CHICAGO | General Discussions

[moorhosj]

Originally Posted by LouisVanDerWright

Bond inversion is not a dead ringer predictor for recession and this is likely a lot of chaos coming out of China as they are having a hell of a time controlling capital flight right now. People are dumping cash in the US right now and that, not economic data, is causing the bond rally.

I keep seeing these lines repeated over and over. The point isn't that they happened to invert this week, the point is that the 2-year and 10-year yields have been converging steadily since 2017. That the yields were close enough to invert in the first place is the story.

Why are people willing to receive less premium to have their money locked up for 10 years instead of 2 years? That's the real question. I can only imagine that a fear of economic slowdown is the answer. GDP growth was 1.9% in the 2nd quarter and it's running about 2% for the 3rd quarter. I'm not sure I see this "great economy" everyone keeps talking about. A great economy doesn't require 4% deficit spending to achieve 3% growth (probably closer to 2% this year).

[moorhosj]

Originally Posted by LouisVanDerWright

As I said before, this could be an indication the economy is about to shit the bed or, more likely in my opinion, it is indicating massive overseas financial turmoil that will force fed easing recession or not.

So if the Fed eases now, what will they do when the actual recession hits?

[Buckman821]

Originally Posted by BonoboZill4

Mostly depends on how the market reacts to the upcoming Presidential election tbh. Everything in between is fireworks

Ya...no. Markets are acting pretty strange right now and the vast majority of it has nothing to do with US politics.

I have a lot of thoughts but I won't drag this further off topic. It would be kind of fun to have a Global Economy thread somewhere on this site. Maybe a mod could move some of these posts.

[marothisu]

Good data and I largely agree with the last line that was underlined. However, I don't even think that's automatic in regards to attracting people who just graduated in the last few years. In part that comes with making Chicago attractive as a place to work after college - which it is already as tons of data shows.

While there's a lot of college grads in their early to mid 20s who can afford downtown, there's many who can't and are totally fine with that. If you just graduated, then most places in the usual neighborhoods are going to be attractive to you even if they aren't new luxury. I know I didn't get into a "luxury" mindset until a few years after graduating college. Although I settled in Gold Coast (in a 25+ year old building at the time), I was excited about the even older places in Lincoln Park I almost moved to instead. Of course, more normal people who just graduated in the last few years can afford to live by themselves in downtown Chicago than places like Manhattan and SF and it's a big point of attraction on that front, but isn't the end all be all.

Here in NYC, most new college grads can't afford anything good (unless they are going to work for a hedge fund or something similar right away) and if they want to live in Manhattan, a lot of them pile 2 or 3 into a 1 bedroom. Tons of living situations here that are definitely worse than Chicago and a lot of new/newish graduates don't care one bit. They care more about having a job and trying to work their way up. Even my 24 (?) year old co-worker who visited Chicago for the first time a few weekends ago was amazed at her friend's regular, definitely non luxury and 40+ year old place in Lakeview. Why? Because it was big and it was relatively cheap. She told me that she was in disbelief at the price related to what the apartment was and started questioning why NYC is so expensive (and why Chicago is so much cheaper).

And honestly this continues for most people regardless of their age. They're fine with it in part because of the job opportunities. The ones who can't afford luxury in Manhattan or parts of Brooklyn or Queens end up moving to semi nearby suburbs in New Jersey.

I do agree with Zotti, overall, but I don't think that if there's less luxury places built that college graduates will stop coming as much. And at the end of the day, you can get a 3000+ sq ft home in Lakeview, Ukranian Village, Logan Square, etc for under $1.2M today and way cheaper in other neighborhoods that aren't like that (but still good). Keep in mind that ~$1.2M will only get you a nice 1 bedroom co-op in the West Village in Manhattan (https://www.realtor.com/realestatean...6-10251#photo9) and that's a studio in the newer buildings. That price is the price of a newer luxury 750 sq ft 1 bedroom in Long Island City with a view of Manhattan.

My point being - even if you make enough money to buy something for $1.2M after being out of college for awhile and you could afford that in Chicago, Chicago still is attractive from that standpoint. A lot of the newer graduates in their 20s do not necessarily require luxury right away, and Chicago on the luxury market is still cheaper than the majority of big, economic powerhouses.

[the urban politician]

I think this article clearly makes the case to rationally minded people that gentrification is not a major problem for Chicago.

Unfortunately, rational thought is often the enemy of good politics. So certain Aldermen in Avondale and Pilsen are going to continue to defy logic, pander, and fear monger to a certain demographic to get their votes. But the educated classes are going to keep pouring into the city--there is no doubt about that.

[marothisu]

Originally Posted by the urban politician

I think this article clearly makes the case to rationally minded people that gentrification is not a major problem for Chicago.

Unfortunately, rational thought is often the enemy of good politics. So certain Aldermen in Avondale and Pilsen are going to continue to defy logic, pander, and fear monger to a certain demographic to get their votes. But the educated classes are going to keep pouring into the city--there is no doubt about that.

Yep, no matter what I think they will. The funniest part is that they think they are protecting by limiting density too. People who can afford $1M+ will just continue to transform these neighborhoods like currently.

[the urban politician]

^ Exactly.

Some day perhaps I will convert one of my six flats in Pilsen into my own mansion. It’s walkable to the Pink Line and it has space for a garage off the alley.

I’m pretty sure that downzoning my property can’t stop me from doing that.

[marothisu]

Originally Posted by the urban politician

^ Exactly.

Some day perhaps I will convert one of my six flats in Pilsen into my own mansion. It’s walkable to the Pink Line and it has space for a garage off the alley.

I’m pretty sure that downzoning my property can’t stop me from doing that.

I did hear someone wanting to put a stop to so many downsizes (multi unit to SFH) which frankly is leading to an increase of house prices in some areas - I think that would be more devastating in some of these gentrified/gentrifying areas than limiting the height of a building.

And I'm not sure what they're trying to do anyway. There's tons of 2-4 unit buildings that are no more than 4 stories tall that have been going up in these neighborhoods for the last large handful of years without any necessary zoning change. Do people seriously think that 6 units going up on 2 parcels has cheaper average units than 18 units going up on the same parcels?

I feel like people look at NYC and say "Well if it becomes denser then we'll end up like NYC prices!" without realizing that the market conditions are completely different for why prices are higher.

[glowrock]

Originally Posted by the urban politician

I think this article clearly makes the case to rationally minded people that gentrification is not a major problem for Chicago.

Unfortunately, rational thought is often the enemy of good politics. So certain Aldermen in Avondale and Pilsen are going to continue to defy logic, pander, and fear monger to a certain demographic to get their votes. But the educated classes are going to keep pouring into the city--there is no doubt about that.

The problem is two-fold (at least)...

1) Many, but obviously not MOST of the areas that are below average in both income and degree attainment tend to have higher crime rates.

2) Many, but not MOST of those same areas tend to have relatively poor transit access, except by bus, which is obviously going to be very slow given the narrow, congested main thoroughfares throughout much of the city.

Perceived, if not real crime issues as well as relatively poor transit access is a huge part of what divides rich from poor Chicago. Of course this is a gross generalization, but there's much truth to it nonetheless.

One thing is certain, however. The entire area from the South Loop through Chinatown into Hyde Park is going to be turning blue over the next decade or two.

Aaron (Glowrock)

[IrishIllini]

^ As they should.

The condemnation of gentrification is mostly lip service since it’s clear the city doesn’t having a housing or affordability issue. I don’t think the speed of gentrification is an issue though. I actually feel the rate of change makes it politically viable to avoid pushing through legislation regarding rent control and deconversions. It’d be awesome to have north side “issues” city-wide, but we don’t so there’s no immediate political repercussions for sitting on our hands.

[Baronvonellis]

I'm wondering what happened in Little Village? It went from mostly working poor to poverty according to this map. Or are the better off leaving it for other areas?

You can follow the orange line and it's keeping those areas from going into poverty, with good transit access to working class downtown jobs probably.

[the urban politician]

Originally Posted by Baronvonellis

I'm wondering what happened in Little Village? It went from mostly working poor to poverty according to this map. Or are the better off leaving it for other areas?

You can follow the orange line and it's keeping those areas from going into poverty, with good transit access to working class downtown jobs probably.

A case can be made that when a neighborhood goes from 'Green' (not college educated but above average income) to 'Red' (college educated but below average income) it is the early phases of gentrification.

Picture older, working class people making a decent income being replaced by young 20ish College grads in the beginning of their careers with lots of educational debt. They may be in Grad school or may just be doing lower wage work (bartender, waitressing, etc) to make ends meet as they advance their careers. Or they may be doing internships or professional jobs but are at the bottom rung of the ladder so are still making below average incomes.

I was a medical student and then a Resident, and when I was a Resident I was making a below-average income literally until I was 30, even though I was a professional and a University grad. A lot of this is a result of the delayed compensation one gets from obtaining a higher education.

[LouisVanDerWright]

^^^ Yup, most of my tenants fall in that boat, arts majors that make no money and business or STEM majors who make decent money but have a ton of debt. The best part is when you have them as a tenant for a few years and they start moving up the paygrade. Then they want to upgrade from that cramped 2BD and you can move your best tenants into your nicest apartments. Win win.

[Baronvonellis]

Originally Posted by the urban politician

A case can be made that when a neighborhood goes from 'Green' (not college educated but above average income) to 'Red' (college educated but below average income) it is the early phases of gentrification.

Picture older, working class people making a decent income being replaced by young 20ish College grads in the beginning of their careers with lots of educational debt. They may be in Grad school or may just be doing lower wage work (bartender, waitressing, etc) to make ends meet as they advance their careers. Or they may be doing internships or professional jobs but are at the bottom rung of the ladder so are still making below average incomes.

I was a medical student and then a Resident, and when I was a Resident I was making a below-average income literally until I was 30, even though I was a professional and a University grad. A lot of this is a result of the delayed compensation one gets from obtaining a higher education.

Huh? I was talking about the areas going from Orange to Yellow in Little Village.

Where are area's of the city going from Green to Red?

It seems like the south lakefront is gentrifying. The high crime areas are going from working class to poverty, and the rich are getting richer in Lincoln park and the central core.

[ardecila]

Originally Posted by Baronvonellis

Huh? I was talking about the areas going from Orange to Yellow in Little Village.

Where are area's of the city going from Green to Red?

It seems like the south lakefront is gentrifying. The high crime areas are going from working class to poverty, and the rich are getting richer in Lincoln park and the central core.

I think middle-class or otherwise upwardly-mobile Mexicans are shifting to the suburbs and this map reflects that... Increasingly it's just fixed-income seniors and single-parent households, since the rest of the Mexican community can afford to get bigger places in the suburbs.

Why stay in a cramped 4-flat in LV when you can buy a bungalow in Berwyn, Lyons or Melrose Park? I even know Mexican families that are buying big new tract homes in Plainfield, with actual cornfields visible from the backyard. And recent immigrants aren't really settling in Pilsen or LV either, they are also heading for the suburbs.

[moorhosj]

Originally Posted by IrishIllini

The condemnation of gentrification is mostly lip service since it’s clear the city doesn’t having a housing or affordability issue.

I think everyone here is missing the forest from the trees. At a macro-level, there isn't an affordability issue in Chicago as shown by citywide rents versus incomes. However, when we start looking at the actual things that impact where people live (transit, crime, schools) we add more dynamics. Transit access and crime have been mentioned in this thread, but education may outweigh each of those concerns (speaking as a parent).

A 25 year-old recent college grad or a doctor on residency has more flexibility than a family of 4 with total household income of $70k, well higher than the city's median of $52.5k. I would be interested in seeing the median rent for a 3 bedroom (a family of 4) apartment located within the boundary of school rated 6 or higher.

[SamInTheLoop]

Originally Posted by LouisVanDerWright

Except this time it is different because central banks are buying and hording trillions of dollars of bonds, Europe's e tire yield curve is negative (wtf?!?), and there's a massive trade war going on with China now exporting massive deflationary signals. Those are all things that very much bear on the bond market that have never happened before. That's not to say there won't be a recession soon, but that is to say that yield curve inversion is not happening because a recession is imminent or expected. It's happening because investor expectations have been warped by a variety of events that may or may not be accompanied by two negative quarters of US GDP.

In every late stage expansion, as the yield curve inverts, there are always unique factors, never experienced previously, and certainly never experienced previously in combination/to degree etc, which many cite as rationale for why this time is different. These folks are of course nearly always wrong.

[SamInTheLoop]

Originally Posted by moorhosj

I keep seeing these lines repeated over and over. The point isn't that they happened to invert this week, the point is that the 2-year and 10-year yields have been converging steadily since 2017. That the yields were close enough to invert in the first place is the story.

Why are people willing to receive less premium to have their money locked up for 10 years instead of 2 years? That's the real question. I can only imagine that a fear of economic slowdown is the answer. GDP growth was 1.9% in the 2nd quarter and it's running about 2% for the 3rd quarter. I'm not sure I see this "great economy" everyone keeps talking about. A great economy doesn't require 4% deficit spending to achieve 3% growth (probably closer to 2% this year).

Yep. At its core, it is the heightened domestic economy risk in the near-to-medium term that the market is identifying in not demanding greater compensation for longer-term bond market instruments than shorter-term. Highly simplified, though true.

[SamInTheLoop]

Originally Posted by glowrock

One thing is certain, however. The entire area from the South Loop through Chinatown into Hyde Park is going to be turning blue over the next decade or two.

Aaron (Glowrock)

Agree - in terms of large swaths of neighborhoods that are on the verge of a great deal of change, near-mid southwest and south have to rank at the top of the list.


One thing about that map that surprises me is that the growth in overall blue real estate is somewhat less than I would have guessed.

[SamInTheLoop]

Originally Posted by moorhosj

I think everyone here is missing the forest from the trees. At a macro-level, there isn't an affordability issue in Chicago as shown by citywide rents versus incomes. However, when we start looking at the actual things that impact where people live (transit, crime, schools) we add more dynamics. Transit access and crime have been mentioned in this thread, but education may outweigh each of those concerns (speaking as a parent).

A 25 year-old recent college grad or a doctor on residency has more flexibility than a family of 4 with total household income of $70k, well higher than the city's median of $52.5k. I would be interested in seeing the median rent for a 3 bedroom (a family of 4) apartment located within the boundary of school rated 6 or higher.

Great point. Does the city have an affordability problem in areas with schools at least average-rated, and at least average transit access....might be an interesting and meaningful way to pose the question.