11 September 2009 ? More signs of improvement in the Chicago housing market according to the most recent Capital Home Data Index Market Report. With the increasing number of sales, the number of distressed properties sold decreased by almost 10% as home prices increased placing Chicago in sixth position among the highest performing major housing markets. Overall the study showed the Lakeview neighborhood to be the best performing neighborhood in Chicago with modest price gains and a very low REO saturation rate. The study showed better numbers for most lakefront neighborhoods. Lakeview is also is favored for quality of life, as well as for its famous resident: Wrigley Field.

01 September 2009 ? It is no secret that the housing market is a very larger driver of the economy. As we see some rebound in the housing market some are getting out there and testing the waters again. Here are a few neighborhoods that have held steady in this declining market:

One bedroom condominiums in Roscoe Village have not declined from 2007/2008 period as compared to 2008/2009. The median price point in Roscoe Village for a one bedroom has held steady at $240,000. The same can be said about two bedroom/two bathroom condominiums in the “True” Gold Coast. Although the market has declined approximately 2.82%, it is holding steadier than areas like Beverly on the south side of Chicago. Single family ranch and bungalow-style dwellings have declined approximately 42% from last year to this year. The numbers are significantly different. The question remains, are we really out of the woods and why are some areas holding steady while others are seriously declining?

Grills and chairs waiting patiently outside their condos

This morning Standard & Poor?s Case-Shiller Home Price Indices numbers were released and the results are surprisingly better than expected. In the Chicago condo market, prices showed an increase of 1.1% from May 2009 to June 2009. Over recent months we have seen the leveling off of pricing. This current report shows signs the Chicago housing market is on an uptick. It will probably be gradual but will this increase get the buyers setting on the bench waiting for the bottom to fall out back engaged in the market?

Several factors are contributing to prices being on the upswing. Supply and demand?less inventory always drives up prices in any industry. Property owners are holding off on listing, a significant number of new developments are not getting built or are converting to rental units and there is an increase in pending sales. Although there are fewer buyers right now, they are better quality: they have higher down payments then in the past. They have been forced to because of the changes in lending guidelines.

Will the Signs that Home Prices are Starting to Go Up Get the Buyers to Buy?

Over the last few weeks, I have found that several of the buyers out there looking have reemerged. In communicating with other Realtors® they are experiencing the same. Buyers were looking six months to over a year ago. They are now in a position to move forward on their new home purchase. Some had to wait until their current home sold and it finally did. Others needed to save more money and clean up their credit. The rest where just waiting to see how low it will go. From today?s numbers I think it “went.”

We would like to thank Sharat Ganapati for kindly sharing today’s photo via the Creative Common’s license.

21 August 2009 ? According to the National Association of Home Builders (NAHB) the Chicago area ranks at position 174 in the nation and 39th in the region in housing affordability for the second quarter of 2009. Indianapolis has topped the list for the last 16 quarters. In the NAHB/Wells Fargo Housing Opportunity Index just released, housing affordability continues to hover near the highest level in 18 years. As a result in falling home prices, affordability has gone from the best conditions in four years to the best conditions in 18 years in a period of less than a year. ?The increase in affordability?along with the $8,000 federal tax credit for home buyers?is stimulating demand, particularly among young, first-time buyers,? said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. ?But to keep the recent upturn in home sales going into next year, Congress will need to extend the tax credit for another year and make it available to all buyers in an effort to encourage activity in the trade-up market.? On a related side note, NAHB will be closed next week as a cost cutting measure.

The Good News

Chicago's Air and Water Show will also be going up and down all weekend

As we reported two days ago, Chicago and Illinois are on a roll; we’ve had five consecutive months of increased month-on-month home sales. It turns out that we are not alone. Many news outlets are reporting that home sales grew in the second quarter in the majority of the country: 39 states saw housing sales increasing a combined total of 3.8% over the first quarter of this year. However, these numbers are about 3 percent below last year’s numbers. Idaho, Hawaii, New York, Wisconsin and Nebraska are doing quite well with 20 percent or more increases in sales. On the other end of the scale, Alaska, Wyoming, California, Colorado and Michigan have all dropped by at least 6 percent.

Bad News #1: Housing Prices are Down

Nationally 129 out of 155 metro areas have seen price drops with the median sales prices down almost 16 percent when compared to last year. Fort Myers, Florida was hit the hardest with prices down 53 percent. Other big price losers are Phoenix and Las Vegas. However, there are cities that are seeing price increases: Davenport, Iowa saw 31 percent increases and Cumberland, Maryland saw 22 percent.

Bad News #2: Housing Foreclosures are Up

More than one third of all sales in the second quarter were of foreclosures or distressed properties. Foreclosure tracking company RealtyTrac Inc. is reporting that one out of every 355 homes (a total of 360,149) received a default or auction notice or were seized last month. That is the highest the company has seen since it began keeping record in January 2005. This is the third record-breaking month they have seen in the last five months.

Economists Upbeat

National Association of Realtors® chief economist, Lawrence Yun is quoted as saying that the sales increases are, “a hopeful sign for the economy.” More and more economists are saying that the worst of the real estate recession is behind us even though foreclosures will likely continue to rise for the next year.

We’d like to thank cikaga jamie for sharing today’s photo via the Creative Commons License.

The gloom over Chicago's real estate market may be coming to an end.

June marked the fifth consecutive month-on-month increase in home sales statewide, including Chicago. It was the fourth monthly increase in the statewide median home sale price. In a release issued by the Illinois Association of Realtors^®, association President Pat Callen says, “We are moving through inventories and that?s a good sign for the Illinois housing market. Year-over-year sales are still lower, but one promising trend is the rate of decline has slowed in recent months and is now at a pace last seen in the third quarter of 2007. More first-time buyers are taking advantage of the federal tax credit while distressed properties prolong the downward pressure on prices.”

Chicago’s Home Sales Numbers Up for Fifth Consecutive Month

In the city of Chicago the median price of a home was up 7.0 percent in the second quarter of 2009 to $230,000 compared to $215,000 in the first quarter of 2009; it was down 25.8 percent from $310,000 in the second quarter of 2008. Total home sales (single-family, condominiums, and town homes) jumped 65.2 percent to 4,947 homes sold in the second quarter of 2009 compared 2,995 home sales in the first quarter; sales were down 21.3 percent from 6,287 homes sold in the second quarter of 2008.

In a world of supply and demand, experts are saying now is the time to buy. As inventory depletes, housing prices will begin to stabilize and the rise again in the upcoming years. Buyers are now taking advantage of favorable rates, inventory, pricing, and incentives. For those shoppers who continue to sit back waiting to see if rates will get lower and prices will drop more will have probably missed the best opportunity.

We’d like to thank cikaga jamie for sharing today’s photo via the Creative Common’s License.

Did you see fewer moving vans this summer in Chicago. It's one sign of the tough rental market.

Let?s face it, it’s a scary time to be a landlord. The apartment rental market is facing difficulties like never before. For the first time in six years apartment rents are down nationwide. Fueling the fire are investor-owned properties (usually condos or town homes), which has expanded the rental supply by roughly 50 percent. Whether landlords own or manage 200+ units or 2 units, everyone is feeling the pinch. Here is where I see problems and opportunities in this market.

The Current Rental Situation in Chicago

1. The rental market and the job market run parallel to each other. Unemployment is up, hiring and recruiting have slowed, and people with jobs are scared that they are going to get laid off.
2. Consumer confidence is very low. People are more money-conscious now then they have been in the past. It is expensive to move and people are taking that into consideration when their renewal letter arrives.
3. There is still an over-abundance of inventory on the market. As mentioned earlier, the “shadow market” has expanded rental stock by over 50 percent.

The Bad News?

In my experience, most of my rental clients are either people relocating to Chicago or recent graduates. I see fewer people in both categories this season. Fewer college graduates are getting jobs right out of college and the job market has tightened with respect to new hires and moving allowances. There are still college graduates getting jobs right out of college and people are still relocating to Chicago, just fewer than in years past, which is creating a more competitive marketplace?especially since there is more inventory available. So, the number of “new” renters has slimmed down and existing renters are staying put, downsizing, moving in with mom and dad, or moving in with more roommates to save money. Of course, downsizing and consolidating living space by living with more roommates creates movement in the marketplace, however, it is just not enough to stimulate market prices positively. Further, this mentality contributes to fewer livable addresses and more apartment inventory, which drives the price of rentals down across the board. Once the job market improves, people will be back in the market looking for new places to live.

The Good News?

Yes, the apartment rental market is facing difficulties like never before. However, despite these recent challenges, a large majority of renters are still looking for a new place to live this year and more than half are planning to pay the same or more in rent. Here is why?

1. People still want to try out living in new neighborhoods or cities.
2. Renters want more for their money and are willing to negotiate.
3. There are a lot of renters out there looking for an upgrade and more amenities.
4. There are tons of rental incentives being offered to renters. It?s hard to pass up on a good bargain.
5. Although unemployment has reached over 11 percent in the Chicago metropolitan area, there are companies that are still hiring.
6. Some landlords have increased rents not knowing that their tenant?s income has decreased. Or, they don?t care. This decreases a renewal rate which means movement in the market place.

My Advice

1. Be sure to stay in tune with news related to employment and the shadow market.
2. If you have leases expiring, be sure to send renewal letters out 60-90 days out.
3. Study what rents are going for in the neighborhood before sending your renewal letters. It’s never been easier to do with sites like rentometer.com, craigslist.com, and chicagoreader.com.
4. If you think your unit(s) is underpriced, consider moderate increases (2-5%).
5. When tenants decide not to renew, maximize exposure by taking quality photos of the apartment when it is clean and use them in advertisements.
6. Keep the building exterior and common areas as clean as possible while marketing the property for rent. It makes a huge difference.
7. Price your property in alignment with the market. Nothing costs more than an empty unit.

Thanks to John Benson for sharing today’s photo via the Creative Common’s License.

28 July 2009 ? The Standard & Poor’s/Case-Shiller Home Price Index is reporting that Chicago-area home prices were up 1.1 percent in May when compared to April. This is the first monthly increase in since Sept. 2006. According to the index, Chicago-area prices were down 17.5 percent compared with May 2008, which is more than the national average.

Appraising a property should be starkly black and white...not emotional. Unfortunately that's not how it always goes.

The Federal Fair Housing Agency, Fannie Mae and Freddie Mac have issued a new guidance to all lenders clarifying two points. They are:

1. Lenders should use appraisers who have clear experience in the geographic area. The Uniform Standards of Professional Appraisal Practice (USPAP) requires that an appraiser be competent and knowledgeable of the local market to perform an appraisal. In addition, in reinforcing USPAP, the Enterprise appraisal guides require appraisers to have knowledge of the local market. The use of unqualified in-state or out-of-state appraisers, unfamiliar with local conditions, should be reported to state appraiser licensing agencies.
2. Clarifying that appraisers are NOT prohibited from talking to the real estate agent.

HVCC’s Goal Was to Improve Appraisals by Protecting the Appraiser

The HVVC’s main purpose all along has been to protect the appraiser and the quality of appraisal reports. The code was to keep the appraiser from being influenced in any way and to make sure there is no conflict of interest. The clarification will help with the appraisal process in the future and still protect the appraiser. With the rules in place, the appraiser could no longer be approached by a lender/mortgage broker and asked to bring in a certain value. In some cases appraisers were bribed with cash or threatened with job loss. If they did not bring in the number the lender/mortgage broker was looking for the appraiser would no longer be hired by that person.

Unintended Consequences of HVCC

There have been some unintended consequences that came about from the HVCC program. A very large consequence has been underwriting times have increased, thus pushing back closing dates. In some instances closings have been canceled all together due to interest rate locks being broken due to the extended underwriting times. Another problem brought on by HVCC is the rise in the number of inexperienced appraisers appraising in unknown markets. Still another problem is that costs to the consumer have risen due to multiple appraisals on one property. This can take place when an inexperience appraiser turns in an iffy report. Underwriters then order a review appraisal. If the review appraisal comes in and is off by 3-5% of the original appraisal (depending on the purchase price), a third appraisal is ordered. All of the cost of these appraisals is placed on the consumer.

Only time will tell if the clarifications will help or hinder the purchase process. HVCC was put into place on May 30th, 2009. The ripple effect of the program started to become known in mid-June to early July. From an appraiser’s perspective, these recent changes can only help shorten the process. I live in the city of Chicago and the city is my appraisal territory. I would be very uncomfortable appraising in a suburb of Chicago.

We would like to thank Uqbar for kindly sharing today’s photo via the Creative Common’s License.

Today the Illinois Association of Realtors released very encouraging data on both Chicago and the state of Illinois.

Chicago Home Sales Way Up, Price Up Too

Vintage Condos Along Lake Shore Drive in the Early Morning Light

There were 7,140 homes sold in Chicago in June compared to 5,674 sold in May. That is an increase of 25.8 percent. However, it’s not all good news. In June of last year  7,806 homes were sold in Chicago. That is a year-on-year decrease of 8.5 percent.

Median home prices in Chicagoland were up 5.0 percent from May to June of this year, going from $200,000 to $210,000. However, this is a drop of 18.0 percent when compared to June of last year when the median price was $256,000.

Illinois Home Sales and Prices Up

Numbers for the entire state of Illinois are also on the upswing. In June of this year 10,909 home sold, which is up from  9,029 in June. That number is 9.3% down compared to June of last year, which was at 12,024. The median price in June for a home in Illinois also went up 6.6 percent: $167,000 in June of this year when compared to $157,500 to May. Compared to June of last year, when the median price was $199,849, prices are down 16 percent.

Leading Real Estate Economist Sees Good and Bad

John Tuccillo?one of the foremost real estate economists in the United States?spoke today at the Community Alliance of Chicagoland REALTORS® Leadership Retreat. He said that one of the bits of good news related to the real estate market is that the $8,000 tax credit is working?it is a driving force in helping first-time buyers. He also commented on the fact that pending sales are up.

On the negative side of influences on the real estate market, he focused on all the appraisal issues impacting transactions. This is a topic we’ve covered extensively here at The Chicago 77 with posts starting in January:

• Appraisers must be local
• Working to suspend HVCC
• HVCC killing transactions and hurting the economy
  
• New rules will have an impact on the real estate market (January, 2009)