Bad time to buy? (Chicago, Chester: for rent, mortgage, loan)

[chet everett]

Originally Posted by King Harold

Of course the Jordan estate is a monstrosity but I guess my point was not that it is a bellwether of the Chicagoland RE market but that there aren't any bellwethers.

It does not make sense to pin any conclusions on an individual parcel. What does make sense it to look trends are compare those to other data from either the region or the broader US real estate market.

In one of the thread h'worth posted some charts to illustrate the important shifts that are strongly favoring rail-centric suburbs in the west suburbs compared to pretty much every other part of the region. The only areas that have done better in terms of price stability / appreciation are areas served by the desirable CTA lines in the north / NW parts of Chicago. That is pretty signficant shift but it would be incorrect to assume that there is no component of "affordability" at work even in these moves. The fact is that areas even closer to the Loop, like Lincoln Park and adjacent areas, are so pricey that any further price gains are chasing a vanishingly small portion of potential buyers. Some of this also true in the priciest areas of the North Shore -- though it is true that they are not making any more "shoreline" for lakefront estate neither is there the kind of explosion of new wealth that is driving prices in places like San Francisco / Silicon Valley or even the similar boom areas of Portland OR or Redmond WA...

Given the fact that average selling prices in many of even the region's most desirable areas have NOT fully recovered from 2008 era implosion it would be foolish to ignore the evidence that suggests the combination of anemic job growth and continued concerns over the ongoing fiscal issues of the state & Chicago are responsible for at least tamping down prices...

There are dozens of ways to slice up data, and when either local MLS or the various sources of national sales data all show that there are areas with much healthier demand in critical price points, from entry-level buyers fed up with renting, to move-up buyers that finally have equity and job stability, to upper bracket buyers that often are the most sensitive to bubbles are all active ELSEWHERE that really is hard to ignore the negative effects facing our region.

[Avondalist]

If you want to buy in Chicagoland, be sure to check the effective tax rate of where you buy. Note this is the rate of the assessed value, not the estimated price.

Compare your property tax rate (database) - Chicago Tribune

[reneeh63]

I understand that as a family of (almost) 4 you need a little space. But do you really need a $400k home? You have a lot of money to put down - think how much less your mortgage would be if you could find something $300-350k. Especially with essentially one income and new baby coming I'd not want to stretch too far. Did you say that you have other "emergency" money? Maybe if you have at least 6 months worth put away.

[jonnynonos]

Originally Posted by Needahomefast

Thinking of buying in Chicago (likely the suburbs). However, I keep hearing about all the financial troubles and chance of taxes continuing to go up and values to go down, jobs will be lost. We are a family of 3 (soon to be 4). We are living off 100k income since my wife works part time to stay with the child part time. We also are in the middle of a car payment. It is pretty tight but we feel its a temporary struggle/sacrifice. We have 180k to put down on a home and a mortgage calculator tells me that is we bought a 400k home we'd pay around 1869 per month (including property taxes) which is only a little bit more than were paying for rent now in a 2br apt. Based on that info - does anyone think we should wait and why? We do have an emergency fund in place but wouldn't want to tap in that unless of emergency i.e. Job loss.

We don't live lavishly but enjoying eating out on the weekends and would ultimately like memberships at places like Shedd and Mosi (which seem reasonably affordable IMO).

We are also considering moving out of the area entirely. However we are nervous about the idea and the risk of not liking where we move to even though we know the dollar may stretch farther.

No. It's one of the largest metro areas in the country. Nothing that dramatically bad is going to happen to it.

Look how bad Detroit was for decades; suburban housing values were still generally stable.

Detroit at its worst was 10 times worse than Chicago will ever be in every conceivable way.

I don't think that long-term even city dwellers have that much to worry about in terms of genuinely outrageous tax increases. I don't know how they're going to ultimately solve the financial situation but they are only going to be able to raise taxes so much without destroying the city, so they are going to have to figure out another way.

[ToriaT]

You have to keep in mind that taxes are high in most major desirable metro areas....those in New York, New Jersey, California, etc. Those are the places that you should look at in terms of amenities and comparability. Comparing Chicago area to something like Tennessee is not the same...of course the taxes will be lower but you are comparing apples and oranges. Salaries are also higher in those metro areas too.

[trailblazer33]

Repeat after me - the house you live in is not an investment.

[IrishIllini]

Originally Posted by trailblazer33

Repeat after me - the house you live in is not an investment.

This is simply not true. The house you live in isn't ALWAYS an investment, but if you're smart about your purchasing and do your due diligence it is not uncommon for people to make money selling their homes. At worst, you lose some money but nowhere near as much as you would have had you rented. Unfortunately, the people most likely to make money on their home purchase are also those with well-lined pockets to begin with. Money begets money.

[dexter1225]

Originally Posted by trailblazer33

Repeat after me - the house you live in is not an investment.

Nonsensical comment makes no sense

[RJA29]

Originally Posted by Needahomefast

I realize many think I'm better off investing in the stock market as opposed to down payment. There are a few reasons I have decided not to. But one of the reasons would be the exchange for the more reasonable mortgage price.

You don't have to put 20% down - you could put 5% and still get a ~4% loan (without extra PMI) and keep the money you have saved up.

And, to be fair -- can you really guarantee that the stock market will do any better than IL as a whole, especially very specific subsets of various suburbs?

If you invest 180K into a stock and the company goes under, it's gone. If you invest 180K in a house and it loses value, you still have a place to live.

[RJA29]

Originally Posted by reneeh63

I understand that as a family of (almost) 4 you need a little space. But do you really need a $400k home? You have a lot of money to put down - think how much less your mortgage would be if you could find something $300-350k. Especially with essentially one income and new baby coming I'd not want to stretch too far. Did you say that you have other "emergency" money? Maybe if you have at least 6 months worth put away.

It does seem that the OP (judging by the stated facts) has been very smart about finances and doesn't want to rush into something.

A "400K" home isn't necessarily anything ostentatious in a large, large swath of the Chicagoland suburbs. I routinely see 400K houses that are small and old -- yet close to the Metra and in good school districts. It seems these things might benefit the OP.

Originally Posted by ToriaT

You have to keep in mind that taxes are high in most major desirable metro areas....those in New York, New Jersey, California, etc. Those are the places that you should look at in terms of amenities and comparability. Comparing Chicago area to something like Tennessee is not the same...of course the taxes will be lower but you are comparing apples and oranges. Salaries are also higher in those metro areas too.

Yup -- didn't we all have this conversation in the suburbs forum (where I suggest OP look).

Things could get slightly worse in Chicago. But, if one has a realistic outlook, there will still be jobs and schools and all of the things that a HUGE metro area offers.