Chicago May Have Hit Bottom

Forbes top ten cities most likely to have not hit bottom on pricing declines. Florida takes 4 out of the top 5 and only New York in the east. Others in South and West.

Orlando
Miami
Jacksonville, Fla.
Tampa
Los Angeles
Phoenix
Las Vegas
Oakland, Calif.
San Diego
New York

As Warren Buffet has been quoted as saying, "If you wait for the robins, Spring will be over". Yet another sign you may want to consider buying in this awesome opportunity we have in Chicago

Chicago Residential Real Estate Market News and Reports

A sign of recovery? If you have to ask ‘have we recovered yet’ chances are we have not. However, by the time we know we have recovered we will have been recovered for some time. Remember we didn’t diagnose the recession until three quarters later.

Warren Buffet says, “If you wait for the robins, Spring will be over”. In my opinion, the best opportunities come at the bottom of the market cycle when depression and worry are at their peak. I’d say we are pretty close to that now.

The market is correcting itself in a healthy way. When prices inflate beyond a normal appreciation (~5% annually) the market requires corrections and that is what is happening now. Correction means opportunity. Look at the graph below and it spotlights the need for this correction (figures are national).

Once local indicator of housing pricing and recovery is to measure the absorption rate. In a healthy balanced market we could expect five to six months supply of units on the market (if no new inventory came on the market that is how long it would take to sell the current housing stock). In most areas we are well into double digit absorption rates. In many areas we are into years to absorb the current supply!

That’s the Chicago buzz for now.

Visit www.ChicagoHomeBuzz.com for the latest market buzz!

Lakeview (Chicago) Condos & Townhomes Chicago Home Buzz

Total condos and townhomes units sold in Chicago's Lakeview neighborhood were down 37% with 245 units sold in the fourth quarter, 2008 compared with 391 units sold in the fourth quarter, 2007. The median sales prices were down 9% to $315.000 from $347,000 in 2007 4Q and the average condo and townhome prices were down 36% in 2008 to $241,592 compared with $376,131 in 2007. Average market time was up 9% to 104 days.

Listen to the local professionals and look at the real numbers when trying to make sense of today's real estate market and your local micro-real estate economy. Even these numbers cannot be read on face value. Drill downs are required!


For more information and a Chicago Home Buzz market report visitwww.ChicagoHomeBuzz.com where this data will be available soon.

Jim

Chicago's Lincoln Park Condo & Townhome Buzz

Total condos and townhomes units sold in Chicago's Lincoln Park neighborhood were down 41% with 128 units sold in the fourth quarter compared with 218 units sold in 2007 (4Q). The median sales prices were slightly down 1% to $427,100 (from $432,500 in 2007 4Q) and the average condo and townhome prices were down 7% in 2008 to $443,146 compared with $478,738 in 2007. Average market time was up 10% to 115 days.

Listen to the local professionals and look at the real numbers when trying to make sense and have an understanding of your local real estate economy. Even these numbers cannot be read on face value. Drill downs are required!



For more information and a Chicago Home Buzz market report visitwww.ChicagoHomeBuzz.com where this data will be available soon.


Jim

Lakeview (Chicago) Market Ups and Downs

While total single-family homes sold in Chicago's Lakeview (60657) neighborhood were down to 12 from 25 ( a 52% drop) the median sales price was up 32% to $1,627,500 (from $1,230,000) and market time was down 4% to 193 days.

Listen to the local professionals and look at the real numbers when trying to make sense and have an understanding of your local real estate economy. Even these numbers cannot be read on face value. Drill downs are required!

Make it a great buying and selling season

Jim

Gold Coast Old Town (Chicago) Market Report Fall, 2008

Chicago Home Buzz Market ReportMarket Snapshot of Gold Coast/Old Town (Chicago) condos for Fall Quarter, 2008 ChicagoHomeBuzz.com

The total number of Lincoln Park , Chicago condos sold for the third quarter, 2008 was 614 units compared with 846 units in 2007 down 27% from the previous year and down 10% since 2003.

The median sales prices of Gold Coast/Old Town (Chicago) condos for the same quarter was $397,000 compared with $377,000 in 2007 up 5% from the previous year and up 23% since 2003.

The average sales price of Gold Coast/Old Town (Chicago) condos for the same quarter was $540,821 compared with $526,148 in 2007 up 3% from the previous year and up 38% since 2003. Note the disparity between median and average prices showing the skewed effect the higher priced Gold COast condos has on the average price figures.

The average market time of Gold Coast/Old Town (Chicago) condos for the same quarter was 144 days compared with 119 days in 2007 up 21% from the previous year and up 129% since 2003.

For a full neighborhood and city wide report visit www.ChicagoHomeBuzz.com

Lincoln Park Single-family homes Fall, 2008

Market Snapshot of Lincoln Park (Chicago) single-family homes for Fall Quarter, 2008 ChicagoHomeBuzz.com

The total number of Lincoln Park , Chicago single-family homes sold for the third quarter, 2008 was 47 units compared with 53 units in 2007 down 11% from the previous year and down 10% since 2003.

The median sales prices of Lincoln Park , Chicago single-family homes for the same quarter was $1,300,000 compared with $1,425,000 in 2007 down 9% from the previous year and up 17% since 2003.

The average sales price of Lincoln Park , Chicago single-family homes for the same quarter was $1,528,101 compared with $1,719,981 in 2007 down 11% from the previous year and up 31% since 2003.

The average market time of Lincoln Park , Chicago single-family homes for the same quarter was 163 days compared with 174 days in 2007 down 6% from the previous year and up 159% since 2003.

For a full neighborhood and city wide report visit www.ChicagoHomeBuzz.com

Market Snapshot of Lakeview Single-family Homes Fall Quarter, 2008

Market Snapshot of Lakeview (Chicago) Fall Quarter, 2008 ChicagoHomeBuzz.com

The total number of Lakeview, Chicago single-family homes sold for the third quarter, 2008 was 30 units compared with 42 units in 2007 down 29% from the previous year and and down 35% since 2003.

The median sales prices of Lakeview, Chicago single-family homes for the same quarter was $1,200,000 compared with $1,041,250 in 2007 up 15% from the previous year and up 64% since 2003.

The average sales price of Lakeview, Chicago single-family homes for the same quarter was $1.276,563 compared with $1.129,197 in 2007 up 13% from the previous year and up 51% since 2003.

The average market time of Lakeview, Chicago single-family homes for the same quarter was 169 days compared with 154 days in 2007 up 10% from the previous year and up 213% since 2003.

For a full neighborhood and city wide report visit www.ChicagoHomeBuzz.com

Chicago Home Sales Activity for the Third Quarter, 2008: The Chicago Home Buzz

Beware of summaries. They are for losers. Beware of the pessimist or the optimist. Look for the micro-economist in your neighborhood. This is an historic time in our national economy and it really is incredible to watch since it is directly affecting each and every one of us. General summaries and market data are for losers and we frown on them. Why? Real estate operates in a local economy. Block by block, street by street, subdivision by subdivision. One street could be booming and the next street busting. Beware the pessimists or the optimists. Look for the micro-economist in your neighborhood. Look at our median sales summary in our Chicago Home Buzz report: Median prices up almost 25%! Wow! This economy is doing great! Read on…summary points of view are worthless such as our summary used as an example of skewed data. The media in their infinitely diluted viewpoint continues to under report (or over sensationalize) the actual state of the real estate market. To their defense, it is impossible to write detailed reporting on the market because the real estate market operates on both a macro and micro level. Even when you get down to what you think is a micro-level, Gold Coast goes and screws everything up! The real estate macro-economic condition is obviously just as important to each of us as what is happening in our back yards as evident by the turmoil in the markets. I’ll refrain from getting into details about why we are where we are but needless to say “A” grade securities which included junk, sub-prime mortgages (mortgages given to people who had no right getting a loan) were traded on Wall Street and across the global market at a hugely profitable speed and no regulator or moderator or Hedge Fund manager wanted that gravy train to stop. Trillions were made just as trillions were just lost in these past few weeks. That said, let’s focus on what the crux of this Chicago Market report is about. Our LOCAL MICRO-ECONOMY. Chicago as compared to national indexes is doing well in many areas, and not so well in others. Our report focuses on the north side of Chicago with a focus on SINGLE FAMILY homes in the Fall Quarter, 2008 compared with Fall Quarter, 2007. Median Price Activity for the Third Quarter, 2008 in Chicago: Taking the Gold Coast/Loop out of the equation, median sales prices for the quarter dropped almost 14% to $412,444 down from $470,141 in 2007. If you add that area back in there is actually a 24.4% increase in median price, but that is because the single-family home median sales price had a few large transactions pushing the median price for the entire North Section up. All other areas showed a decline of median prices compared with last year with the WEST area leading the decline with an average 85% price drop on sales from $228,867 down to only $123,481. This is in large part due to the number of foreclosures leading the sales in this area. West Garfield Park led the decline in a staggering display of depreciation for the area with 5 units sold (up from only 3 in 2007) but a drop in median price from $189,000 down to a paltry $12,500, a 93% decline in median price. North Lawndale (down 78%), East Garfield Park (down 73%) and Humbolt Park (down 53%) were among the area leaders of decline in value. On the positive side, once again one of my HEAVY BULLISH neighborhoods (for condos, multi-unit or single-family investments) continues to be Lakeview in the LAKESHORE area. Median Prices saw a whopping 15% INCREASE from $1,041,250 up to $1,200,000 (average prices too saw an increase up 13%). Rogers Park too saw an unexpected increase in median price single-family homes up 11% from the previous quarter with a median sales price of $456,000. The bad news there was it took an increased market time average of 279 days UP 862% from 2007’s short 29 day market average. The leading declining area for the quarter was Uptown , West Ridge and Lincoln Square (down 21%, 18% and 17% ) for the area. Overall however, the Lakeshore section was down 5% for the quarter. Very little good news for the NORTHWEST section with the area prices down 18% from a median sale price of $387,450 to $329,357. The good news was the area saw good sales volume in units (there are deals to be had). The NORTH CENTRAL section saw Avondale and Albany Park leading area decliners down 30% and 23% but West Town (Wicker Park/Ukranian Village) saw a 5% increase in median price up to $727,000 for a median price home up from $690,000 last year. Bucktown/Logan Square too saw a slight uptick in median prices to $693,000 from $670,000 last year (average prices jumped 15% to $804,804 from $702,666 last year). Unit Activity: Total units sold is down only 70 units across the North Section (-8.5%). The NORTHWEST section of the city is only showing 3% less units sold down from 296 to 286. In that same section, Norwood Park saw a 15% jump in sales from 54 units up to 62 and Dunning saw a significant uptick from 56 units sold in 2007 to 70 this quarter, 2008. However, some losers on units sold were Edison Park with a whopping 48% decline in units sold down to 14 units from 27 in 2007 and Jefferson Park down almost 30% from 45 units to only 32 this past quarter. Moving to the CENTRAL area, Avondale saw a whopping 183 increase in units sold up from 6 in 2007 to 17 in 2008 but the area saw an overall decline of 5% for the quarter. The WEST section saw an overall drop of 12% but areas like Belmont Cragin and Humbolt Park where single-family homes abound saw significant drops in unit volume down 30% and 13% respectively. The NORTH section dropped from 179 units to 170 however, the big news there is Avondale (while median prices are down 30%) saw a 183% increase in units sold from 6 to 17 with people most likely taking advantage of the buyers market and finding those deals which are out there. Summaries are for losers. We already know there are pockets (and even pockets within the pockets we are reporting) where there are signs of growth in this dismal market. Overall for the City on the North section market times were longer (up 27.46%) to 185 days with no one area really better than the other. Uptown was the only neighborhood that saw an average market time below 100 at 93 days (down 36% from 2007). However, taking the skewed Gold Coast out of the microscope we can get a better glimpse of the actual numbers for the quarter. Total units sold were down 7.7% from 870 to 808. The median sales price dropped almost 14% with a few exceptions such as Uptown, Bucktown/Logan Square and West Town/Wicker Park which all showed a positive gain in median sales price compared to 3rd quarter 2007. If we do add the Gold Coast back in to the report we are really looking at a very positive gain in median prices for the quarter up 24.39%.

Beware of summaries. They are for losers. Beware of the pessimists or the optimists.

Look for the micro-economist in your neighborhood.

When is a Buyers Market a Buyers Market?

The news stories these days are scary. If you start to separate out the fact from the fiction or fear, you can begin to make an educated decision about what makes economic sense buyers you when making their next home purchase.

Keep your eye on those interest rates NOT the property prices. They will have more long term impact on your home buying power.

"The thing that will make home prices stop falling is the very same thing that will push mortgage rates higher," says Jim Svinth, chief economist at mortgage firm Lending Tree. "So anything you gain by a further drop in prices might be offset by rising financing costs."

Rather than being concerned about the what-ifs, I'd suggest focusing more on the what-wills: The interest rates will continue to climb (which is an inevitable outcome from an economy such as ours) to head off inflationary pressures which is a reason Bernanke will not likely cut the Fed Rate again - in order to keep inflation in check.

Since January 24th, mortgage rates have climbed 0.6% which is the fastest increase in two decades and rates should continue to rise. That increase in mortgage rates is the same effect as a property losing 5% of its value! That means if you were able to afford a $600,000 home, now you would be limited to $570,000. Look at the numbers on the enclosed sheet and let's talk about why they call it a buyers market. Because rates are still historically low (but rising) and that is what will have the most impact on getting the best deal on a home.

Experts who specialize in macroeconomics know that rates will raise and so will the cost to own the longer you wait.

Mortgage Rates Roller Coaster Ride

Bond prices and home loan rates were all over the place this past week. Some of my lenders told me that there were 1/4 point swings in one day!

Why this flurry? The Fed has been dropping their rates! That's what my buyers think. I try and give them a minor tutorial that the mortgage rates are tied to the bond market not directly connected to the Fed Rates which are more short term loans (car loans, HELOC loans, etc).

The bonds like it when inflation is in check and not increasing. Well this week we got news that showed inflation increasing and not staying in check. That has caused the roller coaster ride of rates whi week ( a quarter point swing in one day is unbelievable).

Keep your eyes on the bond market news and see how this plays itself out in the coming weeks and months. We need inflation to stay in check in order to dig ourselves out of this shifting market.

Chicago's Quarterly Housing Market Report

The latest Chicago Home BUZZ report has almost been completed (just awaiting final few weeks of the year) but the results are staggering. The overall decrease from 2006 to 2007 in the fourth quarter was over 130% decrease in total sales volume from just one year ago.

Some of the leading declines in the City of Chicago included the Bucktown/Logan Square (60647) neighborhoods where there was an almost 300% decrease in single-family (detached) home sales from $32,898,835 in total sales in 2006 down to only $8,214,800 for the fourth quarter (2007). The Hyde Park neighborhood (60619) saw single-family homes drop from $3.6M down to under $1M in sales, down 287%.

Rogers Park condominiums saw only 45 sales last quarter, an over 230% decrease from the prior years 149 units.

The suburbs saw some areas with even worse showings including single-family sales in Highland Park where only four homes sold last quarter totaling $1,753,600 in sales down over a whopping 400% from the $8,888,000 last year.

Over all total sales volume for the quarter was $1.5 billion down over 130% from the $3.5 billions last year.

For more information and a free quarterly update of your neighborhood visit our Chicago HOME BUZZ page at http://www.chicagohomebuzz.com and see all the data and statistics.

If you'd like an Interactive Market Update of your neighborhood request a Market Snapshot

Finally, if you'd like us to mail you a copy of the Chicago Home Buzz report quarterly just drop us a line 

Stay tuned for more....

FNMA Sells $7 Billion in Stock

Fannie Mae, the country's largest buyer of mortgages on the secondary market decided the risks to continue with the housing market decline put too much pressure on their return for investors and sold its preferred stock to raise capital.

The news cannot be greated with a reflection of optimism for the state of affairs for Fannie Mae and their involvement in the secondary market.

Just another sign that even FNMA bit off more than it could chew and is trying to create stability for its investors in this turbulent market.

This from Inman News


Mortgage repurchaser Fannie Mae said Tuesday it would issue $7 billion in preferred stock to raise capital and reduce the company's quarterly common stock dividend beginning in the first quarter of 2008.

Fannie Mae on Nov. 9 reported $1.4 billion in third-quarter losses, but said it had $41.7 billion in core capital on hand, $2.3 billion above minimum requirements set by the Office of Federal Housing Enterprise Oversight (OFHEO).

In a press release Tuesday, Fannie Mae officials said the preferred stock issue -- along with a smaller $500 million issue last month -- will help the company maintain a solid capital position through 2008.

The additional capital will "strengthen Fannie Mae's ability to manage the effects of ongoing volatility in the mortgage credit markets, continue to grow its securitization activities, and pursue attractive investment opportunities," the company said.

But Fannie Mae officials warned that worsening housing and credit markets, continued losses on guaranty contracts, substantial credit-related expenses, and losses on derivatives and securities “will adversely affect in a material way the company's fourth quarter 2007 results.”

In addition, the company said, conditions in the housing and credit markets, including expected further declines in home prices, “will negatively affect the company's financial condition, and results of operations in 2008.

Worst Quarter Since 1994

This article was written by Chicago Crain's columnist Alby Gallun. The state of affairs in the residential real estate market has not seen such a significant slow down in this quarter since 1994.


By Alby Gallun
Oct. 29, 2007

Local homebuilders endured more pain and suffering in the third quarter as new-home sales continued a slide that began two years ago.

Residential developers in the Chicago area sold 3,796 homes in the quarter, down 34% from the year-earlier period, according to Schaumburg-based Tracy Cross & Associates Inc. On a seasonally adjusted, annualized basis, sales totaled 15,296 units, down 40% from last year and their lowest level since 1994.

"It's the same old story," says Tracy Cross, president of the real estate consulting firm. "I think we are at the bottom right now. How long it stays in this trough, I'm not so sure."

After a prolonged boom fueled by easy credit and speculative buying, the residential market faltered in 2005 as rising prices and mortgage rates curtailed demand for new homes. More recently, lenders have tightened their loan criteria amid the subprime lending crisis.

The downturn has rippled through the industry, forcing widespread layoffs at homebuilders and subcontractors.

"On our end, it's terrible. It's awful," says Jim Venhuizen, owner and president of Cimarron Construction Inc., a New Lenox-based carpentry contractor that serves the residential market.

Cimarron employs about 25 carpenters now, down from roughly 100 a couple of years ago. Though the firm is still profitable, its net profit margin has shrunk to the low single digits, well below the 10% that is the norm for the carpentry industry, he says. Work is scarce, and homebuilders that do have work for firms like Cimarron are demanding price cuts.

"Everybody's going to be working real cheap for the next year, for sure," Mr. Venhuizen says.

Another apparent victim of the downturn in the new-home market is Neumann Homes Inc., which last week said it plans to file for Chapter 11 bankruptcy protection (ChicagoBusiness.com, Oct. 22).

The Warrenville-based homebuilder, which had 15 subdivisions in the works in Illinois, has laid off most of its employees and closed all of its sales, production and customer service offices.

The new-home business is especially bad in the suburbs, where sales fell 42% in the quarter, to 2,502 units, according to Tracy Cross. Sales in the city fell 14%, to 1,294 units.

A growing number of people who signed contracts to buy new homes are canceling, either because they can no longer qualify for a mortgage or they simply don't want to buy anymore, Mr. Cross says. The average cancellation rate is about 30% now, up from the more typical 15% to 20%, he estimates.

"Some are walking away from earnest money," he says. "Others are coming up with creative ways to get out."

The average Chicago-area new home sold for $416,329 in the third quarter, up 16% from the second quarter. But that number reflects a shift in the sales mix toward expensive condominiums in the city rather than any broader pickup in the market.

Though the downturn is deeper and longer than most observers expected, sales are so low that they can't drop much further, Mr. Cross says. Only 77 of the 817 condo and townhouse developments the firm tracks had eight or more sales during the quarter, and 327 either logged no sales at all or suffered a net loss of sales as buyers canceled contracts.

Market Pressure Cooker Good ?

This article written on CNNMoney.com site is interesting and while the general gist of the article is a bit slanted towards polyanna (the market jitters from last week and the US Fed $37 billion cash infusion is good for the market) doesn't really address the fact that this could be a major negative for the real estate market....I at least do agree that this will thin the heard of buyers and bring only the best qualifying buyers to the table/ At least I'd like to think so.

I like when the market puts pressure on the industry as a whole and weeds out the trouble spots like buyers who shouldn't be buying or realtors who shouldn't be selling...

What do you think??

Who can't get a mortgage now

Buyers with good credit and a down payment will make out well - all others, prepare to pay.

By Steve Hargreaves, CNNMoney.com staff writer

August 11 2007: 3:15 PM EDT

NEW YORK (CNNMoney.com) -- The stock market is going crazy. Hedge funds are going under. But for the average American looking for a home loan, the crisis in the subprime mortgage market may actually be good news.

"Not only is it nothing to worry about, it's an absolute positive," said Loni Graiver, president of the Maine-based Cumberland County Mortgage. "Not only have [home] valuations come down, but [interest rates] are still historically low."

Rates on 30-year fixed loans dipped last week, to 6.41 percent, according to the Mortgage Banker's Association.

In addition, tightened lending standards stemming from the subprime crisis likely mean fewer buyers, pushing down home prices.

The one catch is this: You've got to be a buyer with good credit, a low debt to income ratio, a healthy down payment, verifiable income, and looking to finance less than $417,000 (the cutoff for so-called jumbo loans).

Those characteristics basically define someone who qualifies for a loan through a government program like Fannie Mae, which makes up about 50 percent of all outstanding mortgages, according to Guy Cecala, publisher of the industry newsletter Inside Mortgage Finance.

Graiver said to expect to pay a down payment of at least 10 percent, and have a FICO credit score of 620 or higher in order to get a rate between 6.2 and 7.5 percent. Perhaps 90 percent of home buyers qualify for that prime rate, although if you want a rate below 7 percent you probably need a FICO score above 660.

To get the best deal, "plan on coming to my office with your tax returns and a down payment," said Bob Mouton, President of the Long Island-based American Mortgage Group.

If you're among the 10 percent of people with credit scores below 620 who need a subprime mortgage, things could get tricky.

"To a large extent, they are going to find that no one wants to lend to them," said Steve Habetz, president of Threshold Mortgage in Westport, Conn. "Those loans are being eliminated from the marketplace."

Someone with a credit score of 600 might have to pay as much as 9.5 percent, according to FICO, which provides lenders with borrowers' credit ratings.

You could also run into trouble if your loan is for more than $417,00, the maximum amount that can be channeled through a government lender. Loans over $417,000 are considered "jumbo" mortgages, which have recently seen rates jump due to a perceived increase in risk.

Mouton said money for subprime loans is still there, but be prepared to pay interest rates of 8 or 9 percent on them, compared to just over 7 up until recently.

Eugene Choi and Rich Bouchner, owners of Commodore Mortgage Group, say they've had to scramble to get loans for clients in the New York area that didn't meet the traditional criteria.

One was a waitress who made decent money at a high end restaurant, but couldn't prove it because so much of her pay was in cash tips.

Another was a young lawyer, making nearly $200,000 in the city but who didn't have the money saved for the down payment on a $800,000 Manhattan condo.

"A lot of people who should have qualified for credit are getting squeezed out of the market," said Bouchner. "Our lenders are turning off the spigot so quickly, these loans might not be here tomorrow."

Join Me on My Map

Welcome to my map.

When you visit the site just for kicks, add a picture and where you live/work and together we can grow this puppy all over the world.

Pretty cool....

Some Available Foreclosures in Chicago

Here is a list of recent foreclosure properties in COOK COUNTY

07/17/07 07CH0018808 Mutual Bank vs. Nicholas Mitchell, 1050 E Oakton St, Des Plaines, Commercial Property, $2,206,900
07/17/07 07CH0018815 Hinsdale Bank & Trust Co vs. Rosewell Dev Llc Na, 6254 N Rockwell St, Chicago, Apartment Building, $2,187,473
07/16/07 07CH0018668 Wells Fargo Bank vs. Chicago H&s Hotel Property Llc Na, 71 E Wacker Dr, Chicago, Commercial Property, $100,785,289
07/24/07 07CH0019407 State Bank Of Countryside vs. Richard Zerth, 12301 S Hobart St, Palos Park, Single Family Residence, $2,006,656
07/24/07 07CH0019408 State Bank Of Countryside vs. Donald E Zerth, 18201 Harper St, Lansing, Single Family Residence, $2,006,656
07/24/07 07CH0019409 State Bank Of Countryside vs. Barbara T Zerth, 14416 S Harrison Ave, Posen, Apartment Building, $2,006,656
07/24/07 07CH0019428 Charter One Bank Na vs. Dharam Vir, 2 E Rand Rd, Mount Prospect, Commercial Property, $2,025,971

Let me know if you are interested in more information on these properties and I will get them to you...or visit my website at http://www.rememberjim.com

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Technorati Tags: foreclosure, chicago, realtor, home, condo, commercial

City Budget Taking Hit From Slowing Housing Market

The slumping housing market is going to hamper Chicago's economy over the next several months, despite a strong job market and increased spending by area businesses.

The local economy is projected to grow at 2.7% in the second half, according to Moody's Economy.com Inc., little changed from the first six months of 2007 as the fallout from mortgage defaults and declining home sales stymie consumer spending.

"We have yet to see the full impact of the housing decline penetrating through the economy," says Geoffrey Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois at Urbana-Champaign. "This doesn't mean we are going down — we are just not going to be growing as rapidly as we have in the past."

For the year, the local economy is expected to expand 2.3%, down from 3.2% in 2006. Economists predict modest growth over the next two years.

Chicago-area home sales and construction have fallen over the last year due to an explosion of defaults on loans to customers with tarnished credit, foreclosures and tighter mortgage lending standards. Combined with more than $3-a-gallon gas prices, consumers are expected to hold back on spending in the second half, economists predict.

"I've been in housing for over 30 years. I've never seen it go this long and this steep at any point in my career," says Tracy Cross, president of Schaumburg-based real estate consultancy Tracy Cross & Associates Inc. "Modest signs of recovery may show itself in 2008."

HOME SALES FALL

Total home sales in Chicago fell 19.8% in June from the year-earlier period, according to the Illinois Assn. of Realtors. Local homebuilding dropped 37% in the second quarter from a year earlier, the worst showing since 1994, figures from Tracy Cross & Associates show.

The housing troubles aren't hurting manufacturers that cater to commercial and industrial customers, says Don McNeeley, president of Chicago Tube & Iron Co. in Romeoville.

Mr. McNeeley is hiring thanks to strong demand. He says orders are up over last year and he plans to add up to 30 workers in the next 12 months, bringing his staff to about 530.

Chicago Tube & Iron built a $22-million plant in Romeoville in 2005 and plans to open two other facilities in Wisconsin and North Carolina.

In addition to manufacturing, there also will be hiring and overall growth in tourism and financial and professional services, says Sophia Koropeckyj of Pennsylvania-based Economy.com.

For some business owners, the question isn't whether they'll add jobs but whether they can find qualified employees.

"The marketplace right now is challenging," says Todd Black, a Naperville-based regional vice-president for Arkansas-based technology consulting firm Technisource Inc.

The firm is recruiting on college campuses and turning to current employees to help find as many as 12 people in the Chicago area this year.

ADDING JOBS

Overall, Chicago-area companies added 44,100 jobs in May, after creating 41,000 the previous month. The unemployment rate in the Chicago area is 5.3% as of June, which is higher than the national average of 4.5%. Still, some local businesses are having a difficult time finding the talent they need to keep up with orders and expansion plans.

Mark O'Malley, president of Chicago-based packaging company Paket Corp., wants to hire 16 mechanics in the next six months after sales rose 17% in the first half of the year. (He wouldn't disclose sales.) But he's wary of bidding on big contracts.

"I'm concerned that we can't fulfill them in a timely fashion," Mr. O'Malley says.

With rising demand from industrial, food, health and beauty products companies, Mr. O'Malley also is spending to invest in new equipment and technologies.

INVESTMENT IS CRITICAL

Business spending, which was tepid during the first part of the year as companies let inventories run down, is propping up the economy in the second half of this year as consumers curtail their purchases.

"Business (investment) is going to be absolutely critical going forward," says the University of Illinois' Mr. Hewings.

Overall consumer spending makes up about two-thirds of economic growth and had been a mainstay for the economy until the end of the first quarter.

But the outlook at retailers like Hoffman Estates' Sears Holdings Corp. isn't good: Sears warned this month that profit will decline in the second half as sales fall.

The outlook has small businesses anxious as well.

Tiffany Bullock, who recently opened her South Loop shoe boutique House of Sole in May, says she's had a slow start and is keeping a close eye on inventory.

"I'm still in a break-even cash-flow situation," Ms. Bullock says. "I'm nervous because I'm the new kid on the block."

By Monée Fields-White
Crain's Chicago Business
July 30, 2007

Technorati Tags: housing, market, chicago, slowing

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Conversion Property Sales Up (but stats are deceiving)

2 major deals drive first-half jump in apartment sales

(Crain’s) — Sales of apartment buildings in the Chicago region soared almost 70% in the first half of the year to $1.45 billion, buoyed by two massive downtown transactions and rent growth that continues to fuel demand from institutional investors.

Sales in the city through June totaled $944.25 million, almost triple the amount from the same period last year, while sales volume in the suburbs fell 4.9% to $502.59 million, according to a new report by CB Richard Ellis Inc.

With another $750 million of deals in the works, sales could climb to $2.5 billion this year, predicts John Jaeger, first vice-president with CB Richard Ellis’ multi-family investment unit in Chicago. That would shatter the all-time high of $1.89 billion reached in 2005.

“I think $2.5 billion is achievable. It’s not a stretch,” Mr. Jaeger says. “You’re seeing mega-deals as well as large and mid-sized transactions.”

Two downtown deals accounted for more than 50% of the volume in the first half of the year: the 2,346-unit Presidential Towers, which was bought for $475 million by Chicago-based Waterton Associates LLC, and the 481-unit Grand Plaza east tower, which a foreign investor bought for $263 million.

Institutional investors such as pension funds and private-equity firms are dominating the landscape, as condominium converters have been almost non-existent.

Through June, not one apartment downtown was bought by a converter, a developer that would convert the building into condos. One such deal was put under contract, though: American Invsco’s agreement to buy a 46-story tower at 200 N. Dearborn St.

The Chicago region has become popular with institutional investors trying to find so-called value-add properties where renovations can lead to big rent increases. That’s because much of the apartment stock here consists of 20- to 30-year-old complexes, says Mr. Jaeger, and because few new apartments have been built in recent years.

“Value-add deals continue to be the buzz as investors are chasing higher yields through a renovation program and resulting rent premiums,” the CB Richard Ellis report says.

One value-add investor concedes that deals have been hard to come by.

“It’s a challenge to successfully win those opportunities in this environment when so much capital is seeking value-add properties,” says Bennett Neuman, a senior vice-president of acquisitions with Chicago-based Laramar Group.

But Mr. Neuman says Laramar, which last bought a property here late last year, is hopeful about some current prospects.

“We’re seeing good increases in market rents, and vacancies are declining,” he says. “In general, we have the wind at our back.”

From Crain's Chicago Business

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