in Lakeview, LP, North Center, Lincoln Square is going to find out they are stuck, and loosing money especially. (those who thought being an owner occupiers makes much of a difference are going to be even more hoosed when they discover they have made the buildings unable to ever be investments again)
Keep dreaming Trader. The good properties are jumping right now. 3.5 month listing time on condos (excluding the few high-rise buildings)
The shill is getting shrill.
“Waaaaaa, but LP real estate always goes up, waaaaa.”
“3.5 month listing time on condos (excluding the few high-rise buildings)”
And excluding conversions and properties on major streets and anything too far west or too close to teh el or too far away from the el and (of course) excluding anything that’s just simply overpriced. Right, Stevo?
Per the mls Lincoln Park attached single-family residence (condo) sales are down around 40 percent for June YOY, 2nd quarter YOY and 1st half YOY. You have to go back before the bubble began (pre 1997) to find such low sales numbers for the same periods.
Considering the new inventory added in the past decade in LP, the low number of sales can only lead to a collapse in prices that even the shills won’t be able to hide.
anon, I wonder where our troll went to? Was it something we said?
I can only assume Stevo’s finally wokring on pulling together his 5 winners for every loser we find. Should take him a while.
Without steven we’re all preaching to the choir.
as a side topic, G, where did you go to college?
In another case, a two-unit building in Chicago was ready to be sold to an investor for $449,000, when the required down payment again was boosted. The buyer still is trying to come up with the funds. It turned out that a different investor in that neighborhood had defaulted on seven properties, driving down comparable prices.
—
Keep waiting and that d/p won’t be as big……
This quote epitomizes the reasoning that should quiet all those people complaining on how stricter standards will worsen the decline in the housing market. This is a healthy dose of medicine that will put houses ONLY in strong and responsible hands i.e. people who won’t default. A side effect will be reduced prices.
—
Well, how long will “WE” have to wait?? The Greedy Sellers still think it is 2005.
I was hoping to meet a guy in the middle between 330 and 359 on a SFR that need a kitchen and a 2nd floor. He refused to negotiate! Some one pls tell the Greedy Sellers that “this is a good time to buy!” ™
Steve H is to bearish for me. What does Joe Zekass have to say? He’ll tell us what to think.
SITC, you know what to do: Go back with a lower offer.
homedelete, let’s just say I was marooned decades ago.
SITC,
With tightening lending standards more and more idiots are removed from the pool of potential buyers and this only bodes better for qualified buyers.
Not having to compete offers against those who aren’t good at math will go a long ways towards restoring affordability. But these things aren’t resolved quickly. Stick to 330k as your highest price and he will either come down or incur the carrying cost as most are these days.
Eventually some will have to cry uncle and give up when they realize they will continue to pay the carrying costs or they will go into foreclosure.
Our hazy picture of G begins to come into focus… slowly… slooooowly…
how could anyone NOT think G went to UC?
G is analytical, a contrarian and bases his views on data and not hype. Its not surprising he went there.
Its also not surprising that most of you guys long in RE are royalled scr_wed if you need to sell within the next 5 years unless you fan find a sucker to assume your huge liability.
There is no fundamental reason why Chicago real estate is priced so far above other midwestern cities. No reason whatsoever given the median incomes. Now that lending standards are going to return to sanity the RE longs are done, save for the few who get lucky and find a greater fool. With tighter lending standards the pool of potentail fools is that much smaller.
Not everyone in Chicago makes six figures, and Chicagoans certainly don’t make 2x what Milwaukeans/Minneapolis/ make. No reason a house in a generic Chicago suburb should cost any more than a house in any other midwest city’s generic suburb with the same income.
Sorry Chicago longs, if you don’t know it yet, its curtains.
“There is no fundamental reason why Chicago real estate is priced so far above other Midwestern cities.”
Um, it is called quality of life. You don’t find same theaters, museums, restaurants, etc. in Cleveland, Milwaukee and Indianapolis.
People want to live in Chicago. There are also more jobs in Chicago than in any other Midwestern city.
On a number of available jobs per people I doubt Chicago is much different. ‘Quality of life’ and other non-financial reasons were a large part of why Chicago real estate is so expensive relative to other MW cities during the boom. But lets see whether non-financial reasons hold up in the bust. I have my doubts.
This may not mean that Chicago RE will become as cheap as Dayton, Ohio, but I think Chicago homeowners are in for far more pain than these other sleepy MW cities with such a perceived low quality of life.
The following employment numbers are from the BLS for May 2008. The population totals are from the 2000 census. The housing unit numbers are also from the census (American Housing Surveys, 2003 or 2004.)
MSA — Labor Force–Housing Units — Population
Chicago — 4,585.1 — 3198.9 — 9,098,316
Detroit — 2,129.8 — 1900.6 — 4,452,557
St. Louis — 1,446.5 — 1139.6 — 2,698,687
Indianapolis– 908.8 — 744.9 — 1,525,104
Cleveland — 1,072.5 — 856.1 — 2,148,143
Minneapolis– 1,855.9 — n/a — 2,968,806
Milwaukee — 783.7 — n/a — 1,500,741
Jobs Jobs
MSA — per HU — per Person
Chicago — 1.43 — 0.50
Detroit — 1.12 — 0.48
St. Louis — 1.27 — 0.54
Indianapolis– 1.22 — 0.60
Cleveland — 1.25 — 0.50
Minneapolis– 0.00 — 0.63
Milwaukee — 0.00 — 0.52
“Minneapolis”
Not the best example. Minneapolis housing is pretty expensive, too, for (roughly) comparable quality of location/house/schools. The big advantage in MSP is that the comparable locations are generally much closer to downtown (or come with lake access); the disadvantage is that there isn’t a large rail network as an alterative to driving (and it’s winter for about 2 months longer than here).
I agree as to the rest–Milwaukee, Indy, etc.
There is a difference between quantity and quality of jobs. Growth comes from big corporations, not small accounting and law firms.
Cities with five or more FORTUNE 500 headquarters.
Chicago Illinois 10
Minneapolis Minnesota 7
Cincinnati Ohio 7
Milwaukee Wisconsin 6
Illinois – 62 Fortune 500 companies
Ohio – 62 But how many people would chose Cleveland or Dayton over Chicago??????
Indiana – 14
Iowa – 7
Wisconsin – 25
Minnisota – 36
Michigan -34
Aleks,
On a per person basis it looks like the other areas have more fortune 500 HQ’s per person than Illinois. So that rather deflates the argument that the jobs here are higher quality. The Cincinnati MSA has about 2MM people, the Chicago MSA has 9.5MM people. I happen to know that you can get a 3500 sqft McMansion in Cincinnati for 450k. What does this buy in Schaumburg: a 3br/2ba?
While it may be true that most people off the street would prefer Chicago to Cincinnati, it is my point that these preferences don’t justify the real estate price discrepancy given the similar (or better from your example) underlying economics between the two cities.
Part of the problem of the bubble is that you had people that weren’t good at math setting prices at the margin. These people will be forced out of home ownership within the next five years and won’t be back in it any time soon.
Aleks,
The best way to compare job quality is to look at median income as well: its measurable just as median home prices are. Here in Chicagoland I am willing to guess the ratio of median home price divided by median income is far higher than other midwestern cities. I don’t believe this increase multiple is sustainable.
I see your point, but then why would someone chose to live in NY vs. Norfolk, they’re both on the ocean…The are intangible benefits for living in a place like Chicago. Chicago is a world class city…and Cincinnati? Probably not. Some people would be happy in a 2bd condo in downtown Chicago, and some have to have a a 3500 sqft McMansion in Cincinnati for 450K.
I think the only fair comparison for prices in a particular city would be rent vs buy.
Bob sums it up nicely: “Part of the problem of the bubble is that you had people that weren’t good at math setting prices at the margin. These people will be forced out of home ownership within the next five years and won’t be back in it any time soon.”
Same goes for the bad lenders that enabled them.
I’m curious whether there were premiums for the Chicago area relative to other parts of the midwest prior to the bubble. My gut is that there is a non-trivial premium but smaller than at present. Anyone have data?
Arguing that Chicago demands a premium over other midwestern cities is like saying “it’s different here.” That excuse doesn’t work anymore.
housingtracker dot net offers plenty of analysis.
Here are some price to income ratios:
MSA———–1st Q 1997——3rd Q 2007
Chicago——–2.8————–4.0
Minneapolis—-2.1————–3.0
Cleveland——2.3————–2.2
Detroit——–1.9————–1.9
Milwaukee——2.7————–3.4
St Louis——-1.8————–2.4
Indianapolis—2.0————–1.9
Not to be misconstrued as a “get out of my town” remark HD…but if you could live in Milwaukee for less than what you’re paying for life in Chicago, why don’t you move?
My answer: Because I find value in living in Chicago that I don’t find in Milwaukee, and I’m willing to pay something in exchange for that value. Hence, Chicago demands a premium.
“Part of the problem of the bubble is that you had people that weren’t good at math setting prices at the margin. These people will be forced out of home ownership within the next five years and won’t be back in it any time soon.”
“Same goes for the bad lenders that enabled them.”
The bad lender that enabled them is the same one, the US government. I hope it’s not out of business in the next five years.
I find it laughable when the senate and congressional committees call the Angelo Mozillo’s of the world in for a tongue lashing when he wouldn’t have sold those mortgages if the government wouldn’t have green lighted it buy OKing Fannie & Freddie to buy them back.
Just Curious,
Paying an increased share of your income for housing (a premium, as you put it) for housing is like any other luxury good.
You are trading part of your disposable income to live in Chicago vs. a city with more affordable housing. In fact almost double relative to other midwest cities. We all know what happens to luxury goods in any recession.
There will be a premium, but Chicago RE will take it on the chin far more than Cleveland would, for instance. Go ahead and look at that price to income ratio again. Look at how the typical Chicagoan paid 2.8x of their income for their house in 1997 and now that is 4x. Look how far that outpaces most other midwest cities now. 4x is one heck of a leverage ratio: look for tons of foreclosures in Chicagoland.
“Arguing that Chicago demands a premium over other midwestern cities is like saying “it’s different here.” That excuse doesn’t work anymore.”
Amen!
Just Curious said “…if you could live in Milwaukee for less than what you’re paying for life in Chicago, why don’t you move?”
“My answer: Because I find value in living in Chicago that I don’t find in Milwaukee, and I’m willing to pay something in exchange for that value. Hence, Chicago demands a premium.”
Why does Chicago demanda premium?
The lake? Milwaukee & Cleveland are on lakes. MSP is surrounded by them.
Natural beauty? There’s more within a drive of Milwaukee or MSP than there is in Chicago.
Pro sports teams? Those other cities have them too.
Restaurants, museums & parks? Those other cities have them as well. If you want to claim one city’s art museum is better than another that’s fine but that’s not a reason to pay more for a home there.
The reason most people don’t leave from where they are is because of roots. I’m one of seven kids with 14 nieces & nephews and all live in the area. I have no desire to leave them for a cheap house. I also see no reason why I should pay more for a home because Chicago has more Thai restaurants and the Picasso in Daley Plaza.
I live in Chicago because I was born in the area. I often joke that I wish my swiss ancestors would have settled further south or west. Instead they chose to wisconsin with the rest of the german speaking folks.
Nevertheless, keep convincing yourself of the premium Chicago commands during February. “It’s different here.” Yeah, it’s much colder.
The proof is in the pudding. Whether you like it or not, Bob, HD, Ken, and everybody else in Chicago has agreed to pay a premium (whether in rent or home prices) for living in Chicago. Blame your ancestors if you want, but they aren’t renewing your lease each month.
Based on G’s #’s everybody in Chicago has agreed to pay a premium in the last ten years so I don’t don’t think it has as much to do with my ancestors as it does yuppie wannabe’s hoping to live like Ross & Rachel on friends.
Enjoy the ride back down.
How about superior public transit, superior restaurant scene (yes, I’ll pay more for it), superior population density, superior urban planning, superior job market (good for both employees and employers)…
No, Chicago is not Manhattan, but, to an admittedly lesser degree, the price premium is justified. While I’m a native, plenty of people living here are not.
Listening to some of these folks you’d think they’d have packed up and left by now. I hear Detroit’s pretty affordable these days.
I don’t pay a rent premium. Its not like I live in NY or LA where supply is limited and apartments are expensive as hell. I live in Chicago where land is bountiful, apartments buildings sprout like wildflowers and rent is cheap and free from rent-control. Only those who bought choose to pay the premium like the 26 year old paralegal who bought a $360,000 condo in Lincoln Square when she could have just as easily rented a nice 2 bedroom apartment for $1,300 or $1,500 a month.
superior public transit – uh, have you ever been to europe or canada? A guy at work jokes, “what is the difference between the el and the metra?” “I says what?” he says, “the smell of urine.”
superior restaurant scene – I hear that Bennigans in Schaumburg has great chicken fingers. I love them; they’re so tasty.
superior population density – I’m not quite sure what you mean by this. Sometimes the pervasive ghettoness everywhere in the City makes me want to move somewhere I can get house and an acre of wooded land to do my thing.
superior urban planning – do you mean the kennedy in rush hour? Or the congested two lane arterial streets throughout the city? Or the fact that most transit options take you through downtown? What ever happened to the crosstown expressway using cicero ave? oh yeah, that’s just a pipe dream.
superior job market – I won’t argue with that.
There is a rent premium in Chicago vs. the other cities were were comparing it to. It may not be nearly as significant as the own premium these days but it does exist. You can rent a 1br apartment in Cincinnati for $550. A 2br/2ba in the burbs can be had for under $800.
Still income taxes in IL are lower than most surrouding states, so that helps, and an extra $250/month in rent I don’t see nearly as significant.
And there are some select jobs in Chicago that aren’t available in these other cities (consulting, finance). But these high paying jobs are so few relative to Chicagoland population that there is no way they should be driving prices.
And with renting I pay less than 28% of my income in housing. Its closer to 18% (my apt is admittedly small). How much does the average homeowner in IL pay who is levered 4x on their income? My guess is its a lot higher than 28%.
I said Chicago, not the suburbs. I wouldn’t know how Bennigan’s chicken fingers are.
Population density affords a lot of benefits you can’t otherwise get, such as culture. They don’t book Stevie Wonder for a free 3-hour concert in Schaumburg. Or many Midwest cities. It also provides the impetus for public transit and for other public services, and it simply makes a city more fun. How’s the bar scene in Cleveland?
I don’t drive. Let ’em sit in traffic. I’m talking about the city as planned before they built those unfortunate expressways: real neighborhoods, a street grid, with alleys, thankfully no “crosstown expressways”, decent zoning (yes, aldermen abuse it, but it mostly works), with an impressive downtown, with the ease of public services that affords.
HD, Dave was comparing Chicago to the cities from G’s list… you’re twisting things around again.
Are you kidding me about the restaurant comment? Schaumburg is not Chicago and neither are any of those other cities when it comes to restaurants. Try taking your girlfriend to a real restaurant… I don’t think she likes eating at Bennigans all the time.
Yeah, I like Chicago a lot more than Cleveland, Milwaukee, Minneapolis, etc. I will pay a premium to live here… The diversity, food, nightlife, arts, etc. etc. There is no comparison.
I just took a quick poll around my desk and yep… everyone agrees with me. All 13 people. Some had a dumbfounded look on why I even bother asking the question.
“superior public transit … [old, bad joke]”
Superior to the listed “competition”–other midwest cities. And, other than (maybe) Toronto & Montreal, what Canadian cities have transit systems so much better than Chicago? (yeah, yeah, what other canadian cities?)
“superior restaurant scene – I hear that Bennigans in Schaumburg has great chicken fingers. I love them; they’re so tasty.”
HD–Just move to Florida (or Phoenix) if you enjoy so little about Chicago. You’ll be able to buy a house cheap, you can do the same work and all your relatives will visit often enough.
“superior urban planning – What ever happened to the crosstown expressway using cicero ave? ”
Um, superior urban planning happened to that. Urban planning is NOT traffic engineering. Although I wouldn’t call Chicago’s planning (in general) superior in anything other than the way it lines the pockets of the connected. It’s okay, but no great shakes. The architecture is a different story, but that ain’y “planning”.
Opportunity costs are higher here than they are elsewhere. If I rent somebody a 2/2 that could go for $2000 for the more “Midwestern” sum of $800, I’ve just racked up $1200 per month in opportunity costs. Same idea if I sell a $300k 2/2 for $100k.
The fair price is equal to what the market will bear, and right now, the purchase market won’t bear nearly what it was willing to do 2-3 years ago. People listing at ’06 prices and people looking for ’01 prices both seem to forget that this is ’08.
The main thing that strikes me when I visit other Midwestern cities, planning-wise, is that they don’t feel like cities. They feel like giant suburbs. I’m looking at you, St. Louis.
I can’t really quantify that feeling, so some of my other arguments in that arena may be lacking.
Yes Jim, you will pay a premium to live here. They paid a premium back in 1997, too. But back then the premium was perhaps managable at 2.8x your income.
At 4.0x your income you are scr_wed beyond belief. Its eithr debt-slavery for 30 years or financial ruin. Unless you expect your income to double within 10 years. This doesn’t tend to happen to nearly as many people who think it will happen to them.
You can be a housing bear and still believe Chicago is wildly superior to living in Milwaukee et al.
I mean, come on, you guys can’t be serious. Are you serious? Seriously.
This week, I might choose to: see no fewer than two dozen rock bands; two dozen plays, five or more improv troupes, select among at least six Ethiopian restaurants, participate in a handful of organized road races or fun runs or group runs, play volleyball on the beach in one of more leagues than I can count…
and on and on. That doesn’t mean I’m willing to pay Manhattan prices. But I’m certainly willing to pay more than in Cincinatti.
Oh, and I’m not a native. And I’ve lived in plenty of other cities. They can take my Chicago when they peel it from my cold (very cold… brrrrrr) dead fingers from it.
Oh, and I’m not a native. And I’ve lived in plenty of other cities. They can take my Chicago when they peel it from my cold (very cold… brrrrrr) dead fingers.
Kenworthey,
I was serious when I was comparing suburbs. When you throw in city dwellers yes the experiences and quality of life/lifestyle can be drastically different. The life and daily experiences of a typical suburban Chicagoland resident and those of any other comparable midwest city are likely similar. Why are 3br/2bas in Schaumburg worth close to half a million dollars when in Cincinnati they are 100k? So they can travel into Chicago on the weekens for the cultural attractions.
Much of the premium doesn’t make sense. It really doesn’t and an area where people are spending 4x their annual income on housing isn’t sustainable. Its a recipe for financial disaster as the 26yr old paralegal example illustrates. Basically she is about as levered as the average Chicagoland owner according to the data G posted.
Bob, why assume that I’m scr_ewed… I never said that I would pay 4X my income on a home. I’m just saying that Chicago is worth a premium over the other cities. I’ve never disagreed that there are a lot of homeowners today that had no business buying a home because they could not afford it. I’ve also agreed numerous times that home prices will go down more (I’m just not as bearish as most of you).
My wife and I are doing just fine. Our condo is 2X our income. For the same money, we chose a condo in Chicago compared to a large house in the burbs to enjoy what the city has to offer. That’s all.
CORRECTION
‘So they can travel into Chicago on the weekens for the cultural attractions.’
Should’ve read
‘So they can travel into Chicago on the weekens for the cultural attractions?’
Chicago is not my favorite city (indeed, I was very reluctant to move here) – but it easily beats Cleveland and Milwaukee!!! I also enjoy that I can fly to almost everywhere direct, with not one, but two big airports; no layovers…Though the current airfares may take some pleasure out of traveling.
The Chicagoland area is 9 million people; 2.8 of them live within the city limits. Of 100 or so neighborhoods in the city the superior cultural attractions exist in about 12 or 18 neighborhoods. There is an old school map of all the chicago neighborhoods on the wall of my office….only a handful of those places could command a premium….would you pay a premium to live in Englewood, Hedgewisch, Gage Park, South Austin, Back of the Yards, Mt. Greenwood, Roseland, etc? No for the most part those areas are not superior in any sense of the word yet everyone in the chicago area pays an average of 4.0x income for a home.
I made my comment about bennigans in schaumburg because the population of schaumburg and palatine is larger than that of the entire 60613 zip code. The best food in the area is probably bennigans or maybe durty nelly’s for 150,000 people yet they pay the same inflated 4.0x premium as the folks who live in 60613. LIke someone said above a 3db/2ba is $450k in schaumburg but it buys a mcmansion in OH. Yet both people get to eat at bennigans. It doesn’t make any sense.
And as far as concerts, they’re mostly in the suburbs in tinley park, allstate area, the sears venue, jimmy buffet is playing in bridgeview this weekend and the best place of all is alpine valley in wisconsin. Maybe once a year the suburban hoi pollei will go to the field museum for a mummy exhibit but that doesn’t justify a 4.0x premium..
“St Louis feels like a giant suburb”
Well, it basically is. There’s the bit of down town, then a wasteland that lost 2/3 of its population in the past century (surrounding the nice forest park/CWE area) and then the suburbs.
“It really doesn’t and an area where people are spending 4x their annual income on housing isn’t sustainable.”
Okay, so in 2007, the median sale price was 4.0x the median income. That’s an interesting trend marker, but (1) only about 65% of Chicago-land owns their home, so the median may be misleading (2) what were total sales in 2007 as a percentage of all metro homes? What, maybe 75000 sales? That’s less than 4% of homes turning over, with a major slant to the new–thus also not REALLY representative of the “typical” homeowner. Sure, the typical buyer in 2007 (and ’06 and ’05 and maybe ’04–and the typical maxed out refi’er) is in potential trouble, but that’s hardly indicative of the typical owner overall anymore than the percentage who own there home free from any mortgage are typical.
Look I love the city and I won’t be returning to the suburbs anytime soon; at least until I can afford a 6 bedroom house on an acre in Long Grove 😉 So please cast away any doubts that I am a schaumburg living purple shirt wearing death cab for cutie listening metrosexual shopping at woodfield.
“Okay, so in 2007, the median sale price was 4.0x the median income. That’s an interesting trend marker, but (1) only about 65% of Chicago-land owns their home, so the median may be misleading (2) what were total sales in 2007 as a percentage of all metro homes? What, maybe 75000 sales? That’s less than 4% of homes turning over, with a major slant to the new–thus also not REALLY representative of the “typical” homeowner. Sure, the typical buyer in 2007 (and ‘06 and ‘05 and maybe ‘04–and the typical maxed out refi’er) is in potential trouble, but that’s hardly indicative of the typical owner overall anymore than the percentage who own there home free from any mortgage are typical.”
You’re totally right but the COMPS from the sales of the last few years set the bar so high that the 35% who wants to own and anyone else who is a first time homebuyer has been priced out of the market unless than can pay 4.0x their income. Which is sort of unnecessarily unfair.
“(2) what were total sales in 2007 as a percentage of all metro homes? What, maybe 75000 sales? That’s less than 4% of homes turning over”
anon — I don’t know enough right off, and haven’t done any research, but 4% seems rather low. That translates to about 25 years between sales for a property, and I could have sworn that the average time between moves was more like 7 years (14% per year).
It could be that 2007 was exceptionally slow. It also could be that my “7 years” memory had some significant restrictions (like it was based on people who recently bought).
anon — is your 75,000 sales in 2007 a sourced number, or merely an (educated) guess?
“as far as concerts, they’re mostly in the suburbs”
That explains a lot. Not that I see a lot of live music (I’m out of the Empty Bottle demo and think that ticket prices for most national acts have lost touch with reality), but if you think that most of even just the good shows are in the suburbs, I will feel free to totally disregard you on all (pop) cultural matters.
“anon — is your 75,000 sales in 2007 a sourced number, or merely an (educated) guess?”
I looked at the Chicago mag chart for the year from july 1 06 to june 30 07 and did some rough estimated addition and came up with ~65000 and added for (my usual) bias to undercount when so adding.
Average time between moves gets skewed by frequent movers and every time I’ve seen it, it included renters. One discussion I quickly found can be found in: Population Bulletin, Vol. 53 No. 3, September 1998, under “Migration” (no link due to rules).
Makes it sound to me like the “every 7 years” is a made up number based on some fact. A discussion tool, rather than a genuine statistic. You probably have 1/3 of the population that probably averages a move every 2 years and 2/3 that average about 10 years.
In my case, if you count “on campus housing” as one location (if you don’t, I’ve moved a LOT) and count as a residence an address where one would expect to receive mail/phone calls and have a bed (or, if you prefer, the first place a process server would look for you), I’ve had two residences for over 2/3 of my live (and 3 making it over 3/4), but averaging to a move more often than every three years.
I’m saying that having such a short sighted view of chicago as being areas on the northside or near southside is a very narrow view of the attractions our great has to offer. It reminds me of the famous cover of the new yorker that shows the a new yorker’s view of the country – its just new york, LA and evrything in between is flyover territory
“I looked at the Chicago mag chart for the year from july 1 06 to june 30 07 and did some rough estimated addition and came up with ~65000 and added for (my usual) bias to undercount when so adding.”
Thanks — I’ll investigate my “7 year” memory for what the screw-up is there.
It could just be the difference between 1/E(x) and E(1/x). That is, 4% of homes selling in a year does not mean that the average time between sales for a home is 25 years. (If 3% of homes sell every year and the other 97% of homes sell once every 97 years, the average time between sales for a home is 94 years.)
More likely, there is something wrong with the population — homes are different from households (even those who recently bought/sold).
For my part, I’ve moved 5 of the last 6 Julys (2 years in a condo followed by 1 year in each of 3 apartments, and now moving to a condo). But before that I was in one apartment for 6 years (and it was a block from the 2-year condo). The 2-year condo was a planned short stay (3.5% 3/1 ARM put total cost of ownership below 75% of rent), but the new one is intended to be long-term.
Bob on July 16th, 2008 at 10:36 am
On a number of available jobs per people I doubt Chicago is much different. ‘Quality of life’ and other non-financial reasons were a large part of why Chicago real estate is so expensive
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Just be ready to duck-and-cover at the Taste next year! The city is sooooo lucky an innocent yuppie or an out of towner did not catch a stray. As bad as it was, the shooter and the target were mutual combatants. You play the game, you need to expect a hard foul…..
SITC,
I think the taste violence was overblown. Hell I think the taste of Chicago is way overblown actually. Who wants to sample what _some_ restaurants in Chicago want to offer at an overpriced bazaar style meet with millions of other people in the humidity?
I am all for Chicago summerfests, but those that are OUTSIDE of Grant Park. You can be guaranteed if its in or near downtown its not a legitimate Chicago downhome summerfest but rather a tourist and transientfest. And this is a Chicago transplant whose lived here for less than five years saying this. Try some North Center summerfests where you can actually bring in your own beverages *gasp*. Not that I’m anti-consumerism or anything I’m just anti-getting taken for a ride.
Bob on July 16th, 2008 at 10:43 pm
SITC,
I think the taste violence was overblown.
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At the time, I was 2 short blocks away from the shooting. The violence was UNDER reported. There were numerous mass brawls that did not get media attention.