Sue Fox, @Properties. Direct 773.816.1788
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Archive for the 'Market conditions' Category
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?
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.
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.
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!
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.
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.
For the third straight month, home sales nationwide have increased, rising 3.6% in June. This three-month streak marks the first time this has happened since 2004, according to the National Assn. of Realtors. The news was even better in the Chicago metropolitan area, where sales were up nearly 26% over May.
“Overall, the news is positive,” Lawrence Yun, the NAR chief economist, said at a press conference. “We have increasing home sales for the third straight month, declining inventory and although prices fell, they declined at a less steep pace.”
“The housing market is healing after four years of recession,” he said. Now, I wouldn’t go so far as to say healing (or four years of recession, for that matter.) But the housing market is definitely perking up in 2009, as buyers snatch up bargains amid the marked-down prices and snag low interest rates on mortgages.
In the city of Chicago, home sales were up 27.2% since May. Prices were up, too, by about 7.7% for the month. Yet all these rising numbers are just a one-month snapshot, and if you pull the camera back and survey the past year, it’s clear that our local market remains distressed.
Since June 2008, sales have fallen 13.1% and prices have plunged 21.8 percent, according to figures from the Chicago Assn. of Realtors. As the group’s president, David Hanna, pointed out, “It is clear from the pricing we are seeing distressed property sales continuing to lead the market.”
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