S3 E2 - Sophia Klopas Unpacks the Complex World of the Housing Markets

Unlock the complexities of the real estate market guru, Sophia Klopas, as we shed light on the often overlooked intricacies of property taxes and their ripple effects on property ownership and investment. Our frank discussion traverses the unexpected landscape of last year's market, detailing the influence of rising interest rates on the strong market outset and the ripple effect of political climates on real estate dynamics. Homeowners, buyers, and investors—Sophia's wealth of knowledge is a treasure trove of insights that will guide you through the economic undercurrents shaping the Chicago real estate scene.

Step into the competitive ring of real estate with us, where multiple offers are the new normal and appraisers are redefining market value. We dissect the influence of a robust stock market on multi-unit housing investments and the strategic maneuvers developers are making in response to market demands. Plus, we explore the challenges FHA buyers are facing in this seller's market, emphasizing the need for innovative financing solutions. Our conversation is a masterclass for anyone navigating the high stakes of real estate transactions or considering property investment in today’s market.

Perfecting a property's online persona and hitting the right pricing note are more crucial than ever in a market of low inventory and discerning buyers. Join us as we discuss the art of pricing against the backdrop of private networks and active listings and compare Chicago's growing affluence to other major cities. As we wrap up, we delve into property taxes, gentrification's double-edged sword, and the appreciation journey of homes, offering a comprehensive view on how these factors intertwine with the real estate market's evolving narrative. Tune in for these enlightening insights and arm yourself with the strategies that will help you thrive in today's market.

Transcript

Speaker 1: 0:00

I mean for you you work there to say that we have a property tax problem. It's blowing my mind.

Speaker 2: 0:04

Well, because he's also. He's also in finance right and he teaches economics. So for him he just he was like this this 2% property tax, and then you know we went down a rabbit hole of where the property taxes go and how you know. That's a whole other story, but yeah, it was. It was shocking to him.

Speaker 1: 0:26

When you get your property tax bill. Everyone just got right. We just got him like a couple of times. Yes, last week, when you get your property tax bill. The top of it has your pin number and then it has what your property tax is. There's it's three sheets. Take a look at the middle.

Speaker 1: 0:43

That tells you where your money is going to and it brings down and it also tells you on on all the way. On this side it'll say percentage of shortfall yes, and it there is nothing that's underneath 40% on that percentage of shortfall, and so it's it's another pocket.

Speaker 1: 1:05

What's the five pds? Do you remember it? Preparation, preventable performance. There you go. It doesn't matter how much money we get. If we don't close it's no money, right? So no clothes is no money. I'm everything that I am because of my dad's death, and I wouldn't be as successful without his death. Hey, welcome to Jason Theory. This is episode two, season three, and we are going to be talking to my partner, sophia Klopis, and we are going to do a little bit of an overview of what happened last year some stories from last year where we see things going this year the state of Chicago, what people are looking for and just how competitive the market is. So if you are thinking about the real estate market, selling or buying this will be a really interesting one for you to see what you may have missed last year, what you may have hit on. So if you bought and you hit, if you didn't buy, you missed, and what you can think about for next year. So let's get into it, sophia, jason, all right.

Speaker 2: 2:11

Hi. So last year, I think was it was, I think generally, for most people would say, a pretty tough year for the real estate market. I think what our rates increased higher than they ever had in history, yes, so I think that that sort of put a bit of a pause and I think it's a repeat of what we talked about the wrap up last year. It was a tale of two markets really. Yes, I think the residential market this year is going to be a lot more robust. I think it's also an election year, which can always make things real dicey.

Speaker 1: 2:52

Yeah, I think it's going to be, or. Last year was a great first five months, six months and then the tail in a six months was pretty terrible because everyone thought the rates were going to go to ever. That was last year's dynamic. I agree with you this year's dynamic will be a crazy first six months and then not an interest rate slow down, but a oh my God, the world's going to die. Slow down. Right, because someone I was talking to somebody yesterday and they were like like an other agent, john, in front of my eyes, like well, why do you think the tail ends? I'd be like man. Don't you remember the commercials that start when it was we come in to start with, like in August, that the election that the world's going to end no matter, like if this person party it's, I mean.

Speaker 2: 3:35

The market always slows down. Yeah, no, no, no regardless if it's a Republican or a Democrat coming in, it's, it's, that's everything.

Speaker 1: 3:43

Yeah, mudd's slinging stops everything. So then, but we, we we've, historically they've had our best December's, like crazy December's in January's, after those days too. So that's nice. Yeah, a little bit of opportunity.

Speaker 2: 3:56

We don't get that post summer bump in an election year, right? So all of those people are sort of those buyers were not necessarily sellers, but more of the buyers are kind of just sitting on the sideline waiting, and I guess it is the sellers, because the sellers then usually turn into buyers. So, yeah, I agree, I think that it's going to be a not typical year this year. What is typical, though, is generally 60% of the inventory of the year is always sold before the end of May, right? So I think that we're going to. It's still going to continue to be the same story this year?

Speaker 1: 4:31

Absolutely.

Speaker 2: 4:32

If not even a little bit more, just because people do know, now that you know, the rates are coming down and I think a lot of the sellers who were holding off because they didn't want to sell they're super low interest rates, so to speak. It's a lot easier to double your rate than triple your rate.

Speaker 1: 4:50

Yeah, I think it's easier to go from four to six where we're at right now, versus four to eight. I agree with you. So you have. Or two right, those people are people in the twos and threes.

Speaker 2: 5:00

I mean I have a two on the time mortgage.

Speaker 1: 5:02

Yeah, yeah, those people, yeah, they're going to rent their place. That's the homes I never get in the market. But I do agree with you. I think that people need to realize that and we're seeing it now. I think people need to realize that not only did you have the slowdown last year because the rates it just, like you said, no one wanted to sell, no one wanted to buy and all of a sudden, through December, december was nuts and then all of a sudden, december to January to February, it's like okay, we're okay at 6%. I've seen some 30 year jumbos come in under 6% on sales that I've done. So you're getting those rates and you're just going to have which is called switching costs. Those switching costs are. Now you can stomach them, like you said.

Speaker 2: 5:44

Well, yeah, and it's also people. I think it just takes time to get used to what is the new normal, which is still a historic legal rate. Right, a six is not a bad rate. I mean, I bought my house in the late 90s on a six and slowly pedaled back and refinanced and then to where I'm at now. I don't think we'll ever see those rates again. No, I hope you don't. That's profitable, but I do think it took buyers a while to just understand that this is the way it is. So I can either sit on the sideline and never buy, waiting for that to happen and watching the homes appreciate, or I can get in now and take the five or six.

Speaker 1: 6:27

And I want to talk about how you're saying that, because you're saying I can get in now and take the rate. Let's just talk about the people that got in towards the beginning of last year. I just want to go over some of these numbers. They're coming. Your stats people, yes, so this is year over year, December 22 versus December 23. Those are the most current full. We do have jans have started to come in, but this is legit, it's stamped, it's good. So if you bought in January of 23, January 23, December of 22, you're up 13% on your medium home sale price. I think Chicago alone was set. I saw 7% from December to December. Overall it's 5.4% in Illinois. I mean there are opportunities and those opportunities are going to come again. I mean you've got not only that, but you've got let's see New listings down 25%. Last year, which we talked about, closed down 23%.

Speaker 2: 7:32

So those should go hand in hand, right, If the inventory's down the sales are down.

Speaker 1: 7:36

Sales are down and then the price is up 13, which means that demand is still continuing Right up to me. Yes, it's continuing to outstrip the sales. One out of four people, I read, still think that the market is going to crash. And that was the same as last year. People, if you are willing, if you're mentally wanting the market to crash so you can get in, it's not going to happen because everything is governed by supply and demand, and people have heard me say that for five years now and there's only 2.1 months of supply.

Speaker 2: 8:07

So a balanced market hovers at around five months, for about five to six months of supply is what is considered a normalized market.

Speaker 1: 8:17

Yeah, so if no one put a house in the market in two months, there'd be no homes for sale in the whole city of Chicago. That's bananas. So I kind of want to tail this into. What you're saying is that it's just time to get in and you never know exactly what's going to happen.

Speaker 1: 8:34

But I think another thing to get a little bit into the 10-year yield and I will just touch on this and I'll make it real easy for people to understand is right now, the 10-year is at about 4%. Let's just say give and take. That's the 10-year note. That's what banks borrow from right, that's what they kind of call it. So the mortgage rates, though, are almost at 7%. That's a spread of almost 3%. So that's what the 10-year is to, where the rates are.

Speaker 1: 9:01

The normal spread historical 40-year spread is 1.7%. So, sophia, that means, if they don't touch rates, if they don't even lower rates, that they're like you know, we're good, we're staying here. We're staying here, we're good. Just on the premium, where it should be historically, we drop below 6% into the 5%. That's without touching rates. We have over because of the last couple of years. We overran where we should be People in any dynamic. There's going to be a pullback and when there's a pullback, all of this supply and this pricing is going to explode again. So if you're waiting for rates to decrease, it's too late, right, and you can re-, I see it, I see it.

Speaker 2: 9:46

Yeah, thank you, glaze over, but you can refinance and people forget that part of the equation. You can't re-get your purchase price, but you can refinance.

Speaker 1: 9:57

Yeah, but the price appreciation last year happened without rates being dropped. This just wouldn't no inventory. And where is that inventory going to come from? It's not coming.

Speaker 2: 10:11

Well, we hope, though, with the lower rates, that some of these people who were sitting on the sideline, like we said, we're willing to give up their 3% 4% that they got during COVID and buy. I do think we're going to see more inventory. It is also to timestamp this it is the Tuesday after Super Bowl, and traditionally, super Bowl Monday has always been the start, officially, of spring market in Chicago. So I think we're going to see. I mean, I think I noticed yesterday there was a massive influx of inventory that went on the market, and I think we're going to continue to see that over this week, just with the new listed properties coming on. So I do think that inventory will be a little bit better. It's my feeling.

Speaker 1: 10:57

Last year. What was the hardest thing when you were dealing with buyers for last year, even though with the limited amount of inventory that was on there, what did you find the hardest thing to find for your buyers? And did they just get exhausted and say you know what? Almost.

Speaker 2: 11:16

So I had a great couple that were looking to purchase a multi-unit because they had listened to a lot of your podcasts and had done a lot of research. And it was a couple looking to buy a multi-unit and they were thinking, ok, we'll get a two or a three flat and we'll live in one, rent the others out and try to quote unquote live for close to free. Well, they kept getting. We were going in on a million dollar property, going in at 1.1, 1.1.5. We were getting outbid consistently and I kept saying how Was it cash, or was it?

Speaker 2: 11:53

Well, they were not cash, but they were putting no people. You were losing. They were putting down 30%. That's a lot, which is a lot. We were striking the mortgage contingency For a first time home buyer. This was very scary.

Speaker 1: 12:08

So striking the mortgage contingency. That is a great move in very competitive markets.

Speaker 2: 12:13

When you're not cash.

Speaker 1: 12:14

What is that so?

Speaker 2: 12:16

what that means is you're going to get a mortgage but you are not going to be able to get out of the deal, should you not be able to get the mortgage, the mortgage content, the mortgage is a non-issue when you're competing on this property with other people. It's the closest way, the closest to cash. You should compete with cash and that has to come with a very strong approval letter from the lender and working with, obviously, a lender that people respect and don't. So if it doesn't appraise out you have to make up the difference.

Speaker 2: 12:48

You have to make up the difference, like you would with cash, like you would with cash if you do an appraisal with cash. But they kept losing out and it got to the point where it was so frustrating for them and I just said, listen, let's refocus. And we just went into a condo Because they couldn't compete with cash. So the thing that was very frustrating about last year for a non-cash buyer was that people with cash were coming out of the woodworks because they knew they were going to win these offers. So I think and it would be interesting to look up the data, maybe we can get that later how many home, the percentage of homes that were sold in cash, I think, were significantly over 30%. Yeah, I was going to say significantly over. I just saw it. Yeah, I was going to say significantly over 30%. I did an IGI. Yeah, so traditionally you hover in the high 20s low 30s 38% but last year it was so high and I think it's because the mortgage rates were higher than people had been accustomed to for the last two years.

Speaker 2: 13:48

But they also knew that this was their opportunity to get these properties and the interesting part was I would always the properties we lost. I mean these were relationships I had with brokers who were like, yeah, I wish, but this. I mean we were coming in at 1.2 on a 1. And they were closing at 1.4. So this spread was too great for somebody to take our offer. And my thought was always like, how is this going to appraise? Not one property did not appraise on those units. It was very crazy. On those. I think they lost out on four and every single one. I checked back with the brokers and they're like, no, we didn't have a problem Anything. What was happening is these brokers are starting to show. Look at, we had seven offers. What did you say happened today? You got out there were 10 offers on these properties, so appraisers did not die.

Speaker 1: 14:41

But the appraiser will say it Like when it's over. The appraiser will call me and go. If you have multiple offers, bring them, because then I can create value.

Speaker 2: 14:47

Well, the brokers were bringing in.

Speaker 1: 14:49

We have Because there's not many trades.

Speaker 2: 14:50

Yeah, we have six or seven offers, so this is market right now. And that used to be something that I felt appraisers did not give as much credence to, but I think last year it was such a big deal because there were as many sales like within six months to go back and check. So that was something interesting that happened a lot last year.

Speaker 1: 15:10

Five or six years ago, if you brought comps to an appraiser like I, got yelled at a couple of times Now I can't do my job.

Speaker 1: 15:17

I bring them now and I'm like do you want these? Or like absolutely, because there's no inventory. So if you can help me with my job, they actually like it. But they do call and ask for that stuff. Yeah, I think that's. On the multi units, you're talking about historical highs in the stock market, people sitting on millions of dollars of cash at highs, where rates are at 8% and they can borrow from their stock account and get lending in the 2s to 3s to 4s and so they're buying these places that are cap rating at 8% and they're only paying 4%. On Jews, they're making 4 on that. The multi-unit market is tough because people have so much money in the stock market right now and they're borrowing from it. It's tough, that's tough.

Speaker 2: 16:08

That happened a lot. It even happened not just in multi units, but that was a specific set of circumstances where I had fabulous buyers.

Speaker 1: 16:16

Yeah, I had one like that last year, but it was. They were like no, we want it, we want a house hack, we want a house hack and this is what they could spend. And I took them to five places that were at their price point and I mean they were like these places could fall at any time they needed one and they were like yeah, no, no, this is how you make money Like, yeah, no, we'll get a car though.

Speaker 2: 16:36

Yeah, not for us, it is not for the week.

Speaker 1: 16:39

That's like you said. Like they list this stuff online, I can make money this, this. And then, when they sit in it and I'm like, okay, this is what you need to do, they're like, yeah, no, let's just. Can you change that search?

Speaker 2: 16:48

Yeah, exactly yeah. So that was something that was real interesting about last year and I think, you know, I do think that it's going to continue this year.

Speaker 1: 16:57

I mean, I know for a fact that a bunch of developers have started to move to specifically meet that demand right Like one of our developers now building homes but has three multi-unit projects going on right now that we're about to finish and all he's doing is buying these rundown three flats in good areas, gutting them. We put renters in, we turn around, we sell it and those things are selling like hotcakes. I see them all over. There's developers that build three flats that are like our project.

Speaker 2: 17:27

We were supposed to have a sales project at Montrose. Yes, and Kenzie was a new construction, new build commercial on the first floor, elevator building, beautifully done, eight, eight flat. And when it was all said and done, they said you know what? Sorry, we're going to rent this property, yeah, the rents are so high, the rents are so high, and that was what they decided to do. And they're going to hold it for a couple of years to appreciate the property and then sell it.

Speaker 1: 17:54

And then sell it. I mean, like you were, we were talking about the someone that I had talked to you about this morning and I do think that it's really nice that agents are doing this. But we've lost out on our fourth property, three or four. One, I think no one sold before we even could put the offer in. And then another one they wanted to see that went on the market on Friday was calling for best and finals today at 12 pm they just marked it. Let's see this. I'd go back to best and final two by 12 today, but the minimum amount so this is for $450,000 in less. The minimum amount of offers that we had on a property that we were battling was 10.

Speaker 2: 18:34

Yeah.

Speaker 1: 18:34

And I will tell you they gave an F. This is very interesting. They gave and I told them this too. They gave an FHA approval. And they gave me their approval, like a month ago on FHA, and I said, listen, you got to go conventional 5% down. I'm like you've got to figure out how to do that Because I'm multiply offers. No one is going to want to deal with an FHA Approval, not the approval, the inspection, yeah.

Speaker 2: 18:59

The approval of the property yeah.

Speaker 1: 19:00

And I don't think people and they didn't know they're like what I'm like yes, there is an inspection that FHA does that's separate than your home inspection. And I go when there's seven or eight offers. Why is it going to want it to deal with that? And you can't give credits. It has to be fixed before the loan is done. They have to come back and fix it. And she called me up yesterday during the, she being the buyer. No, I'm sorry, the agent called me up to you. The agent called me up during the negotiations where she's over viewing all 10 offers and she said yours is FHA, we won't accept it because we have conventionals. We don't want the second inspection. And I said we can go conventional and I had them, get a conventional, but you have to have all your best cards out. And that's Jefferson Park area, which I talked about, I think, a little bit ago. Jefferson Park, edison Park, that whole area by O'Hare, just still in the city Following the blue line. Yeah, it's crazy right now.

Speaker 2: 20:01

Well, it's because everything central has blown up. I mean, somebody listed a $2.2 million home in Buptown yesterday on a 28 by 100. Granted, it's beautiful, but it blows my mind. I mean, when we moved here, I mean I paid like $500,000 for my house and now I mean I just it's like I was thinking about it like in comparison to I never thought.

Speaker 1: 20:26

When I saw that, I sent it to Nikki and I go man, what is this? What's this? Put our house.

Speaker 2: 20:30

Yes, Because it's just you have to move further out now. I mean we have to, and it's cyclical, though, like when we moved to Buctown, our mother said to me where are you going?

Speaker 1: 20:43

You're going west of the Kennedy. You're going west of the Kennedy.

Speaker 2: 20:46

We lived in Gold Coast and she's like where are you going? Oh my God, are you going to die there? Like it was crazy. And now it's like a great, flourishing, beautiful neighborhood with a lot of retail. And that was actually what was the draw was we saw the retail coming and thought, okay, well, something's got to happen here. There's so much retail coming, but that's just like the natural progression. Like we look at Jefferson Park like, and you know who knows what's going to happen there in 20 years, these houses you're selling for $450,000 could hit $2 million.

Speaker 1: 21:15

It is nuts. What do you think when you look when you're going out with a buyer? What do you think like things that you look for? If there's three big things you look for, to tell a buyer hey, listen, this neighborhood's on the up and up and this is why I think you may retail, okay.

Speaker 2: 21:31

So always retail and specifically sounds crazy, but Whole Foods and Starbucks love them, hate them whatever. They do so much market research before they put anything in a neighborhood. So if you see those sorts of stores retail opening, you know that they've done their due diligence. Schools schools are a big thing. When you buy into a neighborhood that has a good school or has a strong parent involvement, pta, you know that that's gonna and I do think that's part of what happened in Bucktown with all for sure here is there was a lot of parents, a lot of parent involvement in the neighborhood. So I think the schools, the neighborhood, the retail, the schools and then lastly, transportation.

Speaker 2: 22:21

I know people are not necessarily going downtown for work, but people want to be able to have transportation, whether it's not taking 25 minutes to get to the Kennedy, you know I mean that's like the rub in some neighborhoods or you know, all the time I mean people are like I don't want to be more and because of our weather here, I don't want to be more than 10 minutes to an L stop. So I think those are the top three things I look for and the things I ask my clients mostly. School and transportation are two of the things I always ask people, like how important are these things and what is your criteria for them? But those are the three things I look for when I'm looking into a neighborhood that's maybe not quite there.

Speaker 1: 23:05

There and then on the sell-in, what are you telling sellers right now in terms of like top things, like when you go it has to be perfect.

Speaker 2: 23:14

Literally. I am the most anal person. I don't even want to see a cup out. I want it to look almost like no one lives there. We're competing a lot with new construction, resale right. There is a lot of new construct not a lot of new construction, but there is new construction. There's also rehab work that's going on, so you have to be perfect to get one chance. People will say, well, can we try it this way? No, because once you've been on the market, it's out there, the internet. Your pictures live forever somewhere. Someone's going to find them.

Speaker 1: 23:47

Yeah, people always like can you take down those pictures?

Speaker 2: 23:49

I'm like they're yours from like five years ago. Yeah, I have no access to those. So the one thing I say is it has to look perfect Inside and outside. People forget about-. The first thing people see is the outside, not the inside. We're walking up I mean I said that too about a property we're listing. The property is beautiful. The association does not have the outside so pretty. We've got to get the outside pretty, because that's actually the first thing people see.

Speaker 1: 24:15

Right, they do, and it also represents how people live inside the building, right.

Speaker 2: 24:18

How well are they taking care of the property? Yeah, I mean, if the outside looks you walk in the door and there's leaves and garbage all over the place. Well, that doesn't show very well. So I'm showing up with a broom to clean up the front of the property. So before showing, I would say those two the inside, the outside and the other thing is just the photos. The photos have to be perfect. I mean, I look sometimes at photos of properties and you'll see uneven towels and a strung cup on the counter or things like that. So, having your photos and making sure that you have a photographer who's looking at all of the details and you're looking over their shoulder for the photos you know I'm there for the photos. People say, oh, you're coming. I'm like, well, yeah, of course I'm coming To controlling to not be there for the photos. On pricing.

Speaker 1: 25:11

How hard is it to price stuff now when we don't have inventory? I mean, inventory is down 25%, sales are down 24%, pricing's up, so it's not a negative thing. But like, how do you figure out? Like, I have a listing agreement, a listing agreement, I have a listing appointment today and the last 12 months there's four sales and it's like Of comfortable properties, of comfortable Four in 12 months and I don't like to go 12 months back, but I have to Because I only go if I go six months back. There's one Right.

Speaker 2: 25:44

Well, I think I don't always just look at the clothes. I look at what's competing. There's no actors? Well, you'll find some somewhere. But I mean you have to look at clothes. I mean people always talk about just the clothes. I always look at actors because that's your competition, that's your competition. I look also in like on TAM.

Speaker 1: 26:06

Yeah, and.

Speaker 2: 26:07

I see, and it's a lot to go through, there's a lot of stuff to do. I always try to push the price a little bit and I think that working within the PLN helps a little bit and getting with their opinion.

Speaker 1: 26:20

Yeah.

Speaker 2: 26:21

You know, there's always the seller's price, the broker's price and then the periphery.

Speaker 1: 26:26

Right, and so the PLN is the private listing network for people that are listing. You can always send something on the private listing network to everyone. It doesn't show up as pricing but you can test the price and you can go real high or push the envelope and if you get it, kudos to you, you got that price and then that creates the new market.

Speaker 2: 26:50

You can also like what we do is put the stuff in a draft, in general less, and we can reverse prospect, which means after 24 hours it kicks back the amount of buyer matches at a certain price point so you can figure out the amount. You can figure out the amount At a million, 9.5, 900. I understand that's a large spread. However, it will turn back after 24 hours where the largest buyer demand is for this type of product and I think that's always a really good way to go about it. And you know you go into a listing, you know you're going into talk to a seller. If you're not listing for a month, talking at a price at that point, pinning it down it's so far out you can't even really pin it at that point, especially this type of year, right, I mean, who knows what in a month? You know 50 things could go on the market between now and then. Maybe not as tight as what you're looking for, but I'm just saying there will be more information this time of year.

Speaker 1: 27:44

Do you think Chicago will continue to be starting to be a more? I mean, I know this I don't know how I say this the right way but do you think Chicago would continue to be what I consider turning into a more affluent city as it gets more and more expensive and people get pushed out of city central areas? It seems like Chicago is like.

Speaker 2: 28:05

Chicago when you mean the city, not the city.

Speaker 1: 28:07

Not Chicago land, but it just seems like when you look at where we were five, six, seven, maybe 10 years ago versus New York and the coasts in Florida, it seems like we're starting to become expensive.

Speaker 2: 28:25

I think our friends have gone up, though, but I think we are still. I think we've gone up, but I think it's happened also. It's also gone up a lot in these the coasts.

Speaker 1: 28:36

And we're just not there. So we don't know how I know my own.

Speaker 2: 28:39

Well, no. So I have a friend I talked to last night who paid $2.1 million for her property in Florida five years ago. Her neighbor, same layout but faces the alley versus faces the street, so she has the premier tier.

Speaker 1: 28:54

Yeah, and she's in the other one's alley 4.2. Oh Jesus.

Speaker 2: 28:58

Okay, so that's what I'm saying is that I think that the coasts have also gone up, but I think back to like. We've been selling real estate for 22, 23 years. Did I ever think that I would see a million dollar one bedroom in Chicago? No, no. Right, so you have to pay if you want to be in a luxury building I mean, okay, it's not a 900 square foot, but it's a 1400 square foot one bedroom condo in a nice building, yeah, so that's between $800 and a million dollars.

Speaker 2: 29:28

I just created it On Michigan Avenue, but that same condo in Manhattan is two to three times yeah, so I do think our prices are going up, but I think it's equally to-.

Speaker 2: 29:43

We still have that surprise we're still way less expensive. I mean, we showed a multi-unit on Fullerton Parkway to a New York buyer and he could not believe the value of the property. And we were having this conversation and he said it's so affordable it blows his mind. Not only the purchase price of the property but the quality of the unit and the finishes and the lot size for the reds, like he can't believe that someone is getting a well to top floor but a top floor studio for $1,900. Mind you, we just took the rent from $17 to $19 on one flip on one lease.

Speaker 1: 30:24

But to him he's like this-, but the cap rate is much greater than New York too. So if you Right.

Speaker 2: 30:31

But the rent. He said that in Manhattan would be like $6,000.

Speaker 1: 30:35

Yeah, but the price of the building would be Right.

Speaker 2: 30:37

But so that was it. The only thing he said that was like a flip was that our property taxes are high.

Speaker 1: 30:42

So think if you didn't have the property tax issue, because the property tax is what is it is an issue. Yeah, well, that's a piece of pricing down. Yeah, it is an issue. So you think you're getting a good price, but then all of a sudden it's like oh, on top of it, I'm paying a million dollars in mortgage payments to taxes, because that's what you're doing, right?

Speaker 2: 30:59

yes, the tax Right, exactly, it's another billion. So what Jason's saying is the equivalent of property tax would allow you another million dollars.

Speaker 1: 31:06

So if you could spend, a million and a half dollars. If we had normal property taxes, you actually could spend 2 and 1 half 2.2. So when you're going down to Florida and taxes are nothing, you're like, OK, that's why the-. Well, I can spend-. Well, I'd use as much as I could spend. It's much more buying power.

Speaker 2: 31:21

It's more buying power, right? So yeah, that was so I do think our prices have escalated, but I also think they've escalated everywhere else.

Speaker 1: 31:30

I mean for you. You're clear to say that we have a property tax problem. It's blowing my mind right now.

Speaker 2: 31:36

Well, because he's also in finance right and he teaches economics. So for him he was like this 2% property tax, and then we went down a rabbit hole of where the property taxes go and how. That's a whole other story, but yeah, it was shocking to him.

Speaker 1: 31:57

When you get your property tax bill. Everyone just got right. We just got it in like a couple weeks, yes, last week, when you get your property tax bill. The top of it has your pin number and then it has what your property tax is. There's it's three sheets. Take a look at the middle.

Speaker 2: 32:13

That tells you-.

Speaker 1: 32:14

The middle is the pressing Going to, and it brings down and it also tells you on all the way, on this side it'll say percentage of shortfall yes, and there is nothing that's underneath 40% on that percentage of shortfall. So it's it's another podcast.

Speaker 2: 32:32

At any rate. So, yeah, the tax thing, I think, is the biggest issue that we face. That might be different than Florida or New York, I think. The taxes in California, I think they're close to ours.

Speaker 1: 32:45

They're close, but they're set. They're so high, but they're set Right.

Speaker 2: 32:48

So in California your property tax is what it is at the time of purchase. It doesn't readjust annually. People who move here from California think it's bananas.

Speaker 1: 32:58

They tried to do that and it was-. No, they tried to do like a triennial assessment in California and it was like what? And there yeah, well, there's people that own homes for you know 50 years, that they're paying taxes. I can't they're paying here. Yeah, no, no, no, but they don't get reassessed.

Speaker 2: 33:13

I know.

Speaker 1: 33:14

So it's like-.

Speaker 2: 33:15

I mean, but that's what happens to elderly.

Speaker 1: 33:18

Yeah.

Speaker 2: 33:19

People who you know. When you see people who are fighting the gentrification, the reason is is there I mean unfortunately being pushed out of their homes because not because they can't afford the home, they can't afford the property tax anymore.

Speaker 1: 33:31

Yeah, but why should and I agree with them why should they be penalized with the fact that they've been there for 50 years? They didn't establish that neighborhood, they didn't paint that neighborhood.

Speaker 2: 33:39

They did. And that's the rub is that, like you want gentrification work, there has to be a but they're also making-.

Speaker 1: 33:49

They're making you know 300% yeah.

Speaker 2: 33:52

But they also stuck it out.

Speaker 1: 33:54

Yeah, no, I agree with you, you know If you made it through the 70s, here the 80s, yeah.

Speaker 2: 33:59

I mean, bucktown is a very different neighborhood today. Yeah Than it was. When we moved to Bucktown. I mean I was the nicest house on the block and now I'm the least next house on the block and so and this is kind of right.

Speaker 1: 34:13

So look at percentage of home appreciation in 30 years 300%. If you did your numbers, that's probably dead on. Yeah, I am 10 years 103%, Five years 54% and one year 7%, Because last year we appreciated 7%. That is crazy. Well, I'm living that yes, no, no, that's what I'm saying. That's bananas. And then the five years at 50%, that's nice. So you've got to stay.

Speaker 2: 34:39

You know and that's when first time home buyers right. They always say, well, I'm just going to stay here for two years and leave. And I said, well, then don't expect to make much money because you're going to have commission fees and you're going to have transfer taxes and all of that. 7%.

Speaker 1: 34:53

Yeah, I said you got to stay.

Speaker 2: 34:56

You got to commit to stay or have a different mindset on that? Yeah, and the other thing people, I think, always forget is when they're thinking about well, I just broke even. Well, no, you didn't, because then you ended up living free, and because then you ended up living free for how many years. Yeah, no one takes no one takes the cost of living into consideration when they sell, and that always frustrates me and I'm like no, that's money.

Speaker 1: 35:19

Yeah, that's utility. I mean you would have been renting somewhere else. No one takes that.

Speaker 2: 35:23

They don't take that and they don't take the tax savings, the deductions that they get it just Well, I think it's really hard because all we hear is how bad our taxes are, you know?

Speaker 1: 35:31

Yeah, but it's still a deduction. Not the property, but the federal. All right. Any last words about 2024? I mean, is there going to be buying an opportunity? Do you jump in right now or do you wait for the election and possibly slow it down then, but maybe not to the inventory you need.

Speaker 2: 35:55

Well, I think that you know I always say that the best time to buy it is you know I'm a real estate agent, but the best time to buy to get the best deal is in the winter months here.

Speaker 1: 36:07

Yeah.

Speaker 2: 36:07

Right, you have to run the risk and you have to decide what's important to you. Do you need to get into a house immediately or are you willing to wait a little bit and maybe not get everything you want? Get most of what you want and then turn what you're buying into what you wanted. Right, doing those upgrades.

Speaker 2: 36:28

I have a client who bought a property on Wood Street in a loft building that needed a total rehab and we got a screaming deal. Last fall I think we paid like $7.20 for a loft. The neighbor loft, literally right next door, listed yesterday for $1.3. I sent him the listing and he's like okay, sophia, it's time for you to come over and help me get on my rehab. All right, so that property, because it needed work, did not sell in the spring high spring market. It was happenstance that he came and we were looking in the fall months and we got like $100 and something thousand dollars off because the seller was like okay, if I don't sell it now, I'm going to have to wait till the following spring. So I do think sometimes there is opportunity if you can wait and if you're willing to do. I have a client, adriana Sweat Equity, if you're willing to put a little bit of Sweat Equity into it. My client is floored that he could almost make 40% on his money.

Speaker 1: 37:32

And that ugly houses are the best.

Speaker 2: 37:33

Yeah, so yeah right, there's a sign at the exit on our mated webuyuglyhousescom.

Speaker 1: 37:39

Ugly houses, I'm plugging that, but yeah, just to make money.

Speaker 2: 37:44

So I do think if you got to get in the market, you got to get in the market and the most inventory is going to be now. But if you have some imagination, a little bit of money for some rehab and some waiting time, I do think that fall and winter are great months to buy for a deal.

Speaker 1: 38:02

For a deal. All right, Thank you so much. Thanks. That is our 2023 and kind of what we see for 24. Don't forget to subscribe to the podcast. Download it. We're on Spotify, Apple, basically every live for and thank you so much and we will see you in a couple of weeks. Thank you.