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I'd say that's about right. The impact of the tax hike is yet to be felt, though.
OTOH, a rapidly rising housing market is not really a good thing. The only people who win out of that are estate agents and tax collectors.
And those who sell at the right time. But that's the problem, you have to time it right. And selling a house isnt exactly like cashing in a mutual fund. A lot of costs are involved. And then you gotta buy something else, probably at an also inflated price.
Personally, I think the best scenario is when real estate slowly and steadily rises. I'll definitely take 3% at this point given the city's financial situation! That would be a miracle.
The likelihood of continued appreciation is slim. The pressure from increased taxes, declining desirability of under-performing schools, declining employment base, unchecked violence, declining city services and a host of tensions fostered by a corrupt cabal of insiders has been seen before -- the collapse of property values in suburbs with similar issues has played out from Maywood to Waukegan to Harvey. While there is currently a level of affluence in Chicago neighborhoods like Lincoln Park, the dynamics of allowing over building of condos in the nearer to the Loop areas may very well have a negative effect. Just as NYC suffered major declines in livability when the combination of unfair taxes, rising violence and chronic unemployment converged, there are scenarios that would see the increased adoption of automation result in far less legal employment in Chicago, a subsequent rise in the already troubling level of violent crime related to the drug trade, and ill-advised low-income housing policies overwhelming the beleaguered ability of CPD to maintain order...
Anyone that has looked closely at the fiscal problems of Illinois and especially Chicago cannot help but see such declines as other than inevitable -- the illusion that some folks have, fostered by shiny high rises near to the Loop, is sharply contrasted with the level of chaos that exists in the less affluent areas. The disparity has more in common with the Central / South American cities where the affluent hire private security to ferry them around as a response to the violence. Even with a huge property tax increase the city is STILL facing an OPERATING DEFICIT -- there needs to be HUNDREDS OF MILLIONS cut to balance the budget. This is not like the Federal government, where deficit spending is relatively easy with a broad currency devaluation being the concern of just a handful of academic economists and maybe some international bankers, the CUTS needed to ensure the meager funds left over after funding the required pension payments go to the highest priority needs (which typically means the well connected insiders...) will make Chicago decidedly less livable, especially for the kinds of people that have the ability to consider other options.
The fallacy that developers would not be building unless they were sufficiently "pre-sold" is easily refuted -- from the real estate bubble that almost two decades ago imploded in Japan has seen their economy sputter to overbuilding in US cities that result in rents being depressed, too many folks with short memories fail to see the highly cyclic nature of real estate. The ups and downs of REITs go back decades -- Citing Overbuilding, Pros Advise Moving Out of Apartment Stocks - WSJ The "cowboy" mindset that is well illustrated by folks like Kelleher of Spire infamy goes a long way to dismiss their ability to asses the true market for their fantasy projects. The fact is that with interest rates being parked at zero for so long while a politically driven Federal Reserve wants to prop up the failed domestic policies of incompetent leadership the traditional investor have lowered their scrutiny of speculative real estate. Once rates spike back up there will be a major shift in where investors park their dough AND horrible ripples as borrowers like Chicago / Illinois find it even more expensive to fund their fiscal folly... It is not just me that shakes my head -- there are real estate investment professionals that have been just as vocal about how unsustainable current climate has become -- Cap-Rate Limbo: How Low Can They Go? | Multifamily Executive Magazine | Cap Rates, Finance, Rent Trends, Real Capital Analytics
Quote:
“International equity may have investment objectives that aren’t motivated by yield alone.”
Maybe they want to use their money to hasten the demise of cities other than their homes...
Believe me, I don't look forward to these scenarios. It would be nice to think there is an easy solution to these problems, but the fact remains that politically there are too few people willing to truthfully address the issues, and the power the insiders derive from allowing the underclass to remain loyal to charlatans is obvious to anyone with any intelligence -- the aldermen that represent depressed areas don't have to answer for the lack of jobs and failing schools, just making a few shows of outrage to oust the police superintendent buys them certain re-election. The potential voters in affluent areas filled with young people that would rather drink and hook-up than support a reform candidate produces a similar result -- politicians that are not accountable to voters, but only concerned with retaining their cushy offices and fat campaign funds...
Last edited by chet everett; 12-09-2015 at 09:16 AM..
While yes, if developers over estimate the market's ability to absorb new units, it can lead to a short term down period of falling prices and limited new construction activity, but that will eventually correct itself as old units are absorbed w/o newer units entering the market.
This is what allows the city to remain affordable, particularly in comparison to cities who are place more barriers to prevent development (DC, Bay Area, NYC). Or we could have Rahm and the Alderman dictate (even moreso) what the supply constraints should be, given your faith in them, surely that's the better option.
Last edited by PJSaturn; 12-09-2015 at 07:42 PM..
Reason: Off-topic.
This is what allows the city to remain affordable, particularly in comparison to cities who are place more barriers to prevent development (DC, Bay Area, NYC).
It isn't a good thing when a city has poor property returns. Chicago's "affordability" (a nice way to spin lagging property values) means that people aren't gaining equity as in other cities.
And DC, the Bay Area, and NYC all build more housing than Chicago. Someone must be "affording" all that new housing.
OP, slow and steady has been the historical growth in Chicago real estate. Essentially an inflation hedge. DePaul does a nice look at Cook County and various submarkets within.
I'd say that's about right. The impact of the tax hike is yet to be felt, though.
OTOH, a rapidly rising housing market is not really a good thing. The only people who win out of that are estate agents and tax collectors.
And current property owners. Yeah, their property taxes probably rise faster, too, but that's easily eclipsed by the increase in home value and isn't a problem as long as the tax increase doesn't price them out of affordability.
Quote:
Originally Posted by chet everett
The likelihood of continued appreciation is slim. The pressure from increased taxes, declining desirability of under-performing schools, declining employment base, unchecked violence, declining city services and a host of tensions fostered by a corrupt cabal of insiders has been seen before ...
All politics is local. All real estate is, too.
In the Central Area and places like Lincoln Park, the desirability of public schools is not declining. I don't know how much their desirability is increasing, but they were already at rock bottom so I think they're certainly not becoming *less* desirable in the Central Area and most of the North Side within 3 miles of the Lakefront.
Employment base in the region may be declining, however the employment base in the Central Area is increasing and at or near historic highs after suffering a big hit during the financial crisis. That the Central Area employers could bounce back after the collapse of Arthur Anderson, the first tech collapse, the post-9/11 recession, and then the financial crisis of 2008 and now be back at historic highs for employment says a LOT about both the desirability and sustainability of Chicago's greater downtown employment market. For most of the north lakefront it is the downtown employment market that matters most. Evanston's market is also doing pretty well, which also contributes to the north lakefront desirability.
Violence is up this year, but again, most of this violence does not spill into downtown or the north lakefront. Sure, some does, but we're still near historic lows. Remember a few years ago when flash mobs were a big, (overblown), issue for the Mag Mile? That didn't end the Mag Mile and when's the last time you heard of that being an issue anymore?
Declining city services may become an issue. It has not yet been an issue, and a lot will depend on how well the city absorbs the coming tax increases for the pension mess. But, again, currently services are not significantly less and in some ways they are better than ever. Recent Federal funding passed for transportation should mean that the Red-Purple Modernization project will get necessary funding to enable improved transit access for the north lakefront. Rogers Park will just be even more desirable if the Purple Express actually becomes fast again and if they do add additional express stops at Loyola and Wilson, it will be even more usable for those residents. The flyover at Belmont will improved travel times and capacity and make service more predictable.
So, yeah, Chicago as a city has a lot of both current and potential issues. But the Central Area and most of the north side within 3 miles of the lakefront or along the Blue Line to at least the Belmont stop is positioned well for continued growth and popularity. Very few of the issues facing the city are likely to create insurmountable headwinds for that growth.
Finally, most of the new residential construction at least in the Central Area has so far been apartments. Overbuilding apartments in a popular area usually only means that the landlords take a bath - they still get rented out, and potential residents get great deals for a while, bolstering the popularity of that area. It self-corrects, essentially. There are some condos being built now, but they're still a small fraction of the total market of new residential. In the long term, bringing a lot of renters as new residents into an area will improve the numbers for owned homes because some portion of those renters will want to buy in the area they live in.
Location: East Central Pennsylvania/ Chicago for 6yrs.
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Quote:
Originally Posted by NOLA101
It isn't a good thing when a city has poor property returns. Chicago's "affordability" (a nice way to spin lagging property values) means that people aren't gaining equity as in other cities. And DC, the Bay Area, and NYC all build more housing than Chicago. Someone must be "affording" all that new housing.
Chicago's NEW(not rehabs) residential construction is at the highest level that it has been since the third quarter of 2008. In the last 12 months, developer have started or completed the construction of 6,143 new residences — specifically single family homes, townhouses and duplexes. This marks a 7.6 percent increase over the same 12 month period ending in Q3 of 2014. Demand for new single family homes and condos has been high in the Chicagoland area as inventory remains low. And with the new rental market becoming more saturated, more developers are looking to build new single family homes, townhouses and condos.
Compare Rents.... between cities. REALLY NOLA? BIG DECLINE AND LITTLE....NEW NON-DOWNTOWN HOUSNG??? IN CHICAGO. LET'S SPIN IT TO LESS THEN ANOTHER CITY..... ESPECIALLY NYC....
Chicago ---30.3% of median income.
Houston---30.5%
Dallas-----28.8 %
Wash DC--27.3%
Boston----34.1%
NYC-------41.7%
Miami-----44.3%
SF---------45.6%
LA---------48.7%
Downtown CHICAGO apartment boom stretching into its sixth year, these are the best of times for landlords.
But this sight says the boom might be over next year...THERE USE IT AGAINST CHICAGO NEXT YEAR. http://www.chicagobusiness.com/reale...year-heres-why
5 Toronto Skyscrapers Under Construction | Real Estate Expedition
There are currently there are 132 high-rise buildings under construction in Toronto. Mexico City and New York City are in the second and third position with 88 and 86 high-rises under construction.
Should WE SPIN THIS AS MAYBE YOU? LESSEN NYC FRO UNDER PERFORMING TORONTO AND MEXICO CITY??? http://www.chicagobusiness.com/reale...er-record-year HOTEL BUSINESS UP 8.3%
How can we SPIN THIS NEGATIVE???? Maybe that Conventions for 2016 is down?
Chicago Named for 2014. Chicago named "TOP METRO" in ALL NORTH AMERICA for CORPORATE RELOCATIONS AND EXPANSIONS.
The impact of Plan strategies including making Chicago a center for business services and headquarters, and building an environment where businesses can flourish in the report.
They tracked 677projects accounting for nearly 40,000 jobs, 35 million square feet of space, and more than $6 billion in investments in 2013*; of these, approximately 370 projects qualified for the publication’s requirements.
Chicago is Referred to as the “Hottest Urban Center in the U.S.” by Crain’s Chicago Business, the city of Chicago welcomed 217 new and expanding businesses in 2013 – nearly one-third of the region’s total (comprising 4.6 million square feet of added space, 21,312 new and retained jobs, and $3.0 billion in investment. Companies including ADM, Gogo and Motorola Mobility moved to access the city’s talent
The number of international companies new to, or expanding in Chicago, also increased from 80 in 2012 to 114 in 2013. Examples include Bank of China, Hannover Fairs USA and airberlin. Approximately 40 percent of the region’s international investments were made within the city.
Chicago's NEW(not rehabs) residential construction is at the highest level that it has been since the third quarter of 2008. In the last 12 months, developer have started or completed the construction of 6,143 new residences — specifically single family homes, townhouses and duplexes. This marks a 7.6 percent increase over the same 12 month period ending in Q3 of 2014. Demand for new single family homes and condos has been high in the Chicagoland area as inventory remains low. And with the new rental market becoming more saturated, more developers are looking to build new single family homes, townhouses and condos.
Compare Rents.... between cities. REALLY NOLA? BIG DECLINE AND LITTLE....NEW NON-DOWNTOWN HOUSNG??? IN CHICAGO. LET'S SPIN IT TO LESS THEN ANOTHER CITY..... ESPECIALLY NYC....
Chicago ---30.3% of median income.
Houston---30.5%
Dallas-----28.8 %
Wash DC--27.3%
Boston----34.1%
NYC-------41.7%
Miami-----44.3%
SF---------45.6%
LA---------48.7%
Downtown CHICAGO apartment boom stretching into its sixth year, these are the best of times for landlords.
But this sight says the boom might be over next year...THERE USE IT AGAINST CHICAGO NEXT YEAR. http://www.chicagobusiness.com/reale...year-heres-why
5 Toronto Skyscrapers Under Construction | Real Estate Expedition
There are currently there are 132 high-rise buildings under construction in Toronto. Mexico City and New York City are in the second and third position with 88 and 86 high-rises under construction.
Should WE SPIN THIS AS MAYBE YOU? LESSEN NYC FRO UNDER PERFORMING TORONTO AND MEXICO CITY??? http://www.chicagobusiness.com/reale...er-record-year HOTEL BUSINESS UP 8.3%
How can we SPIN THIS NEGATIVE???? Maybe that Conventions for 2016 is down?
Chicago Named for 2014. Chicago named "TOP METRO" in ALL NORTH AMERICA for CORPORATE RELOCATIONS AND EXPANSIONS.
The impact of Plan strategies including making Chicago a center for business services and headquarters, and building an environment where businesses can flourish in the report.
They tracked 677projects accounting for nearly 40,000 jobs, 35 million square feet of space, and more than $6 billion in investments in 2013*; of these, approximately 370 projects qualified for the publication’s requirements.
Chicago is Referred to as the “Hottest Urban Center in the U.S.” by Crain’s Chicago Business, the city of Chicago welcomed 217 new and expanding businesses in 2013 – nearly one-third of the region’s total (comprising 4.6 million square feet of added space, 21,312 new and retained jobs, and $3.0 billion in investment. Companies including ADM, Gogo and Motorola Mobility moved to access the city’s talent
The number of international companies new to, or expanding in Chicago, also increased from 80 in 2012 to 114 in 2013. Examples include Bank of China, Hannover Fairs USA and airberlin. Approximately 40 percent of the region’s international investments were made within the city.
Ok NYC's is lower.... LET'S SPIN IT..... That means Chicago is ON DECLINE... INFERIOR AND ALL ARE MOVING OUT...
You forgot to mention that the city has the highest property taxes in the nation and is still broke.
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LET'S SPIN IT TO LESS THEN ANOTHER CITY..... ESPECIALLY NYC....
LET'S SPIN IT..... That means Chicago is ON DECLINE... INFERIOR AND ALL ARE MOVING OUT...
