I like to keep up on any news surrounding the residential real estate industry, something that helps me serve my buyers and sellers better. Lately in my readings I’ve come across quite a few stories focusing on the growing number of people who have chosen to rent instead of buy a condo or single-family home.
This is matched by sellers who have grown desperate enough to take their homes off the market and turn them into rentals. In some of the nation’s most troubled housing markets, places like Orlando and Ft. Lauderdale in Florida, sellers who’ve struggled to move their homes have decided instead to rent them out. The feeling is that this rental income will tide sellers over, especially those who have already purchased new homes, until their local real estate market turns around and they can finally find a buyer.
The question, then, is an obvious one: Should buyers and sellers in Chicago follow suite? Should buyers hold off on purchasing a home and rent until the sluggish housing gmarket rebounds? Should sellers in the Chicago area who are struggling to sell their own condos and single-family homes consider this strategy? My quick answer to both questions: No
The reason is simple: The Chicago housing market is still strong, especially in the hotter neighborhoods surrounding downtown and the North Side. Buyers here can find a nice property, hold on to it for five-plus years and watch it appreciate in value, even if the housing market remains in its slump. Potential buyers who choose instead to rent will be left with nothing after these same five-plus years. Sellers here, if they price their homes reasonably, should be able to move their residences for a fair price, one that includes a solid profit. There’s no reason to try instead to rent out these homes.
Here are the numbers that back me up: The Illinois Association of REALTORS® late month released their most recent housing statistics. According to the numbers, total home sales in Illinois jumped a strong 8.5 percent from March to April. And in Chicago, the median price of a home increased 3.4 percent during the same time. That median price now stands at a healthy $300,000. One year earlier, the median sat at $290,000.
This means that Chicago homeowners are still selling their homes for good prices. And while home sales in the city will take longer now then they did during the housing boom, residences that are priced correctly – and homeowners need to work with a skilled Realtor® to guarantee that they are pricing their properties right – will move.
So if you’re fortunate enough to live in the Chicago area, don’t pound a “For Rent” sign in your front yard and don’t scour the “apartments available” section of the classifieds. Instead, enter the housing market. You live in the perfect part of the country to do this.
The Chicago Tribune last week ran a fascinating feature story about Trump International Hotel & Tower. It focused on how the 92-story building rising in Chicago’s River North neighborhood has managed to open its hotel while construction crews are still completing the condominium floors above it.
What truly fascinated me about the story, though, wasn’t the nuts-and-bolts construction information. No, it was the reminder that Chicago now has its own Trump building.
I don’t know if you remember that the Trump site – on Wabash Avenue along the Chicago River in the trendy River North neighborhood – once was home to the old Chicago Sun-Times building. That building was the very definition of an eyesore. It resembled a floating warehouse or barge, and never quite fit into the area.
Trump International, though, is a marvelous, shimmering skyscraper. It’s a worthy addition to Chicago’s famous skyline. And it’s not the only glamour building in the area.
Construction crews are now building the Mandarin Oriental Tower at 215 N. Michigan Avenue, just a healthy walk from the Trump site. Mandarin is another internationally famous name in the residential real estate business. And Chicago will soon have its own Mandarin project, too.
Then there’s the new Shangri-La hotel being built in the under-construction along the Chicago River at the corner of West Wacker Drive and Clark Street. The Waterview Tower is a big project in its own right, a new luxury condominium tower. The addition of Shangri-La, which is one of the most respected international hotel chains in the world, just adds to the glamour.
Finally, we can’t forget the Chicago Spire being built now along the city’s lakefront west of Navy Pier. This exciting project will be an historic one: The Spire will stand 2,000-feet tall when built, an amazing 150 stories. It will also bring 1,200 condominiums to the area, once construction is complete.
The Spire has attracted international acclaim, thanks in large part to the daring, twisting design created by famed architect Santiago Calatrava. The architect in the past has designed such inspiring buildings as the Olympic Sports Complex in Athens, Greece; the Opera House in Valencia, Spain; and the Milwaukee Art Museum in Milwaukee. The Spire is another example of his innovative design talents. These are exciting times for real estate in Chicago. We have Trump, Mandarin and Shangri-La all in various phases of completion. How much more star power can you ask for?
I know how tempting it is: You can log onto Web sites such as www.Zillow.com or www.Cyberhomes.com, punch in your home’s address and instantly get an estimated value of how much your residence is worth.
Problem is, these home-valuation sites, as popular as they may be, might not be entirely accurate.
The Scream PictureA report released last week by the Associated Press says that sites such as Zillow.com often come up with value estimates that are divorced from realty. The problem is that these sites rely on computer-generated models to estimate the value of homes. That’s usually good. But in many instances, the computer models don’t have enough information to make the right valuation.
For instance, the models don’t account for the condition of homes. They don’t account for any improvements their owners might have made. Maybe your home has exquisite landscaping or a newly finished basement. Doesn’t matter. The home-valuation sites won’t factor those improvements into their calculations. This means that the home-value price you receive when you type in your address might be wildly flawed.
The best way to accurately determine the value of your house is to hire a skilled real estate agent who knows the ins and outs of your market. Agents can factor in the intangibles: Maybe your house sits on a desirable corner lot. Maybe its style is one of the most sought-after in your neighborhood. Maybe those El tracks down the block will actually lower the price of your condo.
See? There are an endless number of variables for homeowners to consider, variables that the computers at Zillow and CyberHomes won’t necessarily catch.
The home-valuation sites are fine for laughs, or to get a rough – sometimes very rough – estimate of what your home might be worth. But for serious pricing decisions, stick with a human being.
There was no way to avoid the bad housing and financial news last week, at least not if you owned a radio. Every time I flipped on a radio news or talk show, I stumbled across one of two stories: The first dealt with the financial troubles of Freddie Mac and Fannie Mae, the two largest mortgage providers in the country. The second focused on the spectacular failure of IndyMac Bank, the 32nd bank failure since 2000.
Real Estate RadioIt’s no wonder that members of the home-buying public are hesitant to jump back into the residential market. It’s not the media’s fault, of course, that the housing industry is suffering. But it’s human nature to let the blanket coverage of bank failures, mortgage crises and falling housing prices sour both buyers and sellers.
The problem is – and I preach this on a near-daily basis – is that buyers and sellers in Chicago still enjoy a healthy and strong residential market. It’s just hard for us to realize this with the constant barrage of negative housing-industry stories. Yes, housing prices in Chicago aren’t rising as quickly as they did during the 2001-2006 residential boom. But that boom featured unrealistic housing appreciation.
There was no way for any market, in any part of the country, to continue that kind of price growth. But prices here have held steady and have even risen in some of the city’s most desirable neighborhoods. Homeowners here should still view their residences as solid investments. So don’t let all the national gloom-and-doom reporting scare you away from the Chicago market. The housing business here is healthy.
A new report by the American Bankers Association says that the number of borrowers who have fallen more than 30 days behind on their home equity lines of credit is now at the highest level in 11 years.
Here’s more proof that we didn’t need that the economy today is a rough one. With the prices of everything from food to gasoline skyrocketing, it’s getting more difficult for homeowners to pay their bills.
A home equity line of credit is a valuable tool. Operating much like credit cards, these products, often referred to as HELOCs, are open-ended loans that borrowers pay as revolving debt. Unlike credit cards, though, HELOCs use homeowners’ residences as collateral. As with home-equity loans, the amount of money homeowners can borrow depends on the amount of equity they’ve built up in their homes.
Homeowners use these loans to finance trips, pay for renovations or pay off other debts. Borrowers, though, do need to exercise some caution. Several studies have shown that borrowers who have already run up their credit cards to high levels are likely to do the same with their HELOCs. This is bad news considering that many borrowers take out HELOCs with the intent of using the funds from them to pay off their credit cards. If these borrowers then run up equally high monthly payments on their HELOCs, they haven’t improved their financial situation.
The American Bankers Association study shows that borrowers have to be just as careful with their HELOCs as they are with their credit cards. U.S. residents have a distressing propensity to ring up high levels of credit-card debt. Doing the same with HELOCs can cost you your home.
Mario Greco is the #2 full-service residential real estate agent in Chicago. He has sold over $575 million in Chicago real estate since 2002, and leads a group of 8 agents and 9 office personnel.
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