“… with a slowing of the pace of sales and appreciation rate, combined with tighter mortgage lending criteria, there is a risk of contract fallout. To date, this fallout has not been occurring in the Chicago market, as lenders and developers are reporting that buyers are closing on their purchases. However, particularly with sales to investors, this will be a risk during the next year.”
– Appraisal Research Counselors, 3rd Quarter 2007 Downtown Chicago Residential Benchmark Report
there is no doubt a lot of stupid people in Chicago. Many have no financail sence at all. A friend of mine bought a NW side Victorian for mucho bucks. Then it turned out he had a pre-con bid for a south loop condo. he tried to sell the 2bd/2bth with no luck. Instead of walking away, he managed to find a renter. He is now negative $500.00 every month bec of the condo. Ouch!
The market will turn around next year right??
ouch? Did you consider an after-tax break that he will get for the condo(depr.value). Or if how you say he is loosing $500/month. That’s $6000 a year, and $18000 after 3 years. So you think that his condo(which was probably at least $280,000) will not cost $18,000 more at the end of 2010???
So you think that his condo(which was probably at least $280,000) will not cost $18,000 more at the end of 2010???
there ain’t no guarantee of that.
If history is any indication it could easily cost less. Real estate recoveries don’t happen in just a couple of years. Its not a liquid market like stocks or commodities.
Real estate recoveries don’t happen in just a couple of years. Bullshit.
Sometimes they do.
I give you the period from 1992 to 1994.
1992 was a strong downturn and there were lotsa foreclosures and a weak market. By 1994 prices were again on the rise.
Will that happen again?
I dunno. My point is you don’t know. In fact you don’t even know how little you know. I know how little I know and I know that you know even less. That’s because the Almighty loves me and snickers at you and your dumbass comments. SHE just told me so. SHE speaks to me as I type and drink wine.
Don’t pirates drink rum?
If you stop with the cheap Uptown wine maybe you’ll stop hearing voices.
My liquor cabinet is like the real estate market. Based on current absorption rates there’s a 28-month supply of bourbon on the shelf. That could change tomorrow to a 1-week supply if historical conditions recur.
This pirate doesn’t drink rum.
As for it being cheap Uptown wine that is only partially correct. It is cheap Jewel wine which was purchased at the Uptown Jewel. Carlo Rossi “Reserve” Caubernet Sauvignon. Good for the heart and helps assuage my gentrifiying conscious. Quite tasty if your pick it up on sale and stock up. Which I do. It tastes better if I get it on sale.
Ah, the Uptown Jewel which was the site of a long ago anti-gentrification battle. Can’t have decent shopping in the hood. That would be wrong. How I don’t miss the 70’s.
the early ninties was nothing, NOTHING like this.
The first rule of real estate investing is to always cover your costs.
Who would buy an investment where you have to tell the person: “hey, buy this item now and you will LOSE $500 a month and maybe at the end of a few years of losing money, you might break even?”
Please!
But people don’t get it yet. They don’t understand the severity of the downturn.
Plus- your friend who is renting it out has to deal with being a landlord. What if the tenant moves and you can’t find a new tenant for several months? What is the cost of repainting the unit after every tenant? Cleaning the floors? Replacing appliances or light fixtures?
He’s going to be out a lot more than $500 a month.
I think cancellations aren’t happening in Chicago yet because all of the investors still believe in the housing boom. They still think they’ll escape unharmed from the bust.
In about six months as more investors see their investor friends unable to sell and losing money on their condos, they might think otherwise.
It would help if we knew exactly how many “investors” actually exist in this market, only then can anyone make an accurate claim about speculation. Chicago has a history of folks buying places and staying put until conditions improve – it’s not a transient market as much like locales as NYC or SF.
sounds like an extremely difficult stat to compile, how would you do it, find units where the owner isn’t claiming the homeowner’s exemption?
anecdotally, just take a stroll around the west and south loop at night, and see how many lights are on in some of those new buildings – not a whole lot from what I’ve seen and heard.
I remember one of the developers in the south loop saying it was 20% to 30% investors about a year or so ago in one of the housing articles.
Also, doesn’t Appraisal Research Counselors track this stat? I thought they did.
I’d be curious how anyone is tracking it- are you required to enter that information anywhere the purchasing process?
I don’t recall a box to check during either my mortgage application process or the closing that said either “will be primary residence” or “I’m looking to get rich, rich, rich!”
Carter,
You did declare as part of your loan process that your home was going to be your primary residence.
There are many people out there who have a dozen or more primary residences if you go solely by the loan applications. I know people who have primary residences in places they’ve never been.
All good stats are difficult to compile accurately. That’s why people pay a lot of money for access to the data.
Tracey,
ARC does track this data and makes it available to their clients.
I stand corrected, it’s been a while and I signed so many documents I can barely keep them straight.
But as you say, that’s still not necessarily that accurate – I’d think the homeowner exemption would be somewhat more accurate (although that is likely abused as well).
Carter,
There are several problems with using the homeowner exemption as an index.
First, there’s the issue of abuse that you suggested.
Second, many people are unaware of this exemption and fail to apply for it.
Third, with new construction there’s the time lag. Example: if I closed a condo last month I wouldn’t be eligible for the exemption for 2007 taxes payable in 2008.
All in all, not a very good index of investor purchases.
irishpirate, I’ll bet you a bottle of cheap booze that the average downtown Chicago condo price will be lower 5 years from now. There is simply too much oversupply on the way to have any meaningful year over year increase.
Tracey said:
The first rule of real estate investing is to always cover your costs.
Who would buy an investment where you have to tell the person: “hey, buy this item now and you will LOSE $500 a month and maybe at the end of a few years of losing money, you might break even?”
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Ya, I doubt he planned on getting stuck in a losing real estate proposition. He probably believed all the hype. Wait untill his assessments start going up…
I just did a quick search of his zip. 60605. As of 12/04 (not the hottest r.e. month) there are 627 condos for sale. G.L.