Sue Fox, @Properties. Direct 773.816.1788
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Archive for April, 2010
Chicago home sales skyrocket 50% in March
The home buyer’s tax credit — which expires tomorrow — has certainly helped light a fire under Chicago home buyers. Home sales shot up again in March compared to March 2009, making this the seventh month in a row of year-over-year gains.
THREE YEARS NEW: After three years on the market, this new luxury home in Lincoln Square finally sold in March for $1.2 million. It was priced at nearly $1.6 million in 2007.
In the city of Chicago, March total home sales (single-family and condos) rose 49.7% to 1,814 sales compared to 1,212 sales a year ago, according to the Illinois Association of Realtors. For the entire first quarter, home sales were also up considerably, by 41.6% citywide.
But prices have continues to slip. Chicago’s median home price in March was $209,000, a 4.6% drop compared to $219,000 last year.
Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois, pointed to the latest figures as evidence of an “upward trend.” He told the Realtor’s association that “there is increasing evidence that the housing market is stabilizing; in many parts of the country sales have increased but prices remain stubborn. In places where there have been increases, they are modest; there is no doubt that the downward pressure on prices can be traced to the volume of distressed properties on the market.”
Meanwhile, foreclosures have continued to climb across Chicago and the metropolitan region. Nearly 3,500 Chicago homes went through a court-ordered auction in the first quarter, and 95% of them were acquired by the bank, according to a story in today’s Chicago Tribune.
This flood of bank-owned homes, which I’m now seeing popping up even in trendy neighborhoods like Lakeview and Lincoln Park, is depressing home prices across the board. But at last, homes are finally changing hands again at a healthy pace, and some stability is returning to our Chicago market.
In Chicago, buying a home now beats renting
CHICAGO ON SALE: A new report on home prices shows that buying is a better bargain than renting in Chicago. Home buyers seem to realize this, if the surge in recent sales is any indication.
Looks like home prices in Chicago have declined to the point that buying is now a better financial deal than renting, according to a front-page story in the New York Times that analyzed home prices in various cities.
“In some once bubbly markets, prices have fallen so far that buying a home appears to be a bargain,” the newspaper reported (read the full story here). Chicago — along with New York, Los Angeles, Houston, Dallas, Atlanta and south Florida — is among the major metropolitan areas where buying now makes more economic sense than renting a similar home.
A simple method for comparing buying vs. renting is called the rent ratio: the price of a home divided by the annual cost of renting a similar one. If the rent ratio falls below 20, buying becomes a better option. In Chicago, the rent ratio is now just 15.9, according to the Times analysis, lower than most of the other major cities surveyed. (In fact, only a handful of cities have ratios below 14, including such hard-hit cities as Las Vegas, Detroit and Pittsburgh.)
“In most markets, you’re better off buying,” Thomas Lys, an accounting professor at Northwestern, told the Times. “But once the ratio gets to 25 or 30,I’d say, ‘You know what? There may be a bubble.’”
In Chicago, whatever housing bubble we saw here never inflated as fast or as far as what coastal cities like Los Angeles or Miami experienced. Still, prices have fallen considerably. Chicago’s rent ratio was 24.3 in 2005.
This report backs up what Chicago real estate agents have been seeing on the ground: Plenty of smart buyers snapping up properties at great prices, and locking in low interest rates to boot.
New listing in Andersonville: Historic bungalow for $469,900
BUNGALOW HEAVEN: Nestled on a quiet street in Andersonville, this gorgeous bungalow has been beautifully restored by its owners. It's now for sale at $469,900.
I’m really excited about my new listing at 5951 W Hermitage Avenue, a beautifully restored bungalow in Andersonville. It is a classic Chicago bungalow, made of brick with original woodwork and hardwood floors throughout, featuring a lovely fireplace flanked by built-in bookcases in the living room.
I fell in love with this house the moment I walked in the door. And everyone else seems to feel the same way, as it’s only been on the market for two days and I’ve already had four showings! The owners have kept it their house in perfect shape, as you can see here from the photos. In addition to renovating the kitchen and putting in a charming breakfast nook that looks out over the backyard, they completely finished the basement, adding a rec room, a media room, a second kitchen, a full bath and an office.
A CHEF's KITCHEN: With plenty of space, an island and a breakfast nook, this bungalow kitchen is a far cry from the cramped kitchens of many historic Chicago homes.
The house is very livable, with two bedrooms and a den on the main floor, a spacious kitchen, a separate dining room, and plenty of storage space. And the backyard is a delight, with a large deck overlooking a landscaped grove of trees and flowers.
Most Chicago bungalows were built several miles west of the lake, in a bungalow belt that stretches through neighborhoods like Jefferson Park and Portage Park. There aren’t too many bungalows in Andersonville or Edgewater, but Hermitage Avenue is a little treasure trove for bungalow lovers. It’s a quiet tree-lined street full of classic bungalows — just a stone’s throw from Clark Street and all of Andersonville’s great shops and restaurants.
Trying to sell your Chicago condo? Get it FHA approved
STAMP OF (FHA) APPROVAL: This 2-bedroom condo at 5926.5 N Paulina in Edgewater has already earned FHA approval. It's listed for sale at $218,900. Vanessa Raflores of Nexus Chicago Realty has the listing.
Ever since February, when the Federal Housing Administration adopted new rules for the approval of condos, confusion has clouded the Chicago condo market. Buyers hoping to use an FHA loan (which requires only 3.5% down) can no longer obtain “spot” approvals for the unit they want to buy, because now the entire building must be FHA approved. And condo sellers — observing that at least a third of buyers are now using FHA mortgages — are eager to get their buildings onto the FHA list.
So how does a seller obtain FHA approval? I attended a seminar on this very topic last week, and the consensus seems to be that the simplest, fastest way is for the condo association to hire a project consultant or lender for a minimal fee. The paperwork that the government requires can be cumbersome, and the condo building has to meet a long list of requirements. For example, no single entity can own more than 10% of the units, no more than 15% of the units can owe overdue assessments, the building must be at last half owner-occupied, and at least 10% of the condo budget must go towards the reserve.
There are companies like Condo Approval Professionals LLC (which sponsored my seminar) that can walk condo boards through a 2-page questionnaire to see if the building is likely to qualify for FHA financing. The cost of getting the building approved runs from $500 to $1000, depending on the number of units. And the process is now taking only a few weeks, which means a seller can get still his/her FHA-approved condo onto the market in time for the spring/summer buying season!
If you are trying to sell your condo, FHA approval will give it a huge boost in the marketplace. Keep in mind, however, that the FHA maximum loan limit is $410,000 in the Chicago area, which means a purchase price of $424, 350 or less.
New listing in Andersonville: Gorgeous 2-BR loft with parking for $319,000
LOFT LIVING: My new listing at 1473 W Foster #3 in Andersonville feels like a loft perched in the treetops, with 13-foot ceilings, exposed brick and plenty of light.
It’s been so busy lately I haven’t had a moment to blog… But at least I have some new listings to show for it! I’m happy to present my latest listing in Andersonville, a beautiful penthouse condo at 1473 W Foster Ave. #3. Please check out the photos here.
This is truly a great Chicago condo, with many features that are hard to find like soaring 13-foot ceilings and exposed brick. The gourmet kitchen features 42-inch maple cabinets and granite countertops, and the open floor plan is ideal for entertaining. There is a huge living room with a wood-burning fireplace, a sunroom, a master bath with custom marble and a large private deck. Parking is included!
There are hardwood floors throughout, plus central air and an in-unit washer and dryer. The assessments are low and this 6-unit building has been well maintained. And this top-floor condo even has roof rights, just in case you ever wanted to build a roof deck.
The location is also ideal, right off Clark Street in the heart of Andersonville. (Of course, I live in Andersonville so perhaps I’m biased, but this neighborhood is awesome.) You’re literally steps away from Starbucks, Cheeetah Gym, the Hopleaf, Ann Sather’s, Reza’s, Andie’s, Women and Children First, Scout and a ton of other cool restaurants and shops. It is only a few blocks to the Red line, the Metra stop at Lawrence, or the lake.
Please call me at 773-816-1788 for more information. I’d be happy to arrange a showing for 1473 W Foster #3 or any of my other listings. Thanks!
Chicago buyers scramble as tax credit expires and interest rates rise
A TIME TO BUY: With interest rates on the rise, buyers are prowling the market for a deal. How about this $450,000 3-bedroom in the heart of Andersonville? A great price, to be sure ... but the property lacks a garage.
It was another home-buying frenzy this weekend in Chicago. The sun shone, the open house signs sprouted like spring flowers, and hundreds of busy realtors and buyers zipped through back-to-back showings.
Some of the urgency is surely the countdown until April 30, when the government’s $8,000 tax credit for first-time home buyers expires (along with the $6,500 credit for other buyers). But larger forces are at work as well — namely the end of cheap money for mortgages and other loans. Interest rates are climbing, and most experts agree they won’t be falling again anytime soon.
The rate for a 30-year fixed rate mortgage has increased half a point since December to 5.31%, according to a front-page story in today’s New York Times. Many mortgage bankers expect the rate to hit 6% by the end of the year.
“Mortgage rates are unlikely to go lower than they are now,” Christopher J. Mayer, a professor at Columbia Business School, told the Times. He estimated that each increase of 1 percentage point adds as much as 19% to the cost of a home.
Interest rates for credit cards and car loans are also rising. Economists are bracing for a sustained period of tighter credit, after a 30-year run of relatively low interest rates. All that easy money helped fuel the housing boom, as well as a generation of Americans accustomed to spending more than they earned.
Higher interest rates could certainly put a damper on a Chicago home market that is finally showings signs of life. But for now, many buyers seems eager to lock in rates in the 5% range before they become a thing of the past.
Under $200,000 in Chicago? The 2-bedroom condo hunt moves north
A HAPPY MEDIUM: Rather than give up the Andersonville area they love, my buyers chose a large 1-bedroom condo there instead of a 2-bedroom further north to stick to their $200,000 price limit.
For many first-time buyers on Chicago’s North Side, $200,000 seems to be a popular price point for their first home. Each year I have several clients — many of them renters in neighborhoods like Lakeview, Lincoln Park, Andersonville or Lincoln Square — who have been pre-approved for a mortgage and hope to find at least a 2-bedroom home.
So what can you get for $200,000 these days? The reality is, despite the downturn in Chicago home prices, most of the aforementioned neighborhoods will be well out of reach (at least for a 2-bedroom unit). Buyers will find themselves steadily drawn further north, to Uptown, Edgewater and Rogers Park, where prices are lower and there are more 2-bedroom condos available for $200,000 or less. (Even in Edgewater, though, there aren’t too many condos in this price range, unless you comb through the high-rises near the lake, where monthly assessments tend to be quite high.)
There are also neighborhoods further west, such as Albany Park or Irving Park, where 2-bedroom condos priced below $200,000 can be easily found.
But if you are determined to live in, say, Andersonville or Edgewater, there are certain compromises that buyers can make. In the last month, I’ve helped two sets of couples with their 2-bedroom condo search in these neighborhoods, and both came up with strategies for staying under $200,000 that involved some trade-offs.
One couple, who had lived in a rental apartment in Andersonville for several years, decided after seeing about a dozen 2-bedrooms in Uptown and Edgewater that their priority was staying in the neighborhood they loved. So they compromised on size and decided to check out 1-bedroom units that featured some kind of extra space, like a dining room or sunroom. Within a couple weeks, they found a sunny 1-bedroom condo in the heart of Andersonville that was actually bigger than some of the 2-bedrooms we’d seen, complete with a large living room and separate dining room, a good-sized kitchen, a laundry room (in-unit!) and a deck.
The other couple compromised in a different way, deciding to look at garden units that would still offer the 2-bedrooms they sought, but would be slightly below ground. We’ve seen several “English gardens” in Edgewater, Andersonville, and Uptown, which are condos only two or three feet below grade that still offer plenty of light through the windows.
Both of these buyers have managed to stay just under $200,000. But if you really want a 2-bedroom condo in this price range, and you don’t want to consider a garden unit or a high-rise, I would suggest heading further north to Rogers Park. There are lots of newly-rehabbed condos — many of them with a second bathroom — at this price point, and Rogers Park is a cool lakeside neighborhood that’s easily accessible to downtown through the Red Line or the Metra.
Happy hunting!
Can you afford to sell? The new Chicago condo conundrum
THE CONDO CONUNDRUM: Chicago condos were rather easy to buy in years past, but for many owners today they are increasingly hard to sell. Even if they find a qualified buyer, many sellers will be forced to bring $10,000 or more to the closing table to complete the transaction.
When it came to real estate, for many years the more relevant question was: Can you afford to buy? These days, however, that question has been abruptly turned on its head, and unfortunately I’m seeing more and more Chicago residents asking themselves whether they can truly afford the thousands of dollars it will take to sell their homes.
This is especially true of Chicago condo owners, many of whom bought their condos within the last five years and now want to move on. I’ve talked to several condo owners in the last month who really want to sell, but upon closer inspection of the numbers, realize they may be facing insurmountable costs to do so.
Here’s the problem: Prices have fallen so sharply in recent years that even if they can sell their condo at a price that will pay off the mortgage, they often can’t afford the closing costs and commissions involved. Closing costs can be 1-2% of the sale price, and real estate commissions are generally 5-6%. Even people who try to wing it without a realtor and do everything themselves are facing at least 4-5% in expenses, because they still have to pay the buyer’s realtor and the closing costs.
Prospective sellers need to take a hard look at the math, paying close attention to what they still owe on the loan and what the property is currently worth (an estimate best left to a seasoned realtor or appraiser.) If they bought a $300,000 condo four years ago and now it’s worth about $270,000, and they owe $270,000 — well, at least they can cover the loan. But can they also afford the roughly $14,000 to $19,000 in closing costs and commissions that they’ll need to bring to the table to close the deal?
Not many people want to (or are able to) bring thousands of dollars to a closing just to get out of their home. And so they are stuck. The only alternatives are to wait, to try to rent out their home at a price that will cover most of the expenses, or to attempt a short sale that probably will not work and will destroy their credit in the meantime.
It’s a terrible situation. And with housing prices continuing to wilt throughout Chicago, more and more would-be sellers are realizing they can’t afford to leave their current homes.
If you are thinking about selling your condo this year, please contact me for a free CMA (comprehensive market analysis). This will give you a solid estimate of your home’s current value, and I’m always happy to sit down with you and review all the numbers, so you will have a clear idea of your financial picture before you decide whether to put your home on the market.
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