Personal Finance

More Real Estate Trouble in the Condo Market

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My neighborhood, the River North area of Chicago, has seen an explosion of condominium developments over the last decade. Loft buildings and business warehouses were the first to be converted, and then purpose-built high rise condominiums began to populate the neighborhood. While Chicago likely isn’t at the same frenzy level as South Beach in Florida, we certainly have a vast overhang of unsold and in-process condominiums on the market right now. Below you can see some of the recent construction (not all condominiums, a lot of it is office space) including the Trump Tower (on the left) as well as other developments. The “beige” building in front has a forlorn “Condos” sign at the top.

Today I was reading the Sunday Chicago Tribune real estate section when I noticed an article titled “Credit Getting Even Tighter for Condominium Buyers”. If you own a condominium and are interested in its value or are consider buying a condominium I strongly suggest that you research this issue in greater depth.

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Valuing Your “Stuff”… Near Zero

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One trend in housing is the ever-increasing size of the average American house. A drive through any city or suburb will show that new houses are growing larger, right up to the lot lines, and buyers perceive total square feet to be an important amenity. If you took the typical suburban family and put them in the house that they originally grew up in they’d generally shudder – only one bathroom for all those people, sharing a bedroom, and hardly any closets! Closets are viewed as a key amenity, with the ability to store racks and racks of shoes and clothes for all seasons is a virtual requirement.

In parallel with this is the growth in off site storage. When I was growing up it seemed that few people I knew had off site storage, but it seems much more prevalent today. Storage for furniture, hobbies, collectibles and everything else that people can’t bear to throw out.

While houses are getting larger and in particular storage elements & off-site storage is a growth industry, a different trend is going the OTHER way. Deflation, or chronic price reduction, is occurring with most of the “stuff” that people are storing.

Here is one example – my new “blog” camera with a small footprint (it is pretty slim although the lends does pop out when you turn it on) was only $212 and it has 7 megapixels and a bunch of cool features, like when you tilt the camera 90 degrees the photos switch from landscape to portrait in “view” mode. This camera blows the doors off previous digital cameras that I paid over 600 dollars for just a few years ago.

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My Investment Advice

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Buy goats.

My niece paid something like $2500 for her goat “Cash.” Last Friday she won the 2007 Grand Champion Junior Market Goat at the Houston Rodeo.

The goat went at auction for $108,000! That’s a Clintonesque rate of return!

In any case, I hope she will remember her loving and supportive uncle and forget last summer’s unfortunate attempt at barbecued goat.

Card Tricks

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Wired had a pretty good article about preventing identity theft. This sort of thing predates the Internet by many decades. It happened to me when someone stole my mail, including my bank statement, some 30 years ago and tried to cash bad checks made out to me, using a fake ID. He happened to use the same bank branch I used and was caught immediately.

There is one more tip I think is worth mentioning: Your credit card company may be able to issue you a temporary credit card number linked to your real account number. This feature is provided by several large US and foreign banks through a company called Orbiscum. Depending on the bank, you can limit the time the number can be used and the amount that can be charged. It can also be restricted to a single transaction, so that once the transaction is complete, your credit card number is useless to anyone else. Consider the one-time use technique when dealing with unknown or dodgy vendors.