Housing Market hitting bottom still!!!????????? (Chicago, Cisco: middle-class, sale, apartments)

[Lookout Kid]

Originally Posted by BJT83

Just bought a nearly brand-new 750 sq. ft. condo in Oak Park (Harrison & Wesley) for $145K. People first put it on the market last summer for around 165-170K. Listing price this time around was $149K, got the seller down to $145K plus $2000 in closing cost credits. Seems like a steal to me and others I've talked to.

I've heard of people asking for closing costs credits from individual sellers that aren't developers. I can understand a developer doing this, but what private individual is going to fork over a few thousand bucks in cash to sell their place? I say screw those buyers. But if you can talk a developer into doing it, more power to you.

[Humboldt1]

One year later after this thread started (10 months actually) and we still are seeing price declines here in Chicago and the suburbs. I think we are 12 months away from a bottom price-wise.

I realize FMV sees that we bottomed earlier this year. I do not agree with this assessment and see further price declines ahead followed by a couple years of nearly flat price appreciation before prices start to really rise again around 2010-2011.

We will have to circle back to this thread in 12 months and see if we have hiy bottom or if people are still looking for bottom.

[BJT83]

Originally Posted by Lookout Kid

I've heard of people asking for closing costs credits from individual sellers that aren't developers. I can understand a developer doing this, but what private individual is going to fork over a few thousand bucks in cash to sell their place? I say screw those buyers. But if you can talk a developer into doing it, more power to you.

The weird thing is that we just found out the seller hasn't bought a new place yet. I don't know why he was so eager to sell and throw in $2000 cash on top of it, but I'm not complaning.

[chet everett]

I can't even remember which thread it was that I ripped on Case-Shiller as being NOT a particularly useful tool for MOST of the true Chicago market but I do think that it is appropriate to add some remarks about it to this thread. Rather to rehash WHY Case-Schiller is not something that I find useful, I will first do a little "recent history recap":

Remember back when Barack and Hillary were still at each other throats? Remember to how ever damned amateur economist and most every economist that worked for any sort of financial firm was all on board with the "oh yeah we are IN a recession or inevitably will be" ???

Well the data is out and SURPRISE the economy grew in the first quarter so, by definition, we are NOT in an recession. While on the one hand it almost CERTAINLY was due in large part because of the Treasury pretty much doing the crazy "throwing money from a helicopter" of the stimulus checks, the fact is LOTS & LOTS of folks with a helluva lot more data than I have and way more prestigious educations were VERY WRONG.

My point is that if they can be SO WRONG based on something that in hindsight seems so predictable WHAT GOOD IS THE PREDICTION? Or MAYBE their prediction was sort of crafted to ENSURE that the Congresscritters went along with what the economists KNOW would keep the economy from spinning round like the man in the Tidy Bowl...

Obviously, despite their individual stupidity, the member of Congress DID LISTEN to experts that said "stimulus checks will probably be a good way to prevent/blunt/delay a recession". Currently the various government and private sources are scrambling to figure out how much of the effect is due to the checks, but the point is that recession was averted.

Right now MANY of those SAME EXPERTS that advise Congress are passing around various proposals that are designed to pump some life back into the housing market/increase availability of mortgages/ stop the slide of housing of prices. Do you think that MAYBE these proposals COULD WORK TOO? Well GOLLY the anti-recession thing worked, so MAYBE the NAR economists are one of the few people to believe. MAYBE their data, which is about as complete and real time as one could ever dream of, is useful and they are not just engaging in wishful thinking.

OR maybe they ARE engaging in wishful thinking, but, as stated above, maybe those "wishes" will be at least partially fulfilled by the what ever safety net the Congresscritters can weave together.

I do think the GOP and the DNC are both going to be angling to try and make the 'other side' look bad going into the fall elections, but both sides also know that if they work too hard to make the other side look bad and it misfires they will snatch DEFEAT from what should have been certain victory...

Soooo, I do not think that Chicago region pricing is going to go off a cliff. I think that we are very near a bottom. It is not important to me whether we are technically a hair above that bottom or a hair below. I do not anticipate a dramatic upturn in prices, though a pretty substantial uptick in VOLUME would not surprise me AT ALL. If real estate UNDER PREFORMS inflation for the next several years that is something else I really cannot predict, though I do think that "elasticity" would suggest that years of price gains that far out paced wage increases would have some snap back {and I don't hold much hope that employers are going to choose this period to boost wages up to level to overcome the affordability gap...}

As to Case-Schiller and the traders who do make the market in this index, you cannot forget that BOTH the hedgers and speculators are using that index market. For every contract that is 'winner' there is an offsetting loser. I saw a stark reminder of such a reality on PBS the other night. Some Iowa hog farmer with a farm under the swollen banks of some river did what a lot of agricultural economists advise doing -- locking in profitable prices for his goods back before he planted his fields /weaned his feeder hogs. He seemed like a bright guy that understood the risk (many current farmers in Iowa have degrees from Iowa St and are really sharp and well off, as the stupid ones got eaten alive in decades past...) . Unfortunately this guy now has NO crops or hogs and is going to have to either fill those contracts at a higher price on the spot market or just even up financially. This means he'll be a "double loser"... The same kind of thing can happen to the traders in the Case-Schiller Index, except they really have NO ability to actually move the market and the data they have is not all that different that what any Joe has access to -- not for the faint of heart!

Yes, I know I am leaving out a helluva of things here. I know that the really movers of indexes, options and futures are the Driehaus & Citadel types. I know that an individual farmer is not all that well equipped to used the commodity markets for "risk mitigation". [Though I would argue that they are in MUCH better position to do so then a Orren Pickrell could bracket their risk with offsetting puts and call to bracket the Case-Schiller Index, and having known both farmers and developers my money would be on the farmers as at least understanding how/why they might want to do that...]

I simply cannot stress enough that when you have a Centex Homes or whoever out in Shorewood selling ready to move in place for $110K and an Orren doing a redevelopment where the CHEAPEST home would be at least 10x that you cannot really convince me that housing behaves like a commodity...

[Anthera]

Originally Posted by Lookout Kid

I've heard of people asking for closing costs credits from individual sellers that aren't developers. I can understand a developer doing this, but what private individual is going to fork over a few thousand bucks in cash to sell their place? I say screw those buyers. But if you can talk a developer into doing it, more power to you.

My mother just did this week, but she got a full price offer, contingent on carrying the closing costs.

[Humboldt1]

Iassumed a year ago that we would be hitting bottom by now price-wise. We appear to be at least another year from that. I am still sticking by my May 2010 chicago home price bottom forecast but even this may be optimistic. Let's hope not.

FMV, Chet, Lookout, Cohdane,

Your thoughts?

[cohdane]

Cool thread to revive. I hope the guy that started didn't buy above his means (or buy something that's already down another 15% since he bought it).

We moved to the area in December 2007 thinking we'd buy within three months. We had a healthy down payment from the sale of our last home and excellent credit. 16 months later, we cut bait and decided to rent a perfectly nice house in a perfectly nice neighborhood.

I've been studying the market as if I was trying to earn an MBA for 16 months. Here's what I've decided. There is no "market." Just your zipcode and in some cases, just the five block area or street you're looking at.

Narrow it down to where you want to live. As narrow as possible. Pull up a map of that area on Redfin. Use the buttons to discover what homes in your area sold for in the 1990's and where they sell for now. Then look at the area's current trends in inventory, days on market, list-to-sell prices.

That's how you attempt to make an accurate prediction.

My area (unnamed fancy north shore suburb) is no where near bottom. Inventory is near record high. Sales are record low. The disconnect between list and sell prices is enormous. And every day, more new listings come on than sell.

Best bets for a sustainable price are families that have owned their home since before the bubble. Other than that, it's house-by-house with no rhyme or reason. One's incredibly expensive (because the owners HELOC'd and are underwater trying to cover their nut before foreclosure starts). Another is priced at 2002 levels (3-5 years into the bubble), but there have been upgrades since then-- fair price or not? No one can tell. What's a fair price for an unfinished McMansion? Or a beautiful old house in a great location that needs a gut remodel because some flipper left it unheated and the pipes exploded? No one knows. The market isn't stable.

The house we're renting? It was supposed to be a tear down, but the architect changed his mind when the market went south and is now an accidental landlord. Next door (literally) is a house that went on the market two weeks after we moved in. Three weeks later they dropped the price $50k. They've owned it forever, but did a major addition two years ago. The house next to them is a recently built McMansion. Shhhhhh. It's lis pendens. The house across the street has been vacant for 9 years-- apparently they were going to sell at "peak" for a teardown, but now no one is buying teardowns, so it's just derelict. Also across the street, a vacant lot where a teardown was started, but has long since stopped work. This is all over the place up here.

Lakefront mansions are foreclosing. Crapola ranches are foreclosing. And standard issue Brady-Bunch-vinyl-colonials are still coming on the market with an initial list of $750k!! Half of the "new" listings I recognize from last year. Many others from last year never sold and never relisted.

My belief about what the market is going to do up here? The price drops will start with the crapola bank auctions, since the banks won't lose much money on them. The wave will wash progessively over the middle tier homes. At some point, the massive unsold inventory of $1 million+ homes will begin their price drops via more bank auctions. (To an extent, it's already begun.) Finally, the rest of the mansions will have their price correction. And then the wave will wash down to the bottom again.

You can't know what the market value on the low end should be until the high end finds its bottom. It's all relative.
I'd like to think this will all be over in a year, but those high end homes are going to have sticky prices. They represent a much greater financial loss to the banks. And sellers on the north shore can afford to entertain their delusions a little longer most sellers. They'll sit on their properties waiting for the market to "bounce back," which it won't do. Only when they finally realize it's not turning around any time soon will they capitulate and sell for whatever the new normal is.

When will my zipcode bottom? Personal opinion: 2014? Certainly no sooner.

When will we buy? When a home we love reaches a price where we can tolerate its further depreciation in value.

Or....when we see signs of the inevitable major inflation starting.

One broad-based market prediction: There will be a bump in sales when mortgage rates hit 8%. Buyers will panic and fear that a coming interest spike will price them out of the market.

Ah. My crystal ball has gone dim now.

Sorry for the long answer. It's been a long 16 months. And I've learned a lot that hopefully someone else will find useful.

Everybody hang onto your hats. And wallets.

Good luck.

[middle-aged mom]

Not quite as dreary in 60010. But then again, the North Shore had an unprecedented run up in prices ........

Right now, it's all about the $400's in my area and multiple bids are happening. Mid $600's and beyond are sitting.

And yet, every day, a new listing hits the market at a price that was unrealistic in 2005, let alone now. And it's the same ole story....seller does not have to sell and is testing the waters/ not going to give it away.....you see their home is different ( updated in 1982) and not subject to market conditions.

It fasinating how consumers react to market conditions. When the market was hot, sellers were quick to sell even though if they had waited for a better offer, they would have netted more. In declining markets, market time is the seller's enemy. The longer it takes a seller to hear the market, the less net proceeds they will receive.

[NYrules]

Originally Posted by Helper2007

Hi everyone! I'm new to this forum but I have heard great things about how helpful people are here. So I want to clarify with you real-day experts who can give me genuine answers, instead of all that Realtors' blah blah who can twist things either way to suit their needs to just make business out of you.

I had been postponing buying a house for a long time, despite my wife nagging about it, but now that our family is increasing, I decided its afterall time that I take that plunge into this big housing world and ease a little of the chaos around. Of course it's not that we have so much money to own even now, but just enough to put a down payment of 25K, for around 300-350K house, and declare ourselves as a proud house owner. So I started first with understanding this big housing world.

I am daily coming across the real estate columns analysing/predicting ,..... and bragging that this is a buyer's market and there is no better time as the market has been taking a downturn etc,.. etc,... This all made me congratulate myself on my right time and go see the real figures...... and I am surprised----the prices are same as earlier irrespective of it being a buyer or seller market!

So now I am getting totally confused, are these analyses/predicitons just a load of crap! or just about that big LA & Cal markets only!? or Did the prices really fell here in Chicago suburbs too? Can soemone tell me if it indeed is wise that I buy a house now? or just wait for one more year for the market might get even lower? ---meanwhile I can build some more towards downpayment? No offense to any owners, guys, but I am desperate of a better deal due to my pocket restriction. I would greatly appreciate some help here. Thanks in advance.

The housing market is still going down. I am president of a homeowner's association in Orland Park where we have 96 homes in our association and homes in some cases have been sitting on the market for over 6 months without a single offer and they are nice places too and fairly priced. It's just a horrible economy out there and virtually nobody is buying anything, so the longer homes sit on the market and the more saturated the market becomes with homes for sale, the lower the prices will go. Supply and demand my friend. The more of something that is available, the lower the price for it goes and that includes real estate. I think we still have quite a few years to go before we see bottom. Remember a few years ago when virtually every open field that was left around Chicago was under construction and something was being built? 100 single families here and few thousand condos there? Well that has come home to roost now. Now there are simply too many homes on the market in a market where population growth is low to mediocre so that said, there are simply too many roof tops now and not enough residents to fill what's under them. When those new homes get filled, then and only then will you maybe see home prices start to go back up as there won't be enough vacant homes for the buyers that are out there.

[Lookout Kid]

Originally Posted by Gioobag

It seems to me that the average person/family in the USA today has LESS WEALTH than they did in 1999 at the height of the dot.com era. Incomes are down too as compared to 10 years ago.

Here's the problem with that logic... That was ten years ago, and the "average family" of 1999 is now retiring and the kids have moved on. For instance, I'm in my mid-thirties will soon have two children. In my case, I was in graduate school in 1999 with a mountain of debt. I have had several years since then of six-figure household income to pay off that debt, build a retirement fund, and buy a piece of real estate. In spite of my assets dropping in value recently, I am still FAR better off than I was in 1999. Someone in their forties has done quite well too, in spite of the market. Ever heard of dollar cost averaging?