CHICAGO | General Discussions

[Via Chicago]

Originally Posted by moorhosj1

This isn’t really how inflation or wages work, but yes purchasing a house is risky. For the average college-educated person, wages increase from 20s to 30s to 40s and peak in your 50s. Combine that with the fact that mortgages don’t increase with inflation and you have the world we live in.

right, so why make it even more risky? lets also not forget that wages have remained stagnant for the vast majority of americans over the past several decades and purchasing power is far less than what it used to be...inflation has hit big ticket items like equities, cars, college education, healthcare, and housing orders of magnitude higher. incomes have nowhere near kept up with these things, hence the extreme wealth inequality we are dealing with today.

Your scenario leaves out so much of reality, like opportunity costs or the fact that if you have to take a job at a coffee shop it will be tough to carry ANY size mortgage. If I bought a smaller house, my mother-in-law wouldn’t have been able to move in during COVID, my family wouldn’t be able to grow, and my home value wouldn’t increase as much.

the opportunity cost to buying less house than i can afford is i can save more of my paycheck on something other than housing (i.e. retirement, which americans are woefully underprepared for). it may even allow someone to stop working early, in turn buying freedom from work obligations as opposed to have a big house to clean and pay off for another 15 years. if you need the space, than by all means take it. but encouraging people to buy at the extreme end of their budget when they dont need to is reckless.

Nobody is saying to take on a payment you can’t afford, but if you are in the first 15 years of your career, it’s likely your wages will increase over time. Ignoring this is as silly as ignoring past recessions.

final note, but ageism is a real thing in the workplace and there are more than a few 50-somethings forced into unwanted early retirements who find themselves locked out of careers going to younger people who are willing to work for a fraction of the cost. or who cant get their careers back after untimely late career recessions at the peak of earning power. lots of people plan to work for a certain number of years, and that is not always fully in your control. as automation and AI takes increasingly outsize roles in our workplaces (the numbers are readily available for how many good paying white collar jobs this is likely to impact), ill personally create the financial cushion while i can as opposed to the extra 2 bedrooms and whatever on-trend finishes i dont really need.

back to regular scheduling.

[west-town-brad]

Originally Posted by Via Chicago

right, so why make it even more risky? lets also not forget that wages have remained stagnant for the vast majority of americans over the past several decades and purchasing power is far less than what it used to be...inflation has hit big ticket items like equities, cars, college education, healthcare, and housing orders of magnitude higher. incomes have nowhere near kept up with these things, hence the extreme wealth inequality we are dealing with today.



the opportunity cost to buying less house than i can afford is i can save more of my paycheck on something other than housing (i.e. retirement, which americans are woefully underprepared for). it may even allow someone to stop working early, in turn buying freedom from work obligations as opposed to have a big house to clean and pay off for another 15 years. if you need the space, than by all means take it. but encouraging people to buy at the extreme end of their budget when they dont need to is reckless.



final note, but ageism is a real thing in the workplace and there are more than a few 50-somethings forced into unwanted early retirements who find themselves locked out of careers going to younger people who are willing to work for a fraction of the cost. or who cant get their careers back after untimely late career recessions at the peak of earning power. lots of people plan to work for a certain number of years, and that is not always fully in your control. as automation and AI takes increasingly outsize roles in our workplaces (the numbers are readily available for how many good paying white collar jobs this is likely to impact), ill personally create the financial cushion while i can as opposed to the extra 2 bedrooms and whatever on-trend finishes i dont really need.

back to regular scheduling.

I have a different view:

the leveraged principle residence is the single best investment available today

benefiting from the power of government subsidized leverage, and the power of inflation, amazing tax write offs, the benefits of gentrification, the power of the protected "homeowner class" via government regulation/building codes and policy, protected by highly restrictive zoning and NIBYism all around the US which caps supply, and paid for by ever inflating wages for almost all working people (not mythical average stagnant wages)

dont finance more than you can pay for - obviously - but even if you cant make the payments at some point in time, you likely will have years to figure it out with lots of handouts and help and free money before anything really bad happens

and if the house value temporarily goes down - who cares - you still get to live in the house until values recover

[Via Chicago]

as always, real estate is local, and gentrification is rarer than you imply. typically, at best, housing barely keeps up with inflation which makes it more or less a forced savings account. and making sweeping generalizations about highly leveraged mortgages being "good" because the government will just bail you out when things go south just kinda confirms every suspicion i had about this bubble

(not mythical average stagnant wages)

yeah just one big imaginary myth









if youre a white person in the upper 10% percentile of earnings and wealth than yeah i imagine it all just seems like a myth to you. if you happen to be anyone else, not so much.

[Mimol742]

Originally Posted by Via Chicago

as always, real estate is local, and gentrification is rarer than you imply. typically, at best, housing barely keeps up with inflation which makes it more or less a forced savings account. and making sweeping generalizations about highly leveraged mortgages being "good" because the government will just bail you out when things go south just kinda confirms every suspicion i had about this bubble



yeah just one big imaginary myth









if youre a white person in the upper 10% percentile of earnings and wealth than yeah i imagine it all just seems like a myth to you. if you happen to be anyone else, not so much.

No Asians data on those charts?

[The Lurker]

Originally Posted by Mimol742

No Asians data on those charts?

Look closely. Something interesting happens in 1983. Pre 1983 there were only two races. White and non-white (which presumably included Asians) and then post 1983 there are 3 races. White, Black and Hispanic. Asians and even Middle Eastern people (who have also done well in the last few decades) are omitted for some odd reason. Seems blatantly.........curious, doesn't it? But this is from Urban Institute. Outside of big cities in middle income areas, the lines trend a bit closer, and the average white family makes significantly less than a million annually. This graph only shows the baffling wealth inequality prevalent in big.......Non-Red cities.

This thread went off the rails days ago, but something tells me it will get cleaned up now.

[west-town-brad]

Originally Posted by Via Chicago

as always, real estate is local, and gentrification is rarer than you imply. typically, at best, housing barely keeps up with inflation which makes it more or less a forced savings account. and making sweeping generalizations about highly leveraged mortgages being "good" because the government will just bail you out when things go south just kinda confirms every suspicion i had about this bubble



yeah just one big imaginary myth









if youre a white person in the upper 10% percentile of earnings and wealth than yeah i imagine it all just seems like a myth to you. if you happen to be anyone else, not so much.

don't confuse averages of 100 million working adults with an individual person's experience.

Since I was talking about a person investing in a home - would you be able to show me one individual person who has stagnant wages since 1964?

I will wait patiently.

I have a degree in economics thank you

[SteelMonkey]

Originally Posted by west-town-brad

don't confuse averages of 100 million working adults with an individual person's experience.

Since I was talking about a person investing in a home - would you be able to show me one individual person who has stagnant wages since 1964?

I will wait patiently.

I have a degree in economics thank you

Congrats on your degree but judging by your question the only thing you received was the diploma

[LouisVanDerWright]

Sorry Y'all, I've been checked out and you had a long conversation about all sorts of stuff that interests me. I'm going to try to break this into a couple posts, but please actually read what I'm saying and respond!

Originally Posted by marothisu

Pretty much - at least this hits home. We're planning on having children and also moving back to Chicago (one of the main reasons - affordability with children). Definitely been looking at properties and the rankings of schools in the areas. We don't want to live in the suburbs, but holy crap is moving to somewhere like Naperville in an area with schools with all 8-10 ratings going to be attractive at some point.

The "rankings" are often garbage though. For example, the coveted Belding School district in OIP is ranked 2/10 across the board. Not sure why everyone is falling over themselves to buy a $1.5 million house in OIP so they can send their kids to a shit school.

Originally Posted by Handro

My GF and I have a combined income of ~$175K and there is no way in hell we can afford a place large enough to have kids in Lincoln Park, North Center, Lakeview, etc. The type of dense, walkable neighborhood that we both want are basically off limits to us unless we take some big financial risks in the next few years and they all pay off. If my options were a place like Gladstone Park, I'd rather just live in a pre-war suburb with a dense downtown and a Metra stop. As such, we have no plans for kids right now and there are no children in our medium term plans. People like us certainly aren't helping the city grow, I know that.

Don't despair, that's what Mayfair/Portage/Old Irving Park are for. If you can't find a reasonable house for under $500k in these areas, you ain't trying.

My wife and I are finishing up a gut rehab of a 4,000 SF house on a 50x155' lot in Mayfair, we paid like $305k for it and are putting $200k into it. Once we refi out of the construction loan in a few weeks our payment will be $2k total. The house has 4 beds, 3.5 baths, a huge office that can be another bed, and a sunroom that could also be another bedroom:

Originally Posted by OrdoSeclorum

One thing I've observed is that people in Chicago tend to underestimate how much house they can "afford". There are many folks in California earning $175,000 who buy houses that are over a million dollars and don't think twice. I'm not saying that's the way it should be, but some of this is cultural.

This whole market has gone insane due to ultra low rates. The bottom will drop out again, this time on the "giant overpriced house that you can't actually afford" market. You are very right to put "afford" in quotes because people are making housing decisions off all time low interest rates and assuming they will do nothing but sit at home like they did the last 12 months. As soon as people realize they would like to travel or go out to eat again before they die, there's gonna be a bum rush back to more reasonable housing.

Originally Posted by Via Chicago

i mean you could very very easily reverse this statement and it would equally as possible/true. future earnings are no guarantee and being underwater en masse on real estate is a thing this country, like, JUST went through a decade ago. we had people with masters degrees and PHDs out of work competing for jobs at coffee shops. how does everyone just operate with this kind of collective amnesia? is zero breathing room really the place you want to be when this inevitably happens again?

biting off less than you can chew will literally never hurt you. the inverse is risky for reasons that should be blatantly obvious. and people wonder how we wind up in bubbles...

Yes Yes Yes!

Originally Posted by ardecila

Supposedly the steel beams are still in storage to put the L back up, but I imagine if they built it again it would be shifted to the alleys north or south of 63rd with a concrete structure and better soundproofing.

Wow, that's... Bizzare... I don't think I've ever seen anyone dismantle a steel structure and then NOT scrap it? Maybe the first time they took apart the Ferris Wheel?

Originally Posted by west-town-brad

I have a different view:

the leveraged principle residence is the single best investment available today

This is categorically false. Single Family Housing has historically had a nominal return in the 2-3% range. Once you account for inflation, the return is essentially zero. It might be your "view", but your view is factually incorrect. You would be much wealthier renting your entire life and piling money into the stock market at 6-8%.

The reason SFH's have a poor return is that people don't actually buy them because they want to invest. They buy them for the freedom to do as they please with their property and for personal enjoyment. This is why the return is so low because people tend to overpay for SFH's like they are doing now.

Originally Posted by ardecila

27 units, 23 parking spaces is not ideal for TOD. And they NIMBY'd it from 5 floors down to 4. Sounds like they still have a ways to go. They're not building mini-towers like the one at 43rd or Damen Green Line stops.



One building is up. They have solid fencing so I can't tell if the foundations are in for the others.

The Starbucks site is outside the 1/4 mile radius around the Orange Line stop but Western itself is also a TOD corridor. There's housing just across the tracks and the park across the street, it's not even an industrial site. Suburban retail here is such a waste. And the Starbucks will face Oil Express instead of facing the park...

My girlfriend and I are planning to buy a house in a few years, we'd love to stay in Pilsen or Bridgeport but the prices might push us to McKinley. The park access and Orange Line is a huge plus.

I'm actually looking at an 8 unit right by the Western Orange Line now. There is definately development starting to jump Western from McKinnley into Brighton. There's even some new construction on like 35th just West of Western.

[LouisVanDerWright]

Originally Posted by Via Chicago

definitely some interesting little bits and pieces of rehabs in N Lawndale. i dont think you would have seen something like this 10 years ago (whether it will get whats its asking is one question and cant say im a fan of the black brick trend thats seemingly now the default way for developers to signal "we gut rehabbed a brick building everyone!", but...)

https://www.redfin.com/IL/Chicago/30.../home/13232464

This place is an atrocity, they stripped the brick clean only to paint it black. Idiots... Also it will never sell, there isn't a single comp within a mile of it, it will never appraise out.

Originally Posted by OrdoSeclorum

Douglas Park is on my watch list for places that might pop. I didn't really even know about it before Riot Fest got booted out of Humboldt Park, but it reminds me a little of of Logan Square or the Northwest Corner of Bucktown in the late 90's. Good transit access, a nice park, boulevards. Feels well maintained with good bones.

Yes, Douglas Park is the best, been investing here for almost 10 years. About to make the jump West of the park, been eying the sketchy North side of it too since that's all OZ.

Originally Posted by Via Chicago

well maintained is a bit of a stretch. walk around and really look at the buildings and they are in sadly, incredibly rough shape with an enormous amount of deferred maintenance. not to say they cant be saved, but its going to take a big influx and pretty fast before the structural issues get to the point of no return. i dont see it happening in time sadly. the buildings are the same age as those on the north side, but they have an additional 30+ years of distress and neglect added in on top of it. wheras anything worth saving on the north side was pretty much tidied up by the 90s/00s.

also, the trash/blight situation is completely out of control, so anyone driving or walking around is going to be turned off pretty quick. not to mention north of ogden is a premanent open air drug market in the park...directly next to a police station.

id love nothing more to see the area rebound. the odds are just so incredibly steep. walk around McKinley Park and its just a completely different vibe compared to Douglas Park, and those communities arent all that different housing wise

I strongly disagree, Lawndale is incredibly well maintained. There are stretches and streets that aren't, but then there are the side streets. Check out Millard and Avers North of Ogden. Literally Logan Blvd style Mansions in perfect condition. Don't let the main drags with litter and white elephant vacant buildings confuse you.

Originally Posted by Via Chicago

thatd be great to see, and at least Lawndale Christian has a track record of actually following through

This, the nexus of Lawndale has become and will be Central Park and Ogden, this is almost entirely because of Lawndale Christian's efforts.

[marothisu]

Originally Posted by LouisVanDerWright

The "rankings" are often garbage though. For example, the coveted Belding School district in OIP is ranked 2/10 across the board. Not sure why everyone is falling over themselves to buy a $1.5 million house in OIP so they can send their kids to a shit school.

I've actually been thinking this lately. I just assumed they'd send their children to private school or get them into something else. Is that not very true?

As far as rankings go, yeah. True. My elementary schools in Minnesota I went to are rated like a 5. Maybe something drastically changed but they were very good schools with solid teaching. My high school was ranked one of the top public schools in the state. I mean I went to school with multiple people who scored very highly on SAT and ACT, including multiple perfect schools. I had multiple friends going to ivy league or really highly rated colleges like Middlebury, Cal Tech, etc. Most people at the school were kids of doctors or highly paid engineers. Heavy AP classes all around and I know it's still true today. Very good teachers that really set me up for success in college. Yet it's rated a 6...


As far as some areas being less affordable...its probably a good thing to fast track development in other areas whether McKinley Park or Woodlawn or wherever else. Exactly the case here in nyc. Only difference is that it got out of control here. And TUP brought up the state wanting to undo the rent control ban. Remember here in nyc we have rent control and it has slowed absolutely nothing down for new development for years and years.

[west-town-brad]

Originally Posted by LouisVanDerWright

This is categorically false. Single Family Housing has historically had a nominal return in the 2-3% range. Once you account for inflation, the return is essentially zero. It might be your "view", but your view is factually incorrect. You would be much wealthier renting your entire life and piling money into the stock market at 6-8%.

The reason SFH's have a poor return is that people don't actually buy them because they want to invest. They buy them for the freedom to do as they please with their property and for personal enjoyment. This is why the return is so low because people tend to overpay for SFH's like they are doing now.

sorry, no. the leveraged return on a personal residence is not nominal

[ardecila]

Originally Posted by LouisVanDerWright

Wow, that's... Bizzare... I don't think I've ever seen anyone dismantle a steel structure and then NOT scrap it? Maybe the first time they took apart the Ferris Wheel?

CTA rebuilt that whole section from the ground up in the 1990s with Federal money when they did the rest of the Green Line, and then Daley decided to screw over Woodlawn and tear it down. The Feds were pissed that Chicago was throwing their money in the trash so they required CTA to keep the steel.

I think (but not sure) there may be some kind of 25 or 30 year clock that CTA is running out before they can scrap it. Or, y'know, they can just put the L back up! Hope springs eternal

I'm actually looking at an 8 unit right by the Western Orange Line now. There is definately development starting to jump Western from McKinnley into Brighton. There's even some new construction on like 35th just West of Western.

Yeah it's a great neighborhood. Would be better without Mike Tadros' asphalt plant. Most of the new construction is driven by the Chinese community who are happy to live on a brownfield site next to a rail line if they can get a compact SFH or townhome.

[jtown,man]

Originally Posted by SteelMonkey

Congrats on your degree but judging by your question the only thing you received was the diploma

No.

Aggregates matter. These numbers are taking every wage earner, and we all know the lower wage earners have seen barely a blimp in raises in the last 4 decades.


However, for people in the middle class, we see raises.

My dad has seen consistent raises his whole life, I have, my girlfriend has, her two sisters, everyone I know. None of us are wealthy but our income has consistently been increased throughout the years, more certainly above inflation.

I am sure this is the case for most people in this forum. Just because a McDonalds employee hasn't seen a raise in a decade doesn't mean a hell of a lot of non-min wage job earners haven't.

[Via Chicago]

Originally Posted by jtown,man

No.

Aggregates matter. These numbers are taking every wage earner, and we all know the lower wage earners have seen barely a blimp in raises in the last 4 decades.


However, for people in the middle class, we see raises.

My dad has seen consistent raises his whole life, I have, my girlfriend has, her two sisters, everyone I know. None of us are wealthy but our income has consistently been increased throughout the years, more certainly above inflation.

I am sure this is the case for most people in this forum. Just because a McDonalds employee hasn't seen a raise in a decade doesn't mean a hell of a lot of non-min wage job earners haven't.

ancedotal evidence is not statistically meaningful. i know this and i dont even have an econn degree. if you fall in the upper-middle band of income earners than you have probably done OK. but the reality is the american middle class is shrinking.




^yes the upper bracket increased but so has the lower

evaluating income in a bubble is also irrelevant, COL is just as big a factor. if you need to be located in a big expensive city in order to have a reasonable chance at good employment (not to mention the cost of education needed in order to position oneself for good employment), than income isnt telling the whole story. youre FAR closer to poverty and falling into the lower income class than moving up into the top 1-2% whether you realize it or not.

aggregates do matter, and income growth among the majority of Americans in no way resembles this line:



or this line:



or this line




point is our parents could get the same sort of lifestyle with just a high school diploma and they worked far less hours as well. the student loan crisis didnt just emerge out of thin air, its creating a significant drag on the potential for wealth building among young people. and the reality is, for anyone who dosent have an in-demand degree, they are falling into the service sector which is precisely the kind of job which has seen barely any movement at all in terms of earnings, and which the majority of new jobs growth over the past 20 years could be categorized as.

basically your argument boils down to "im doing good and people i hang out with are doing good so therefore everything is good!". in other words youre living in the the little blue emerald city and pretending that the exploding sea of red isnt something that actually happened and continues to exacerbate year after year



and thats America in a nutshell.