Sue Fox, @Properties. Direct 773.816.1788
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Archive for the 'Neighborhoods' Category
Check out this beautiful octagon bungalow that recently hit the market in West Ridge, just a block west of Indian Boundary Park. It needs a little TLC, including cosmetic upgrades and a new roof, but the oversized lot and spacious rooms may make this bungalow worth the effort.
Located at 2705 W Lunt, the home was built on a 40×125 foot lot, which is a good 15 feet wider than the standard size in Chicago. That leaves plenty of room for a large living room (20×18) surrounded by windows, a spacious formal dining room (17X14) and three large bedrooms, all on the main level. Although much of the original woodwork has been painted over and the floors are carpeted with a greenish-yellow shag, the structure of this classic 1925 bungalow is intact. All it would take is a bit of money and elbow grease to restore the woodwork and hardwood floors (not to mention the kitchen, which currently features an unfortunate acoustic tile ceiling, outdated cabinetry, and what looks like a sheetrock backsplash).
Yes, it’s a bit of a project, but not a total gut. A homeowner with patience and some extra cash could certainly restore this sleeping beauty, returning it to its historic charm and creating a beautiful home to enjoy. It’s been on the market for just three weeks, priced at $295,000. And the seller is even willing to include a classic 1965 Chrysler convertible with the sale of the home (no word on the condition of the car, which, judging from the house, may also need some love.)
These days, a lot of sellers and some condo associations have become interested in getting their condo building approved by the Federal Housing Administration (FHA). That’s because FHA loans — which are insured by the government and require only a 3.5% down payment — have exploded in popularity, with more than a third of buyers now using them to purchase homes.
But in order to use an FHA loan to buy a condo, the entire condo building must be FHA approved. This is a somewhat laborious process that involves gathering up detailed paperwork to prove that the condo’s budget, reserves, collection of assessments, percentage of ownership and other factors all meet FHA’s rather stringent criteria. In Chicago, where many smaller condo buildings are self-managed, it may seem a confusing and overwhelming task for individual owners to put together an FHA application that stands a chance of being approved. Even larger buildings could often use a hand when it comes to FHA’s rules.
That is where an expert in securing FHA approvals can help. This spring, for example, I had a buyer named Michael who made an offer (which was accepted) to buy a newly-rehabbed 2-bedroom condo in Edgewater. But due to a combination of factors involving both the buyer and the building (he could only afford to put 5% down, and more than 10% of the building’s units were still owned by the developer) Michael wasn’t able to secure a conventional loan. He could use FHA, but then he was up against a major roadblock many Chicago condo buyers encounter: Most Chicago condos are not already FHA approved.
So we decided to see if, with the cooperation of the developer, we could get this 22-unit building approved. Wintrust Mortgage, Micheal’s lender, put us in touch with Steve Stenger of Condo Approval Professionals, LLC, a local company that specializes in getting FHA approval for condo buildings. And it worked!
Stenger worked hand in hand with the condo board to bring the building into FHA compliance, assembled the necessary package of documents, submitted everything to FHA and got the building approved in less than 30 days. And yesterday, Michael finally was able to close on his new condo.
“I think the key is really having someone with the ability to get it done, who knows what things need to be worked on to get the building into compliance,” Stenger said. “Some condo associations might try to do it on their own, but it’s difficult because there is a lot involved in terms of the budget, having the right insurance, looking at the declaration of bylaws. It’s not just ‘gather and submit.’ That’s why the FHA doesn’t want people to just pull documents together and send them off.”
Stenger, who has been in the business for 16 years, said he starts by “prequalifying” the building with a condo questionnaire and a budget review “to determine if they’re even eligible for FHA right out of the gate.” Sometimes, as was the case with Michael’s condo, the building isn’t in compliance — but could be, with a few changes. In this case, Stenger advised the board to collect some unpaid assessments (FHA won’t allow buildings with more than 15% of the units beyond 30 days delinquent in their assessments) and to use the condo reserves to cover some upcoming sewer repairs rather than levy a special assessment, which could also derail FHA approval.
“When I put that package together, I fully expect it’s going to be approved,” Stenger said.
Condo Approval Professionals doesn’t charge to prequalify a condo building, he added. But to work with the building and shepherd the whole FHA application package through, the fees are:
$500 – Building with 5 units or less; $750 – 6 to 10 unit building; $1500 – 11 to 20 unit building; $2000 – More than 20-unit building
In my opinion as a realtor who helps many condo buyers, it may be well worth the investment. Once a building is FHA approved, buyers can now use FHA loans to finance units there — which gives the building a huge competitive edge in a very sluggish market.
Steve Stenger of Condo Approval Professionals can be reached at (847) 293-2962.
Ouch. Once the tax credit expired, so did interest in buying homes. That’s the gist of the data released this week showing that home sales plunged in July, both in Chicago and nationwide.
Nationwide, the annual sales rate fell 25.5% in July over the previous year, according to the National Association of Realtors. The numbers were a little better in Chicago, where July home sales (single-family houses and condos) slid 19.5%. There were only 1,589 sales last month, compared to 1,975 homes sold in July 2009.
All the foreclosures clogging the Chicago market also helped to yank down prices. Chicago’s median home price was $196,500 in July, according to the Illinois Association of Realtors. That’s a drop of 19.8% over last July, when the median price was $245,000.
Genie Birch, president of the Chicago Association of Realtors, said that the abrupt drop in July home sales “seems consistent with what Chicago realtors anticipated for the summer, as buyers on the fence moved up their purchases to earlier in the season in order to qualify for the federal tax credits then offered to move-up or first-time home buyers. While it still remains a great time to buy, buyers are guarded as they consider their own financial stability and job security in the current market, hindering many from making a purchase.”
Statewide, homes sales fared even worse but prices held up better than in the city. Sales were down 29.7% in July compared to last year, and the median home price in Illinois fell 4.3% to $160,000. Illinois has been one of the hardest-hit regions in terms of both unemployment and foreclosures.
The summer of 2010 was a particularly slow season for Chicago real estate, beginning in May when the federal tax credits for home buyers expired. But now, as summer heads into autumn, house hunting seems to be picking up again.
Super-low mortgage rates are certainly part of the allure. Many Chicago lenders are now offering rates well below 5%… This week I saw that Guaranteed Rate was dangling a 4.375% interest rate on a 30-year fixed loan, which is the lowest I’ve ever seen. These rock-bottom rates make borrowing money quite cheap, meaning that buyers can get considerably more house for the same monthly payment than they would have a few years ago when rates were between 6 and 7%.
At one of my listings, a 2-bedroom condo with parking in the heart of Andersonville, I’ve had three showing requests in the last three days. One of the prospective buyers told me she and her husband just sold their previous home. My theory is that now we’re going to see more buyers like her, people who managed to sell their existing property (perhaps thanks to the tax credits earlier this year) and are now in a position to buy again.
It looks like the wind has once again been knocked out of the sails for Chicago’s downtown condo market. Sales of new construction condos plunged 52% in the second quarter of 2010 compared to the same period last year, according to a new report from Appraisal Research, a real estate research firm based in Chicago.
Even compared to the first quarter of 2010 — when the federal government’s tax credits for home buyers were still in force — the numbers look pretty weak. There were 256 downtown Chicago condo sales in Q1, but only 150 sales — a 41% drop — in Q2 this year.
“With the tax credit expired, continued concerns about the economy and job market, worries about the stability of housing prices, and the difficulty in selling an existing residence and securing financing, many buyers continue to remain on the sidelines for the near term,” said the report.
It’s been a rather rude awakening for downtown developers, who once feasted on thousands of sales of glittering high-rise condos each year. In 2005, for example, developers sold more than 8,000 units in downtown Chicago. Last year they only sold 572. But the collapse means it’s a very attractive time to buy a new condo downtown, many of them with sweeping lake or city views, sleek gyms and swimming pools.
For the past few weeks, I’ve been taking out a pair of buyers to see many of the new 2-bedroom, 2-bath condos with lake views in Streeterville, and we’ve been pleasantly surprised by the prices. At 505 N McClurg, a snazzy building built in 2008 with floor-to-ceiling windows and beautiful finishes, a 2-bedroom, 2-bath unit that was priced at $554,500 last summer recently sold for $473,500. And with sales slumping, I expect to see even greater discounts ahead this fall.
You can really see the impact of the $8,000 tax credit for first-time buyers. In June, the final month buyers could claim the credit, Chicago home sales shot up nearly 28% over the previous June, according to data released today by the Illinois Association of Realtors. That marks the 1oth consecutive month of year-over-year increases in Chicago.
But just because more properties are changing hands doesn’t mean home prices are recovering. In fact, the opposite is true in Chicago. The median home price, now $234,250, is down 3.2% compared to a year ago.
Genie Birch, president of the Chicago Association of Realtors, pointed out that the year-to-date number of homes sold in Chicago is up 41% for the first half of 2010 versus 2009. “We believe this is a positive indicator that Chicago’s housing market is stabilizing,” she said. “Motivated buyers and sellers are working toward realistically closing deals at current market values.”
I have my doubts about whether our market is truly stabilizing, or whether we are just witnessing a final surge of home sales fueled by a government stimulus program that no longer exists. Congress has since extended the date to close on a home purchase through September (provided you were already under contract by April 30) to help people seeking the tax credit who were unable to close by June 30, the original deadline.
So we may yet see a slight swell of closings in July, August and September that were actually spurred by the tax credit. But that doesn’t mean our local housing market is healthy enough to stand on its own.
Even as the job picture brightens slightly in Illinois, the number of homes facing foreclosure continues to soar. The Illinois unemployment rate is now 10.4% — still one of the worst in the country, but better than the 11% we saw earlier this year. The scarcity of jobs has left thousands of local homeowners in trouble, and they are continuing to default on their mortgages in record numbers.
Nearly 24% more Illinois properties received a foreclosure-related notice in the first six months of 2010 than during the same period last year, according to RealtyTrac Inc., a real estate listing service that tracks distressed properties. This means more than 85,000 properties statewide — most of them residential, and many of them in the Chicago region — got a notice. Illinois had the 9th-highest rate of foreclosure notices in the nation.
Nationwide, the rate rose slightly more than 8%, RealtyTrac reported. More than 1 million homeowners will likely lose their homes to foreclosure this year.
What does this mean for our Chicago housing market? Nothing good, I’m afraid. Are you noticing more “For Sale” signs sprouting in your neighborhood lately? Now that the government’s tax credits for home buyers have expired, the inventory of Chicago homes for sale is starting to rise again. There were 4,259 listings in the Chicago area last week, according to Midwest Real Estate Data LLC, but only 855 closings.
This is an ominous sign. Last year the inventory was roughly the same (it was 5% higher then) but the number of closings during the same week last year was 31% higher.
In other words… there is a lot more pain to come in the Chicago real estate market. I predict more foreclosures, fewer qualified buyers to absorb increasing inventory, and further price drops. Anyone looking to buy will have plenty of homes at attractive prices to choose from, and anyone looking to sell will have an increasingly tough time.
ChaNell Marshall, a 31-year-old urban planner in Chicago, didn’t have her heart set on a foreclosure when she contacted me earlier this year about buying a condo. She just wanted to find a 2-bedroom home, preferably with a dining room, that fit her budget: $150,000 or less. We focused on Rogers Park and Albany Park, two North side neighborhoods where 2-bedroom units can be found in this price range, but it soon became apparent that many condo buildings here had been bruised (if not maimed) by the housing bust.
Every other condo, it seemed, was either a short sale or a foreclosed property. Because ChaNell was hoping to qualify for the first-time home buyer’s tax credit, she needed to get a property under contract by April 30 — which did not leave enough time to navigate a short sale. Some of the foreclosures were attractively priced, but many were in disrepair and more than a few were missing all the kitchen appliances. Finally we found a large, almost new 2-bedroom, 2-bath condo (with an intact kitchen and even a washer and dryer) on Hermitage Ave. in Rogers Park, a foreclosure priced below market value at $121,500.
Then the fun really began. For the next two months, the seller — an affiliate of Chase bank — and its attorney proceeded to delay, deny, fail to respond, and otherwise not lift a finger to help get this deal closed. “There were a lot of things that stalled the process,” said ChaNell. “Dealing with a seller that’s a bank means you’re dealing with a whole bureaucracy. You want to get an answer but there’s nobody who can provide it.”
For those of you out there contemplating buying a foreclosure (particularly a condo, which involves more extensive requirements that the building must meet in order to secure a loan), take note: Foreclosures are not for the faint-hearted. Not only do they require much patience and persistence to prod the deal forward, but they can be riskier as well. Extra costs for repairs, attorney fees or unpaid special assessments can spring up, and buyers do not receive the standard disclosures about the property from the seller, an absentee bank who knows nothing about the home.
For ChaNell, the challenges included a seller who took nine days to accept her offer, but then refused to extend the closing date by nine days, forcing her to cancel the original contract and start over; a seller’s attorney who often refused to negotiate or even respond to her attorney’s requests; a condo board that never produced many of the documents a buyer would typically receive; and about $1300 in unpaid assessments that the seller was supposed to pay, but the condo board had no record of receiving, an impasse which delayed closing by nearly three weeks.
“Attorney review was a mess,” she recalled. “We never got direct responses to anything.” But ChaNell had an ideal temperament for dealing with all the hurdles a foreclosed condo presents. She always stayed calm and didn’t let the seller’s lack of cooperation rattle her, because at the end of the day she knew she would get the condo she loved at a fantastic price. And eventually, she did.
For other buyers who might be considering a foreclosure, ChaNell cautioned: “It’s not going to be a quick sale. It can be time-consuming. There’s a lot of risk involved.”
Not to mention inconvenience. Because the seller delayed closing for weeks, ChaNell’s lease ended and she had to move out of her apartment and put her furniture in storage while she waited for the deal to close.
This week, I went to visit ChaNell in her new condo. It looked great, with the floors redone and the walls freshly painted. With a full living room and dining room, she had plenty of space to spread out, and she was getting ready to set up her entertainment center, complete with the Wii, in the second bedroom.
All things considered, ChaNell said, “I think you can get a great deal on a foreclosure.”
Thanks to the federal home buyer’s tax credits, Chicago buyers turned out in droves to snap up properties in May, according to data released this week by the Illinois Association of Realtors.
In the city of Chicago, May home sales (single-family and condominiums) skyrocketed 32.1% to 2,057 sales, compared to 1,557 homes sold in May 2009. The increase marks the the ninth consecutive month of year-over-year sales gains. Sales are now almost back to where they were two years ago in May 2008, when 2119 homes were sold in Chicago.
Even more impressive, the median home price — which has been falling and falling in Chicago for several years now — actually ticked up 2.2% in May over the previous year. Chicago’s median price is now $230,000, up from $225,000 in May 2009.
“The tax credit created a more positive impact on the Chicago marketplace than the movement we saw in 2009,” said Mabel Guzman, the incoming president of the Chicago Association of Realtors. “Additionally, the credit afforded buyers the opportunity to look at higher-priced homes, helping keep their options more affordable.”
I expect that we’ll see more of the same — dramatically increased sales, and possibly slightly higher prices — when the June numbers are released. But home-buying demand has certainly slipped in Chicago since the tax credits expired April 30 (the date by which buyers had to have a home under contract in order to qualify.) They have until June 30 to close the deal.
Doesn’t it feel like wherever your money is invested, it hasn’t really grown over the last decade? Much like the stock market, the Chicago-area real estate market seems caught in rewind mode, with home prices now similar to what they were back in 2001.
It’s as if the boom, and the subsequent bust, never happened — that is, if you’ve owned property this whole time. If you were unfortunate enough to buy mid-decade at the top of the market, you may be out tens of thousands of dollars if you sell now. Recent data from the Case-Shiller Home Price Index shows that Chicago single-family home prices have plunged 29% from their peak in September 2006, while condo prices have dropped 26.3% from their high point in September 2007.
This means condo prices are now back to where they stood in the summer of 2001… before September 11th, when the Dow was hovering around 11,000 (it’s at 10,172 today) and Barack Obama was a little-known Illinois State Senator from the 13th District. Chicago’s single family home prices, meanwhile, are now back at spring 2002 levels.
As a Chicago homeowner, it’s hard not to get a little depressed. On the other hand, you’d probably be in the same boat if you’d skipped buying a house and invested your cash in the stock market instead.
But what about the next 10 years? Today’s buyers now have a chance to buy Chicago-area property at prices unseen for the last decade. Where will prices stand in 2020? Will we look back at 2010 as the bottom of the market, and spend the next 10 years griping that we should have bought then, when homes were affordable?
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