April Home Sales Up 28% YOY (Chicago, Lincoln: to rent, condos, mortgages)

[Attrill]

Originally Posted by trailblazer33

How are things returning to historical norms? First time homebuyers are still staying out of the market, which is now dominated by investors. This is not the historical norm, especially for a "recovery."

By historical norms, I mean the average appreciation rates before the bubble of 2000-07 (about 3-5% annually). The first chart on this page does a great job of illustrating how much of an aberration 2000-07 really was. Lower appreciation rates doesn't mean that no one should buy a house, it just means that you need to keep it longer for it to make financial sense.

First time home buyers staying out of the market is meaningless in regards to real estate prices. All that matters is if there is a demand for the existing housing stock - and there is. The people who aren't buying still have to live somewhere, and so they rent. The increase in renters has driven rents up, so it makes sense for investors to buy rental properties. And while home ownership rates have dropped, they've dropped to exactly where they were in the late 90's, before banks starting throwing loans at anyone who walked in the the door. Right now we're at a home ownership rate of about 65% - that is exceptionally normal.

[trailblazer33]

Originally Posted by Attrill

By historical norms, I mean the average appreciation rates before the bubble of 2000-07 (about 3-5% annually). The first chart on this page does a great job of illustrating how much of an aberration 2000-07 really was. Lower appreciation rates doesn't mean that no one should buy a house, it just means that you need to keep it longer for it to make financial sense.

First time home buyers staying out of the market is meaningless in regards to real estate prices. All that matters is if there is a demand for the existing housing stock - and there is. The people who aren't buying still have to live somewhere, and so they rent. The increase in renters has driven rents up, so it makes sense for investors to buy rental properties. And while home ownership rates have dropped, they've dropped to exactly where they were in the late 90's, before banks starting throwing loans at anyone who walked in the the door. Right now we're at a home ownership rate of about 65% - that is exceptionally normal.

When investors figure out Single-Family homes are not giving them the return they expected, and they dump their holdings back onto the market, we'll see how housing - prices, especially - will react.

[Vlajos]

Originally Posted by trailblazer33

When investors figure out Single-Family homes are not giving them the return they expected, and they dump their holdings back onto the market, we'll see how housing - prices, especially - will react.

I think investors are primarily buying in lower cost areas of the metro area. I can't imagine they are buying in any market moving way in Naperville, Evanston, Lincoln Park, Forest Glen, Glenview, etc.

I guess we'll see what happens.

[Lookout Kid]

Originally Posted by trailblazer33

When investors figure out Single-Family homes are not giving them the return they expected, and they dump their holdings back onto the market, we'll see how housing - prices, especially - will react.

Can you point to a specific area of Chicagoland that is dominated by investors at the expense of owner-occupiers? I've heard of investors buying up loads of properties in places like Aurora and Elgin, but not so much in the areas discussed a lot on this forum. To be frank, I'm not overly concerned with an investment bubble popping in Aurora if I own a home in a popular North Side Chicago neighborhood. The two markets aren't particularly interrelated.

[Lookout Kid]

Originally Posted by Vlajos

I think investors are primarily buying in lower cost areas of the metro area. I can't imagine they are buying in any market moving way in Naperville, Evanston, Lincoln Park, Forest Glen, Glenview, etc.

I guess we'll see what happens.

I think you're correct in your assumptions.

Chicagoland is an increasingly bi-polar market, with some areas decreasing in desirability while others are increasing. It's something to keep in mind when talking about real estate data across the region. All indications are that the North Side neighborhoods popular with professionals and college grads are booming this Spring.

[Attrill]

Originally Posted by trailblazer33

When investors figure out Single-Family homes are not giving them the return they expected, and they dump their holdings back onto the market, we'll see how housing - prices, especially - will react.

Things can certainly change in the future, but right now the rental market is booming. But I'm sure facts and data don't play any role in your predictions.

[jdiddy]

Originally Posted by trailblazer33

How are things returning to historical norms? First time homebuyers are still staying out of the market, which is now dominated by investors. This is not the historical norm, especially for a "recovery."

I would see that as a tailwind, not a headwind.

The recent price increases should bring additional home on the markets, which will also induce more buyers. New HH formation was impacted significantly during the recession, but that can't and won't last forever.

[Lookout Kid]

Timing the market and predicting the future is really impossible, and I'd encourage people to just get on with their lives and purchase/sell if that fits their plans. I realize that virtually no one stays in a home for the length of a 30 year mortgage these days, but a mortgage payment is a fixed housing cost that doesn't increase with inflation, and unlike stocks, you receive the value of having a place to live. And eventually, you end up fully owning your property.

[trailblazer33]

Originally Posted by Lookout Kid

but a mortgage payment is a fixed housing cost that doesn't increase with inflation, and unlike stocks, you receive the value of having a place to live. And eventually, you end up fully owning your property.

First of all, not everyone has a fixed rate mortgage. So mortgage costs do increase over time. Even if you do have a fixed rate mortgage, insurance and taxes increase all the time. I see clients on a daily basis that are facing foreclosure because they cannot afford the increase in taxes and insurance.

Secondly, you NEVER ever fully own your property. Miss two years of property tax payments and see if you own your property after that.

Some of you seem to live in a fairy tale world, and I would have thought the Great Recession would have at least altered that world view, but I guess it's a recession when it happens to your neighbor, a depression when it hits home. Markets are not as insulated as they used to be, and to assume that markets in Chicago are becoming MORE insulated despite the fact that the market is less and less controlled by market fundamentals and more by too big to fail banks will be a mistake.

[Vlajos]

Time will tell.