I’ve written several times about a foreclosed house in suburban Downers Grove, Illinois (a western suburb of Chicago.)

Here are the facts:

1710 Maple Avenue, Downers Grove:

Originally listed for $979,000 in 2005
Was foreclosed and then bank-owned
Reduced to $712,900 by August 2007
Reduced again to $682,900 in September 2007
Down to $644,000 in November 2007

In February 2008 it was listed at $618,900 with no buyer in sight.

Well- it FINALLY found a buyer in March 2008.

But, lo and behold, it is back on the market! An investor is apparently trying to make a quick buck.

Thanks to reader JDW who just wrote in with an update:

I just had to post an update because this is too hysterical!

This house finally sold in March, 2008 for $540K. Quite a drop from the original price, huh? Well, if that’s not classic enough, we watched the house getting a “freshening” and thought a family was making it their own. Well, to my surprise the house came back on the market today for $769K!! Wow… For an increase of $230K in 7 months they must have built an addition or something, right? HAH. Nope… The listing lets us know exactly what they did:

“Beautiful Remodeled Kitchen With Granite Tops, Stainless Appliances And Huge Butcherblock Island. Freshly Painted.”

Yeppers, it’s a “put in granite and stainless” and make 200K flipper. If that isn’t flippin’ ridiculous in this market, I don’t know what is! Let’s see how long it takes to sell it this time!

There are no pictures (yet) with the listing but I’ll post them when they come on-line to see what the “remodel” really looks like.

Housing Hasn’t Hit a Bottom Yet
This is yet another indication that we are far from a bottom in housing. There is no fear as clearly someone thinks they can make some quick money here. And maybe they will. We’ll have to see (though listing it with only 2 weeks until November in the Chicago area is never a good idea.)

At the bottom of a crash, people are terrified to buy a declining asset. I don’t see much terror in housing. I see some people fearful but I know plenty of people buying real estate and many more who would buy if only the banks weren’t being so tight and requiring a downpayment.

I hear about more people who want to buy real estate than want to buy stocks right now.

That tells you all you need to know.

No one is scared enough. The housing downturn will continue until the fear outweighs the greed.

But right now, there’s plenty of greed.

Thanks for the update JDW. I appreciate it. The story of this house continues to be interesting.

There have been several articles over the past few days talking about how badly New York City will get hit economically by this financial crisis.

Investment banks are going under and thousands of people will lose their jobs. But many will be absorbed by other companies and life will go on.

The real difference now is that with the end of the investment bank as a solo operating entity, like a Lehman or a Merrill, the era of huge bonuses will also probably come to an end.

When has Bank of America ever paid mega-bonuses? Don’t get me wrong. I’m sure they pay very good bonuses. Even stellar bonuses. But they didn’t pay the size bonuses a Lehman or a Merrill was paying.

And it was the bonus that propped up the Manhattan housing market for so many years.

You know- the housing market that the “experts” said could never decline. The housing market that was “immune” to a downturn because there was simply too much money in New York and, of course, “everyone wants to live there”.

Maybe we might find out with this bust- that everyone DOESN’T want to live there after all.

This financial bust isn’t just re-wiring Wall Street, it will re-wire New York’s money culture.

It’s only fitting that this comes at a time when a Russian fertilizer Billionaire is suing the Plaza for his condo deposit because his $50 million penthouse turned out not to be so great after all. He never saw the condo before purchasing it. He bought it completely site unseen.

Those were the excesses of this bubble. And now they’re going away.

I don’t know how long it will take- but normalcy will return to Manhattan’s real estate market. It likely won’t be “cheap” to live there, but at least it can be affordable.

Maybe that will be one of the positive things from this financial crisis. A return to housing sanity.

Some analysts were surprised by the housing numbers out this week which showed that sales actually started to improve in a few cities across the country.

In fact, the one city seeing booming sales is Cleveland.

Cleveland?

Isn’t Ohio in deep financial pain?

Yes and no.

Foreclosures are crushing housing prices in Ohio. So as houses become cheap- suddenly a bunch of people who could not have afforded a house in the past, can now get one. Even with tighter mortgage requirements, they’re still able to buy.

And if prices get really cheap- they’ll WANT to buy.

That is why the housing data is showing a slight improvement in sales. Prices are getting so low in some areas, that some buyers are thinking they’d be crazy to rent.

From CNNMoney:

Still, Larson of Weiss Research said he believes that while year-over-year prices will continue to decline, sales of foreclosed homes will help moderate those losses by taking rock-bottom priced homes off of the market.

“Prices have fallen so much that you’re starting to see sales improvement,” he said. “People are snapping up a lot of distressed properties.”

Foreclosures Dominate the Market

In some cities, foreclosures make up 30% of total home sales. That’s not really a “healthy” market. But it does indicate that the correction is well underway.

That correction entails housing prices that are much, much lower than the last several years. Affordability all but disappeared during the housing boom. And now, without the easy to get loans that required no money down, affordability will be the key to getting this housing market moving again.

What is “affordable”?

I was watching House Hunters the other day on HGTV. They had an episode on about a young first time home buyer who was a school teacher in the Detroit suburbs. She was looking to buy a foreclosed bungalow in the Detroit suburbs.

The price?

Around $70,000.

And these weren’t dumps! They were 1920s-1940s brick bungalows with nice yards. Sure, they were on the smaller side (1100 to 1300 square feet)- but for $70,000? And that was the ASKING price. She likely bought it for much cheaper- probably around $50,000.

Most people in this country couldn’t even imagine a garage space selling for $50,000, let alone a house.

Imagine all the other things that school teacher can now do with her money (instead of obsessing over her house)?

1. She can go on great vacations anywhere in the world.
2. She can max out her 401k.
3. She can save money for a rainy day fund.
4. She can buy expensive clothes.
5. She can buy that iPhone.
6. She can donate to charity.
7. She can buy stocks. Lots of stocks.

And on, and on, and on.

Being house poor is NOT financial freedom. A large mortgage doesn’t make you wealthy. A house is simply shelter- and if you make some money off it along the way then that’s great.

This school teacher has endless ways to create wealth in her life- simply because all of her income isn’t going towards a mortgage payment.

The rest of the country hasn’t yet caught up to Cleveland and Detroit in affordability. But it’s getting there. We’re seeing big price declines in cities where incomes haven’t kept up with housing prices.

Las Vegas is down 28.6% from last year. Miami has fallen 28.3% and Phoenix has slid 27.9%.

This housing bust will bottom out when affordability returns. And not before.

The National Association of Realtors (NAR) released April pending home sales numbers which showed a rise of 6.3% from March, a the highest reading since October 2007. Sales are still well below April 2007.

But if you read NAR’s press release you might not even know that this was the worst housing market in decades.

In fact, things sound pretty rosy.

Lawrence Yun, NAR chief economist, said pending sales contracts have picked up notably in areas undergoing significant price drops.

“Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it’s unclear if they are investors or owner-occupants,” he said.

“Sharp price reductions are leading to a quicker discovery of price equilibrium points. The West is already seeing year-over-year gains in pending contracts.”

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the market may be breaking its holding pattern.

“It appears that more buyers are realizing they can take advantage of a favorable combination of mortgage interest rates, home prices and family income,” he said.

“Overall affordability conditions are the best we’ve seen since the middle of the housing boom in 2004, but with far more choices and much less pressure than buyers experienced four years ago to make an investment in their future. Recent declines in mortgage rates on conforming jumbo loans and a return to sound but not overly stringent underwriting standards will permit more people to qualify for a loan.”

Yun said the underlying fundamentals point to a pent-up demand.

“Home sales are at about the same level as they were 10 years ago, yet the population has grown by 25 million people and we have over 10 million more jobs,” he said.

“The housing market has been underperforming by historical standards, partly because buyers were hampered by mortgage availability issues, but that’s improved and an upturn is more likely. On the other hand, it’s unclear what role consumer confidence will play in the coming months.”

And, see, things are even “picking up” in horrible markets like Detroit and Las Vegas. The end MUST be near.

“We’re seeing healthy price gains in moderately priced areas like Erie, Pa., and Corpus Christi, Texas, and double-digit gains in others,” Yun said. “Our most recent data shows sales rising strongly from a year ago in some areas that experienced sharp price drops, including Detroit and Las Vegas.”

Yes- sales are up. But they’re up because buyers ARE being practical. The banks are listing the foreclosures for pretty attractive prices (especially compared to recent years.)

If you live in San Diego and saw small cottage houses selling for $600,000 that are now priced at $300,000- you would have thought you had died and gone to heaven too.

It IS all about affordability. Sales will increase if people actually have the income to buy the property (with a downpayment.)

What NAR isn’t saying is that many of these “sales” are in the foreclosures. The regular properties on the market at 2005 prices aren’t selling. These homes are what are piling up in inventory around the country.

Is this the bottom? Not even close.

I know it’s NAR’s job to rah-rah about real estate. That’s their market.

But they’ve been saying for awhile that this was the bottom. But like the decline of the Nasdaq, when the market hits the bottom, no one will be announcing that it finally made it there.

It will happen quietly. With no one paying any attention.