Sue Fox, @Properties. Direct 773.816.1788
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Chicago condo sales plunge
This 2-bedroom condo on Wilson Ave. in Lakeview has been on the market for six months. Originally $409,900, the price was reduced this week to $375,000. Ken Jungwirth of Prudential Rubloff has the listing.
The data on August home sales is out, and the picture isn’t pretty for condo sellers. The gap between single-family homes and condos widened dramatically, with sales of houses up 22.6% and sales of condos down 19.1% over last year, according to the Chicago Association of Realtors.
As prices have fallen citywide, it’s become more affordable for buyers — many of whom would prefer a house anyway — to reach for a single-family house instead of a condo. In fact, Chicago is so clock-full of rundown bungalows, ranches, and other houses whose owners are in trouble that the median price of a single-family house is now just $154,000, a 30% drop from last August. Many of these homes wind up in foreclosure, or sell for less than what is owed (a short sale), which further drags down prices.
Meanwhile, condo prices have also taken a hit, but a lighter one. They’re down 15.3% this year, with a median sales price of $271,000. “Condo sales, until the beginning of this year, were the best part of our market,” David Hanna, president of the Chicago Association of Realtors, told the Chicago Tribune. “There aren’t any buyers for this stuff because the lending process is tortuous.”
That’s true: Most lenders now require at least 10% down on a condo, unless you’re using a government-backed FHA or VA loan. But those loans come with a thicket of red tape. Meanwhile, in a big city like Chicago, the $8,000 first-time homebuyers tax credit has less impact, because so many people here earn more than the income limit. I have a buyer who just inked a deal for an Andersonville condo, but he makes more than $75,000 (the point at which the credit, for single people, starts to phase out.) He’s not eligible for any of the credit.
All of this means that condo sellers must be very realistic about pricing their homes. There are not enough buyers to absorb all the granite countertops, stainless steel under-mount sinks, and stackable washer/dryers now clogging the market in Chicago.
The clock is ticking: $8,000 credit soon to expire
Well, Johnny Isakson may be talking, but it doesn’t look as if Congress is listening.
Isakson, a Republican senator from Georgia, gave a speech on the Senate floor Friday urging lawmakers to extend and expand the $8,000 first-time home buyer tax credit, which is slated to expire Nov. 30. He has proposed increasing the credit to $15,000 and opening it to all home buyers, regardless of income.
“If we do this, home values will return, unemployment will go down, our economy will turn, and consumer price confidence will go up,” Isakson said. “I would submit it is a part of the main solution. We need to take an economy that is on the bottom and move it back toward equilibrium and prosperity for America.”
The tax credit has undoubtedly boosted the troubled housing market. According to a recent New York Times article, up to 40% of all home buyers this year will qualify for the credit. This would cost the government $15 billion — more than double what lawmakers expected when they approved the stimulus bill in February.
Congress may yet act to extend the measure… but then again, with the housing market showing modest signs of recovery, lawmakers may decide to hold off. In any case, if you are a first-time buyer still hoping to scoop up your $8,000 bonus prize, you must act now! Really, because attorneys and title companies are going to be swamped as the deadline approaches.
In order to close by Nov. 30, buyers now have about two weeks left to find a home, make an offer and get it under contract. Luckily, summer seems to have finally arrived in Chicago, making house-hunting nothing short of a sun-dappled dream…
Mortgages going fast… and low
Time to buy? Rates dipped again last week.
Mortgage rates have been sweet this summer, and the demand is rising.
Loan applications soared 17% last week, with low interest rates driving demand for both new purchases and refinances, according to the Mortgage Bankers Association’s weekly survey.
Some of this demand, in my opinion, is also coming from first-time buyers trying to close in time to snag the government’s $8,000 tax credit. It expires at the end of November, so there’s a bit of a rush right now for lenders.
Here’s a look at current mortgage rates in Chicago, courtesy of Wintrust Mortgage:
| 30 Year Fixed | ||
| Rate | Discount Points | APR |
| 4.875% | 0.96% | 5.019% |
| 5.000% | 0.50% | 5.106% |
| 5.125% | 0.00% | 5.183% |
| 5/1 ARM | ||
| Rate | Discount Points | APR |
| 3.625% | 1.30% | 3.782% |
| 3.750% | 0.50% | 3.844% |
| 3.875% | 0.08% | 3.935% |
| FHA 30 Year Fixed | ||
| Rate | Discount Points | APR |
| 4.750% | 2.02% | 5.720% |
| 4.875% | 1.46% | 5.796% |
| 5.000% | 0.58% | 5.843% |
If you’re already a homeowner who is paying a higher rate, it may be time to refinance. Keep in mind that many lenders expect you to have 20% equity in your home, so if you just bought it last year with 5% down you’re probably out of luck.
According to the Mortgage Bankers Association, refi applications rose 22.5% last week, the largest increase since March. The demand for purchase loans went up 9.5% from the prior week.
Sellers: The price is right
It’s hard out there for a seller. At the moment, there are way more of you than there are buyers, which means that thousands of homes for sale in Chicago will not actually sell this year.
Consider this, one little stat plucked from the Chicago Association of Realtors’ weekly report: In the third week of August, just 206 condo sales closed citywide — a 55% plunge over that same week two years ago.
So if you want your property to be among the lucky ones, it’s time to be realistic. Extremely realistic, as in flinty-eyed, steely-spined, flat-out ruthlessly business-minded about the sale of an asset that you — but not your prospective buyers — may have invested with an emotional value. It’s time to look strictly at the numbers.
If you don’t, buyers will. Market information is easily available these days, and any competent realtor can run the comps to determine the average sales price and market time of homes in your neighborhood. Every buyer will know that the condo upstairs sold for $30,000 less than you are asking, or that it took your neighbor across the street eight months to sell his house.
Sellers often say things like: I don’t want to lose money. I need to sell it for at least (insert desired price here). Let’s just test the market. If someone likes my house, won’t they just offer less if they think the price is too high? I’m not desperate; I don’t have to sell it. My house is special.
And then they price the house based on factors that, when you get right down to it, have nothing to do with its current market value. Honestly, the market truly doesn’t care that you bought it three years ago for $425,000. In today’s slumping economy, similar houses may be selling for $350,000.
The longer a house languishes on the market, the harder it becomes to sell. I often see homes that have endured multiple price reductions over many months. Once a property gets sucked into this sad spiral, the seller usually winds up with an offer well below what he might have commanded if he’d just priced it properly to start.
I sold my last two listings in about five weeks, at 96 to 98% of the asking price. That’s far better than average, and it’s because I was working with realistic sellers who carefully sized up the current market before deciding on a price.
So, as I advise all my sellers, take a long look at those comps. Try to forget about how much you like your house, or what you paid for it, or how much money you hope to walk away with. Pretend you’re a business analyst coolly assessing a deal. Consider what similar assets have recently sold for, and price accordingly.
If the price is right, a willing buyer may be closer than you think.
Will the $8,000 tax credit be extended? Inquiring buyers want to know…
Over the weekend, one of my buyers asked me whether I thought the government’s $8,ooo tax credit would really expire on November 30 as scheduled. There’s been talk of extending it, and even a few proposals in Congress to do so, but here we are at the end of August with only three months to go!
For would-be homebuyers, this is no small question. It can take 30 to 60 days to close on a home, meaning that if you plan to squeak in under the deadline, you need to find a home and get it under contract sometime in the next five weeks.
Some buyers may gamble that Congress will extend the program. But look what happened with “Cash for Clunkers,” the government cash incentive to get people to trade in their old gas-guzzling cars for a rebate of up to $4,500. The money ran out this weekend, despite the program’s popularity.
Sen. Johnny Isakson, a Georgia Republican, has introduced a bill that would dramatically expand the home-buying credit, boosting it to $15,000 and opening it to everyone purchasing a home, not just first-time buyers. There would also be no income limits. Sen. Chris Dodd, a Connecticut Democrat who chairs the Senate Banking Committee, is co-sponsoring the bill.
Meanwhile, the housing industry is pushing hard for some sort of extension, pointing out that home sales have begun to recover nationwide as first-time buyers snapped up the government’s $8,000 giveaways. The National Association of Realtors and the National Association of Home Builders are both mounting lobbying campaigns to extend the credit, and perhaps expand it, through 2010.
Congress, of course, has bigger fish to fry at the moment, including health care reform. But I would say chances are fair that at some point, the housing credit will be given a new lease on life. After all, housing is to blame for much of our economic malaise, so why kill a program that is actually boosting home sales?
Buyers surge back into market
In Chicago, median home prices rose 1.1% from June to July.
Home sales and prices are on the rebound both nationally and locally, thanks to a wave of buyers taking advantage of low interest rates, attractive prices and the $8,000 tax credit for first-time buyers.
In the city of Chicago, prices in July inched up 1.1% over the previous month, continuing a positive trend. The median price in the city now stands at $245,000, according to a report today from the Chicago Association of Realtors.
Buyers, it seems, are finally jumping off the fence. Part of the allure, of course, is that home prices citywide are down 18.3% over last year, making this summer’s pricing look like a bargain.
“Chicago continues to show a leveling of the marketplace as we see distressed properties being absorbed,” said David Hanna, president of the Chicago Association of Realtors.
Some economic analysts are beginning to call a bottom. In an upbeat speech today to central bankers and economists, Federal Reserve Chairman Ben S. Bernancke asserted that “the prospects for a return to growth in the near term appear good.”
The stock market jumped more than 150 points, buoyed by Bernancke’s optimism and a better-than-expected report on the national housing market. According to the National Association of Realtors, existing home sales jumped 7.2% from June to July, the largest monthly gain since the group began tracking these sales a decade ago. Even more encouraging, sales were 5% higher than in July 2008.
“The housing market has decisively turned for the better,” said Lawrence Yun, the group’s chief economist.
Forecast: weak growth ahead
Last week, policy makers at the Federal Reserve suggested that the recession appears to be ending. Consumer spending — which accounts for almost 70% of economic activity — seems to be stabilizing. Other hopeful signs in recent weeks include data showing the country’s three-year housing slump is slowing, and news that unemployment leveled off in July after climbing precipitously in the months before.
In Chicago, we are seeing more evidence that the housing market, while not exactly bouncing back to previous heights, at least does not seem to be sinking further. According to a new report, sales of new homes downtown jumped sharply in the second quarter, from 55 to 313 homes. The quarterly tally is still down 35% compared to a year ago, according to the Downtown Chicago Residential Benchmark Report issued by Appraisal Research Counselors, a real estate consulting group. But at least things are heading in the right direction.
Developers across the city continue to announce dramatic price cuts, sometimes up to 20 or 25%, in order to move their inventory, particularly in large buildings where dozens of units remain unsold. The discounting appears to be working: “The developments exhibiting the strongest sales were the developers which were offering the largest price discounts,” the benchmark report said.
A house for the price of a condo
This 4-bedroom bungalow in Portage Park is priced at $269,000. Mary Jaeger of Baird & Warner has the listing.
Earlier this summer, I was contacted by a young couple who said they were ready to buy their first home. We met in a coffee shop to discuss their criteria, and the challenge quickly emerged: They hoped to stay on the North Side, spend around $250,000 … and they wanted a single-family house, not a condo. “Is this even possible?” they asked, somewhat apprehensively.
The good news for buyers is that, yes, in the city of Chicago there are now THOUSANDS of single-family houses for sale in the mid-$200s, even on the pricier North Side. But after a month of searching, in which we’ve visited about 50 properties, several caveats are becoming clear.
One is that many of the neighborhoods that feature such properties — Irving Park, Albany Park, Portage Park, Avondale, Logan Square — are a little further west than many young would-be buyers are accustomed to living. Many of these areas boast parks, family-run restaurants and corner pubs, but they don’t necessarily have the trendy boutiques and coffeehouses common to lakeside neighborhoods like Lincoln Park and Lakeview. There often aren’t as many places within walking distance, and the neighborhoods have a quieter, more residential feel.
Secondly, some of the more affordable areas are also rife with distressed properties. In Portage Park, for example, it seems that every other house listed on the MLS is a foreclosure or a short sale. Many of the foreclosures we’ve seen are in miserable condition, with holes in the walls or mold creeping through the basement. And with only a few months to go before the government’s $8,000 tax credit expires, my buyers don’t want to pursue a short sale, in which bank approval could take months (or be denied).
So, taking only the properties that aren’t under some sort of financial cloud, we have noticed a few things: Many of them are outdated, with kitchens and bathrooms from the 1960s. Wiring, plumbing, and other mechanical systems may be decades old. Central air is a rarity. The homes tend to be small, with less than 1,400 square feet of living space. Many of them are bungalows or ranches, and if there is a second floor it is almost always cramped, with scant head room and makeshift bedrooms that only seem big enough to fit children.
BUT THESE ARE STILL SINGLE-FAMILY HOUSES! That means they have backyards, garages, basements with plenty of room for storage (and sometimes even laundry rooms). You can start a garden. Mow the lawn. String decorations from the front porch for each holiday. These houses are the sole domain of their owners, with no condo board to contend with and no monthly assessments.
So if you can handle an older home, perhaps one in need of a few repairs, you too can find a house for the price of a condo!
Prices hold up in Andersonville
Andersonville is home to a lively shopping district, which includes a weekly farmer's market at the corner of Clark and Berwyn.
Ok, so home prices on the whole are down around 18% over last year in Chicago. But all real estate is local, and in a market as volatile as this one it’s important to zoom in on a given neighborhood before you generalize about the market there. Many areas, particularly gentrified neighborhoods near the lake that have a solid business core, have managed to hold their own in this downturn.
Take Andersonville, the quaint southern swath of Edgewater that runs roughly from Foster to Bryn Mawr and Broadway to Ravenswood. Once a Swedish enclave, Andersonville is a peaceful, tree-lined neighborhood anchored by a strip of small businesses along Clark Street. It offers plenty of restaurants, bars, clothing boutiques, and increasingly, antique shops.
As far as real estate statistics go, Andersonville is generally lumped in with Edgewater, making it hard to discern precisely what is happening in this tiny hamlet. So let’s look at Edgewater, where prices have slipped a bit over the last few years — but only a bit. In 2006, for example, a 2-bedroom, 1-bath condo sold for an average price of $246,525 in Edgewater. In 2008, the average price slipped to $239,188, a decline of about 3%. For single-family houses under $500,000, the average price during that two-year period fell about 5.5%, from $416,972 to $397,958. And for the more expensive homes above $500,000, prices dropped less than 2%, from $698,450 to $686,130.
So if prices are down about 2 to 6% in Edgewater as a whole, chances are Andersonville is doing just fine. Andersonville, which includes the tony Lakewood-Balmoral historic district, is generally more expensive than the rest of Edgewater. Single-family houses in Andersonville often fetch upwards of $800,000 and new condo developments (and there are only a few) tend to sell out quickly. With demand high, prices here have barely taken a haircut even though the city, overall, has been hard hit by the market downturn.
What does all this mean for prospective buyers and sellers? Well, if you’re a buyer in Andersonville, know that you’re unlikely to find massive discounts or a raft of foreclosures here. But rest assured that as a homeowner you, too, will be relatively insulated from price swings as compared to the rest of the city. Andersonville sellers, too, are better off than many in this declining market. Even if you bought your home just a couple years ago, chances are it is still worth around what you paid for it, or maybe a little less. And if you’ve owned it for five years or more, you’re probably ahead of the game.
More signs of life: New home sales surge
This week, I sold this 2-bedroom condo in Lincoln Square after just a month on the market. With the market stabilizing in Chicago, stories like these are becoming more common.
Has the housing market finally hit a bottom? Only time will tell, but several recent signs point to a small but significant upturn in both prices and sales.
Nationally, home sales in 20 metro areas posted their first month-to-month increase in almost three years, according to the S&P/Case-Schiller Home Price Index. In Chicago, that spelled a 1.1% rise in prices from April to May 2009, the most recent month for which data is available. (As mentioned in my previous posts, however, the overall picture is much less rosy. Prices are down 17.5% in Chicago since May of last year, according to Case-Schiller. In other words, it’s still very much a buyer’s market.)
New home sales are also showing signs of traction. Yesterday the government reported that single-family home sales shot up 11% in June — well over the 3% increase economists were expecting. It was the largest monthly jump in almost eight years. And last week, resales of existing homes also rose, for the third month in a row.
Economists are sounding notes of caution, calling the uptick a modest recovery at best and pointing out that much of the activity appears to be at the lower end of the market, where first-time buyers are taking advantage of discounted prices, low interest rates and the $8,000 tax credit.
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