Comments ( 35 )

• Wow, I’m honored!

  You have to be careful when looking at median prices. By itself, a median price is most useful when describing very similar items – the median sales price of 2007 Honda Accords, for example. Everybody across the US is going to negotiate a slightly different price, so a change in the median price is probably a good indicator of what you might expect to pay if you were going to the dealership tonight.

  There are so many variables in the housing market. Size, location, style, amenities, condition, etc. In this case, the median price alone doesn’t do much but tell you the most likely price range where most of the sales are happening. Really, that’s about all you can infer!

  We can definitely see that sales are down. We can also look at individual homes and see that many if not most are reducing prices to get them to sell. Some have not been reduced low enough and they are sitting on the market. We can use this information to say that anecdotally prices are dropping. It’s not an exact science by any means.

  This brings us to my previous comment. Knowing that sales are down and prices are down, the rise in the median price is most likely signaling a larger slowdown in sales of homes that are priced in the lower price ranges while homes priced in the upper price ranges haven’t had the same slowdown in sales.

  Remember though that our anecdotal info is telling us that each individual house is dropping in price. That seems to indicate that the people that are buying are deciding that they can spend, for example, $500,000. Instead of buying a house that was priced at $500,000 last year and $400,000 this year, they are buying a house that was priced at $600,000 last year and $500,000 this year.

• factor out all the “incentives” that have been floated out there to sell homes over that period and that 3.5% increase, if that is even accurate “NOT”, is gone. the person you sell to doesn’t care that you paid the asking price because you got $10K back at close or 1 year of hoa’s for free or the builder paid your closing costs. incentives are a sucker play and those who took the incentives, instead of negotiating down asking $, are the suckers

• Anon, not totally true, if you were able to negotiate upgrades that you were going to pay for anyway.

• yes, paying 6.5% interest for 30 years for $10,000 worth of ss appliances & granite ctops rather than just buying them at lowes or home depot makes great financial sense

• This was bound to happen once banks were forced to return to lending standards. Its easy to spend $500,000 of the bank’s money on a poorly built condo in the ghetto, but when asked to put down $50,000 of your own money, most buyers will get cold feet. The truly high end will keep selling (slowly) and the true mid-range will sell, but the bottom end and the drastically overpriced units will come to a complete sales standstill. I’m going to wait to buy my condo for a couple of years when I can go to an auction and scrape up a condo that was once “worth” $500,000 for about half price.

• Anon, not if you are looking to sell in less than 5 years and want a competative unit. The return now is not soley in capital gains, but in how fast you can get rid of a unit compared to others. It either has to have great opportunity for the price, or better features, or it will languish. 5 months on the market will cost you $10,000 before taxes.

• It is absolutely amazing how smart you folks are. How you talk in absolutes about something that is anything but absolute. Considering that many of you have probably bought nothing more expensive in life than a car I am amazed at your foresight and knowledge. Where I see mere trends you actually see the future. You should all be on a reality tv show. Maybe it could be called “Real Estate Heroes” where you predict the future. Perhaps you can get a show during Pledge Week on PBS.

  This is like flipping through the radio stations and hearing a bunch of people talk on a sports station. Everyone has an opinion and most of them make no sense. It could be like a real estate version of Rush Limbaugh’s “dittoheads”. It’s like getting marital and sexual counseling from a truly celibate Catholic Priest. Why not ask Bill Clinton the secrets of a good marriage or George W. Bush how to win a war quickly.

  The anecdotal evidence you refer to is mixed. On one four block stretch in Uptown(Buena Park) where I live selling prices on very similar units have actually gone up slightly since last year. Asking prices are down. Market times are up; however, units are still selling fairly quickly when priced correctly. Now most of the condos on this stretch are similar in that they are in center entrance six flats which makes it easier to compare.

  Now the larger, newer, and more expensive units in newer construction seem to be selling slower. Which is exactly the opposite of what your anecdotal evidence was.

  Generally in a downturn the lower priced housing in a market will sell quicker. Perhaps this market is different. Perhaps just this little submarket of Uptown is different. Wait, there’s a concept. Perhaps all real estate is local. Not only local but “local” in a “down to the block” sense.

  Maybe people who are priced out of Lakeview are now buying just north driving up prices slightly. Maybe the more expensive units selling at a slower pace is driving the prices up on the less expensive units. Maybe it is something totally different.

  The thing is I don’t really know. I got news for you. You folks don’t know. You think you know, but all you can truly know is how little you know. Now I am going to go drink a beer and ponder metaphysics. I will get to you with all knowing answers and prognosticate the future.

• ip – for a guy who says he doesn’t know you sure gave an all knowing answer funny thing is that 1.5 years ago everyone knew real esate always goes up now people are using small slices of neighborhoods as their example that things are still good all re is local but the loose lending was national which why 73 of 77 nieghborhoods are seeing a rise in foreclosure

  j – if you buy now and sell in 5 year you will lose unless you put 20% down which most aren’t doing those first 5 years youre renting from the bank and building little equity plus the realtor fees you pay you will not make a dime

• Real estate is even more local than at the block level – it’s local down to a single property.

  It’s hard to know what to make of the foreclosure numbers. There’s much skepticism about the accuracy of the main reporting services, for starters. There may also be a “bunching up” effect going on as troubled lenders and their successors clean up the books after a binge of bad lending. We need to see whether or not this is a trend.

• Thanks anon.

  I didn’t think I gave an all knowing answer. But if you say I did I must have. Now your answer to Jeffrey is absolute and all knowing. On behalf of the readers of YoChicago I thank you.

  Now if you could tell me who is going to get the nominations of the various parties for President, what day Blago will be indicted, and who will win the World Series and SuperBowl I would appreciate it. I want to place some bets.

• http://chicagobusiness.com/cgi-bin/news.pl?rssFeed=news&id=25144

  “Cook County is on pace to record at least 30,000 and as many as 36,000 foreclosure filings this year, according to Cook County Circuit Court Judge Dorothy Kinnaird, who presides over the Chancery Division, which handles foreclosures. That would mean a 35% to 62% increase from 2006, when 22,248 filings were easily the highest in county history after having risen 36% from the previous year.”

  sounds like a trend to me.

  ip – if you want to ignore the obvious be my guest. im tired of reading quotes from people(not speaking of you)that say “no one saw this coming” BS! a lot of people saw this coming they were ignored

• The point is what is the impact of increased foreclosures not only on the overall market, but in specific markets. Where are the foreclosures at? Are they happening in Lincoln Park in huge numbers? Naperville? How about economically depressed areas on the SW side?

  If the number of foreclosures doubles in Lakeview, yet still remains tiny, does it have a significant effect on that market? If foreclosures double in Roseland on the far south side what is the effect on Edgewater?

  I don’t know. You don’t know. I suspect foreclosures mostly matter in economically depressed areas. Now if they start happening in huge numbers in other places then that is a whole new issue. If we start seeing $500,000 condos being sold at Sheriff’s auctions in large numbers then the overall market is in trouble. I don’t see any indicators of that. Maybe I am missing something.

  My guess is that real estate prices may drop slightly overall or maybe they have leveled out. The evidence is mixed. Now if you are in a depressed neighborhood with rising foreclosures it will certainly keep prices down. If you are in Kenilworth I don’t think it may mean much.

  Right now if anyone asked me whether they should buy I would tell them to wait till winter to see how things play out. In the city at least, winter is a slow time to purchase and generally there are better deals out there as there are fewer people looking.

  That may be excellent advice. It may not be. I personally think it is worth the risk to wait. I don’t expect huge gains in the overall real estate market the next few years. I don’t expect huge price drops. When you see stats that say sales have dropped 20% that is significant. It is also significant to note that that drop is off record numbers of sales and the market appears to be in a more “normal” mode.

  Time will tell.

• you wanna put some money down on something, ip? short housing http://www.cme.com/trading/prd/re/housing.html

• where are the foreclosures at? every where did you read the crains article i posted? 73 of 77 neighborhoods, up in wilmette, up in naperville, up every where the financial impact of fc in neighborhoods is huge they can affect the value of homes around it by ten of thousands of $ of course a fc on the south side doesnt hurt kenilworth but very few communities arent being hit by fc kenilworth may not be getiing hit by fc if so it will be fine but the current and futre footprint of fc is getting bigger by the day and fewer communites will be able to hide from it

• Does it significantly matter in Lincoln Park if foreclosures double in Lincoln Park.? So you go from a tiny number to a slightly less tiny number. I have no idea what the actual numbers are in Lincoln Park for foreclosures. Let’s say there were 10 in 2005. Let’s say there are 20 in 2007. The percentage doubles. How big an effect does that have on the 2500 or more housing units that sell there every year?

  The percentage increase doesn’t matter as much as the actual numbers do.

  You are taking ONE thing, foreclosure percentage increase, and predicting a whole market based on it.

  Your overall prediction may turn out to be right. I suspect that areas that have had a high rate of foreclosures in the past are going to suffer even more.

  That Crain’s story is interesting. It would be more interesting if I had ready access to the actual numbers they used. Context matters.

• I’d have to agree that the absence of actual numbers is a bit suspicious, it makes me wonder if they were left out intentionally as the numbers weren’t “sensational” enough to back up the story’s gist.

• Well thank you Carter. Just for you I will now spell Lakeview in the correct way……..LAKE VIEW.

• Look people. There are a few truths in real estate that will always be true.

  1) Real estate always goes up. Don’t listen to the numbers that say real estate is going down; that’s just biased spin by a small number of housing bears. Real estate will always go up just like the run will rise tomorrow morning.

  2) All real estate is local. It doesn’t matter that national banks do all the lending and provide the same loan products to our nation of 300,000,000 people. How local? It depends how local you want to go. Local can mean a particular state (CA), or a metropolitan area (Chicago and six counties) or in irishpirate’s case, one particular block in Uptown.

  3) Location, location, location. This construction boom has truly shown us that any cheap, postage stamp sized piece of land is good enough to build condos. It doesn’t matter if it’s in the ghetto, or a bad area, or surrounded by high power electrical lines, people will buy them no matter where you build it.

• I work at a law firm that does foreclosures in Chicago and let’s say that things are going very, very well. This firm is paying me more money this year than I’ve ever made in my life, partially because of the legal fees generated from the booming foreclosure biz.

  We do foreclosures in every neighborhood from englewood to the LP to Mt. Prospect. No area has been unaffected. The common theme in this housing downturn is people, rich or poor or in between, are living well beyond their means. In the last 7 years people took on too much mortgage debt, credit card debt and card loan. Now they’re struggling to pay it back. Poor people have a more difficult time repaying so they fall quicker. ‘Rich’ people are in over their heads too. A lot of the ‘rich’ folks in nice neighborhoods are just a facade. They have a steady income and a decent salary but they live paycheck to paycheck paying car notes, enormous mortgage payments and servicing credit card debt.

• I was just talking to a friend describing someone in exactly that situation – a good job, but maxed out on credit cards, still paying student debt, and they just go a no-money-down condo in the West Loop for approx $240K, but the mortgage is $2200 a month – and what happens when the ARM expires and said person needs to refinance? Exactly what we’re talking about, unfortunately.

  I think they need to bring back the “Financial Common Sense” for dummies classes in high school or something, because the “new math” is obviously not working.

• REIC, the stock market always goes up as well, n the long run – but in the short run, people gamble and get burned.

  the problem is the people with ARMs who gambled (wittingly or unwittingly) that rates would stay approximately the same, or who didn’t understand their terms, etc. (a pretty bad bet when you look at rates historically).

  Is the end of the world? No, most people I know all locked in 30 year mortgages when they were under 6%, but it can be a problem if one might need to sell due to a change in job requiring they move, corporate lay offs, etc., and they couldn’t keep up with the mortgage or had to sell when the market is slow.

  To me, the first and foremost function of my house is to keep a roof over the head of me and my family. But I plan long-term- some people do not, or find external situations outside of their control affect them negatively.

• Carter, you said, “the first and foremost function of my house is to keep a roof over the head of me and my family.”

  The second function should be investment. The third should be the liberation of your untapped equity. Why do you want all your money tied up in your house? wouldn’t you rather have a boat on the Lake or something?

• REIT,

  real estate prices should be judged locally and taking inflation into account. One house my parents bought in 1969 for about $40,000 now would sell for around $150-160,000. If you factor in inflation just to stay even it should sell for around $225,000 in today’s dollars.

  Now if they had spent $40,000 somewhere else at that time it might be a different story.

• The investment aspect is far secondary to the shelter aspect, after you pay your mortgage every month, you can always take extra income and invest it anywhere you want. Too many people have been treating their homes like ATM machines, and this is indicative of the “living beyond your means” problem which is a running issue in America.

  As IP points out, the idea that real estate is like a lottery where everyone wins big is debatable in the fine points, and when you look at the opportunity cost. yeah, it looks like someone is making a fortune when you compare 1969 dollars (in his case) to 2007 dollars, but then you would have been paying taxes, been responsible for repairs, etc.

  As purely an investment, a house is generally not a great bet unless you are a rehabber doing the work yourself or have the major bucks to buy huge rental properties- and even then there are mutual funds a plenty that allow you to spread your risk over thousands of properties..

  As for that boat, I’m pretty happy with a six pack and the kiddie pool, but I’m also pretty low maintenance.

• awww come on liberate your equity and buy a boat. can you think of anything that depreciates faster and has more up keep costs than a boat?

• location location location – the concept behind that little phrase is that you need to build and or buy in a good location yet you said that you can build in any ghetto. either you dont know the meaning of that phrase or you are arguing against yourself.

• How dare you accuse me of not knowing the meaning of that phrase or you arguing against myself. I know almost everything about the real estate market…..that I need to know. Real estate always goes up, all real estate is local, and location, location, location. Oh, there’s a fourth unspoken rule. The market has bottomed out and the market will pick up this summer, for sure. I say another 10% appreciation for the Chicago area is in the bag.

• “awww come on liberate your equity and buy a boat. can you think of anything that depreciates faster and has more up keep costs than a boat?”

  A spouse?

  (drumroll, please!)

• Carter,

  a boat generally doesn’t complain. A boat doesn’t mind if you ride another boat!

• Can’t believe I missed this one! Too busy buying and selling real estate today I guess.

  My favorite is Jane up there, holding off two years for the $500,000 condo that will sell for half that in said two years.
  Well Jane, in the last two years I bought a condo, sold it, made money… moved up into a nicer, bigger condo in a better neighborhood…and in two more years while your waiting, will have a ton of equity and can move that money into something else if I want.
  In this same time, many of my clients are doing, and will be doing, the same thing. Keep waiting Jane and see what you get for that $250-$300K in two years… the same thing you’ll get now. Except, you would be paying a landlord all your money during those two years (or living with mom and dad) and have no equity or pride of ownership. A $300-$700K condo is not going anywhere down significantly in price in any neighborhood worth living in (since you so eloquently refer to the ghetto in each post).

  The only overpaying I’ve seen in good neighborhoods has been on some high-end single family homes… and if most of those people just stick it out, they will enjoy their homes for years. You can’t afford these deals in the $1M to $2M range that I shop for some of my clients anyway. Forget the auction… you’ll get eaten alive by a cash buyer.

  My point being is, remember, you are buying a home first, that just happends to be an investment vehicle too. In any market, you can find a nice home, sell a home, rent a home (if you own it). The Jane’s of the world just don’t know how to buy them and enjoy them… these are the same types who buy stocks high and sell low… the difference in a home is, you can live in it either way, up or down.

  This general market talk and “gaming the market”, waiting until it “bottoms out” makes no sense. Chatter all you want about the market, but its a good bet that those with higher net worth and general happiness buy homes they can afford, show some financial prudence in other parts of their life, and as a home owner, are generally more active in their neighborhood and civic minded no matter if the market is “hot” or “cold”.

  Renter guy calls these people lucky to buy more home for the dollar this year… I’ve never been lucky. But I can afford more expensive homes every few years regardless of the market.

  Jane and renter guy, when you get serious, just click my link… you know where to find me. As well, the rest of you annonymous folks.

• Eric,

  I wonder what they will make of the story today, Saturday, that housing prices ROSE 5 percent from March 2006 to March 2007. They also ROSE nationally.

  Must be a statistical blip.

  Now I would want to see the underlying numbers to get a better idea of what is happening before I past the all knowing judgements some people post on this site.

  Perhaps if the number of foreclosures shoots up 200% it may have a dramatic effect. Maybe just 100% or 40%. I will wait till they inform me of how I should think and proceed.

  I am lucky to have this site here with such enlightened and brilliant people to tell me how to proceed.

• “I am lucky to have this site here with such enlightened and brilliant people to tell me how to proceed.”

  yes you are. instead you choose to listen to rojas.

• The “anon” posting above is not the anon who’s been with us for a while.

• I wonder what they will make of the story today, Saturday, that housing prices ROSE 5 percent from March 2006 to March 2007. They also ROSE nationally.

  Must be a statistical blip.

  it is OFHEO numbers are worth less than than the paper they’re printed on

• anon2,

  Thanks for clarifying that you’re not the same as the “anon” who has something to contribute.

  Everyone is truly impressed by someone who can disregard objective research without having any basis for doing so.