Why did the Chicago residential real estate market slow down sooner in Chicago? (Time: condo, houses)

[Johnny Northside]

Agree strongly with all EXCEPT # 9 ... many accidental landlords are bringing the same unrealistic pricing to their rentals as they were/are to their sale prices. At least where I see. But I'll concede there is probably bigger pool of renters, and it's not quite as hard to qualify for a $3,000 rental as a $3,000 mortgage payment these days. The opposite would have been true three years ago.

Originally Posted by cohdane

Current potential buyers in the Chicago area:

1. Are afraid of getting badly burned by falling prices.

2. Are waiting to see what Obama does.

3. Aren't of the subprime/alt-a gene pool and are more judicious with their money.

4. Don't feel any pressure to buy because interest rates are staying low and prices are dropping.

5. Are worried about losing their jobs, their retirement savings, their kids 529's.

6. Can look online and see exactly how much sellers originally paid (and what the mark up is).

7. Are seeing open houses that are utterly empty-- sometimes even the realtors no-show.

8. Can't tell what the market price should be because there are hardly any comps.

9. Are looking at an increasing supply of nice rental properties as more and more sellers become accidental landlords.

10. Still would really like to buy a house if they could just figure out what the hell is going on.


Here's to 2009.:ham d:

[chet everett]

The biggest mistake a landlord can make is trying to charge too much rent.

If you price you place realistically and find the renters that can afford the rent you will be WAY AHEAD when you factor in the costs of evictions, the damages disgruntled tenants may do, the harm you cause to the are where the evictions happen. Very very bad.

I am not surprised by the magnitude of the fall off -- lots of people have completely LOST CONFIDENCE in the value of ANY real estate. They are of course VERY WRONG, but they are sheep.

Months ago, in thread with FMV, I stated that too many buyers had a mindest they could get "luxury cars" like Lexus for Hyundai prices. In the mean time sales of CARS have completely fallen off a cliff too -- I suspect that right now even if Cadillac dealers did put Hyundai sized prices on cars (and they cannot...) NO ONE would be buying those cars. The media has done one heckuva job of convincing the world that very very very soon GM will have auctioneers on the lots of the car dealers slamming down the hammer for cars for pocket lint. That is not going to happen.

Similarly even in areas with seven quadrillon months of inventory or what ever the nonsens that the media has siezed onto you are NOT going to have people say "Yep, I'll trade you my 7,000 sq ft 6 bedroom home for some magic beans, cause I'm going to just take a tent and plant those beans and then a climb a bean stalk up to a land of giants and find a golden goose". NOT GONNA HAPPEN...


BTW -- Anybody else notice how the AP reports framed the new adminsitration's information about Rahm & Blago vs how the local news was reporting it? I'll start a new thread on that, but it DOES have relevance to real estate and such....

[hank0604]

Originally Posted by BRU67

Hope you're right but I don't know. To describe our last "cycle of growth" in a few sentences, our country's major financial institutions calculated that it would be easy to make a lot of cash by selling mortgage backed securities. To get those securities, they made a lot of cash available and freely supplied it to mortgage brokers. The mortgage brokers, in turn, loaned it to people regardless of their ability or likelihood to repay it. That is what drove up prices to the astronomical levels they are falling down from now.

I highly doubt (and also highly hope) that such a shortsighted mentality will be repeated at any point during most of our lifetimes. So logically, where is the next "cycle of growth" going to come from? How would it be fueled? About the only thing my crystal ball can see as a possibility is some kind of mass migration of people from one type of area to another, from suburban to urban or vice versa. And that type of situation would have winners and losers, and wouldn't so much represent growth in the U.S. housing market as a whole.

Whatever caused the last cycle of growth (which you are spot on about), that is irrelevant to the recovery. The bottom line is that no matter what, people will always need a place to live. As such, there will always be people buying and renting homes, which is why the price of any given parcel of real estate almost always goes up over the long-term. Sure, you may get burned on your investment for 3 or 4 years, but eventually, you'll make a lot more than you will lose.

The one exception to this is that you have to be smart about where you buy your property and know what factors in the area could cause real estate prices to drop, even in a time when nationwide prices don't drop. An example of this: if you bought property, then three years later the city puts in a low-income project 1/2 a mile away, then a company comes in and puts an oil refinery in the area, you're going to lose money. But its really only environmental and locational factors such as those that will make a home lose value over time, not nationwide economic problems. The housing market will bounce back, we'll just have to see how soon, and how well the other markets fare...

[BRU67]

Originally Posted by hank0604

Whatever caused the last cycle of growth (which you are spot on about), that is irrelevant to the recovery. The bottom line is that no matter what, people will always need a place to live. As such, there will always be people buying and renting homes, which is why the price of any given parcel of real estate almost always goes up over the long-term. Sure, you may get burned on your investment for 3 or 4 years, but eventually, you'll make a lot more than you will lose.

The one exception to this is that you have to be smart about where you buy your property and know what factors in the area could cause real estate prices to drop, even in a time when nationwide prices don't drop. An example of this: if you bought property, then three years later the city puts in a low-income project 1/2 a mile away, then a company comes in and puts an oil refinery in the area, you're going to lose money. But its really only environmental and locational factors such as those that will make a home lose value over time, not nationwide economic problems. The housing market will bounce back, we'll just have to see how soon, and how well the other markets fare...

I agree that there will be growth over the long term. When you said "cycle of growth" I thought you meant another period like that which occurred during the first 6 years of this decade. Now I see what you meant. My bad on that.

I think it will take awhile before prices settle down to "normal." And by "normal," I mean what houses would have been worth with historical rates of appreciation. Much of the value added during the bubble will be bled off.

[Lookout Kid]

As reported by Crain's Chicago Business, Moody's Economy is predicting that Chicago area real estate prices will bottom out in early 2010, after a three year 17.1% drop (they have dropped 13.3% as of the third quarter of 2008). This is a much lower drop than projected for many other cities--including New York (-33.3%) and Los Angeles (-53.0%).

Prices to fall here less than other cities: forecast - Chicago Real Estate Daily

[chet everett]

Ugh. Based their data on Case-Schiller, groan. Too big a bucket! My gut tells me there is STILL too much inventory in too many areas that fall into the Case-Schiller slop to say with more than about 25% accuracy whether or not things overall will continue to slide. Foreclosures are taking far too long to "clear" in every price point -- from the bottom of the barrel to the Top Hat & Tails areas there are just too many bank-owned properties to have any faith in prices moving upwards.

On the other side of the coin, if I do a quick check of how many homes I know of that would sell for their 2004 asking price I come up with a pretty small pool -- in desirable areas MANY of those homes were TORN DOWN and the much larger house now on the site is orders of magnitude more expensive. Even in areas where tear downs were not common the odds of some randomn home NOT having been fixed up (with easy HELOC, HGTV, Home Depot and the Empire Carpet guy all pushing people into renovation fever...) are slim and none.

[Humboldt1]

I very much doubt that we have only 3.8% to drop here in Chicago for prices from 3Q 08, though I hope they are right. I think Mid 2010 for a bottom, but more of 10-15 additional drop price-wise before this is all said and done. That would be more of a 25% overall decline, instead of the 17.1% they are forecasting in this article. Time will tell.

[Lookout Kid]

Originally Posted by Humboldt1

I very much doubt that we have only 3.8% to drop here in Chicago for prices from 3Q 08, though I hope they are right. I think Mid 2010 for a bottom, but more of 10-15 additional drop price-wise before this is all said and done. That would be more of a 25% overall decline, instead of the 17.1% they are forecasting in this article. Time will tell.

Based on what? I don't really put much stock in these forecasts, but they did crunch a whole lot of data to come up with their predictions. What are yours based on? Hunches?

[Humboldt1]

My numbers are based upon what is selling. Prices have dropped more than 3.8% since 3Q 08 and now. It is rather optimistic to say that prices will decline only 3.8% between 3Q08 and 1Q10.

Given how optimistic this forecast is, imagine how steep price drops will be in Miami (they are forecasting 67% drop).

[Avengerfire]

CAR and the City propaganda machine is at work in this story.