It’s easy to be down on the housing market these days. After all, more than 16 million U.S. homeowners now owe more on their mortgage loans than what their house is worth. In other words, they’re underwater. But, as a recent Associated Press story shows, owning a house is still a good investment, despite the struggles we’ve seen recently in the housing market.
The Associated Press story offers even more evidence of the wisdom of investing in residential real estate. The story mentions that homes act as a buffer against inflation. It also points out that they provide tremendous tax benefits for owners.
Finally, the story cites one more figure that shows what a strong investment residential real estate is: When homeowners make a down payment of 10 percent on their residence, they’ll receive an amazing 1,000 percent return if the price of their home doubles.
The story also points out that homeowners must usually own their residence for a long enough time to ensure that they’ll enjoy all of these benefits. The author of the story says that homeowners who own their residence for at least 10 years will almost always see their homes significantly appreciate in value. That’s because they’ve owned their condominiums and single-family homes long enough to outlast any downturns in the housing market.
Of course, some housing markets are better than others when it comes to appreciation. Those buyers fortunate enough to live in Chicago have a great opportunity to make money on their housing investment. This is especially true for buyers who purchase in such traditionally strong city neighborhoods as Roscoe Village, Lakeview, Ravenswood, Lincoln Park and Lincoln Square. Housing in these neighborhoods holds its value, even during down markets.
So the next time you read about how terribly the housing market is struggling, remember to take the long-term view. If you hold onto your Chicago home for a long enough time the odds are great that your residence’s value will rise significantly.
A new supermarket, in addition to townhouses and condominium units, may soon begin rising in Chicago’s Ravenswood neighborhood if a proposed development eventually wins approval.
Ravenswood is already a sought-after neighborhood for people looking to buy single-family homes, condos or townhouses on the North Side of Chicago. The neighborhood is located close to public transportation, boasts several restaurants and retail options and features a diverse housing stock. A new supermarket, not to mention the new residential units now being proposed for the neighborhood, would only boost this popularity.
The plans for the residential portion of the project are sketchy. But Schulter in the Sun-Times story says that developers would like an 11-story condominium building plus townhouses. Schulter, though, does not support such a large residential influx, especially considering the struggling housing market now sweeping across Chicago.
Aldermen usually get their way when it comes to projects that require a zoning change, so the odds are good that the housing portion of the project will be reduced from the 11-story condo proposal. But regardless of how many housing units come with the project, a new supermarket would be a welcome addition to the Ravenswood neighborhood.
A strong retail mix is a vital component to the success of the top North Side neighborhoods. Many of the residents in neighborhoods such as Ravenswood, Lincoln Park, Lincoln Square and Streeterville prefer to leave their cars parked as much as possible. They instead like to walk to their retailers, including their grocers. Strong grocery stores, then, are an important part of the retail mix that adds to the desirability of neighborhoods such as Ravenswood.
Roundy’s, according to news reports, has long sought to open a location in Chicago. Ravenswood, with its growing population, would be a good spot for the chain to start its expansion into the city.
I’ve always boasted to outsiders that Chicago is a world-class city. One of the reasons for this is that the city has a history of attracting some of the country’s top retailers to its business strips. Whatever you need to buy, the odds are great that you’ll be able to find it in Chicago.
The city recently nabbed its latest big-name retailer: computer and electronics giant Apple.
This will mark the second Apple store in the Chicago area. The company in 2003 opened a 25,000-square-foot outlet at 679 N. Michigan Ave.
It’s little surprise that Apple chose this location. Bounded by North and Clybourn avenues and Halsted Street, the Clybourn Corridor shopping district has become a go-to strip for shoppers from Lincoln Park, Roscoe Village, North Center, Lakeview and much of the North Side. Apple, apparently, is so confident in this area that it chose it over the greatly hyped Block 37 development along downtown State Street.
The Apple Store will be just one more retailer adding to the wealth of shopping options for the residents of Chicago’s top North Side neighborhoods. This mix of retailers is just one reason why I still point to housing in neighborhoods such as those listed above as good investments.
Yes, the housing market in Chicago is still slumping. And, yes, housing prices are still falling. But these neighborhoods are strong. And once the slump does end, housing prices here should recover nicely.
Buyers want to live in these neighborhoods. As more businesses move into them, they only add to the strength of these already popular neighborhoods. So if you’re thinking of purchasing a residence in one of these top areas – whether you’re considering a condominium or single-family home – meet with your REALTOR® to go over exactly what you want in a residence.
This is a great time to buy. And the neighborhoods noted above - among others - are great places to invest in residential real estate.
The Baby Boomers represent the largest generation in the United States. It’s little surprise, then, that homebuilders are especially interested in what Boomers want when it comes to housing.
According to the U.S. Census Bureau, there are about 76 million Baby Boomers in the United States, all born between the years 1946 and 1964.
Even though these Boomers are getting older – even they can’t stop the aging process! -- they’re not necessarily happy about this fact. So they don’t want their homes to scream out anything that suggests they were built for aging residents.
The Tribune story quotes one Chicago-area architect and builder who says that his firm doesn't include anything in Boomer-targeted homes that even suggests handicapped accessibility. This, of course, means no grab bars in the bathrooms, and no hallways and doorways obviously built for wheelchair access.
However, Boomers aren’t totally oblivious to their advancing age. According to research by the National Association of Home Builders, Boomers do prefer single-level homes. They also want homes that require as little maintenance as possible, and are especially focused on quality.
These are qualities that you’d find in homes built for aging residents. But they’re also qualities that you’d hope to find in any well-built home today.
Many of Chicago’s top neighborhoods, places like Lincoln Park, Lakeview, River North, Streeterville and others are perfect for Boomers. There are plenty of low-maintenance condominiums in these neighborhoods. And Boomers will be living next to a wealth of entertainment, dining and shopping options if they choose any of these neighborhoods.
The housing slump, of course, has slowed the construction of new homes in Chicago to less than a trickle. But once the industry begins its inevitable recovery, builders will be flocking to put up homes that appeal to Baby Boomers. The Boomers have already had an incredible impact on the housing industry. Once the home-selling business begins its rebound, you can bet that Boomers again will change the way that new homes are built.
The numbers right now aren’t good when it comes to the housing industry. Just look at the local numbers: Home sales in the city of Chicago came in at 20,589 in 2008, down a significant 25.1 percent from one year earlier. The median sales price of homes in Chicago stood at $290,000 last year, a smaller drop of 0.5 percent from 2007.
A large number of vacant homes is a sure sign that the housing industry is still in the midst of a serious slump. Homebuilders built too many residences during the housing boom. Now there are simply too many homes available. With more people choosing to rent, and others no longer qualifying for mortgage loans, there aren't enough buyers to fill in all these empty residences.
As the USA Today story points out, the number of empty houses is a serious problem. By having so much housing inventory still on the market, there is no incentive for buyers to pay more for homes. After all, if one seller is asking too much, there's always another trying to unload an empty home at a less expensive price.
At the same time, empty houses and condominium units cause problems for communities. Homes that remain empty for months tend to turn into eyesores. They also seem to attract trouble.
According to the USA Today story, the U.S. Census Bureau is reporting that more than 14 million housing units – a figure that doesn’t count seasonal or vacation homes -- are now vacant. Overall, the combined housing vacancy rate is almost 15 percent, a figure that is higher than the 11 percent vacancy rate the country saw in the recession of 1991 and the 9.4 percent rate it suffered through during the 1984 recession.
The USA Today story also reports that 9 percent of homes built since 2000 are vacant, additional proof that homebuilders overdid it during the housing boom.
There might be some help coming from the federal government. The economic stimulus bill now being debated by Congress contains $2 billion set aside to help communities buy and fix foreclosed and vacant properties.
In the meantime, I advise clients trying to sell empty homes to consider hiring a stager who can fill that home with enough furniture and artwork to make it look warm and inviting. The problem with trying to sell an empty home is that it often looks exactly the opposite, cold and uninviting.
Was it the opposition of local residents? Was it the struggling economy? Or was it the glut of unsold condominium units already on the market?
Whatever the reason, a controversial condominium tower proposed for a lot next to a historic Michigan Avenue church is now dead.
In a story reported by Crain’s Chicago Business, the Fourth Presbyterian Church of Chicago has given up on its plans to let a developer build a condo tower next to their church building, which has an official address of 126 E. Chestnut St., better known to passersby as the busy corner of Chestnut Street and Michigan Avenue.
It’s been a long road for the proposed 64-story condo tower. The first plans for it were created nearly six years ago, according to the Crain’s story. Many vocal neighborhood residents were never in favor of the project. Burton Natarus, then the alderman of the ward in which the project would stand, also opposed the project.
In Chicago, when the local alderman opposes a project, it usually dies a quick death.
The ward’s new alderman, Brendan Reilly, has also opposed the plan, something that certainly hastened the decision of church officials to declare the project dead.
Of course, the city’s sluggish condo market probably played a role, too. There are too many unsold condos already clogging the market. The city, at this point and in this economy, doesn’t need another condo tower.
The fate of the Fourth Presbyterian Church’s project is a good example of how significantly the city’s condo market has changed. During the recent housing boom, condos were selling at an incredible rate for high prices. Developers were eager to build new towers or convert existing apartment buildings into condos.
This has all changed now. Today, it’s a real challenge to sell a condo in the city. Owners can still do it, but they must set the right price. That’s why it’s so important to work with a licensed and skilled REALTOR®. A REALTOR® will help owners set the perfect price for their units, one that attracts fair offers and keeps a unit from sitting on the market for months.
Economists, my fellow REALTORS® and home sellers are all asking the same question: Has the housing industry finally reached bottom?
It’s a good question. Unfortunately, no one knows. We all hope that housing prices are finally ready to start climbing again. And we all certainly hope that sales will soon pick up. But for now, at least, sellers are still struggling to move their homes.
But while this isn’t wonderful news for sellers, it is great news for Chicago buyers. In today’s market, buyers interested in even the top city neighborhoods can find great value.
At the same time, the median housing price for Chicago in December came in at $235,000. That’s down a significant 18.2 percent from the median price of $287,450 in December of 2007.
For buyers, this is good news. Most analysts agree that sellers are actively lowering their asking prices. This means that buyers can purchase more home in the city for fewer dollars than they would have spent just six months ago. Sellers are also willing to negotiate, and not just on price. They’re willing to make reasonable repairs. They’re willing to work with buyers on setting a closing date that works for everyone.
The market definitely favors buyers. But don’t think this will last forever. It wasn’t that long ago when the Chicago market heavily favored sellers. Remember the days when sellers enjoyed multiple offers? Remember when they could routinely demand full-price offers? Real estate is a cyclical business. Chicago will again be a seller’s market. When? That’s something I can’t predict. But I can tell you that there’s never been a better time to buy in the city than now.
The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today. It remains within a target range of 0.000-0.250 percent.
In its press release, the FOMC reiterated most of the key points from its December 2008 statement, including:
The U.S. employment outlook continues to deteriorate
Consumers and businesses continue to cut spending
The housing sector is still showing weakness
In addition, the FOMC addressed the "extremely tight" credit conditions for U.S. households and business, even as it said some financial markets are showing signs of improvement.
To the Fed, the latter is a precursor for the former. For Americans needing new mortgages or other forms of credit, it may mean that getting approved gets easier sometime late this year.
Most importantly, the Fed's press release again mentioned the policy-setting group's intention to "employ all available tools" to promote economic growth. This includes the open-market purchasing of mortgage-backed debt that has helped fuel the current Refi Boom. The Fed indicated a willingness to extend the program beyond the initial $500 billion, if necessary.
For each of the Fed's interventions, though, there is a trade-off.
Buying securities costs money and the Fed -- literally -- comes up with the cash by printing it. The extra supplies devalue the U.S. dollar which, if left unchecked, can cause the Fed's plan to backfire in the form of runaway money supply-led inflation. The Fed is aware of this risk and is pledged to monitoring it closely.
Overall, mortgage rates worsened today after the Fed's statement.
Source
Parsing the Fed Statement
The Wall Street Journal Online
January 28, 2009
http://online.wsj.com/internal/mdc/info-fedparse0928.html
When a homeowner sells his home and decides to buy a new one, there are 3 basic options for the residence -- sell it, keep it, or rent it.
Unfortunately, no matter which path they choose, move-up homebuyers in need of a new conforming mortgage will find qualifying for a home loan to be more difficult this season than in the past.
Mortgage guidelines are dramatically tighter for people "carrying two mortgages".
Among the changes this spring's buyers face:
Selling the primary residence
If you plan to close on your new home prior to the closing of your existing home -- even if it's only by a day -- both payments must be listed as monthly debts on your mortgage application. This will disqualify the majority of homebuyers.
Converting your residence to a second homeIf your current home has less than 30 percent equity in it, your mortgage application for the new home will not be approved unless you can show 6 months worth of mortgage payments + taxes + insurance in reserves for the current home and new home combined.
Converting your residence to an investment propertyIf your current home has less than 30 percent equity in it, any rental income derived from a tenant is disallowed on your mortgage application for the new home. You must still count the mortgage payment + taxes + insurance as a monthly debt.
In other words, being a move-up buyer isn't as simple as it used to be. New lending rules make buying a new home an exercise in timing and financial planning. And the rules are expected to get tougher, too.
Therefore, if you expect to be a move-up buyer in the next 12 months, consider moving up your timeframe or -- at least -- planning ahead for it.
Understanding the new mortgage landscape and how they can influence your upcoming purchase may be the difference between getting approved for a home loan, and getting turned down.
If you’re debating whether it’s time to become a homeowner, you should know one thing: Housing is currently a great value in the city of Chicago.
Housing prices are dipping across the city, including in some of its top neighborhoods. This means that buyers today can buy more home for their dollars than they’ve been able to for years.
These numbers aren’t unusual. The median sale price for a home across the nation stood at $181,300 in November of last year. That’s a drop of 13.2 percent from the median price of $208,000 one year prior.
At the same time, homes aren’t selling as quickly. Home sales in the city of Chicago for November of 2008 were down 41.3 percent to 1,057 sales. In the same month one year earlier, home sales came in at 1,801. This slowdown has left a glut of homes on the market, meaning that buyers not only are paying less for homes in Chicago today, but they have more properties from which to choose.
Don’t expect, though, to steal a home. Sellers may be eager to move their properties, but they still won’t react well to an offer that’s insultingly low. That’s where the value of an experienced REALTOR® comes in. A REALTOR® can help you make a good, solid offer, one that is fair for the property on which you’re bidding.
It’s difficult to get excited about the residential housing market with all the gloom and doom you see on the news. But take a look at the prices out there and you’ll see the truth: If you’re in the market to buy a home, this is a great time to act.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
Was it the opposition of local residents? Was it the struggling economy? Or was it the glut of unsold condominium units already on the market?
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