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.
According to the story, U.S. homes have appreciated by an average of 4 percent every year since World War II. That includes the recent real-estate-slump years, so that 4 percent average is pretty impressive.
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 Milwaukee-based Roundy’s Supermarkets, according to a feature story in the Chicago Sun-Times, is in advanced talks to build a store in the Ravenswood neighborhood. According to the story, Roundy's would join a health club and small retailers on a 6.5-acre plot of land just west of the local Metra station. The neighborhood’s alderman, Gene Schulter, is quoted in the story as saying that developers are also hoping to build residential buildings on the land.
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.
Apple recently announced that it will open a nearly 15,000-square-foot Apple Store along the Clybourn Corridor on the North Side of Chicago. A story in Crain’s Chicago Business says that Apple will pay a top rent of about $700,000 just for the land on which its new store will sit.
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.
Today, at least according to an interesting story in the Chicago Tribune, Boomers want simple, maintenance-free homes. But they absolutely do not want anything that reminds them of how old they are getting.
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.
Nationally, of course, the numbers are no better.
Then comes this piece of news from the USA Today: A record one out of every nine U.S. homes is now vacant.
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.
Mario Greco is ranked as #1 full-service residential real estate agent in Illinois and #26 in the nation. He has sold over $600 million in Chicago real estate since 2002.
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