-- Connecting the dots between our economy, government and business --
Summary and audio linked here.
Chicago’s political leadership is floating a pension buyout program as evidence it is seriously addressing the city’s thirty-six-billion-dollar unfunded pension liability, but Mark Glennon, founder of the Illinois policy research organization Wirepoints, said that the proposal moves debt from one column to another rather than reducing it, and that the broader fiscal picture facing the city continues to deteriorate across every measurable dimension. Audio here.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Full interview and summary linked here.
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Comments are ignoring the math that created these home value disparities in the first place. Consider a $300,000 home in Woodstock Illinois (3.6% property tax rate) vs. A $300,000 home in INDIANA at capped 1% property tax rate: A 30 year fixed rate 5% mortgage would require a monthly payment (interest, principal, and taxes) of $2540/month in Woodstock, vs. $1944/month in Indiana. That is, every single year the Indiana household will have $7200 more discretionary income to spend, save, or invest than the Woodstock household. Additionally, at the end of 30 years when both mortgages are paid off, the house… Read more »
I did not ignore your assessment Susan. It’s all about the total monthly cost. Sure, a homeowner loses out on wealth building with their home equity but most people don’t use long term thinking when it comes to their finances. Think about the number of people when buying a car fixate on the monthly payment and not the total cost. My last car purchase I could hear three different deals going down while I was waiting for my car to be prepped. All of them focused on the monthly payment and not one on the actual cost.Taxes will be paid… Read more »
Read my answer again, it addresses monthly payments. In same priced homes, the monthly payments are $600 higher in Illinois, because mortgages typically include property tax escrow in monthly payments. Example 1= $600 HIGHER monthly payments. Example 2= Equal monthly payments but lost equity starting day 1 ( which means, you’re stuck in the purchase, you can’t convert out without paying the annual and cumulative growing price disparity.). “If taxes go up but price goes down, affordable by comparison “…for new buyers you must mean? Where is your math to support that? In example 2 one can buy a house… Read more »
Do not forget the time value of money when making this assessment. Take the $7200 saved every single year of the mortgage and invest it and your $223k will grow to over $500k. Those that recognized that they are getting screwed on this Illinois deal have already left. I feel sorry for those that remain. I just got a letter from the tax board of the county I currently live in, they said they will be reducing my taxes next year, they collected to much county-wide and they did not spend it all. A letter like this will never be… Read more »
Oy, go check-out condo prices in Streeterville! Asking prices at some buildings are below sold prices in 2000. Negative appreciation made large.
Streeterville. That’s MAGA country, Jesse Smollett would have us believe.
Lower price appreciation is a good thing. We are in a massive real estate bubble and those 30% gains in YOY elsewhere are about to evaporate, leaving a trail of destruction in its path. FL has had real estate bubbles since the 1920’s and this bubble in the 2020’s is par for the course. It’s not just home sales either – think of all the sweet, sweet equity liberated by homeborrowers with low interest rate Refi’s. If that house value falls below the mortgage balance, it’s jingle keys back to the bank as homeowners walk away in large numbers. Chicago/IL… Read more »
I would add that the double digit gains many places have seen are a result of low property taxes plus the cost of materials to build are still sky high. I went to Menards and a 2×4 8Ft is still $7.00 and plywood is close to $80+ a sheet depending on finish and thickness. So the increases may not be so out of line since replacing a home from materials alone can add 20% or more plus getting skilled labor is very difficult to find and shipping costs for everything in a home is going up. Home values reflect current… Read more »
Agreed. And affordability is something Chicago now has going for it. Destination cities like Nashville and Austin now have nose-bleeding high prices.
Exactly, the higher home price (likely paid back with a now higher interest rate) doesn’t off-set the lower real estate taxes. Sure there are other quality of life issues but I’m not going to mortgage my future earnings, and upend my financial planning, to live in a warmer climate today. My gut is that after the crash, there will be plenty of deals in those more desirable places. Sure, I’ll get less $$$ for my house in the Chicago suburbs today but I can buy a similar house for the same price or cheaper somewhere else, which became near impossible… Read more »
Illinois is becoming more affordable (on a monthly cash flow bases) relative to other locations. Most people just look at their monthly housing cost vs their income. Saving money on mortgage/rent does no good if you needed to move to a location that offered less income. Saving money on property taxes doesn’t mean much (again cash flow) if the cost to purchase a similar property cost way more. That’s why it doesn’t make sense to compare similar priced properties and compare their property taxes. It’s all about the total monthly cost. Sure, a homeowner loses out on wealth building with… Read more »
PPF, I increasingly disagree that policy in IL reflects what voters want. Rigged voter maps, politicized judges, legal bribery of lawmakers by public unions, biased or inadequate press coverage and schools that have propagandized young voters all make the claim that democracy is functioning at all in IL questionable at best.
Oh but the circular argument! Voters vote for politicians to rig the voting system in their favor. See? This is just the will of the voters because Democrat voters want a supermajority of representatives despite statewide receiving less than a supermajority of votes statewide!
Right. Democracy, of course, is not the right term for what we are supposed to have. We are supposed to have a republic. It’s the legitimacy of the republic that is at issue.
Republicans benefit nationally from these map shenanigans more than democrats. Which ever party is in charge does the exact same thing.
Whataboutism is not a defense.
I understand your opinion Mark. The left has been crying that same tune at a national level for years. How many times have we heard that a dem +4 at the national level is considered a tossup for the house. It always comes across as sour grapes. Obviously a 50-50 vote outcome in Illinois would deliver the GA to dems. However, these elections haven’t been 50-50. In the last 20 years how many elections have republicans made competitive? Lately it’s been dems by 15 plus points. The reality is that if a commanding majority truly want change then they will… Read more »
In the past two decades, hundreds of thousands of people that vote like me, or would vote like me, have left the state. They’ve been replaced by foreign-born that reflexive vote Democrat. The reality is that any house jurisdiction in the US that is more than 14% foreign born has a 90% change of going Democrat.
https://www.breitbart.com/politics/2019/02/07/democrats-winning-90-congressional-districts-with-large-foreign-born-populations/
https://www.indexmundi.com/facts/united-states/quick-facts/illinois/foreign-born-population-percent#map
And look at this map, the D counties in IL are all more than 14%: Cook (21.1%) Dupage (19%), Kane 17.7%, Lake 18.6, Champaign 12% (which is controlled locally by R’s but votes D statewide), Will is at 12% and went full on D too.
That’s the reality. The maps, the gerrymandering, the legal bribes and the soft corruption are the symptoms of one-party Democrat rule enacted to solidify power.
You keep acting as if that argument means anything. So people that don’t like Illinois are voting with their feet and leaving and people that want to be here are coming here. That’s capitalism at its best.
Those foreign born that you try to devalue will have kids and will be contributing members of society. In fact, 1st generation kids move up the economic ladder at a greater pace than poor white kids that have been living here for generations.
1) Censoring tech platforms, 2) biased and often dishonest corporate media, 3) K-12 and higher education consumed by radical propagandists and, increasingly, and 4) a national security establishment increasingly interfering in elections (as in the Russia hoaxes). That’s not grasping at reasons. Those alone are probably worth 5 or six points to the left up and down the ballot in the past two elections, and they will be the four horseman of America’s apocalypse unless fixed. Illinois’ particular issues are on top of those.
So the voters are brainwashed? That’s why they don’t vote your way Mark? The left has had the media for decades. There are more sources of data for people to research than ever before. Does information only get out to red states and it’s only propaganda in blue states? No Mark, the voters prefer these candidates that support these polices. If they are too dumb or “brainwashed” to vote for their best interest then that is also on them. They get what they deserve. Also, 5 or 6 points still gets you JB. You remind me of the homer fan… Read more »
Yes, most are brainwashed. The vast majority of people vote based on a little time watching or reading corporate media and perhaps a shallow read of their local paper. Only a few percent watch the evening cable shows that everybody frets about. People here are 99 percenters in terms of interest in policy issues. Commenters here are even fewer. Typically they are far less than 1% of our page views on any given story. There is a load of good research on this, particularly from Pew.
As other areas increase costs relative to Illinois, fewer people will have a desire (or can afford) to leave the state.
The anomaly is both that everywhere else compared to IL has become so expensive, while at the same time, high tax/high cost IL has become relatively more affordable than other formerly less expensive locales. However, this is only a temporary phenomenon, and will last only a short time longer, just as every unsustainable financial situation comes crashing down to reality.
“However, this is only a temporary phenomenon, and will last only a short time longer” What’s your time frame? Typically short term is considered in the next year. Is that your contention? You told us in 2019 that Illinois only had 6 to 12 months before we were insolvent. That didn’t happen. Put out your prediction so we can see if you’re correct. Better yet, sell your home and rent until the massive bubble pops and you can buy on the cheap. You’ve expressed that the real estate market is a massive bubble but some of the fundamentals will still… Read more »
You told us in 2019 that Illinois only had 6 to 12 months before we were insolvent. Insolvency as defined by Black’s Law Dictionary is: The condition of a person who is insolvent; inability to pay one’s debts; lack of means to pay one’s debts. Such a relative condition of a man’s assets and liabilities that the former, if all made immediately available, would not be sufficient to discharge the latter. Or the condition of a person who is unable to pay his debts as they fall due, or in the usual course of trade and business. So yes, IL… Read more »
Nice try. If that is your take on insolvency then why did you make a prediction in 2019 that it would happen in 6 to 12 months? You can try and backtrack all you want but you were wrong. Illinois is playing their bills and even less of a backlog now vs pre covid. A state with debt does not make it insolvent. The state has unlimited resources to tax the public. That is quite an asset to weigh against all of its enormous liabilities. You may define it as insolvent but the market doesn’t. You may say prices of… Read more »
If that is your take on insolvency then why did you make a prediction in 2019 that it would happen in 6 to 12 months? The state is insolvent. I’m not even going to argue this point with you. However, I never did say in 2019 that the state would collapse/go insolvent/default in 6-12 months. That was not me. In fact, I’ve consistently said the exact opposite. I’ve repeatedly said it will take a generation, as the old playground equipment at the elementary school is your superinendent’s pension, and the potholes on your street exist so Tony in Naples can… Read more »
Must have been another debtsor. I’ve seen you make the point you mention above but I also remember you making the collapse point during heart of COVID lockdowns. I assumed you took a different stance because you love to argue for the sake of arguing.
So when is the housing market going to collapse? When? Still won’t answer? It’s ok. I’ll just assume you really don’t think the real estate market will collapse.
The housing market is in the early stages collapsing right now.
When will prices be reduced to pre pandemic levels? When? Provide a time frame.
A market that is still growing is hardly collapsing. You clearly operate off your own set of definitions. Example, trying to use the definition of an individual insolvency for a sovereign state like Illinois.
It wasn’t another debtsor. You were confusing me with someone else. You receive a lot of criticism here. I don’t expect you to remember three years later on some anon forum who said what and when they said it.
“It wasn’t another debtsor. You were confusing me with someone else. You receive a lot of criticism here. I don’t expect you to remember three years later on some anon forum who said what and when they said it.” It was you debtsor. An article on WP from May 19th 2020. Trading at junk levels: Illinois borrowing costs 5 times higher than AAA-rated states. You were asked the question: “So, make the prediction, when does the default frenzy hit and blow IL up? 1 year? 2-3 years? or 5?”Your reply, “Ask me this question six months ago and my answer… Read more »
I don’t remember making that statement but if I did, I stand by it. And we would have collapsed but for the Deus Ex Machina of the federal printing press that bailed out IL. Biden’s covid money merely delayed the collapse.
You denied the statement and now you stand by it. You also have stated that Illinois has a long way until its destruction. Do you also stand by that assessment as well? Stand for something debtsor.
You keep saying that the real estate market will collapse but you won’t provide a time frame or an estimate of the correction. If you believe in that then sell your home and rent until the market corrects.
You’re like the guy on the street holding a sign “The world is coming to an end” but offer no actual time frame. Man up.
“Economists are predicting slower growth not decline”. Would that be the 17 Nobel winning economists who assured us that inflation would be only transitory? See today’s WSJ
Can economists make the wrong prediction? Of course. At least they put their prediction out there for all to see and judge. There are plenty of people saying the real estate market is going to collapse. I don’t believe any collapse is in the near future and if it is I believe that Illinois real estate will collapse along with other areas keeping it affordable as a whole. My main point in this thread has been that Illinois real estate is a value compared to these other states. It’s what will keep people here even if taxes are high.
PPF, Chicago has always been a value compared to other large cities and coastal areas i.e NYC, Boston, most of CA, Seattle, Portland. Our salaries are similar to coastal areas but our cost of living and real estate is cheaper. The downside has been the weather, violence and of course, taxes. However, historically, Chicago (and suburbs) have always been more expensive that surrounding second tier cities like Milwaukee, Indy, St. Louis, and even farther out like Nashville, Austin, SLC, nearly all of FL. The cost of living in these places was cheaper but the wages were also less too. However,… Read more »
“It will pop”
When? Otherwise your prediction is pointless. Will it rise for another year or 2 and then pop and return to 2022 levels? 2021 levels?
Otherwise your prediction is “at some point in the future housing will decrease in price”. Wow. How insightful.
It’s kind of like pensions. When people on this site say someday pensions will be cut. If it’s 10 years from now that pension has already grown by 34%. Time frame is kind of important.
It’s popping right now, as we speak, as inventory and interest rates are rising fast, demand is waning just as fast, and price cuts are happening furiously as sellers are collectively running for the exits hoping to be the first out the door. Watch as prices are starting to ‘plateau’ and then it’s look out below!
It’s happening worldwide too. China has already tanked
https://www.cnn.com/2022/05/20/economy/china-record-lpr-cut-property-market-intl-hnk/index.html
China slashes key interest rate as housing sales collapse
Canada:
https://www.westerninvestor.com/british-columbia/metro-vancouver-house-prices-cut-as-sales-dip-listings-increase-5436440
Metro Vancouver house prices cut as sales dip, listings increase
“With interest rates rising, home buyers are taking more time to make their decisions in today’s housing market,” said Daniel John, REBGV Chair. “Home buyers have been operating in a frenzied environment for much of the past two years.”
John described the current market as “calming” but that may not reflect the attitude of some home sellers, especially in the suburbs.
“There is panic in the market,” said Kevin Skipworth, a partner and managing broker at Dexter Associates, “But there shouldn’t be.”
Australia: https://www.msn.com/en-au/news/australia/cost-of-building-home-hits-scary-new-high-more-builders-buckle-as-construction-confidence-collapses/ar-AAXXc0i Cost of building home hits scary new high, more builders buckle as construction confidence collapses Metricon was forced to deny being on the brink of collapse last week and held crisis talks after the sudden death of its founder. Mario Biasin, 71, died on Monday, the company confirmed in a statement and added that he had been ‘experiencing mental health issues’. The Melbourne-based company landed a new financing deal that will see new funding from the Commonwealth Bank, including $30 million in cash from its shareholders. Metricon was Australia’s largest homebuilder last year, with 6,052 homes under construction… Read more »
The same fed that missed inflation, missed the previous housing bubble, and intentionally caused the greatest disparity in wealth between the rich and poor that has existed since Croesus, says there might be a bubble…..Uh, huh..sure thing, Fed.. https://fortune.com/2022/06/03/housing-market-might-be-bubble-dallas-fed-economist-home-prices-outlook/ ‘This might be a housing bubble,’ says Dallas Fed economist—here’s an exclusive look at the latest housing market analysis “This might be a housing bubble. The evidence suggests it looks like a housing bubble. A little bit like a duck. It walks like a duck, it looks like a duck, it certainly might be a duck,” Martínez-García tells Fortune. While he… Read more »
Give a percent reduction and a time frame. Stop delaying. You have no intel and you are guessing. You refuse to provide a date because then I’ll call you out when you are wrong.
Provide a real estimate. Stop delaying debtsor. All that private education and you can’t even come up with an educated guess. Just post articles about others saying the market isn’t as hot right now as it was 6 months or a year ago. Wow, how insightful.
Fine Chicago market, down 20% in next 30 months
30 months is short term to you? That’s why I wanted a time frame. I guess that gives you enough time to hope people forget about another false prediction. You must have learned your lesson from last time when you said Illinois would be swimming in defaults by the fall of 2021.
30 months is just the beginning of what’s coming…so yes, that’s short term!
Jamie Dimon, the CEO of JPMorgan and one of the most respected Wall Street leaders, gave a stern warning to investors. He advised people to prepare for an upcoming economic “hurricane.”
At an investor conference on Wednesday, Dimon said, “That hurricane is right out there down the road coming our way.” The chief executive added, “We don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself.”
‘..fewer people will have a desire (or can afford) to leave the state.’
Same thinking my parents experienced in 1960s Poland, the ‘Workers Paradise.’
Only a true party apparatchik can think in these terms.
Government and economy there eventually imploded, so there is this hope for IL yet.