Chicago Real Estate Prices - Prediction (Stockton, Warren: 2013, foreclosures, mortgages)

[dtcbnd03]

A couple of questions...please keep this thread focused on Chicago real estate prices.

1. Where do you predict Chicago real estate prices are headed in the next 5 years?
2. Are RE investors on this forum continuing to buy given rates are low and rents are high?
3. Will Chicago real estate prices decline like they did in Detroit, Stockton, etc. (maybe not to same degree)?

Warren Buffet invests in businesses and NEVER looks at economic reports. He buys if a business cash flows at a great price regardless of the economy. Once he owns, he doesn't care about price so long as it's cash flowing. If prices drop he simply buys more. And you can never time the market. But he also never invests in businesses with large amounts of debt.

I totally agree but the problem is Chicago/Illinois debt crisis is highly correlated to real estate prices. Investing in real estate is like tying yourself to that debt. The Chicago pension fund contributions increase by 30% in 2020 to $1.6B and to $2.25B by 2025. There has to be a huge increase in taxes including property taxes to fund that increase.

My Prediction
Chicago real estate prices will decline by at least 20% in the next 5 years because the pension ramp and eventual downturn in the economy will wreak havoc on our junk bond status and create serious fiscal issues exacerbating the underfunded pensions problem even further creating a vicious cycle.

[Di3s3l_Pow3r]

You have to look from a Macro perspective

Chicago even with high taxes is still cheaper than Seattle, Portland, LA, Boise, Denver, Dallas, Austin ... the list goes on

There are many people from cities listed above upset they cannot purchase a home and start a family due to high housing costs

I expect the prices to increase with inflation 2~3% per year

Also, the risk for a Chicago housing bubble is minimal as the prices slowly recovered from Housing Bubble 1

[Hiruko]

Originally Posted by Di3s3l_Pow3r

I expect the prices to increase with inflation 2~3% per year

Chicagoland housing prices don't keep up with inflation in some of the better years. What do you base this expectation on?

[Chicago_Person]

People who think Chicago is expensive are nuts.

[Hiruko]

Originally Posted by Chicago_Person

People who think Chicago is expensive are nuts.

It's all relative. Chicago's cost of living is above average.

[Grlzrl]

I agree with all of your predictions although maybe 20% is too high. Who knows? We have already seen 15-20% declines in the suburbs since late 2016 and I expect to see more after the triennial reassessment coming this year and the 'fair tax' in 2020. I think it is going to have a bigger impact on the suburbs (especially the higher end homes) because those are the people who are getting socked with the tax increases. Although, and I think it's true, lower end homes are unfairly assessed too high as well. I am not sure when the next Chicago reassessment is but the income tax increase won't affect most people in the city.

[Kamms]

Originally Posted by dtcbnd03

A couple of questions...please keep this thread focused on Chicago real estate prices.

1. Where do you predict Chicago real estate prices are headed in the next 5 years?
2. Are RE investors on this forum continuing to buy given rates are low and rents are high?
3. Will Chicago real estate prices decline like they did in Detroit, Stockton, etc. (maybe not to same degree)?

Warren Buffet invests in businesses and NEVER looks at economic reports. He buys if a business cash flows at a great price regardless of the economy. Once he owns, he doesn't care about price so long as it's cash flowing. If prices drop he simply buys more. And you can never time the market. But he also never invests in businesses with large amounts of debt.

I totally agree but the problem is Chicago/Illinois debt crisis is highly correlated to real estate prices. Investing in real estate is like tying yourself to that debt. The Chicago pension fund contributions increase by 30% in 2020 to $1.6B and to $2.25B by 2025. There has to be a huge increase in taxes including property taxes to fund that increase.

My Prediction
Chicago real estate prices will decline by at least 20% in the next 5 years because the pension ramp and eventual downturn in the economy will wreak havoc on our junk bond status and create serious fiscal issues exacerbating the underfunded pensions problem even further creating a vicious cycle.

In the last downturn Chicago real estate dropped 30%+ on average with huge numbers of foreclosures and massive % of properties underwater so these facts can’t be dismissed compared to other cities mentioned. The recovery is better in some areas than others. Even if the mortgages are not underwater, many homeowners can’t get what they paid or are just getting enough to get out after expenses are paid.

Add in the fact that buyers are once again not using their own $ to purchase real estate and we having the makings of meltdown 2. “House-flipping” and the annoying advertising for paid seminars on how to do this are back, helping create another housing pyramid scheme.

Chicago’s debt, iffy city population numbers along with declining county and metro population declines aren’t helping the longish-term outlook. Who knows what Chicago’s new mayor us all about either.

[mwj119]

Originally Posted by Hiruko

Chicagoland housing prices don't keep up with inflation in some of the better years. What do you base this expectation on?

Chicagloand does not, that is for sure. But does Chicago in a silo? Without looking at specific data, seems like the housing is far more stable in the city than outside of the city.

[fusillirob1983]

Originally Posted by Grlzrl

I agree with all of your predictions although maybe 20% is too high. Who knows? We have already seen 15-20% declines in the suburbs since late 2016 and I expect to see more after the triennial reassessment coming this year and the 'fair tax' in 2020. I think it is going to have a bigger impact on the suburbs (especially the higher end homes) because those are the people who are getting socked with the tax increases. Although, and I think it's true, lower end homes are unfairly assessed too high as well. I am not sure when the next Chicago reassessment is but the income tax increase won't affect most people in the city.

15-20% declines in the suburbs since late 2016? Which suburbs? I think a blanket statement is highly inaccurate.

I can see that being true in more undesirable suburbs or the high-end housing market.

[Kamms]

Originally Posted by Grlzrl

I agree with all of your predictions although maybe 20% is too high. Who knows? We have already seen 15-20% declines in the suburbs since late 2016 and I expect to see more after the triennial reassessment coming this year and the 'fair tax' in 2020. I think it is going to have a bigger impact on the suburbs (especially the higher end homes) because those are the people who are getting socked with the tax increases. Although, and I think it's true, lower end homes are unfairly assessed too high as well. I am not sure when the next Chicago reassessment is but the income tax increase won't affect most people in the city.

If some suburbs have seen declines of 15%-20% since 2016, what is the overall decline since say 2005-2006? It would have to be huge given that metro prices bottomed out in 2012-2013.