Wheaton and Glen Ellyn Still Overpriced? (Chicago, Lake Forest: sale, real estate, condominiums)

[fairmarketvalue]

Originally Posted by vandre

You are completely missing his point. Cubsfan1492 is arguing about the rate of appreciation of those towns, not whether they were overpriced or not even before the bubble.

In other words, all other things staying constant, historically house prices have increased at a given rate % (because of inflation,etc..). Because of the housing bubble, this pattern has a 'bump' whichCubsfan1492 expects to be corrected by the market itself

Assuming the rate of appreciation could be represented by a linear equation, in a 'normal' market you would see a straight line with certain angle (rate of appreciation)... because of the housing bubble though, there is a gap..... Now notice how this graph is b number of units above the x axis.. Saying that Wheaton/Glen Ellyn are overrated would mean that the whole line should be shifted down

y= mx+ b

m= rate of appreciation
b= "desirability"

If Wheaton/Glen Ellyn were overrated to begin with(even before the bubble) it would mean arguing that the 'b' should be lower

If the rate of appreciation is skewed (which most likely is) it would mean arguing that the 'm' should be lower

You are way too over analytic of the situation. Neither town is "over priced" in good or bad markets, just more expensive in a sellers market and hard to get in when multiple offers happened as it was in the hot sellers market when a listing didn't even last a day! Solid communtities like these tended to take "less advantage" of the run-ups that others did, building homes on any given corner and calling them "expensive". Location is not to be excluded when considering a home purchase. For a while, this "crazy market" did forget just that very thing- people wanted a sizeable home with nice ammenities and didn't think about ANYTHING else as far as location, schools, commute time, etc. Towns like Wheaton, Glen Ellyn, and for that matter, many others in the Chicago suburbs, have been able to stand on their own through this tough market. I beg to differ (and have since joining this forum) that homes in these communities are overpriced. They are lower by 10-12% from peak (as the nation calls it) and considering places like these were not grossly inflated like some parts of our nation, home prices in Wheaton and GE are back at normal appreciation prices. Some argue that the Chicago suburbs, including towns like Wheaotn and Glen Ellyn have another 10-15% drop to go through until 2009-2010, which would total 20-30% after all said and done. In real numbers, this means that those would think that a home priced $500,000 at peak should be at $400,000/$350,000- depending on if the drop bottoms at 20/30%. NO WAY, my friends! I absolutely think this will not happen and that prices have dropped as much as they are going to and back to moderate appreciation by market standards. That does not mean they are affordable for everyone, just back to "Norms". And contrary to what was originally posted on this thread, there are all price ranges of homes in Wheaton and Glen Ellyn available. The problem is, after listening for nearly 2 years about how real estate is overpriced, many did not have the forsight to know that it wasn't everywhere, but in places like CA, AZ, FL, and even at some point, the east coast cities of NY and BOSTON. But none as bad as CA. A very, very different "mentality" took over the real estate market in our nation, as a whole, even though information was distorted as a whole for most markets. Never mind the sub-prime crisis and foreclosure crisis(at which is still a small percentage of the inventory). All of this changed the expectations of home buyers and many were led to believe the inventory was filled with desperate sellers needing to "unload" their homes at any price!

We have owned 3 and living in our 4th home in Wheaton that we built last year. All of our homes appreciated at an average rate of 3% per year for the amount of time we owned each. The one we built was complete last fall('07) and so yes, we did get a better deal than we would have a year prior('06), but not some FANTASTIC steal of something way below what fair market is/was. And contrary to what some may believe, it has not gone down in value, but rather "up" as we had an appraisal to re-fi when rates went down to 5.75 and bank appraised it for 50,000 more than we closed for a year ago and we opted NOT to take any more of our equity- period, as we have a nice down of 40% and want to keep it that way! I think that says alot, considering the tight lending conditions and appraisal requirements these days!

******I also want to add that Glen Ellyn tends to be a bit more expensive than Wheaton, apples to apples, becasue it's school system is considered a little better, by some, and it is east of Wheaton, hence, closer to the city. It also has a HUGE swing of home prices, and near downtown or lake ellyn, homes are more than a bit more expensive based on location, location, location!

[seattlehawksea]

Why is it that when one gives a detailed analysis of 6 homes in the Glen Ellyn/Wheaton area that are considerably overpriced by even the standards of fairmarketvalue (3% yearly appreciation), one gets comments like:

A. "I'm not sure but it just seems to me you're a little bitter of not being able to afford a home you are looking for in these areas, perhaps look elsewhere?"

Look, I can live anywhere. OK? I may be rich, but I’m not stupid. And as a stupid person does not pay $7 for a gallon of milk, nor does she overpay for a home that appreciated 5-6% on a yearly basis in the past 8 years (even in Glen Ellyn!!). Especially when all fundamentals point to a correction in line with a historically-based 3-4% yearly appreciation at most during that time period. In addition, credit is tough and job losses most likely will mount. That won’t sustain 5-6% yearly appreciation rates.

or

B. “People who live in cities like wheaton and glen ellyn are more well off in life for the most part and the foreclosure problems are not an issue for the most part in these cities”

Nobody said anything about foreclosures. Please learn to read.

or

C. “Neither town is "over priced" in good or bad markets, just more expensive in a sellers market. ….. I beg to differ (and have since joining this forum) that homes in these communities are overpriced. They are lower by 10-12% from peak (as the nation calls it) and considering places like these were not grossly inflated like some parts of our nation, home prices in Wheaton and GE are back at normal appreciation prices. Some argue that the Chicago suburbs, including towns like Wheaton and Glen Ellyn have another 10-15% drop to go through until 2009-2010, which would total 20-30% after all said and done?"

If you paid attention in algebra class in 7th grade, you may have noted that the whole “y=mx+b” equation that vandre posted deals with the fixed effect (it’s the “b” by the way) of being “more expensive in a seller’s market”. But since you’re not good at math, you won’t be able to tell me how the “m” will be able to sustain 5-6% yearly appreciation rates.

And, what do these phrases that you use such as “normal appreciation prices” even mean? Or are you just thinking about how Glen Ellyn and Wheaton are God’s gift to earth? If you read my original post, you will note that the listing prices I gave on 6 ACTUAL REAL-LIFE examples are above and beyond higher than what would be expected given a 3-4% yearly appreciation rate.

Finally, if you guys, who supposedly are from Glen Ellyn and Wheaton (which, of course, is full of very highly educated people), cannot possibly follow the logic of my argument, either you are the duds among the highly educated or I’m going to seriously reconsider sending my kids to the same schools you went to when they’re of age.

Opinions from those who have a vested stake in proving that prices will fall/stay the same/increase matter to me very little. Facts do. If the facts on the ground told me that house prices will remain stable, I would buy today. If the facts told me that Bill Gates is seriously considering buying up a huge portion of Glen Ellyn to construct his own personal residence and investing 10 Billion dollars in the local school systems, I would have bought yesterday.

[fairmarketvalue]

Originally Posted by cubsfan1492

Why is it that when one gives a detailed analysis of 6 homes in the Glen Ellyn/Wheaton area that are considerably overpriced by even the standards of fairmarketvalue (3% yearly appreciation), one gets comments like:

A. "I'm not sure but it just seems to me you're a little bitter of not being able to afford a home you are looking for in these areas, perhaps look elsewhere?"

Look, I can live anywhere. OK? I may be rich, but I’m not stupid. And as a stupid person does not pay $7 for a gallon of milk, nor does she overpay for a home that appreciated 5-6% on a yearly basis in the past 8 years (even in Glen Ellyn!!). Especially when all fundamentals point to a correction in line with a historically-based 3-4% yearly appreciation at most during that time period. In addition, credit is tough and job losses most likely will mount. That won’t sustain 5-6% yearly appreciation rates.

or

B. “People who live in cities like wheaton and glen ellyn are more well off in life for the most part and the foreclosure problems are not an issue for the most part in these cities”

Nobody said anything about foreclosures. Please learn to read.

or

C. “Neither town is "over priced" in good or bad markets, just more expensive in a sellers market. ….. I beg to differ (and have since joining this forum) that homes in these communities are overpriced. They are lower by 10-12% from peak (as the nation calls it) and considering places like these were not grossly inflated like some parts of our nation, home prices in Wheaton and GE are back at normal appreciation prices. Some argue that the Chicago suburbs, including towns like Wheaton and Glen Ellyn have another 10-15% drop to go through until 2009-2010, which would total 20-30% after all said and done?"

If you paid attention in algebra class in 7th grade, you may have noted that the whole “y=mx+b” equation that vandre posted deals with the fixed effect (it’s the “b” by the way) of being “more expensive in a seller’s market”. But since you’re not good at math, you won’t be able to tell me how the “m” will be able to sustain 5-6% yearly appreciation rates.

And, what do these phrases that you use such as “normal appreciation prices” even mean? Or are you just thinking about how Glen Ellyn and Wheaton are God’s gift to earth? If you read my original post, you will note that the listing prices I gave on 6 ACTUAL REAL-LIFE examples are above and beyond higher than what would be expected given a 3-4% yearly appreciation rate.

Finally, if you guys, who supposedly are from Glen Ellyn and Wheaton (which, of course, is full of very highly educated people), cannot possibly follow the logic of my argument, either you are the duds among the highly educated or I’m going to seriously reconsider sending my kids to the same schools you went to when they’re of age.

Opinions from those who have a vested stake in proving that prices will fall/stay the same/increase matter to me very little. Facts do. If the facts on the ground told me that house prices will remain stable, I would buy today. If the facts told me that Bill Gates is seriously considering buying up a huge portion of Glen Ellyn to construct his own personal residence and investing 10 Billion dollars in the local school systems, I would have bought yesterday.

Stupid is as stupid does. Your post makes very little sense. Quite confusing, actually. If you do not understand the "logic" behind what drives prices in ANY given communtiy, then it's a lost cause to explain further. But you are incorrect on your percentages. And I don't know why the $7 for a gallon of milk is used. It never has been that expensive, unless you by the 1/2 gallon of oberweis which does come to nearly $7 for 2 (that ='s a gallon if I did my "math" right) at which some are willing to pay but I would not call them "stupid" for that choice of priority if dairy is important to them. While I wouldn't pay that much for milk, to each his own if they think it's that much better and can perhaps compromise on something less important than the milk of their choice.

As many will tell you, what someone paid "X" amount of years ago for a house is really irrelevent to market value! Lastly, a lot of people that live in this community did not grow up here, so the school comment was meaningless. I think it's highly unlikely that any of us think either of these 2 communities are "God's gift to earth" and if you think our prices are high, you ought to do an analysis of Hinsdale, LaGrange, Burridge, Clarendon Hills, Glencoe, Wilmette, Winnetka, Kenilworth, and even Naperville. You have never disclosed what price range you are looking in, how much updating/remodeling has been done so it's hard to know if your numbers are justified but it's still pretty safe to assume there is some justification in all of them, just not the kind you necessarily agree with. Perhaps if you let us know a little more "detail" about your 6 examples, we can give a better explanation that will seem more "educated" for you! And to think I still want to have faith, since you are a Cubs fan. But the "sarcastic" comments in your last post actually do sound "bitter". As I said on another thread, same topic- sorry you feel that way. As Irish setter said- many feel it's worth it and rational in comparison to those communities I listed above. When looked at that way, Wheaton and Glen Ellyn seem like great deals to me.

[irish setter girl]

Using data from Sept 1-Nov 3:

The average LIST price of a Wheaton home sale was 412,402
The average SALE price of a Wheaton home sale was 394,327
The average market time was 136 days, list to sale ratio is 96%

The average LIST price of a 4 bedroom Wheaton home was 497,778
The average SALE price of a 4 bedroom Wheaton home was 478,552
The average market time of 4 bedroom home was 160 days, list to sale ratio is 96%

Granted this take into account that the list price could have been reduced 10 times by the time the house got an offer. Either way 96% is pretty good for this market. I think it would be safe to say that those homes that did close since 9/1/08 were priced to be competitive and were in good condition. Buyers today want it all: price,location,condition and size.

Just to share a funny story about the Wheaton market. In 2003 I had an agent knock on my door, with clients in tow, asking if I would sell my house. It was not on the market and I didn't know these people. Moving was not on my radar at that time. They offered silly money. I took it. That would not happen today!

Just wanted to share...carry on........

[seattlehawksea]

All I can say to most of these opinions (hardly any facts), is we'll see. If prices in 2 years (in nominal terms) are where they are now, then I'll be right. That will be a 6-8% depreciation in real terms. And if at that point selling to listing prices are still 96%, I'll be right by another 4%.

By the way, I'm not singling out irish setter girl as that poster has been fairly reasonable in their comments opposed to the comments I have been getting from certain realtors/mortgage brokers on this site.....

[fairmarketvalue]

Originally Posted by irish setter girl

Using data from Sept 1-Nov 3:

The average LIST price of a Wheaton home sale was 412,402
The average SALE price of a Wheaton home sale was 394,327
The average market time was 136 days, list to sale ratio is 96%

The average LIST price of a 4 bedroom Wheaton home was 497,778
The average SALE price of a 4 bedroom Wheaton home was 478,552
The average market time of 4 bedroom home was 160 days, list to sale ratio is 96%

Granted this take into account that the list price could have been reduced 10 times by the time the house got an offer. Either way 96% is pretty good for this market. I think it would be safe to say that those homes that did close since 9/1/08 were priced to be competitive and were in good condition. Buyers today want it all: price,location,condition and size.

Just to share a funny story about the Wheaton market. In 2003 I had an agent knock on my door, with clients in tow, asking if I would sell my house. It was not on the market and I didn't know these people. Moving was not on my radar at that time. They offered silly money. I took it. That would not happen today!

Just wanted to share...carry on........

Thank you for this info. And I laughed at your story. We too, used to get notes in our mailbox, offering GREAT amounts of $ if we were interested in selling, especially when we put all new landscaping and a new beautiful front door and paver driveway. We never were. Until suddenly, we were. We built a new home from 2006-2007 (took over a year) and in that time frame, all the notes interested in our existing home were nothing but a memory. It's so strange, isn't it? And to top it off, you hit the "nail on the head" when you said buyers expect EVERYTHING- granite in updated kitchens, hardwood floors, baths re-done, basements finished, and crown moldings/trim/bases, EVERYWHERE like the ones you see in million dollar homes. We struggled for a total of a year- on and off the market and finally closed in Aug. We did finally get a decent price, but only after we DID reduce by 10%, from the overall original market and lists. We were in the 500,000-550,000 range, and this price range between 5-6 seemed to suffer the most. People "got the word" that all homes were overpriced by then and expected our 3,200 sq. ft, brick front, cedar sided, newly landscaped, paver driveway,etc.... completely updated (old home built in 1992) should be in the 4's? Some low-ball offers were just that! I'm happy to say, by the time we got a contract, those "types" of buyers seemed to have finnaly "gotten it" and realized homes had come down and were probably close to if not at, where they were going to stay for a while. When those "notes" were coming in 2005? One offered $620,000!!! Boy, do I wish we had a "thought"' to build and move back then! But it's OK, we still made the "normal appreciation" of 3.5% per year in the 9 years we owned it. Take care and I hope, Cubs fan, this helps you understand as we closed for nearly 100,000 less than that "note offer"!

[seattlehawksea]

To further drive the point home that my wishes or opinions (as is the case with some of the others) are not driving my statements, let me re-iterate some points I made on another real-estate forum on this site. Cheers.

cubsfan

Ok,

I am an economist and have looked at the housing price data in an official capacity. I am enjoying the discussion on this thread and I agree that house prices are difficult to forecast in the short term. However, let me give my $0.02 on what the economics profession believes with house prices in the long run:

1. House prices in the long run track people's ability to pay. This means income.

2. House prices in the long run are roughly in line with price inflation for other goods. In the 20th century, house prices and consumer price inflation both averaged 4%.

This actually makes intuitive sense for two reasons: (a.) the quantity and value of money drives inflation in both consumer and housing goods in a similar manner (i.e. more money = more pressure on the price of those goods) and (b.) a house is very much a composite good of land, labor, and materials, some of which are consumer goods directly or indirectly (the price of intermediate goods such as plastics, oil, or even labor drives the price of goods using plastics, oil whether they be in construction of a home or in a car or something else).

3. House prices to rent ratios are a good indicator of whether prices are high or low relative to historical trends. Look at it in terms of P/E ratio for stocks.

Therefore, for all of these reasons, house prices in the US (even in Chicago where I am from), are still too high.

I want to stress that in the case of long term housing prices, economists are not people in front of a crystal ball making predictions. Long-term housing price forecasts are very similar to the calculations economists make about the coming social security and medicare entitlement crises (due to some basic and generally agreed on assumptions about demographics and costs of health care for example). Of course there are situations in which most economists could be wrong--the whole world sans the US could start a war and the US could become a haven for rich refugees, driving up house prices. We could import 10 million high-skilled immigrants, driving up house prices. Every family could start to have 4 kids each, driving up prices for 3 and 4BR homes, etc.

I can't tell you what housing prices are going to be tomorrow morning at noon or next week for that matter. In the short run, anything can happen. In fact there have been some studies that conclude that in the short run where house prices are in decline (this has happened regionally before), home sellers are very reluctant to cut prices relative to the price at which they paid for the home. And they end up keeping the home on the market longer or just pull the home off the market.

And, of course in the short run or even on a very microeconomic level, things can deviate from what I am saying. That is why you will find some people paying listing prices today in overpriced markets. You may also find some really rich people who don't mind overpaying for homes because they just don't care about searching for 20 homes and haggling with stubborn home sellers. These incidents don't invalidate the above points. Ok?

But, in the long run (sometime in the next 5-7 years), due to the statements I made above, which are based on years of careful study and debate by thousands of economists, statisticians and the like, prices will decline in either real (inflation-adjusted) terms or outright in nominal terms. This is not my opinion or my wish driven by my emotions guided by the fact that I am selling my home or purchasing a home or taking equity out of a home or investing in a REIT.

Finally, on a personal level, I understand why there is so many heated opinions on housing prices. We all have a stake in the matter. And on that note, I wish that prices would have remained stable over the past decade so that people don't have to deal with these upswings and downswings that cloud important long term investment decisions (timing of a purchase for example)

[irish setter girl]

FMV, but had you taken the 620k back then you would have paid much more for the house you built. Be glad your home is sold, and I'm sure you got a relatively good price for your new construction home.

I sometimes regret selling my home but I've moved twice since then and feel good where I am now. I think I am one of those sick people who likes to move. If someone knocked on my door today and wanted my house I'd probably sell it

CubsFan, I don't feel singled out. I was just offering some information to spark discussion. I am one who feels everyone should do whatever is best for them. If you want to wait to buy, that is great. If someone wants to buy tomorrow, good for them too. Not trying to stir the pot.

[fairmarketvalue]

[quote]

Originally Posted by cubsfan1492

I can't tell you what housing prices are going to be tomorrow morning at noon or next week for that matter. In the short run, anything can happen. In fact there have been some studies that conclude that in the short run where house prices are in decline (this has happened regionally before), home sellers are very reluctant to cut prices relative to the price at which they paid for the home. And they end up keeping the home on the market longer or just pull the home off the market.

OK, then if I am understanding correctly, you keep quoting what a "fair" appreciation rate would be- correct? and I believe you said and annual of 3-4 % is not unreasonable- fair.

If I would have paid $620,000 for a home in 2005, I GET that it is not worth that now and would NOT expect that return. But you suggested in the quote above that "home sellers are reluctant to sell for what they paid"- this is a different story, big time, if you bought in 1999. Are you suggesting that homes do not appreciate and that selling in 2008, we should sell for what or near what we paid? Let alone, the amount of money put into updating to the "standard" of a buyers market, putting in all or nearly all that's expected in the price range example I gave? Give me a break. It is not a matter of sellers reluctant and taking them off the market, it's downright CRAZY to think that anyone would sell at "foreclosure prices" which is what it would come to if a seller was expected to "sell for what they paid". And lasty, a I disagree that this has "anything" to do with emotions, and as an economist, you should know better. And the rent/own thing is a tired old arguement as it's COMPLETELY distorted by apples to oranges comparisons! In other words, they take average "rent prices" of a 2 bdr., 2 bth apt. in a building and compare tham to a 4 bdr., single family home that's owned! If you want to RENT a 4 bdr. home that's in the $500,000 range, it will NOT be the same rental price as that 2bdr. apartment! In most parts of our nation, Chicago area included, people did not overpay by much more than a single digit % in the peak times, and in the hotter markets, 10-15 % at the most! We are not in California where people DID pay 30,40,50 and even 60% over value at peak. But the rest of us are just plain tired of being put in the same catagory where expectations are concerned.

I also would like your thoughts on my comments about the home values in all of those other suburbs I listed in my previous post ( and I forgot the most important one of all- Lake Forest), and the fact that "numbers" are only a part of what "makes" a market value of a home. Location, schools, commute to job/city, proximity to conveniences, etc..... I'd honestly like to know what your thoughts are and why you think Wheaton/GE is so "overpriced". In a lot of ways, with home values being down 10% or so from peak, I think communities like this are at a "good price" and attractive to the "fair 3-4% appreciation" you keep saying is fair. Again, if bought in 2003-2005, not the case and we all understand that. That's why "market value" is in line and if you paid more than current "market value" as it stands, now, you also know why you are not going to make much if any, appreciation. But a home bought for 390,000 in 1999 that sells for 540,000, then that's fair appreciation- right? But if that same home was turned over for the $620,000 once offered in 2005, then for sale again, in 2008, of course your not going to see ANY appreciation and will actually see a loss- right? So tell me what I'm missing here? I will say it again, while homes were worth more in our area, a few years ago, they were not hugely inflated like places in CA. And our market has listened to the "realities" of market prices and expectations and have come down to "fair prices" for the area. Home purchase is more than just about the Structure. This is when certain communities start to stand out among others and the reasons for it. Not "Gods gift", just clear differences. If my home in Wheaton ever becomes the same value of a comprable home in Lake Forest? Then I'll agree with you! Until then, it's all relative.

[fairmarketvalue]

Originally Posted by irish setter girl

FMV, but had you taken the 620k back then you would have paid much more for the house you built. Be glad your home is sold, and I'm sure you got a relatively good price for your new construction home.

I sometimes regret selling my home but I've moved twice since then and feel good where I am now. I think I am one of those sick people who likes to move. If someone knocked on my door today and wanted my house I'd probably sell it

CubsFan, I don't feel singled out. I was just offering some information to spark discussion. I am one who feels everyone should do whatever is best for them. If you want to wait to buy, that is great. If someone wants to buy tomorrow, good for them too. Not trying to stir the pot.

Believe me, we understand and are gald we were able to sell. Thank you for understanding what I was trying to say. I know you do. Yes, we did really well, as the market turned downward, and on our new home were able to negociate nicely with the builder, who was just "sure" we'd have no problem selling our home when we contracted with him in 2006. So it all evend out in the end. Thanks again.-FMV