Condo sales fall for 2nd straight quarter
By Eddie Baeb
Oct. 25, 2006
(Crain’s) — While the apartment market remains strong in Chicago and the suburbs, downtown condominium sales fell for a second straight quarter, raising concerns that a number of proposed high-rises may ultimately be scrapped.
Condo sales in new buildings fell to about 700 in the third quarter, down from about 1,200 in the second quarter and 1,600 in the first quarter. Sales this quarter also marked a 26% decline from the same period a year ago, according to a report to be released next month by Appraisal Research Counselors, a Chicago-based real estate consulting firm.
That’s bad news for developers, who generally need contracts for about half of their units to get financing required to begin construction.
“Some projects might not get built,” Gail Lissner, a vice-president at Appraisal Research, said during a presentation Wednesday at the Chicagoland Apartment Assn.’s industry outlook meeting.
However, Ms. Lissner noted that year-to-date condo sales have fallen only about 5% from last year’s record pace and still remain well above sales in the first nine months of 2004 and 2003.
The more stark figures: About 5,700 new condos are being marketed this year, most of which aren’t yet under construction, compared with just 4,700 that were marketed all of last year.
Of those 5,700 new condos, contracts have been signed on about 3,500 units through the third quarter, according to Appraisal Research data. “Sales aren’t keeping pace with new inventory,” Ms. Lissner said in an interview. Despite the decline in sales, Ms. Lissner said two condo developments that started this year are already under construction: CMK Co.’s 1720 S. Michigan Ave. and Mesa Development Co.’s The Legacy at Millennium Park. The third quarter provided more good news for apartment building owners, who are benefiting from job growth in the region along with tight supply because developers have been converting apartments into condominiums and not building many new apartment complexes.
Net apartment rents in the suburbs rose 5.9% in the third quarter from the year-earlier period, while rents downtown for “Class A” apartment buildings rose 8.9%.
Appraisal Research Vice-president Ron DeVries said he thinks the supply-demand trend will continue and cause rents in the suburbs and city to rise another 5% over the next 12 months.
Wednesday, October 25, 2006
Chicago Foreclosures Up 2x National Average
(Crain’s) — The number of Chicago-area homes entering some stage of the foreclosure process increased in September, keeping the metropolitan area’s rate at more than twice that of the nation.
A total of 6,177 homes in the eight-county metro area were in the foreclosure process last month, a nearly 5% increase from August, according to a report released by RealtyTrac Inc., which tracks foreclosures. The Chicago area represents the bulk of the 7,431 Illinois homes at some stage of foreclosure.
“Chicago foreclosure activity has increased more than 60% over the last months, boosting the foreclosure rate to an unexpectedly elevated level given the area’s low unemployment rate and above-average home price appreciation,” James Saccacio, CEO of RealtyTrac, said in a statement.
In the Chicago metro area, one household in every 471 are in some stage of foreclosure. That compares with one in 658 households for Illinois and one in 1,030 for the nation.
A total of 6,177 homes in the eight-county metro area were in the foreclosure process last month, a nearly 5% increase from August, according to a report released by RealtyTrac Inc., which tracks foreclosures. The Chicago area represents the bulk of the 7,431 Illinois homes at some stage of foreclosure.
“Chicago foreclosure activity has increased more than 60% over the last months, boosting the foreclosure rate to an unexpectedly elevated level given the area’s low unemployment rate and above-average home price appreciation,” James Saccacio, CEO of RealtyTrac, said in a statement.
In the Chicago metro area, one household in every 471 are in some stage of foreclosure. That compares with one in 658 households for Illinois and one in 1,030 for the nation.
Americans Paying Less for Previously Owned Homes
Americans are paying less for previously owned homes than they were a year ago, but the number of such homes sold continues to fall.
The National Association of Realtors reported today that the average price of a previously owned home fell to $220,000 in September, down 2.2 percent from September 2005. At the same time, the pace of home sales slowed to a seasonally adjusted annual rate of 6.2 million, down 1.9 percent from August.
Sales fell even further when compared with September 2005. In the past year, existing home sales slid 14.2 percent, the realtors association said.
The new sales numbers suggest a housing market that is downshifting, but it remains unclear just how much further sales and prices will fall. Market experts are divided over whether housing is just beginning a deep and lengthy correction, or merely leveling off after several years of explosive growth.
The association said the latest statistics indicate that the market is starting to stabilize, but many economists said it is far too early to say that the worst has passed.
The association said that the inventory unsold homes on the market declined to 3.8 million in September from 3.9 million in August, a sign that it found encouraging.
“The good news is that fewer new listings are coming on line,” Thomas M. Stevens, president of the association, wrote in its statement. He predicted prices would pick back up within a few months: “A stable sales pace is expected to draw down the number of listings to a supply balance that will support positive price growth.”
The September report was the second in a row to show falling prices; the August report was the first in more than a decade to show a year-over-year decline in the median price of an existing home.
Despite a small decline in inventories last month, the number of homes for sale remains near historic highs. Many economists believe that with such a large surplus of homes unsold, prices are likely to weaken for some time. At September’s pace, it would take 7.3 months to sell all the existing homes now on the market, the association said.
“A year ago, this ratio was 4.6 months,” said Joshua Shapiro, chief United States economist with MFR, a consulting firm. “And the sharp rise over the spring and summer suggests that pricing will weaken further in the months ahead.”
The data showed that selling a condominium in September was more difficult than selling a single-family home. Condo sales fell by 3.2 percent from August, and inventories rose to an 8.6-month supply. By contrast, single-family home sales fell 1.6 percent while inventories rose to 7.1 months.
Overall existing home sales and prices fell the fastest in the Northeast, by 3.7 percent from August, and median prices there slipped 5.1 percent from a year earlier, to $259,000. In the West, sales volume fell 3.1 percent from August, and prices dropped 4.3 percent from a year earlier, to $332,000. In the Midwest sales decreased 2.8 percent from August; prices dropped 2.3 percent from last year, to $208,000.
The South was the only region where sales picked up, rising 0.4 percent in September. Prices there, however, were 1.6 percent lower than a year ago.
By JEREMY W. PETERS
Published: October 25, 2006
New York Times.com
The National Association of Realtors reported today that the average price of a previously owned home fell to $220,000 in September, down 2.2 percent from September 2005. At the same time, the pace of home sales slowed to a seasonally adjusted annual rate of 6.2 million, down 1.9 percent from August.
Sales fell even further when compared with September 2005. In the past year, existing home sales slid 14.2 percent, the realtors association said.
The new sales numbers suggest a housing market that is downshifting, but it remains unclear just how much further sales and prices will fall. Market experts are divided over whether housing is just beginning a deep and lengthy correction, or merely leveling off after several years of explosive growth.
The association said the latest statistics indicate that the market is starting to stabilize, but many economists said it is far too early to say that the worst has passed.
The association said that the inventory unsold homes on the market declined to 3.8 million in September from 3.9 million in August, a sign that it found encouraging.
“The good news is that fewer new listings are coming on line,” Thomas M. Stevens, president of the association, wrote in its statement. He predicted prices would pick back up within a few months: “A stable sales pace is expected to draw down the number of listings to a supply balance that will support positive price growth.”
The September report was the second in a row to show falling prices; the August report was the first in more than a decade to show a year-over-year decline in the median price of an existing home.
Despite a small decline in inventories last month, the number of homes for sale remains near historic highs. Many economists believe that with such a large surplus of homes unsold, prices are likely to weaken for some time. At September’s pace, it would take 7.3 months to sell all the existing homes now on the market, the association said.
“A year ago, this ratio was 4.6 months,” said Joshua Shapiro, chief United States economist with MFR, a consulting firm. “And the sharp rise over the spring and summer suggests that pricing will weaken further in the months ahead.”
The data showed that selling a condominium in September was more difficult than selling a single-family home. Condo sales fell by 3.2 percent from August, and inventories rose to an 8.6-month supply. By contrast, single-family home sales fell 1.6 percent while inventories rose to 7.1 months.
Overall existing home sales and prices fell the fastest in the Northeast, by 3.7 percent from August, and median prices there slipped 5.1 percent from a year earlier, to $259,000. In the West, sales volume fell 3.1 percent from August, and prices dropped 4.3 percent from a year earlier, to $332,000. In the Midwest sales decreased 2.8 percent from August; prices dropped 2.3 percent from last year, to $208,000.
The South was the only region where sales picked up, rising 0.4 percent in September. Prices there, however, were 1.6 percent lower than a year ago.
By JEREMY W. PETERS
Published: October 25, 2006
New York Times.com
Fed Holds Rates Steady
Key rate unchanged at 5.25 percent but with the economy slowing and inflation looming, what's the central bank's next move?
By Paul R. La Monica, CNNMoney.com editor at large
October 25 2006: 3:04 PM EDT
NEW YORK (CNNMoney.com) -- The Fed held interest rates steady Wednesday and noted again that the economy was slowing, but the central bank also indicated it's still wary of inflation - a sign the Fed may not cut rates in coming months as many investors had hoped.
Federal Reserve policy-makers held their target for the federal funds rate, an overnight bank lending rate that helps determine the interest consumers pay on auto and other loans, at 5.25 percent.
The move, widely expected on Wall Street, marked the third straight time the Fed left rates alone after raising them 17 consecutive times through June of this year. But now many economists and market strategists think Fed Chairman Ben Bernanke & Co. face tougher decisions ahead.
Some argue the Fed should consider rate cuts next year in a bid to make sure the economy doesn't tumble into recession. Others who fear inflation is a more pressing threat say the Fed should start raising short-term rates again.
Again, there was dissension within the Fed on this matter.
For the third consecutive meeting, Federal Reserve Bank of Richmond President Jeffrey Lacker voted against a pause and for a quarter-point rate hike. The other 10 members of the Fed's policy-making committee voted to leave rates unchanged.
Read the Fed statement
The Fed did, however, appear to indicate it may be more worried about a slowdown. In its statement, the Fed said "economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market."
That differs slightly from the language on the economy in the last statement when the central bank said that "moderation in economic growth appears to be continuing."
But the Fed added that the economy "seems likely to expand at a moderate pace" going forward.
It also kept its language about the threat of inflation, saying that "readings on core inflation have been elevated" and that "some inflation risks remain." The Fed did remove a phrase about energy prices and other commodity prices having "the potential to sustain inflation pressures."
David Kelly, an economic advisor at Putnam Investments in Boston, said the changes to the statement show the Fed is fairly satisfied with the prospects for economic growth next year as well as the inflation picture.
"This statement is an expression of increased confidence in the economic outlook," Kelly said.
As such, Kelly said he thinks the Fed will probably start cutting interest rates sometime in 2007. He does not expect the Fed to change rates at its next meeting on December 12, however.
By Paul R. La Monica, CNNMoney.com editor at large
October 25 2006: 3:04 PM EDT
NEW YORK (CNNMoney.com) -- The Fed held interest rates steady Wednesday and noted again that the economy was slowing, but the central bank also indicated it's still wary of inflation - a sign the Fed may not cut rates in coming months as many investors had hoped.
Federal Reserve policy-makers held their target for the federal funds rate, an overnight bank lending rate that helps determine the interest consumers pay on auto and other loans, at 5.25 percent.
The move, widely expected on Wall Street, marked the third straight time the Fed left rates alone after raising them 17 consecutive times through June of this year. But now many economists and market strategists think Fed Chairman Ben Bernanke & Co. face tougher decisions ahead.
Some argue the Fed should consider rate cuts next year in a bid to make sure the economy doesn't tumble into recession. Others who fear inflation is a more pressing threat say the Fed should start raising short-term rates again.
Again, there was dissension within the Fed on this matter.
For the third consecutive meeting, Federal Reserve Bank of Richmond President Jeffrey Lacker voted against a pause and for a quarter-point rate hike. The other 10 members of the Fed's policy-making committee voted to leave rates unchanged.
Read the Fed statement
The Fed did, however, appear to indicate it may be more worried about a slowdown. In its statement, the Fed said "economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market."
That differs slightly from the language on the economy in the last statement when the central bank said that "moderation in economic growth appears to be continuing."
But the Fed added that the economy "seems likely to expand at a moderate pace" going forward.
It also kept its language about the threat of inflation, saying that "readings on core inflation have been elevated" and that "some inflation risks remain." The Fed did remove a phrase about energy prices and other commodity prices having "the potential to sustain inflation pressures."
David Kelly, an economic advisor at Putnam Investments in Boston, said the changes to the statement show the Fed is fairly satisfied with the prospects for economic growth next year as well as the inflation picture.
"This statement is an expression of increased confidence in the economic outlook," Kelly said.
As such, Kelly said he thinks the Fed will probably start cutting interest rates sometime in 2007. He does not expect the Fed to change rates at its next meeting on December 12, however.
Sunday, October 15, 2006
Stop Paying PMI
Millions of homeowners were required to get private mortgage insurance (PMI) at the time they purchased their homes, due to having made downpaments of less than 20 percent. The monthly mortgage payment includes as much as $150 that represents the PMI premium.
You can get so accustomed to making that identical mortgage payment every month, some people stay on auto-pilot and continue paying for a policy they’re entitled to cancel.
Typically, if you’ve reached the 20% equity level, you’re eligible. If your mortgage is less than 5 years old, it’s 25%. You also need to have a good track record for making mortgage payments. That means having had no more than one late-payment penalty in the past year; no payments over 30 days late in that same time frame; nor, any notice of default recorded against the property.
If that sounds like you, and if you haven’t gone through the process, there are user-friendly resources to help you get the cancellation process started.
First, you’ll need to confirm your eligibility. The Mortgage Insurance Companies of America (MICA), the trade association for mortgage insurers, sponsors an excellent website (http://www.privatemi.com/cancel/index.cfm) that offers an eligibility calculator, as well as sample letters to send to mortgage servicers that will help you jump start the cancellation process.
If you are eligible to cancel your PMI, your servicer might require an updated appraisal of your home. Don’t rush out and have an appraisal done yourself, though. Mortgage servicers use their own sources to select an appraiser for the job.
If you don’t want to handle the cancellation personally, you can hire someone else to do it for you. PMI cancellation services take over all of the correspondence, escrow account analyses and any disputes with servicers. Figure on spending about $500, including the appraisal. An Internet search for “Cancel PMI” will help you locate a local company.
You’ve worked hard to have accumulated 20% equity in your home. Don’t pay for something you no longer need!
Even if you know you’re not eligible yet, use the eligibility calculator to figure out when you WILL be and keep that date posted prominently somewhere in your records. Or even, for instance, on the refrigerator. It’ll remind you daily of something positive you’re working toward that’ll be worth celebrating when the time comes.
There is another strategy buyers are using these days and that is the second line of credit. By getting a 80/20 or 80/10/10 loan, lenders will waive the PMI but then you will of course have the second line of credit payment until that is paid off. But the benefits may be worth it in some cases.
Bridging the International Gap
Join me at the International Real Estate Expo - November 3 at Navy Pier. The real estate industry is changing every day and that includes expanding markets. It used to be Florida was THE destination of choice for second home buyers or retirees, but now you can be in the Carribean or Mexico in another hour by plane and those destinations can make real sense to some.
The market is changing and I plan on becoming as educated as possible on this growth. Panama is another area of potential investment where you can get a 6000SF condo for under 500K!
But I do not recommend buying without an expert and I can put you in touch with those.
Here is more about the expo:
The Chicago International Real Estate Council of the Chicago Association of REALTORS(r) will host its Second Annual International Real Estate Expo at Navy Pier on Friday, November 3.
Why you should attend:
Get connected with expert conducting international real estate transactions
Stay ahead of the competition with the most current market information
Understand what will influence this expanding niche
And much more
What you will learn:
Solid advice for becoming an international real estate investor/REALTOR®
Opportunities in the international real estate market
Best emerging real estate markets globally
Strategies employed in building a global real estate portfolio
Managing risks in international real estate
Market opportunities as REITs expand around the world
Which classes of funds make best use of emerging opportunities
Email me if you need more info and I hope to see you there.
Friday, October 06, 2006
20/20 Vision
Many real estate prognosticators have been worrying about the slowing of the appreciation rates across real estate markets nationwide, scaring many buyers out of the market. The Office of Federal Housing Enterprise Oversite released its 2nd quarter figures on average housing prices this month and many market watchers jumped on the "dropping prices" bandwagon.
The astute buyer, however, watches the prices and the interest rates adjustments together and then makes an offer at the optimal time to get the best house for the best price and terms.
Headlined "House Price Appreciation Slows," the OFHEO report showed that prices nationally are not dropping, rather the rate of growth has slowed. On average, the houses in the 2nd quarter were 10 percent more valuable over the same period last year. So consumers and economists have on their worry hats about the future. Understandably, none of us like to see an investment stop growing; however, for the buyers, this slow in appreciation is good news.
I've always held on to the belief that there's not a lot you can do about the future, so you have to live and make decisions based on the facts you have today. The reality about real estate, is that sometimes you have to buy when your life situation dictates it, not when the "price is right." However, for buyers who have been on the sidelines, the time may be right to hit the iron of making an offer, so to speak.
Have you been watching the interest rates lately? Bankrate.com has its average 30-year fixed rate at 6.4 percent -- a drop of 3 basis points in one week and the lowest level all year. In addition, for those willing to pay more points, you could get a rate under the 6 percent threshold. Meanwhile, if the prices in your area are about to flatten before beginning their next cycle upward, and you MUST buy now, your waiting may have paid off -- if you jump over the fence of indecision and get a contract written now.
Earlier this year, rates were standing at 6.8 percent. The drop of 4 basis points since then could save a shopper hundreds or thousands of dollars per year on a home mortgage, depending on the loan amount.
At 6.4 percent, the principal/interest payment on each $100,000 borrowed is $625.51 -- that's about $25 less per month than when the interest rate was at 6.8 percent a couple months ago.
Thus on a $400,000 loan amount, your payment would now be $100 less per month -- that's a savings of $1,200 per year (more than $6,000 over the next five years) if, and this is the big IF, you get off the fence, lock in your loan and make an offer on that house you've been waiting on.
Watching the interest rates as well as housing prices in your market is the 20/20 Vision of the real estate market. Look to the future. Buy when prices are stable with a low interest rate and then hold on for the ride. According to some forecasters, this month may be the month buyers should get off the dime.
The Financial Forecast Center, a market research group in Houston that monitors and forecasts indexes, interest rates and various other market data, predicts the average national interest rate will climb beyond the highest rate this year to 6.97 percent by January 2007.
If that's the case, that money mentioned above will then cost a buyer $663.29 per month for every $100,000 borrowed. For a $400,000 mortgage, that would then be over $1,800 per year more in monthly payments for the same amount of money (assuming your favorite house is still available and that the price hasn't gone up again).
If you're waiting for prices to hit bottom, it could happen while you wait or you could create your own "bottom" price by making an offer now before interest rates start their upward climb once again. Get the house you want for the price you want at today's interest rate.
By M. Anthony Carr
Realty Times
Thursday, October 05, 2006
Chicago Market Facts 2006
Click below to see some great market statistics for the Chicago region.
Be sure to click on the Real Estate link to see some interesting market statistics for the various neighborhoods in Chicago. I am a bit skeptical on some of the areas based on my experience, but in general the data looks good.
I hope everyone is well.
Chicago Market Facts 2006
Be sure to click on the Real Estate link to see some interesting market statistics for the various neighborhoods in Chicago. I am a bit skeptical on some of the areas based on my experience, but in general the data looks good.
I hope everyone is well.
Chicago Market Facts 2006
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