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  #81  
Old Posted May 14, 2021, 11:03 PM
Camelback Camelback is offline
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Originally Posted by SIGSEGV View Post
well you can buy municipal bonds, but I don't think I'd recommend that for CHI.
Lol, yeah. I'd buy those if I never expect to see that money ever again!
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  #82  
Old Posted May 14, 2021, 11:24 PM
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Originally Posted by Camelback View Post
They both seem like steals in today's insane RE world. Both cities could see some huge investments in the near term, while the existing infrastructure gets upgraded. The existing infrastructure is nice, compared to cities that are having to play catch up. If CHI and PHL were listed on the NYSE I'd be buying as a long hold (I'm not old and have time to watch the investment grow).
Why? lol. This seems to be the antithesis of what people are claiming to be Chicago's strength: that it's cheap. If that is true then buying Chicago stock would be a bad deal, right? You should be buying stock in a place that is keeping pace, or outpacing, the market as a whole.

I spot checked Chicago's historical median price just to loosely confirm a suspicion that I had, which is that Chicago was previously an expensive city but isn't anymore (for whatever reason). In 1980, Chicago's median sales price for single family homes was $70,000, and the U.S. median was $47,200. So Chicago was roughly 50% more expensive than the U.S. as a whole. In 2020, the U.S. median sales price was roughly $350,000, and Chicago's was $316,000. So today Chicago is inexpensive to the U.S. median.

Checking this against "expensive" San Francisco, the data I could find suggests that the median there was in the $180,000 range around 1983 (calculated using the Case-Schiller index, but if someone has an actual number for 1980 that would be helpful). If what I calculated is correct, that is almost 4x the national median of $47,200 in 1980. Interestingly, the median in San Francisco in 2020 was about $1.5M, or roughly 4.5x the U.S. median.

In other words, San Francisco isn't really that expensive today from a historical (1980) perspective -- today it's only about 13% more expensive relative to the U.S. median than it was in the 1980s. But Chicago is MUCH cheaper from a historical (1980) perspective, as it's median is -50% off from what it was relative to the U.S. in 1980. If Chicago's market had appreciated in parallel to the U.S. over the past 4 decades, Chicago's median should be around $525,000 today.
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  #83  
Old Posted May 15, 2021, 12:19 AM
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Originally Posted by JManc View Post
Not everyone sees their home as part of their investment portfolio. That's the problem with areas with skyhigh real estate costs, everything is based on rate of return.
Everyone should care about money management. Has nothing to do with "investment portfolio".

And it doesn't mean you shouldn't buy a depreciating housing asset, but then it probably isn't "cheap". I just don't get the SSP sentiment that turning $1 into 80 cents is a "better deal" than turning $2 into $4, especially when the buy-in on the $2 is cheaper for most (because existing homeowners would have the larger equity for a larger down payment).
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  #84  
Old Posted May 15, 2021, 12:29 AM
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Originally Posted by SIGSEGV View Post
Property taxes as a percentage are higher, but as value, not sure.

Anyway, assuming you had the extra $40k for a down payment and ~$600/month for a mortgage payment and you invest that with a 7% return, you end up with very roughly

40k*(1.07)^15 + (7.2k) * (1.07^14 + 1.07^13 + ...1) ~= $300k. Not too different a return and probably safer on average.
This would be the calculation for a first-time buyer only. Existing homeowners (most people) would have greater equity for a more expensive property in a hotter market, meaning the down payment wouldn't be more burdensome.

And in a hot market, you can take the 30 yr (or longer) mortgage and let the equity work for you. In a stagnant market you're getting killed unless you keep the mortgage term short.
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  #85  
Old Posted May 15, 2021, 1:36 AM
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Originally Posted by Crawford View Post
Everyone should care about money management. Has nothing to do with "investment portfolio".

And it doesn't mean you shouldn't buy a depreciating housing asset, but then it probably isn't "cheap". I just don't get the SSP sentiment that turning $1 into 80 cents is a "better deal" than turning $2 into $4, especially when the buy-in on the $2 is cheaper for most (because existing homeowners would have the larger equity for a larger down payment).
The better deal is the opportunity to buy at all. A concept you seem to heavily struggle with. Most people looking to buy now aren't existing homeowners and especially not in expensive cities, how incredibly out of touch. You really think the current housing frenzy is driven by people who already own??

If you're from an expensive city and can't afford anything, then cheaper cities become an attractive option or really your only option. Millennials, even highly educated ones, are much poorer then previous generations. This is the reality and it gives them even more motivation to leave expensive markets. They have no hope to begin wealth building otherwise.

There are big benefits to home ownership that have nothing to do with real estate appreciation and those benefits are the same whether you're in San Francisco or Indianapolis. Equity doesn't care where you start either.
A better example is turning $1 to $3 dollars because you couldn't afford to turn $2 into $4. And many cheaper metros have seen insane appreciation anyway, especially if you bought in the early 2010s. Even if you bought as late as say 2018 you're still looking at some great gains in many Midwest regions. This is the perfect situation for new home owners, that's an opportunity a coastal city can't provide for most people.

Your commentary is clearly all just heavy projection on others from your life. Your situation and your market clearly works for you, it makes sense. Great, but other's have very different realities, we're talking about totally different generations here.
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  #86  
Old Posted May 15, 2021, 1:59 AM
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Originally Posted by Crawford View Post
Everyone should care about money management. Has nothing to do with "investment portfolio".

And it doesn't mean you shouldn't buy a depreciating housing asset, but then it probably isn't "cheap". I just don't get the SSP sentiment that turning $1 into 80 cents is a "better deal" than turning $2 into $4, especially when the buy-in on the $2 is cheaper for most (because existing homeowners would have the larger equity for a larger down payment).
Of course anyone looking to make the biggest purchase of their lives should do some due diligence and ensure they are 'investing' wisely and not wind up upside down on their mortgage in 10 years...or in an area transitioning downward. So yeah, turning $1 into 80 cents is a bad idea but so is chasing turning $2 into $4 if it's out of someone's budget or reach.

Our house was and still is a bargain for what you get but it can only appreciate so much, it's an outer ring suburb. We looked at townhouses in the city that were about 2x as much as ours with potential to appreciate considerably in 10-20 years but didn't want a massive mortgage...despite a fair amount of equity on our current home. So we opted for the bargain, which was staying put.
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  #87  
Old Posted May 15, 2021, 2:26 AM
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Originally Posted by Steely Dan View Post
"prime area" is open to LOTS of interpretation.

the main deal with chicago is that there are lots "unprime areas" that are still very decent and stable and affordable for raising a middle class family in.

my good friend who's a plumber just a bought a 4-bed/2 bath bungalow (with a small city yard) for his family of 4 over in jeff park for $325K back in feb.



normal middle class housing.

in normal middle class neighborhoods.

for normal middle class families.

AT NORMAL MIDDLE CLASS PRICES.

welcome to chicago!
Yup! So some schmuck not rich in income like me owns in a great neighborhood that probably is in the top of the US for whatever urban metrics you want and I'm surrounded by miles and miles of it with a foot print that is hard to duplicate in America in size. And yes to Philly too.
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  #88  
Old Posted May 15, 2021, 3:11 AM
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Originally Posted by Crawford View Post
This would be the calculation for a first-time buyer only. Existing homeowners (most people) would have greater equity for a more expensive property in a hotter market, meaning the down payment wouldn't be more burdensome.

And in a hot market, you can take the 30 yr (or longer) mortgage and let the equity work for you. In a stagnant market you're getting killed unless you keep the mortgage term short.
But you can still invest the excess money you have in something that typically performs better than the housing market (albeit less tax-advantaged). You can even invest in the housing market in a city you don't live in that has higher appreciation potential.

Obviously any amount of appreciation is good financially, but it's less obvious that it's worth a significant premium. (In fact, in the illusory efficient market hypothesis, that would be perfectly priced in, wouldn't it?).
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  #89  
Old Posted May 15, 2021, 3:13 AM
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Think drug dealers, hookers, burrito/taco trucks, scary cars bumping loud movies all hours of the day and night etc. These 3 homes are in one of the most dangerous areas of Oakland that also happens to be fairly vibrant and walkable(actually lol). The problem with the cost is that these homes are priced at about double or maybe 3 times what they should cost based on the area. These arent areas that are gentrifying or being overrun by techies, no, this is the hood.
https://www.estately.com/listings/info/2606-e-20th-st

https://www.estately.com/listings/info/2011-s-27th-ave

https://www.estately.com/listings/info/2347-e-17th

and this one, dont let the cuteness fool you, this area is **hella** bad.
https://www.estately.com/listings/in...nary-avenue--3

this area? dont even think about it. The house is cute but the neighborhood not. at all. ever.
https://www.estately.com/listings/info/1433-69th

These homes should be in the 200s tops. TOPS.
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  #90  
Old Posted May 15, 2021, 4:34 AM
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Originally Posted by dimondpark View Post
Think drug dealers, hookers, burrito/taco trucks, scary cars bumping loud movies all hours of the day and night etc. These 3 homes are in one of the most dangerous areas of Oakland that also happens to be fairly vibrant and walkable(actually lol). The problem with the cost is that these homes are priced at about double or maybe 3 times what they should cost based on the area. These arent areas that are gentrifying or being overrun by techies, no, this is the hood.
https://www.estately.com/listings/info/2606-e-20th-st

https://www.estately.com/listings/info/2011-s-27th-ave

https://www.estately.com/listings/info/2347-e-17th

and this one, dont let the cuteness fool you, this area is **hella** bad.
https://www.estately.com/listings/in...nary-avenue--3

this area? dont even think about it. The house is cute but the neighborhood not. at all. ever.
https://www.estately.com/listings/info/1433-69th

These homes should be in the 200s tops. TOPS.
However, market value is what people are willing to pay. If these houses sell at those high prices, then that's the market value regardless of whether it's a hood. If they don't sell, then the asking prices will come down to a point at which they do sell. This sort of thing makes me scratch my head and think "why would anyone pay that kind of money for this"? But it happens every day, all over the country.
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  #91  
Old Posted May 15, 2021, 4:37 AM
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However, market value is what people are willing to pay. If these houses sell at those high prices, then that's the market value regardless of whether it's a hood. If they don't sell, then the asking prices will come down to a point at which they do sell.
yeah unfortunately the market includes suckers (or, more charitably, people who are new to the area and have no idea about that area).
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  #92  
Old Posted May 15, 2021, 4:48 AM
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Originally Posted by SIGSEGV View Post
yeah unfortunately the market includes suckers (or, more charitably, people who are new to the area and have no idea about that area).
Or maybe they just don't care what they're getting into. I see situations right here in my neighborhood where people are paying over $1M for a beautiful house located next door to a total dump, and two blocks from a homeless camp. I've been finding that people in general are way more tolerant of their surroundings than I am. I get pissed if a neighbor doesn't keep their yard mowed like I think they should, or doesn't take care of peeling paint. But most people I know are way more tolerant than I am. They do their thing, and let others do their thing. Of course, it's way different if you have a strong HOA, which is very common in newer suburbs but not in older areas of cities. I would love to live in a neighborhood with a strong HOA, but then I wouldn't have all the things I love about living right in the city.

Edit: It does seem that people I know pay more attention to crime rates than other things. But we still have plenty of people buying in areas I would consider unsafe and paying very high prices.
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  #93  
Old Posted May 15, 2021, 6:23 AM
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Originally Posted by kool maudit View Post
$300,000 in Stockholm will buy you an apartment in a lovely, central pre-war building.

Provided there is no bidding war.

Which there will be.

Did I note that the apartment is a whole 245 sq. ft.?

https://www.hemnet.se/bostad/lagenhe...n-25a-17495740
European housing is a shock to North Americans. You become accustomed to a certain amount of space. Condo sizes keep going down and down but I hope it never gets to that point. Maybe I'm spoiled but I'd be miserable in anything under 500 sq feet. I could do it for a few days before I started going mental.
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  #94  
Old Posted May 15, 2021, 12:18 PM
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Originally Posted by Crawford View Post
I'll never get the idea that RE is a "bargain" based on its price. RE is a "bargain" based on its relative appreciation. The price is a function of market expectations of long-term appreciation.

Chicago has relatively low housing prices for a major, first-tier city. However, Chicago has some of the worst housing appreciation of any major U.S. cities (I believe the absolute worst per the Case-Shiller index), so the reasonable prices make sense in this context.

If you buy a home for 400k, and sell it for 400k 15 years later, that isn't a "good deal" relative to buying a home for 600k and selling it for 1 million 15 years later. You also have to factor in taxes, maintenance and the like, and Chicagoland property taxes tend to be high.

Property taxes, in particular, really affect housing prices. You can see this in some NY suburbs, where a more affluent suburb will often have lower housing prices than a less affluent suburb, because the rich town votes for crazy property taxes to support gold-plated schools and services. People buy into the community because the schools are de facto private schools, and the property taxes are de facto tuition. But if you didn't have school-age kids, you would be crazy to pay 40k in annual property taxes, for a modest home.
Excellent post! Can't overstate the importance of appreciation and high property taxes!
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  #95  
Old Posted May 15, 2021, 1:45 PM
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Originally Posted by dimondpark View Post
Think drug dealers, hookers, burrito/taco trucks, scary cars bumping loud movies all hours of the day and night etc. These 3 homes are in one of the most dangerous areas of Oakland that also happens to be fairly vibrant and walkable(actually lol). The problem with the cost is that these homes are priced at about double or maybe 3 times what they should cost based on the area. These arent areas that are gentrifying or being overrun by techies, no, this is the hood.
https://www.estately.com/listings/info/2606-e-20th-st

https://www.estately.com/listings/info/2011-s-27th-ave

https://www.estately.com/listings/info/2347-e-17th

and this one, dont let the cuteness fool you, this area is **hella** bad.
https://www.estately.com/listings/in...nary-avenue--3

this area? dont even think about it. The house is cute but the neighborhood not. at all. ever.
https://www.estately.com/listings/info/1433-69th

These homes should be in the 200s tops. TOPS.
You being dramatic bro. The bottoms and East Oakland ain't that bad, at all. And they will be gentrified (for better or worse). Even Sobrante Park used to be a middle class neighborhood and is fine. I use to work on West Oakland on San Pablo Ave in the worst part in early 2010s it wasn't that bad... ofc the areas aren't gonna cost 200s in the Bay Area in a central location.
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  #96  
Old Posted May 15, 2021, 2:32 PM
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Originally Posted by Crawford View Post
This would be the calculation for a first-time buyer only.
And that's all anyone here is saying.

No one is saying that Chicago is a great place to invest in real estate (or at least I'm not).

Only that it has low real estate purchase costs on a PSF basis, apples to apples, relative to the other big urban coastal cities (minus Philly, which appears to be more in chicago's league).

That can be an attractive situation to many first time home buyers who don't have much money, but would still like to own their own home in a big urban american city. No, it will not make them rich, but for some people there are advantages to home ownership that go beyond strict investment potential.

Relative to other tier 1 US cities (or tier 2 if we rightfully place NYC in its own tier), Chicago has lower barriers to entry to the local real estate market and lower ceilings on the returns. Most of the other tier 1/2 big urban coastal cities are the exact inverse of that equation.

Pick your poison: higher barriers or lower ceilings.

That's the trade off.
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Last edited by Steely Dan; May 15, 2021 at 3:12 PM.
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  #97  
Old Posted May 15, 2021, 3:34 PM
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You being dramatic bro.
No, I'm not. It's one thing to be a casual observer on the internet, but it's something else to plunk down three-quarters of a million dollars for that.

My huge family immigrated to the United States and settled in East Oakland, they bought houses for $10-$20K that are now worth close to $1 million, and that's really the cruxt of the matter to me, these prices are outrageous. The free market is shutting out poor people and even middle class, investment buyers are outbidding actual homebuyers who want to live there.

I dont mind the hood aspect at all but these prices dont make sense.

The federal government is just sitting there as prices across the country are soaring? It was cute when it was just the rich areas of the Bay Area because they could afford it, but now it's spread to literally every corner of the region, and the rest of the country is facing a crisis.

Look at this ridiculousness:

Median Home Price, Metro Areas, Q1 2021
$1,500,000 San Jose
$1,200,000 San Francisco
$1,000,000 Anaheim
$940,400 Honolulu
$763,500 San Diego
$726,600 Boulder
$682,400 Los Angeles
$653,400 Seattle
$599,500 Naples
$598,600 Nassau-Suffolk
$582,700 Boston
$580,400 Bridgeport
$567,600 Barnstable Town
$554,400 Denver
$514,200 New York
$498,100 Washington DC
$489,100 Portland(OR)
$478,100 Reno
$475,000 Riverside
$469,200 Fort Collins
$465,000 Sacramento
$445,000 Miami
$437,900 Austin
$435,400 Salt Lake City
$322,600 Boise
$392,500 Salem(OR)
$387,500 Colorado Springs
$387,000 Manchester(NH)
$379,100 Eugene
$375,000 Sarasota
$373,700 Phoenix
$373,700 Portland(ME)
$369,900 Dutchess-Putnam
$362,600 Providence
$362,200 Ogden(UT)

National Association of Realtors

^This is hideous.

Quote:
The bottoms and East Oakland ain't that bad, at all.
No, sorry, for $774,000 it's unacceptable--prices need to make sense. Why do immigrants and middle class people need to move to Tracy and Lathrop to buy a house?

Also, I was born and raised in East Oakland, attended K-12 schools there, and I am unapologetically proud of my hometown, even after my parents moved us out of the 20s and to the hills we still attended schools in the urban core-even after growing up and moving all around the world for work--I am grateful for the perspective I have by growing up in the hood, but there are some things that are much worse now then when I was a kid in the 1990. Yes, I would say crime is actually lower now than back then, but it's still very high crime, there is an extremely reckless group of individuals here who have zero regard for others, you see it in how they drive. I go to the area around 98th and Macarthur every saturday to do some volunteer work and I refuse to ever take my kids down there, I am literally almost run off the road every week by a car that wont stop at stop signs, or are driving 80MPH in a 25MPH street. Im not kidding. It's not just the driving, it's the shadyass looking people walking around looking in cars, mailboxes, people always on the come up.

Im not saying it's all bad because these are actually family oriented neighborhoods with lots of families who are middle class and working class, but again, there are lots of very real, visible issues.

1. There are way more prostitutes on International and Foothill now then back then. Kids--KIDS!

2. There are now homeless encampments that look like shantytowns along E.12th and along the BART lines that remind me of Brazil from 20 years ago(I live in Sao Paulo part of the year)-if we're being honest.

3. There was actually more retail back then, Eastmont Mall was actually a mall, now it's like a social services complex/police station. East Oakland is the most underserved retail market I have ever seen anywhere in the United States. Thank goodness for enterprenurial locals who open the thousands of mom n pops that serve the community.

I could go on and on..

Quote:
And they will be gentrified (for better or worse). Even Sobrante Park used to be a middle class neighborhood and is fine. I use to work on West Oakland on San Pablo Ave in the worst part in early 2010s it wasn't that bad... ofc the areas aren't gonna cost 200s in the Bay Area in a central location.
Sobrante Park is always held up as some standard bearer of high crime but to me, Seminary Av, Bancroft, Macarthur from High St to 98th, are all worse.

West Oakland is a different animal from East Oakland-and San Pablo Av from oh West Grand to 580 is just rancid-in the past 2-3 years has gotten worse due to the homeless.

Again don't me wrong, I take Oakland, warts and all, but I'm not delusional.
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  #98  
Old Posted May 15, 2021, 3:43 PM
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Originally Posted by isaidso View Post
European housing is a shock to North Americans. You become accustomed to a certain amount of space. Condo sizes keep going down and down but I hope it never gets to that point. Maybe I'm spoiled but I'd be miserable in anything under 500 sq feet. I could do it for a few days before I started going mental.


Fair, but that is an extreme situation selected to illustrate high housing prices. In reality, a flat like that will be occupied by a student from a rich family with a villa in the suburbs or something like that.

Most people would just forego the "central" and "prewar" aspects, which is why Stockholm is as it is (Potemkin hyper-gentrified kernel of Vienna surrounded by a broad sprawl of modernist complexes and SFH).

Of single people I know who are making sacrifices to rent in the centre, about 350 sq. ft is the minimum they look at.






Which of course is still very, very rare in Canada.
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  #99  
Old Posted May 15, 2021, 3:49 PM
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In a way, New York is the only European North American city, and look how large it had to get on such a unique geography to get Anglos to bite that 6-storey streetwall bullet!

Meanwhile, small cities like Copenhagen are built like this... it plays a role in all this.

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  #100  
Old Posted May 15, 2021, 4:50 PM
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Originally Posted by dimondpark View Post

My huge family immigrated to the United States and settled in East Oakland, they bought houses for $10-$20K that are now worth close to $1 million, and that's really the cruxt of the matter to me, these prices are outrageous. The free market is shutting out poor people and even middle class, investment buyers are outbidding actual homebuyers who want to live there.

I dont mind the hood aspect at all but these prices dont make sense.

The federal government is just sitting there as prices across the country are soaring? It was cute when it was just the rich areas of the Bay Area because they could afford it, but now it's spread to literally every corner of the region, and the rest of the country is facing a crisis.
I think those prices and housing appreciation would be less troubling if the properties were being upgraded to add more units or have better quality construction.

It was mentioned above that Chicago’s housing used to be more expensive relative to the country prior to 1980, but...the properties built then were genuinely worth that money. Beautiful brick, built like a battle tank, could be fully restored after decades of neglect.

Pre-war housing speculation led to massive improvements in infrastructure, density and housing technology. Nowadays, properties sell for millions on the West Coast, and Chicago still has the better-quality contemporary construction.

High rents without physical improvements is just wealth extraction.
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