From the standpoint of buying your 'dream house' and living in it forever, a potential short term real estate market decline probably doesn't mean the end of the world. However, if it were me, I'd rather continue paying out $800 a month rent for a couple of years instead of buying at today's $200k price (spending about $20,000 in the process), and then buy the same house for $160k a couple of years down the road ! But if you live in a high tax state like NY or IL or CA, you also give up two years worth of mortgage interest tax deductions in the process (assuming the AMT doesn't bite you). On the other hand, you also avoid two years worth of property and school taxes.So, you buy a $200,000 house that is worth $160,000 for a year or two and then begins climbing. Who cares? The point is that nothing stays "low" forever, just like it doesn't stay "high" forever.
However, based on Chicago's own media, the area isn't totally immune ..
It would appear that Chicago's real estate market prices are holding because sellers aren't sufficiently motivated to be forced to accept whatever the highest offer for their property actually is ... yet. Instead, they are in a position where they can 'hold on' in hopes that better purchase offers will materialize in the future. While this does keep local on-record real estate market prices from falling, the side effect is that the inventory of local homes listed for sale keeps rising and rising ... i.e. the local real estate market stagnates due to a large gap forming between sellers' asking prices and buyers' purchase offer prices which neither party is willing to budge over. At the same time the sellers' monthly ARM payments keep increasing, property taxes keep increasing, homeowners insurance premiums keep increasing, utilities keep rising. Admittedly it's one thing to keep making mortgage, property tax, insurance and utility payments if you are actually living in the house - it's another thing if the house was purchased by 'investors' on spec, with the buyer's sole intention being to quickly 'flip' the house at a profit.
The real question that nobody can accurately answer is which will come first - the 'holding on' homeowner's supply of cash to continue making these monthly payments running out, or a rebound in local real estate purchase offer prices to levels somewhere near the seller's asking price again. Given that 'investors' i.e. 'flippers' are estimated to comprise 25-30% of all recent home purchases, the monthly cash drain to continue 'carrying' a house they had no intention of living in themselves has got to be an area of mounting concern. If/when the 'flippers' decide that the 'carrying' costs to keep holding on to their spec house is devouring whatever profits they had ever hoped to earn on a quick flip, and decide to accept whatever best offer has actually been made in order to get out from under the 'carrying' costs, this WOULD book falling on-record local real estate prices and start the snowball effect.
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She is looking for input on how to accomplish that goal not be bombarded with a bunch of "Chicken Little" bullshit.
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