It Ain't All Big Hair and Cadillacs

Chicago - that t'totallin' town! According to the Chicagoist, the only cities in the US that outdrink us are Austin, San Francisco, Providence and Milwaukee. Ok - Milwaukee is not a huge surprise considering you could take one step in Brewer's Country and essentially fall into a bar.

Providence? PROVIDENCE? I guess if I lived there I'd drink too - heavily.

Austin and San Francisco are interesting. I'd take San Francisco as more of a - er - natural, kinda herbal city. Austin? College town - 'nuf said.

According to the article, "62 percent of Chicagoans had had at least one drink in the last month, 5.4 percent were regular drinkers, and 20.4 percent had consumed five or more drinks on one occasion."

Geesh - PEOPLE! What are you waiting for? A six pack includes 6 individual cans - hence the name - SIX PACK! Why would you stop at 5?

Drink up Chitownians! *hick*!

I admit my mind works a little differently than most - I like to write and talk about things that are current - so, in light of the past week’s recent events, I decided that I wanted to correlate last week’s LA earthquake, the current credit crunch and my recent trips to Costco into a meaningful discussion regarding real estate. Surprisingly, there is a high correlation.

I have a habit of sharing my addictions as many of you well know - caffiene - and yes, Costco - sad to say, I often find myself “dining-out” with the combo pizza, occasionally the chicken caesar salad, 2 hotdogs (for my dogs) and let’s face it - the 2 drinks are essentially free. Critical in today’s tough economic times.

You ask - how is this even remotely relevant? Well - after hearing the news regarding the quake, and the follow-up public service announcements locally on the radio questioning what my emergency plan is in the event of an actual emergency - have I made the necessary arrangements for 72 hours of provisions - bottled water, food, batteries etc?

I immediately thought - I need to go to Costco.

Prior to my almost twice weekly adventure - mind you there are 2 of us plus 2 dogs - I checked to see what I needed - a quick scan of the pantry revealed 36 boxes of Mac & Cheese, 24 rolls for toilet paper, 72 bottles of water, two 128 fluid oz bottles of Neutrogena handwash - fridge check - 4 gallons of milk, 36 eggs, 128 oz of mayo and 48 slices of Timberlake muenster cheese. Hmm - no batteries.

Off to Costco.

Being a Sagitarius, I am by nature an optimist, however, in light of my chosen profession, I am becoming intimately familiar with actual emergencies - the professional kind. I’ve negotiated some tough deals, fended off irrate clients - but the emergencies I am speaking of are realtor’s-life threatening. I Twittered briefly today with fellow “hound” Tom Vanderwell regarding Meredith Whitney’s interview on CNNMoney.com regarding the nature of the credit market. She has a fairly solid track record of getting her predictions right. I also recently read Crain’s Chicago Business and its article regarding the latest market statistics in Chicago - their real estate category clearly highlighted how the subprime mortgage fiasco directly affected the Chicago area.

After reading the Crain’s spread, I was unnerved regarding the following statistics:

1. Half of Illinois residents with a subprime mortgage have made a late payment
2. Nearly 80% of the 144,341 subprime mortgages in Illinois as of December, 2007 were in the six county area. Cook County represents 80,800 of the 144,341 of subprime mortgages held in Illinois or 56%.

Statistically, of the subprime mortgages held:

1. 59.6% are current on their payments
2. 10.2% are 30-59 days past due
3. 5.4% are 60-89 days past due
4. 8.0% are 90+ days past due
5. 12% are in foreclosure
6. 4.8% are REO or Real Estate Owned - they have been foreclosed and are currently bank owned.

75% of subprime mortgages issued in Illinois are adjustable rate mortgages. In Chicago and surrounding suburbs, 80% of these loans are scheduled to reset in the next two years.

These latest stats in Chicago, combined with Meredith’s comments regarding the still to continue contraction of capital available for lending due to the downgrading of mortgage backed securities, indicates to me that whatever buyers that are currently active in the market will continue to be pressed with fewer lending options. Yes - lenders are lending - but to a far fewer number of buyers.

Needless to say, the deals aren’t coming together quite as briskly - I’ve put off buying the “wants” versus the “needs” - and even though the 36 boxes of Mac & Cheese sounds like alot, I’m finding it complements the rotisserie chicken quite well. There are some that are saying that some markets are hitting bottom. Quite frankly, at the risk of sounding alarmist - I sense we are not yet into the thick of it.

Granted the recent Federal Housing Bill 3221is intended to assist in providing the necessary capital to keep the mortgage market afloat, however, until lenders work through the write-downs of the assets, i.e. the houses in various stages of foreclosure, I doubt the new Federal housing bill will truly free up money for buyers in the short term. No matter how well staged or well priced a property is, I don’t think it’s going to get any easier to sell. Dropping the seller assisted downpayments will hurt.

This begs the question - while counter intuitive to a market of historically low interest rates, will seller financing become an attractive way to sell real estate? I think for the sellers that still have equity and are in need of selling, it might be worth discussing. If the Chicago statistics are any indication, I’d say we’re in this pickle for at least a good 2 more years.

Needless to say - I sense that my life is going to get a bit more Mac & Cheesier. I’ve been praying alot harder too - I’ve been asking the Man upstairs to please send me cash buyers.

Ok - I guess I’m going to make another trip to Costco. May as well pick up some more Mac & Cheese and candles - for novenas. Does Costco sell plastic injection molders? I thought I’d pick up one of those and crank out a few Saint Joseph statues. I hear he’s been working overtime.

It was a beautiful day today so I thought I would spend some time on the construction site at The Rotunda - here is my latest video diary:

According to Crain's Market Facts 2008 report, here is the latest and greatest stats regarding Chicago. Some interesting factoids to nibble on:

By 2013, Cook County is the only county in the Chicagoland metro area to have a projected decrease in population:

2000: 5,376,741
2008: 5,392,784
2013: 5,378,813

How old is the median Chicagoan? In 2008, 34.8 years old - increasing 4% since 2000. We must like it here - I guess we're just growing old together.

Highest population growth in Chicago:

1. Near West Side (west of Halsted and south of Van Buren) from 2000 to 2008 = 71.65% increase
2. Near North Side (Halsted south of Division) from 2000 to 2008 = 65.54% increase
3. Near South Side (South of Cermak and Michigan Avenue) from 2000 to 2008 = 28.22% increase.

Highest population decrease in Chicago:

1. Near West Side - because the area may have more than one census tract, the area is also decreasing. From 2000 to 2008 = 5.7% decline Basically, they don't know if they're coming or going.
2. Washington Park - the projected site of the Olympic Village. From 2000 to 2008 = 4.1% decline.
3. Hyde Park - From 2000 to 2008 = 3.6% decline.

While this may not be a shock to most of us who live in this fair city, the cost of living in Chicago is higher than the national average, however, it is still cheaper to live in Chitown than in New York or Los Angeles - um - duh.

An interesting revelation? Where Chicagoans fall in terms of what we earn - we ranked third, not behind New York and Los Angeles, but New York(1) at $49,789 and Houston(2) at $43,174. Chicagoan's per-capita personal income came in at $41,591, y'all.

When it comes to where we spend it? Windy City residents pay a higher percentage of their mulah on entertainment, healthcare and charitable contributions. When you need to stop for cash for that dinner out? Chase has the most bank branches and ATMs in Chicago - second is Bank of America.

Puff out your chests fellow citizens on the lake - ALAS! Chicago as a city ranks third in gross domestic product in the US. The city of Chicago's economy ranks between The Netherlands and Turkey relative to global GDP ranking - our economy is larger than Turkey and Belgium! Drink all the beer you want Belgium, we're still kickin' yer ass.

When it comes to healthcare, just over 1 in 4 people in Chicago are without health care coverage. A pathetic statistic that I truly hope gets addressed under our next administration. On the bright side, if you die in Chicago - regardless of whether or not you're a male or female, it's most likely due to heart disease.

We're darn generous to those who wait on us while we dine and imbibe - Chicagoan's tip an average of 19.1% - the national average is 19%. We eat out an average of 3.2 meal per week, probably while reading "A New Earth Awakening to Your Life's Purpose" - the number one best seller in Chitown.

While all those facts are indeed facinating, let's get to the stuff that really matters, shall we?

REAL ESTATE!

The number of homes sold in the Chicago area in 2007 fell 20.6% on average - 20.1% in Cook County. The median home price - not necessarily the best indictor, remained flat in 2007. Median price in Cook County in 2006 was $255,000 increasing to $266,000 in 2007.

The median monthly cost of ownership without a mortgage in Chicago = $559 With a mortgage is $1,840. Slightly higher here in Chicago without a mortgage than Los Angeles and less than New York and LA with a mortgage.

How did the subprime mortgage fiasco affect Chicagoans?

1. Half of Illinois residents with a subprime mortgage have made a late payment
2. Nearly 80% of the 144,341 subprime mortgages in Illinois as of December, 2007 were in the six county area. Cook County represents 80,800 of the 144,341 of subprime mortgages held in Illinois or 56%.

Statistically, of the subprime mortgages held:

1. 59.6% are current on their payments
2. 10.2% are 30-59 days past due
3. 5.4% are 60-89 days past due
4. 8.0% are 90+ days past due
5. 12% are in foreclosure
6. 4.8% are REO or Real Estate Owned - they have been foreclosed and are currently bank owned.

These statistics alone clearly show that we are far from out of the housing mess in Chicagoland. 75% of subprime mortgages issued in Illinois are adjustable rate mortgages. In Chicago and surrounding suburbs, 80% of these loans are scheduled to reset in the next two years. If you have an adjustable rate mortgage, be sure to find out if you are eligible for the new FHA government backed refinance program.

While there are a number of other statistics worth mentioning, there is one that I found that might just cut both ways. Chicagoan's divorce rate is less than 50% and below the national average.

While that statistic sounds hopeful, I can't help but think that we simply prefer to live in misery? Surely I jest - um - hello?

So - how many outstanding parking tickets do you have? Well, if it's more than 2, pay up or get the boot! The Chicago SunTimes this morning had it all in black and white.

In order to close the widening $400M budget gap in Chicago, Mayor Daley's rather unpopular plan is to subject any person with more than two outstanding parking tickets or two redlight violations the distinct pleasure of having their car incapacitated with the device called the Denver Boot. History has shown that the plan has actually brought in the dough. In 2002, the city reduced the penalty from 5violations to 3 which generated $8.2M smackeroos - that ain't chump change.

City Alderman aren't finding the plan bootylicious - many are concerned that any additional financial burden on their constituents will only worsen the financial strains due to the current economic downturn.


Speaking from personal experience, getting the boot ain't no Rocky Mountain High. It is FAR cheaper to pay the tickets. If you dare to play Russian Roulette with the City's Department of Revenue, just know - according to the SunTimes article, last year, Chicago booted 58,886 vehicles. The booting rate is up slightly this year -- to 29,719 through June 30 -- thanks to vans equipped with automated license plate readers. They stalk the streets at all hours.

Come to think of it - make sure you have your new city sticker too. Um - when I got the boot, I didn't have the new sticker either - again - fun? Not so much.

If the housing turmoil isn't enough, caffiene addicts have more to worry about - the closing of Starbucks locations. While the closings aren't necessarily unexpected, collapsing coffee coffers may be due to Starbucks departure from their discplined approach regarding the selection of locations. Starbucks was considered the master in real estate selection, grinding over demographics, traffic patterns, VPH statistics etc. Growth expectations may have gotten the best of them.

I guess we learn time and time again - stick to the fundamentals - seems they work.

From a realtor's perspective, the advent of a new Starbucks location was a telltale sign of a "hot spot" or an up and coming area - not so much anymore. Many a buyer has told me, "If I can't walk to a Starbucks, I ain't buyin' it." How's that for loyalty?

I am a self-confessed caffiene addict - I like it simple: a venti black-eye. When hearing of the 600 store closures, I was rangled - concerned that my daily routine would be seriously altered - however, I was happy to find out that Chicago and its suburbs dodge the major bullet, Chicago only 5 locales, collectively - Chicago and suburbs 24 locales.

Now - I feel for those now afflicted - let's just say I'm glad I'm not selling real estate in Florida. It's hard enough living in a state where property values are dropping 30%+ in value. Take the Starbucks location away - it may as well be worthless.

Walk Score just ranked Chicago the 4th most walkable city in the US of A. San Fran took numero uno, The Big Apple #2, and Bean Town #3.

The most walkable neighborhoods in Chitown you ask? Why they're The Loop, Near North Side and beautiful Lincoln Park. For those who like to do a walk-about in the city of big shoulders, check out City Walks: Chicago: 50 Adventures On Foot The deck is also available at Climate Home - 2462 N. Clark, 1971 N. Fremont or 1702 N. Damen.

Even for the born and bred Chicagoan, this deck of cards has recommended city walks in 50 neighborhoods throughout the city. I suggest them for dog walkers too.



The cards provide the route in a map format - the flip-side provides points of interest and historical information regarding the area - honestly, one of the best investments for learning more about the Windy City

With the significant downturn in the real estate market, where will the real opportunities be?

From a seller of real estate - one who has the equity but needs to sell, perhaps the way to sell is to provide seller financing. The concept of a land contract has not been common during the times of easy money, however, it appears to be a new way for sellers to actually sell their properties. There are still qualified buyers capable of buying properties, but in light of the current credit crunch, they simply may be unable to get a mortgage.

In terms of private equity, there may be a growing market for private mortgages - not seller financing, but perhaps pools of private equity that may be able to bridge the gap.

My gut tells me that mortgage rates are going to climb and probably quickly in the near future, further squeezing out buyers - perhaps the worst is truly yet to come?

Where's the good news regarding real estate? Here's some counterpoints to why you SHOULD buy and buy with confidence in Chitown - the Windy City - The City of Big Shoulders - ok, you get the picture. I just wanted to pass along the comments my colleague provided regarding why Chicago is a good bet when it comes to buying real estate:

If this city would get some New York attitude, it sure would help the situation.. If people can not make it here, they are losers.... see Wrigley Field... Chicago has no equal .. we are like the 20th largest economy.. IN THE WORLD. this city.. wake up to the gold at your feet.. the cry baby , un informed consumer needs shut up and buck up.... so pop this in their pipe to smoke..

from Wikipedia.... for memorization

Chicago has the third largest gross metropolitan product in the nation — approximately $ 442 billion according to 2007 estimates.[32] The city has also been rated as having the most balanced economy in the United States, due to its high level of diversification.[33] Chicago was named the fourth most important business center in the world in the MasterCard Worldwide Centers of Commerce Index.[34] Additionally, the Chicago metropolitan area recorded the greatest number of new or expanded corporate facilities in the United States for six of the past seven years.[35] In 2006, Chicago placed 10th on the UBS list of the world's richest cities.[36]

Chicago is a major financial center with the second largest central business district in the U.S. The city is the headquarters of the Federal Reserve Bank of Chicago (the Seventh District of the Federal Reserve). The city is also home to three major financial and futures exchanges , including the Chicago Stock Exchange , the Chicago Board Options Exchange (CBOE), and the Chicago Mercantile Exchange (the "Merc"), which includes the former Chicago Board of Trade (CBOT). Perhaps due to the influence of the Chicago school of economics , the city also has markets trading unusual contracts such as emissions (on the Chicago Climate Exchange ) and equity style indices (on the US Futures Exchange ).

In addition to the exchanges, Chicago and the surrounding areas house many major brokerage firms and insurance companies, such as Allstate and Zurich North America. The city and its surrounding metropolitan area are home to the second largest labor pool in the United States with approximately 4.25 million workers.[37] Chicago has the largest high-technology and information-technology industry employment in the United States.[38]

Manufacturing, printing , publishing , and food processing also play major roles in the city's economy. Several medical products and services companies are headquartered in the Chicago area, including Baxter International , Abbott Laboratories , and the Healthcare Financial Services division of General Electric . Moreover, the construction of the Illinois and Michigan Canal , which helped move goods from the Great Lakes south on the Mississippi River , and of the railroads in the 19th century made the city a major transportation center in the United States. In the 1840s, Chicago became a major grain port, and in the 1850s and 1860s Chicago's pork and beef industry expanded. As the major meat companies grew in Chicago many, such as Armour and Company , created global enterprises. Though the meatpacking industry currently plays a lesser role in the city's economy,Chicago continues to be a major transportation and distribution center. Early in the 20th Century, Chicago was part of the automobile revolution, hosting the brass era car builder Bugmobile , which was founded there in 1907.[39]

Chicago is also a major convention destination. The city's main convention center is McCormick Place . With its four interconnected buildings, it is the third largest convention center in the world. Chicago also ranks third in the U.S. (behind Las Vegas and Orlando ) in number of conventions hosted annually.[40] In addition, Chicago is home to eleven Fortune 500 companies, while the metropolitan area hosts an additional 21 Fortune 500 companies.[41] The state of Illinois is home to 66 Fortune 1000 companies.[42] Chicago also hosts 12 Fortune Global 500 companies and 17 Financial Times 500 companies. The city claims one Dow 30 company as well as aerospace giant Boeing , which moved its headquarters from Seattle to the Chicago Loop in 2001.

Saw this article on the Illinoic Association of Realtors website and I thought it might be of interest.

Turning the dream of homeownership into a reality can be both exciting and daunting at the same time. Many renters don’t realize they have the means to purchase their own home or the benefits of homeownership as compared to renting. Whether it’s building equity or getting tax advantages, owning a home can be a great investment for your future. For the majority of Americans, their home is their largest financial asset and a major player in their investment portfolio.

Building financial equity is one of the greatest advantages of owning a home. According to the National Association of REALTORS® (NAR), during the past three decades, home values have increased an average of 6.6 percent per year. If you compare this rate to that of stocks or bonds, you are investing in something with a much steadier rate of return.

NAR estimates that on average, the value of a home nearly doubles every ten years. As a homeowner you earn appreciation on your purchase price, something you cannot earn as a renter. In Illinois, the median home price has increased more than $40,000 since 2002. This value, paired with low interest rates and plentiful inventory makes now the perfect time to transition from renter to owner.

In addition to equity, homeownership has tax advantages that can help you save a great deal of money, something that renters cannot enjoy. According to the Federal Reserve Survey of Consumer Finances, the average homeowner today has 36 times the net worth of the average renter. By taking advantage of federal income tax deductions on property taxes and mortgage interest, you can save thousands annually.

Here are some other advantages to buying a home:

Control over your property
Freedom to decorate and landscape how you like
Fixed mortgage payments
Pride and comfort in owning your own home
Housing security

Renters are the ideal clients for sellers because their offers are not dependent on selling their own home first. The Illinois Association of REALTORS Partnership for HomeOwnership has a number of mortgage and downpayment assistance programs created specifically for first-time homebuyers.

And owning a home has intangible benefits too. Owning a home adds value to communities and gives you a setting to enjoy your lifestyle with the ones you care about.

Copyright, all rights reserved, Illinois Association of REALTORS®
REALTOR® is a registered trademark of the National Association of REALTORS®

I have had a number of clients contact me recently asking when is a good time to list and sell their property? Traditionally around the holidays, the market tends to be slower - fewer buyers are looking, however, there are motivated buyers in the market at all times of the year.

Needless to say, consumers are being bombarded with media reports stating that the real estate market is in the tank - getting worse by the day. Bottomline, all real estate markets are local. They respond to the factors relevant to the local economy, strength of the job market etc.

Chicago real estate is doing okay - while inventories are up, property is selling. For properties that have been on the market longer, sellers are realigning expectations with market conditions. Market times are longer with the availability of inventory at a high. For motivated buyers, this is an opportunity to find more within your price range than has been the case in several years.

To answer my sellers' question - when is a good time to sell / list my property? I tell them list your property to sell when you are truly motivated to sell and move on. That may strike many as an obvious answer, however, the answer assumes that sellers understand the nuances of the current market.

First step prior to listing - determine the facts. What have similar properties SOLD and CLOSED for in the past 3 to 6 months? Recent past sales are generally the best indicators for what the value of your property will be. While that may be the best indicator, the ultimate sale price of your property will be determined by what ready and able buyers will put in writing when they submit a contract. In many cases some negotiating will allow both buyer and seller to arrive at a mutually acceptable price.

What is key to selling your property in a timely fashion is pricing your property at a reasonable and appropriate price. Regardless of the time of year, there are always motivated buyers. Truly motivated buyers will write offers on property that is appropriately and reasonably priced. While current market conditions currently indicate longer market times, it is not unreasonable to expect that appropriately priced property will sell more quickly.

Clearly there are some buyers currently in the market seeking deals and may be motivated to write a "low-ball" offer. Understand not all buyers have the same perceived value of a property. However, if multiple buyers write offers that are in the same of similar price range on a property that is significantly lower than your perceived value, the market is telling you something. Under current market conditions, you may not have the luxury of multiple buyers - you may likely only get one buyer. If you are not priced appropriately, you are likely to have NO buyers.

Again, past sales are the best indicator, however under these market conditions, buyers may be establishing new perceived values due to the available inventory. This is an important factor to consider when you are ready to sell. If you are not ready to listen to the market, you are not ready to sell.

Again - with some understanding of the current market conditions, list your property when you are truly motivated to sell - and be prepared to listen to the market.