January 3, 2008

By Bill White, Jr.

This morning I came across a quote in an email: 

"We spend January 1 walking through our lives, room by room, drawing up a list of work to be done, cracks to be patched. Maybe this year, to balance the list, we ought to walk through the rooms of our lives... not looking for flaws, but for potential" - Ellen Goodman, Pulitzer Prize-Winning Columnist

As the Real Estate market continues to stabilize, this quote rings true as we hit the ground running in our industry in 2008. While the national media delivered the marketplace a steady barrage of negative spin (despite the likelihood of 2007 being in the books as the fifth best year on record per the National Association of Realtors), there is reason for optimism in 2008. As the end of 2007 market statistics were recently delivered (and will continue to be in the next month), existing home sales rose in November, giving reason to believe the market is stabilizing.

"The National Association of Realtors trade group said total existing-home sales -- including single-family residences, town homes and condos -- rose 0.4 percent, to an annualized rate of 5.00 million. That's an improvement over October's 4.98 million rate and came as a surprise to experts who had been expecting November to show a decline to 4.97 million." (Miller, Chicago Tribune, 1/1/08) "'Near term, existing-home sales should continue to hover in a narrow range, just as they have since September,' said Lawrence Yun, the Realtor group's chief economist. 'That's good news, because it'll be a further sign that the housing market is stabilizing.'" (Miller, Chicago Tribune, 1/1/08)

One major reason for optimism in 2008 is a return to normalcy in the mortgage world. In December of 2007 President Bush signed the Mortgage Cancellation Tax Relief Act. Additionally there are strides being made through FHA reform to make affordable financing available to prospective buyers. Mortgage rates remain low, giving the housing market additional opportunity to improve at a quicker rate. The job gains locally and nationally suggest imminent sales and home price strengthening.

Locally, the Illinois Association of Realtors is forecasting the 2008 expectations based on a newly-developed home price forecasting model developed by economists at the University of Illinois. Combining data used by Multiple Listing Service (MLS) sales (gleaned from 35 participating Illinois MLS boards and associations) this model "took about a year to develop an accurate forecast that uses an augmented distributed lag model as the framework to relate house pricing and the economic business cycle." (IAR Magazine, Ann Londrigan, 1/2008)

Expectations, obviously without the benefit of a crystal ball, anticipate 2008 as steady and healthy.

"People have been sitting on the sidelines due to the press telling everyone that the sky is falling," says Michael Golden, Chicago Realtor Association President. "Since the sky has not fallen, I expect to see some recovery in early 2008."

Chicago and the neighboring Chicagoland area benefits from steady job growth, its ability to attract new businesses & opportunity and the fact it has international appeal - all factors that affect the local housing market.

"Homes in Chicago are still appreciating steadily versus other markets which have seen steep depreciation of home values," says Golden. "Money Magazine named Chicago among the most attractive cities for empty-nesters and seniors to move to... The international appeal of such developments as The Chicago Spire help continue to drive Chicago's housing market. As a contender for the 2016 Olympic bid, Chicago will continue to flourish as a world-class city."

As we enter this new year it is worthwhile to look for the potential that lies ahead.