Quote:
Originally Posted by the urban politician
Sorry bud, but our income tax is about to go up, and property taxes are going to be headed up and up.
I love your little “I was talking to a New Yorker and he said wow Chicago is awesome” anecdotes but with this one there is a legit issue.
It’s not just that our taxes are just going to go up.
It’s that even after that, the constitutionally protected pension windfall is so gargantuan that everybody knows that they will be going up and up and up indefinitely. Let’s not forget the new garbage collection fees and water/sewer taxes added to water bills just a few years ago that out of towners don’t know about.
That’s what many people don’t understand. Savvy investors realize that our ridiculous unfunded pension obligation coupled with zero political will to change means that recent tax increases are merely the tip of a long and huge iceberg. That’s why our credit rating is junk, home values are the worst in the country, etc.
But all of this keeps the rents high because people rightfully don’t want to buy a house here, and yes Chicago is an awesome and great city, etc etc.
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I've had this conversation with dozens of Chicago RE naysayers before. Real estate is inherently a low-information marketplace. Each property is different and so is each market and sub market. Further complicating things is the fact that most data on real estate sales and values isn't public.
One thing that is unquestionably public is data on the fiscal health of state and local governments. So if you believe markets function reasonably efficiently given all available information, the worst case scenario for Chicago and Illinois is already priced in. The one bit of information about our markets that isn't private or difficult to define or poorly understood is the fiscal mess Chicago and Illinois are facing.
Therefore prices will likely never be lower for RE in Chicago and Illinois because it's pretty difficult for the crisis to get worse without outright insolvency triggering a bankruptcy and wholesale destruction of public debts or, on the other hand, a true reform of the system improving finances and also alleviating the fiscal threat. In any eventuality, long run investments in Chicago and Illinois real estate will be rewarded because things can't really get any worse than they are now.