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Despite our differences, I think linicx is giving great advice.
Many have been calling for bottom for several years. We are still not there. Renting now and buying later is the smart play in my opinion.
I am doing exactly that now, renting in Oak Park. When we get closer to a bottom I will look to buy.
Regardless of one's opinions of Elmwood Park, it is a mostly stable middle to lower middle class suburbs with some areas better than others. It is not the worst area and certainly not the best. It should do okay compared to other areas but not great as it is centrally located in an average school district with mostly average homes. The population is fairly stable but becoming more hispanic.
I would encourage the original buyers to seek out better areas but with a budget of 200k they are fairly limited in the inner suburbs that are livable. I would encourage them to look at Forest Park as well in that price range.
Regardless of where they ultimately live I still think it is wise to rent if nothing else to get to know the area before they commit themselves to that area via a mortgage.
I generally agree with Humbolt1 but on this one I think he is way off...
The schools serving Elmwood Park are pretty much the worst non-minority majority schools in the region by any objective measure. You would be nuts to not see that. Forest Park similarly suffers mightily in the school department and if it weren't for being able to supply the "entertainment" to Oak Park's "charm" I would also put it squarely on the "avoid" list.
Honestly, I can not emphasize how poor the performance of these schools are other than to say that if that is "average" performance we should just roll the whole region up in rug and move to someplace where at least if we're squealing like a pig we won't be doing with a foot of snow under our bellies...
Chet I agree totally on several points. There is no Chrsitmas in July. The mythical bottom is elusive in every area of every state in the lower 48. Some areas will recover quickly, others not so fast. One thing for sure the upper income housing stock will move at a more predictible rate as the population shift continues and sales are driven by demand.
The real question for the OP is this: If he invests in a $200,000 house today, will it hold its value next week or next year? The answer lies in location. There is absolutely no polite way to say if you buy an overpriced house in a town forgotten by time the only people who win are the bankers and realtors. Blocks of old empty buidlings, no investment or new developement, shabby downtown, shuttered businesses, no grocer or pharmacy etc., are red flags. The exception might be the county seat, as in illinois it will generally survive. Is EP a county seat? If it is take the gamble, you will still lose money, but probably not as much as if it is not.
Most towns, villages and cities in Illinois have varied incomes, varied ages, varied housing stock, and residents of varying backgrounds, etc., However not all neighbothoods have mixed incomes. It is not common to find a $600,000 house in a neighborhood of $50,000 houese. It is not common to find a $200,000 house in a neighborhoof of million dollar homes. Therein lies the problem. Here is something to consider.
[]] The housing market has not bottomed out. [2] Anyone who invests in say a $300,000 house in a neighborhood of like houses, has no guarantee all the houses, or even one house, in that block, or neighborhood, will retain its value. [3] House prices must decline in the future because the jobs that are being created are not paying what they were prior to 2000. [4] I do not believe the average house today will retain its value in the future.
The gamble is whether or not it will regain its former value in 10-15 years?. This question is answered in location. If the town is in obvious decline, the answer is "not likely". Is it a vibrant town where people want to live, then the answer is "most likely".
"I want to buy a house because prices and interest rates are down. If I wait I might miss a great opportunity to buy a good house at a reduced price!" Realtors love me like ranchers love a great angus bull. They are both $$$$ on feet.
Are you willing to gamble $50,000? If not, then rent untll the housing market bottoms out. Yes, you will pay a higher interest rate. The trade-off is more choice, more house for less money and the house probably will not lose more value.
To the OP: By the time the market bottoms out you will have had the opportunity to closely watch the town of your choice recover or continue to decline. You will have had the chance to watch the forclosures, the sale signs, people moving into and out of the area, and the local stores
A hasty decision today may prove to be an expensive economic lesson in the furure.
How will I know when the market bottoms out? Seems like a crap shoot. We've been planning to buy for years, patiently renting the same apartment for 9 years, saving money, and watching prices come way down. Not exactly a hasty decision in my mind. Do you honestly believe we could lose $50K buying a $200K property in Elmwood Park? I don't think you'd get a lot of people to agree with that statement. If houses there aren't fairly valued, has to be close. Sure, we'd like price appreciation, but we mainly want to have a home to live in, entertain, host holidays, raise a family eventually, etc.
As to some of Chet's comments, it almost sounds like you're saying that if I don't spend $250K+ in a far out suburb with dynamite schools, I shouldn't bother buying at all. Is there a scenario where you wouldn't suggest living 30 miles out? Because I don't want to, and it seems like you're saying that only idiots don't live in Elmhurst or further out. I want to state that we know ZERO people in the burbs. Again, I want appreciation, but there's not much point in my mind if we're unhappy living in a distant burb that no one comes to visit.
Do you believe that areas ever come back? It seems that you have an underlying theme that once an area has been blighted (your words, "starts to deteriorate"), there's no going back. I understand a lot of nice neighborhoods now like Wicker Park, Roscoe Village, and towns like Oak Park used to be pretty rough, but they've turned around. In your world, is there such a thing as a nice part of an okay towns? Or does the whole town have to be richy rich and the schools flawless in order for you to approve?
How will I know when the market bottoms out? Seems like a crap shoot. We've been planning to buy for years, patiently renting the same apartment for 9 years, saving money, and watching prices come way down. Not exactly a hasty decision in my mind. Do you honestly believe we could lose $50K buying a $200K property in Elmwood Park? I don't think you'd get a lot of people to agree with that statement. If houses there aren't fairly valued, has to be close. Sure, we'd like price appreciation, but we mainly want to have a home to live in, entertain, host holidays, raise a family eventually, etc.
When the market for a particular area appreciates year over year in value by over 10 percent. That will be a strong indication that the market in that area has bottomed. As for purchasing now. The solution to this is buying under market value. There are many great opportunities to buy way under market value in lots of areas that have some distressed home prices. Some areas as low as 30 to over 50 percent under reasonable market value depending on how distressed the prices in the area are overall. So, currently buying under market value can more than offset any price decline within the next few years. Finding those kind of undervalued properties is not difficult at all in this current market, but most are not in the suburbs that everyone is trying to flock to at the moment. Example in the western or SW suburbs, bolingbrook and plainfield. Some far south suburbs, some neighborhoods in chicago's west, northwest, and south sides. Plenty of undervalued properties in alot of areas that you can purchase way under current reasonable assessed or appraised market value.
I am not talking about the increase in equity that you get from buying a property that needs work and making the financial investment to fix it up while you are living there. You can get appreciation from that in any market. Getting appreciation from just buying an undervalued property in a distressed housing market and holding it long enough for the market to turn around only comes along in times like this.
Last edited by allen2323; 02-02-2011 at 12:10 PM..
When the market for a particular area appreciates year over year in value by over 10 percent. That will be a strong indication that the market in that area has bottomed. As for purchasing now. The solution to this is buying under market value. There are many great opportunities to buy way under market value in lots of areas that have some distressed home prices. Some areas as low as 30 to over 50 percent under reasonable market value depending on how distressed the prices in the area are overall. So, currently buying under market value can more than offset any price decline within the next few years. Finding those kind of undervalued properties is not difficult at all in this current market, but most are not in the suburbs that everyone is trying to flock to at the moment. Example in the western or SW suburbs, bolingbrook and plainfield. Some far south suburbs, some neighborhoods in chicago's west, northwest, and south sides. Plenty of undervalued properties in alot of areas that you can purchase way under current reasonable assessed or appraised market value.
I am not talking about the increase in equity that you get from buying a property that needs work and making the financial investment to fix it up while you are living there. You can get appreciation from that in any market. Getting appreciation from just buying an undervalued property in a distressed housing market and holding it long enough for the market to turn around only comes along in times like this.
If you wait to buy until prices go up 10% in a certain market, then you already missed the "true" bottom, technically speaking. Let me re-iterate, I'm not interested in playing the "guess the bottom" game. Prices have fallen to 2003 levels in many Chicago-area markets, rates are under 5%, that's good enough for me. I accept there's some risk in any asset purchase, and I could lose money. I still want to buy a house.
Allen mentioned Bolingbrook and Plainfield on a post about close-in suburbs, really? Those are an hour out, Plainfield's practically in Joliet. Do you think low prices in those markets may partially reflect their distance from the city? Allen, you mention that some N/NW suburbs are very underpriced now. Which ones, any of them close-in and in my price range? How about Des Plaines?
Despite many posters questioning my sanity, I'm still looking for a decent close-in suburb in the $200K range. Any suggestions? Chet and Allen aren't keen on towns that fit my description, and continue to recommend far-out burbs with more expensive houses. I appreciate you sharing your expertise, but your comments are not very helpful to my situation. They are probably better suited for a post about Hinsdale or Naperville--and a poster with a bigger price range.
If you want a house very close to the city in a relatively safe neighborhood with non-tragic public schools for 200K, and you aren't overly concerned with appreciation, then there aren't really a lot of options to recommend. EP sounds like it works for you. I thought Berwyn and Oak Lawn were excellent suggestions also. East Beverly (in the city) and Evergreen Park could probably be added to that list. I think three of those are too far south for you (not sure what the issue with Berwyn is), so there isn't a lot more to discuss. Doesn't sound like a horrible plan to me, but I personally wouldn't do it. Would need to see more upside as things tend to trend one way or the other these days.
Quote:
Originally Posted by CityToBurbs75
Despite many posters questioning my sanity, I'm still looking for a decent close-in suburb in the $200K range. Any suggestions? Chet and Allen aren't keen on towns that fit my description, and continue to recommend far-out burbs with more expensive houses. I appreciate you sharing your expertise, but your comments are not very helpful to my situation. They are probably better suited for a post about Hinsdale or Naperville--and a poster with a bigger price range.
Allen is pushing the south side and west side. Advocating buying on the west side of Chicago (aka Austin, Garfield Park, Lawndale) may be cheap purchase price but due to high crime and limited future appreciation you have to be careful. These are not areas many of us would raise families in.
There is usually a reason some areas are more cheaply priced than others. Be careful buying in an area with tons of cheap foreclosures.
I still think Elmhurst is a good option for you as it is fairly close to the city with good train access, good downtown and schools. With the right foreclosure, you might be able to get a place for slightly more than 200k.
As mentioned before, River Forest and Oak Park will be too expensive unless you are willing to live in roughest parts of Oak Park next to Austin. As previously mentioned, 940n austin is not safe, regardless of how cheap it is.
How will I know when the market bottoms out? Seems like a crap shoot. We've been planning to buy for years, patiently renting the same apartment for 9 years, saving money, and watching prices come way down. Not exactly a hasty decision in my mind. Do you honestly believe we could lose $50K buying a $200K property in Elmwood Park? I don't think you'd get a lot of people to agree with that statement. If houses there aren't fairly valued, has to be close. Sure, we'd like price appreciation, but we mainly want to have a home to live in, entertain, host holidays, raise a family eventually, etc.
As to some of Chet's comments, it almost sounds like you're saying that if I don't spend $250K+ in a far out suburb with dynamite schools, I shouldn't bother buying at all. Is there a scenario where you wouldn't suggest living 30 miles out? Because I don't want to, and it seems like you're saying that only idiots don't live in Elmhurst or further out. I want to state that we know ZERO people in the burbs. Again, I want appreciation, but there's not much point in my mind if we're unhappy living in a distant burb that no one comes to visit.
Do you believe that areas ever come back? It seems that you have an underlying theme that once an area has been blighted (your words, "starts to deteriorate"), there's no going back. I understand a lot of nice neighborhoods now like Wicker Park, Roscoe Village, and towns like Oak Park used to be pretty rough, but they've turned around. In your world, is there such a thing as a nice part of an okay towns? Or does the whole town have to be richy rich and the schools flawless in order for you to approve?
At risk of sounding like a cheesy motivational speaker, you don't need anyone to approve of your choice but you. Not one person here has a crystal ball, just opinions.
There are community areas that have outpaced the market and face much more affluent futures than anyone would have predicted 20 years ago. You've cited examples. There are others. More community areas will likely join that list in the future as gas prices rise. And once an area starts becoming more affluent, the schools and other issues the area may be facing today will take care of themselves pretty quickly.
Of course, predicting the lucky ones will not be easy to do. Sure, there are factors which make a future visit from the Equity Fairy more likely (proximity to the Loop, housing stock, public transit, private schools, good surrounding communities), but you're never going to know for sure until the "buzz" about the area gets loud enough to hear. And by then of course, prices will be heading towards the stratosphere.
Of course, on the flip side, no one can sit here and say for sure that a community is going to plunge into the residential abyss either. I sure wouldn't have pegged Logan Square to improve like it did when I lived there 15 years ago. Things looked pretty bleak at that time. Today, it's definitely on the upward swing.
The unpredictability of this is why I don't necessarily recommend an Elmhurst, but an area that has at least reasonably low crime and schools that are decent, with private schools available. I think EP fits that bill, IMHO. As would Berwyn and Forest Park in the immediate area.
If you're honestly that nervous about this, you can always rent for a year in one of the communities you're interested in. I doubt prices are going to jump that much during that span and you'll start to get a flavor of the area and decide whether they are for you. That's really what matters.
Allen is pushing the south side and west side. Advocating buying on the west side of Chicago (aka Austin, Garfield Park, Lawndale) may be cheap purchase price but due to high crime and limited future appreciation you have to be careful. These are not areas many of us would raise families in.
There is usually a reason some areas are more cheaply priced than others. Be careful buying in an area with tons of cheap foreclosures.
I still think Elmhurst is a good option for you as it is fairly close to the city with good train access, good downtown and schools. With the right foreclosure, you might be able to get a place for slightly more than 200k.
As mentioned before, River Forest and Oak Park will be too expensive unless you are willing to live in roughest parts of Oak Park next to Austin. As previously mentioned, 940n austin is not safe, regardless of how cheap it is.
Certainly not all foreclosures are a fantastic or even always a good deal. Most are just ok deals. But, in some distressed slower moving markets, currently you can find some great deals on some of the higher priced properties that must be sold now. And some of the biggest discounts that can be found aren't always foreclosures. There are alot of baby boomers and people relocating for work that must sell sometimes at distressed prices also. A discount to me means selling for much less than the CURRENT tax assessed value or what a professional appraisal would come back at. Not just from a previous sales price where someone might have over paid.
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I generally agree with Humbolt1 but on this one I think he is way off...
