Housing Market hitting bottom still!!!????????? (Chicago, Berwyn: condos, how much, big house)

[BRU67]

Originally Posted by Gioobag

Prices today are already at or below 2005 levels.

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.

Why couldn't housing retreat to 1998 price levels?????

Housing could indeed retreat to 1998 price levels, I won't argue with that. But as Lookout points out, your logic is a bit too simplistic. A lot of things happened since 1999, including the housing boom. The major trouble was that the average family spent way too much money and got into way too much debt.

I'd say the vast majority tapped into the home equity they were building to some degree and peed it away in fashions so spectacular and trivial, that it would have landed them in an insane asylum in previous generations ($100k musclecars, $80k kitchens, 10 mpg Hummer H2s, etc.). People were also very mobile and "upgrading" to larger homes and prestigous communities that they're now trying to figure out how to afford.

There is a severe backlash brewing against these things, and the whip is going to snap really soon. What will get whacked when that happens is anyone's guess. I highly doubt it's simply going to go back to the way things were before it started like some dream designed to erase a faulty plot line in a bad soap opera. I think we're going to see a fundamental shift in how Americans live.

[Lookout Kid]

One interesting effect where I live (Buena Park, or southern Uptown) is that there are a LOT more young kids around than even a few years ago. On a typical walk to the playground I will often see up to ten strollers being pushed around. Young couples stuck in condos are still moving forward with their lives, and are making it work with less space in neighborhoods they would have abandoned a few short years ago. In some ways it has been a blessing, since these normally transient years have actually been stable in terms of friendships and community. We have a large community of friends with kids in the city, and we are learning the value of creative storage solutions and sleeping arrangements (especially with house guests).

[ccjarider]

You are right about lifestyle modification - Lookout Kid.

Many of us grew up in 60's/70's with large "Catholic-like" families with 4-6 kids.

How many of those families even had two cars or more than one bathroom? Alot of us never had a single room but rather shared with siblings our entire childhood.

We survived, some would say even thrived.

Man, I look at some of the huge homes built in last decade and think-who would want that monstrosity. I can afford it no problem- just never wanted it.

[ajolotl]

The engineers I hire make a hell of a lot more than they did in 1999. I pay some just over 200K. Probably 120 was tops back then.

[ajolotl]

No, not software engineers.

Originally Posted by Gioobag

Computer science? The last hurrah in that field was Y2K, and since then it's been outsourcing, H1-b visa scams, and importing cheap foreign labor driving down wages. You must hire the best of the best, because the "middle-class" and middle-age IT professional no longer can raise a family with 4 kids anymore, those jobs are GONE and the wages fallen.

There was never a better time for technology than 1999, it's misleading to suggest it's better today for anyone in that business. Intel, Cisco, MSFT all those stocks have been flat for a decade now. Microsoft just laid off 5,000 employees (first time) and Gates is still whining that we "need foreign talent" here. It's a crock, that traitor just wants cheaper employees (H1-b).

[Humboldt1]

We are at 2002 values in Chicago now. I don't know if we will get back to 1998-1999 values or not, but certainly 2000-2001 values are not out of the question.

Gioobag,

I disagree with your assessment that the average 35 year old has less than in 1999. The average person today has a lot more stuff and technology has gotten way cheaper. In 1999, not every 35 year old had a digital television (few still have analog except this 31 year old (me) with a converter). I know I certainly am worth less than I was 2 years ago, but I am still ahead of where I was 5 years ago (even with home price declines because I have invested money, even if some of it was in declining stocks and bonds) financially. I am also a lot more liquid than I was 2 years ago, even though my overall net worth has gone down slightly.

Stocks may not have come back since their dotcom highs, but I would say in general society is better off than 10 years ago due to technological advances.

I do agree that it is possible home prices could overcorrect and fall back to late 1990s values in Chicago and other areas, even the non-bubble areas. Throw out Detroit (back to 1995 levels) and Cleveland (back to 1999 levels) and you still have markets that are back to 2000-2003 levels for the most part on the Case Shiller 10 city index.

[mh7]

Originally Posted by Gioobag

So, if someone in 1999 who bought a 2/2 condo when they were 30 yrs. old (making $X and worth $Y) is trading up today, then the prototypical 30 year old buyer of that same 2/2 can't afford more today! They can afford less than in 1999, since the current 3o yr. old of today makes less than $X and is worth less than $Y, so prices could fall below those levels. Possibly.

Stocks are at or below 1999 levels, the NASDAQ ridiculously so. Real estate could follow suit soon. Plus housing is, in reality, a depreciating asset and the housing stock is just aging every year.

While it is true that wage growth has slowed during the last decade, there have only been something like 2 quarters in the last 15 years or so where wage growth lagged inflation. This means that your hypothetical average 30 year old is in general better off now than a comparable 30 year old in 1999.

The choice of 1999 as a base year for your stock market point is disingenuous at best - you are essentially comparing a crest & a trough. I arbitrarily picked 7/9/1971 & compared the nasdaq close to yesterday, which resulted in slightly higher than a 7.5% annualized return.

[middle-aged mom]

Originally Posted by Lookout Kid

I've heard of people asking for closing costs credits from individual sellers that aren't developers.

The majority of sales that close now days contain some form of seller assist with closing costs.

[middle-aged mom]

Originally Posted by ccjarider

You are right about lifestyle modification - Lookout Kid.

Many of us grew up in 60's/70's with large "Catholic-like" families with 4-6 kids.

How many of those families even had two cars or more than one bathroom? Alot of us never had a single room but rather shared with siblings our entire childhood.

I grew up in a family of four in 3-4 room apartments, in various Chicago neighborhoods. One of my childhood friends had 11 siblings and lived in the house on the corner. At the time, I considered them " rich".

I recently noticed that house was for sale and looked at the square footage in the tax records. It's 1200 square feet with one bathroom for that Catholic family of 14.

[mh7]

Originally Posted by Gioobag

Well, let's pick 5 years then. Someone who "dollar-cost-averaged" over the last 5 years would've done even worse than the 10 year horizon!!!

When looking at performance, it is better to use longer, not shorter time frames to determine returns.

We're just trying to figure out where RE prices will settle at a bottom. If 1999 was a crest and we're in a trough, then why couldn't prices fall below 1999 levels?

They certainly could. It might be better to actually use some form of rational thought process though, rather than "omg the sky is falling!"

There hasn't been "wage growth" in the last 10 years at all. All the gains in wealth over the last ten years have been wiped out. Some people today have a zero wage. Unemployment is at 16%.

I'm not sure where you are getting your information, but all gains in wealth in the last 10 years have not been wiped out and unemployment is not at 16%.

I'd say the average 35 year old has far less wealth and wages than they did in the Nineties, and far more debt of all kinds.

You can say that, but it does not make you right. Simply looking at wage growth & inflation data over that period of time confirms this.

I'm not sure what a flat-screen TV has to do with anything. All that stuff is commodity now anyway, look at Dell's stock over 10 years. Motorola? They were doing better 10 years ago than today, they represent exactly what I'm talking about. What technology wealth creation has replaced that? Nothing. The NASDAQ is still low.

The fact that flat-screen tvs are a commodity is a demonstration of how we are better off now than we were 10 years ago. In terms of companies, how about AAPL, they are doing better today than 10 years ago there are always winners & losers over periods of time, its called the free market.

Just because one person may have advanced from age 30-40 doesn't mean he ended up at 40 where the prior guy did ten years earlier. Most people today at 40 are doing worse than those that turned 40 ten years ago.

Again, looking at wage & inflation data shows that this is not true.