Hello Chicago??

Chicago is not Florida..........yet. But give it enough time and this housing slump will turn into a bust. Let us take note of our older brother-in-bubble, Florida.

Price it right and it will sell

Home sellers coming down on sale prices

Carlton Proctor
cproctor@pnj.com

There's nothing wrong with the Pensacola Bay Area real estate market that several thousand more stories like Greg Chapman's won't cure.

Chapman put his East Hill home on the market in November 2005 at a time when residential prices were approaching post-Hurricane Ivan highs.

But it also was a time when the inventory of unsold homes was starting to climb rapidly.

Over the next three months Chapman got only three half-hearted inquiries about his three-bedroom brick home, listed originally at $193,600.

Frustrated and disillusioned by the process, he pulled his home off the market, deciding to bide his time and wait for the market to strengthen.

...

Harrod convinced Chapman to price the house at what he considered a fair market rate for that section of East Hill.

The result: the house sold the first day on the market at a price -- $165,000 -- Chapman said made him "extremely happy."

So happy, in fact, he proposed to his girlfriend that same day, and she accepted.

"Fair" means within reach.

I know everyone want to be a millionaire. But you cannot see ANY gains if you don't sell your wares first. The reason the market has hit the wall is because prices have far out reached the average home buyer.

Time to take a look around.

Time for a reality check.

Time to look to Florida.

The Housing Market is Silly, Silly I Say!

Look for it real close. The first time I read it, I missed it. Daley admits the housing market is in trouble.

Mayor Daley admits to housing slow down

It's designed to raise $1.1 million to help plug a $10 million hole in Mayor Daley's 2007 budget caused by weather-related overtime and lower-than-anticipated tax revenue tied to the housing slowdown. Daley has also cut off non-emergency overtime and suspended hiring unrelated to public safety.

...

Earlier this week, Daley declined to rule out a post-election tax increase. "We don't know yet. . . . It's a critical time. The economy has slowed down. Housing has slowed down. The [real estate] transfer tax has slowed down. You start making decisions much earlier than later," he said.

Having watched the housing market unravel in the last year plus, there is one problem. Sellers' expectations are too high. The boom years are past and gone. Maybe if people were not so greedy, and lowered their prices commerce could commence!

Where Will They Go?

Housing slump, job losses conflict

Immigrant workers often go uncounted

By Bob Willis, Bloomberg News: Alexandre Tanzi in Washington and Valerie Rota in Mexico City contributed to this story
Published June 4, 2007


The slump in home building, the deepest since 1990, has taken only a modest toll on the U.S. job market. Workers like Francisco Leon may be part of the explanation.

Two years ago, Leon, an undocumented immigrant from Guatemala, had little trouble finding construction work five days a week in northern Virginia. Nowadays, the 22-year-old mainly does odd jobs, often only two days a week.

As Congress debates whether to provide a path to citizenship for undocumented immigrants, workers like Leon, hired off the books for day labor, are among the first to lose their jobs as home building falters. Such workers often go uncounted as well, meaning official labor statistics don't fully reflect the decline in construction-related jobs.

Will the illegal immigrants stay when the jobs, the reason they came, are gone?

Where is His Cut?

Cook County Board President Todd Stroger might have the politician gene, but he lacks other ones.

Toddler and Property Taxes

Breaking with his father's avoidance of property tax increases and his own campaign promise not to impose them, Cook County Board President Todd Stroger made it clear over the weekend that he thinks a property tax hike is one way to balance the 2008 county budget. Stroger made the comment in an interview that aired on "Fox Chicago Sunday." In response to a question by hosts Dane Placko and Jack Conaty about how he planned to balance the budget, Stroger replied, "For years, we haven't taken any of the natural growth [in property values]. We should go to the next level that we can."

Foreclosures still raging

Chicago-area foreclosures, which set a record last year, are projected to reach full-blown crisis levels in 2007.

Cook County is on pace to record at least 30,000 and as many as 36,000 foreclosure filings this year, according to Cook County Circuit Court Judge Dorothy Kinnaird, who presides over the Chancery Division, which handles foreclosures. That would mean a 35% to 62% increase from 2006, when 22,248 filings were easily the highest in county history after having risen 36% from the previous year. (The court combines both commercial and home foreclosures, but residential mortgages comprise the vast majority of its cases.)

The driving force behind the foreclosures: adjustable-rate mortgages, which proliferated during the housing boom, according to a new report by the National Training and Information Center, a Chicago affordable-housing advocacy group. The mortgages offered low interest rates for a limited period and often let buyers skip down payments and get approval without showing proof of income, or both. Many buyers landed in trouble when their interest rates — and their monthly payments — adjusted upward, the NTIC said.

Chicago and Cook County is not the only place that is suffering problems. A wise political leader would look out side the walls of his fiefdom to gain some fore-sight to the problems he might occur one day. Just like Chicago is oblivious to the housing crash all around her, Toddler is oblivious to his own problems.

Property Tax Dilemma

Kevin Depew in Tuesday's Five Things wrote about the Property Tax Dilemma.

The Florida legislature plans to convene a special session in mid-June that could result in more than $30 billion in property-tax relief over the next five years, the Wall Street Journal reported.

*Thanks to the housing boom, the average annual property-tax bill in the U.S. was $1,132 per person in 2005, up 13% from 2000 in inflation-adjusted terms, according to data from the Commerce Department.
*The boom was so strong that in many areas housing prices rose too fast for local tax assessors to keep up, the WSJ said.
*Now, tax assessments are catching up just as market prices are declining, a double whammy for homeowners facing increasing mortgage payments due to resets, or homeowners now trapped in residents with property tax bills edging them out of their comfort zone.
*But that's the homeowners problem.
*Here is the dilemma for states: Reducing property-tax revenues threatens budgets of cities and counties. However, a property-tax cut could stimulate the economy by leaving homeowners with a bit more money in their pockets.
*Florida doesn't have a personal income tax, and its cities and counties depend heavily on property taxes to pay for services such as police and firefighters, the Journal noted.

I have read that the County's plan is to line up existing home tax assessments to new construction. Existing home have already been assessed. The taxes are based on those older numbers. There was a cap on how much they can go up: 7%. New construction is different. The County assigns taxes based on the SALES PRICE of the unit. Look in my right side Links for the CC Assessors and CC Treasurers web sites. You can find yours and everyone taxes.

The County's logic is that if you bought that N.W. Side bungalow for $500,000 then they will tax you at $500,000. Sounds fair right? Not to the Jones' that are pushing the edge of foreclosure with that 1/2 Million dollar note, just to "live the American Dream". With a steep hike in takes, the Jones' might go over the edge. Florida is learning that higher taxes can lead to more foreclosures, and more foreclosures mean less taxes coming in.

When will Toddler learn?

That's What I Thought

Average salaries lower than past generation's

The Associated Press

WASHINGTON - The part of the American dream that says children will be better off than their parents were has become a dream, not reality, according to an analysis of Census data released Friday.
A generation ago, American men in their thirties had median annual incomes of about $40,000, compared with men of the same age who now make about $35,000 a year, when adjusted for inflation.

That's a 12.5 percent drop between 1974 and 2004, according to data from the Pew Charitable Trusts' Economic Mobility Project.

Household incomes rose during the same period, though the main reason is that there are more full-time working women, a new report on the project said.

We get paid less, but you are supposed to dump more of our income on a mortgage.

This is what some authors call the Revolution of Lowered Expectations. Do more, get less; pay more, receive less. It starts with a, "HEY! Wait a minute." And shortly becomes a, "Eh, what do you expect?"

Not in the Top 100

Chicago was not in the MONEY Magazine Top 100 cities. This is not a surprise if you consider the numbers:

Chicago, IL Population: 2,873,790

Median family income
(per year) $46,748

Median home price $254,500

Sales tax 9.00%

Job growth %
(2000-2005) 0.70%

Test scores reading
(% +/- state average) -24.8%
Test scores math
(% +/- state average) -35.6%

Personal crime risk
(100 is nat'l average; lower is better) 351

It does not look good.

How does the median income family afford a median priced house?? The banks would have to loan out 5.4x the income for those people to qualify such a house!

Fun with math time: Per month, the principle and interest on a $254,500 home loan at 6.25% for 30 years = $1,567.00. A $46,478 year income / 12 (I'm being so nice, I'm not even taking out taxes!) = $3,895.66 a month. The Chicago median incomer in 2006 is spending 40.22% on his median priced home loan! If I add $300 a month for median taxes and insurance, the percentage would equal 47.92%!! Just short of one half of a median incomer's not yet taxed income is going to keeping him in his house!

I am suspicious of the Median home price. I believe that number is too low. Considering a 1 bed condo at Lincoln / Foster starts at $263,000!

Here is 115 homes for sale in Chicago for the $250,000 median price. As you will see, either it's a tiny condo, which taxes and condo assessments will chip further into your income, or it's in the ghetto.

Have fun!

Books to Read

I have read these books, and found them very informative.

America's Bubble Economy, Weidemer

Empire of Debt, Bonner

The Comming Economic Collapse, Leeb

The Two-Income Trap, Warren

When Corruption Was King, Cooley