My Chicago Real Estate Predictions for 2015!

The Real Estate market in Chicago, for both sales and rentals did quite well not only in 2014 but in 2013 as well. Pricing in some areas have returned to 2006 and 2007 levels so the question is what is in store for 2015? Is it the best time to sell or the best time to buy? What will happen to rent prices which have continued to increase year after year for the past 4 years?

The Residential Sales Market in Chicago

I believe we will see steady price growth throughout the Chicago area, likely around 3%. Inventory levels should increase year over year as new construction comes on line and sellers continue to realize that market conditions have improved. Over the past 2 years we have seen much of the “back log” of buyers, that have been sitting on the fence for years, start buying. I believe much of this backlog has already entered the market. Driving demand in 2015 will be first time home buyers at various price levels, those trading up or down (current home owners moving within the city), and investors / second home purchases.

Interest rates are lower than they have been in well over a year. Current APR on a 30yr fixed is hovering in the 3.8% range.

Now is an excellent time to buy because I believe the hysteria we saw a couple years ago is over and the market is now normalized. This allows buyers who are currently in the market to breath a little as they are looking at property. Keep in mind, however, well priced properties are still selling in a day or twos time and receiving multiple offers. However, unless improperly priced, I do not see residential properties receiving 5 offers and selling for 10/20% above list like we did over a year ago. Is this a bad thing? Not at all! What we saw in 2013 and in 2014 was simply the market equalizing which happens after any crash in any kind of market. We do not want that type of market to continue because it is not stable and it is not sustainable. What we will have in 2015 is a normalized, highly stable and highly sustainable residential real estate market. In short, this means it is a great time for both buyers and sellers as both parties have lower risk when making financial decisions regarding their property.

The Rental Market in Chicago

As many of you know rental prices have been increasing dramatically since 2009/2010. Due to various economic factors that I will not bore you with here, investment money flew into multi family property throughout Chicago. Developers who could not get financing for a 30 unit condo building had no problem shoring up financing for a 300 unit rental building. Currently rents are at all time highs in Chicago.

I believe in 2015 we will see rent prices, in the majority of the city, remain flat or slightly decline. As thousands of new, high end, rental units hit the market in downtown Chicago we will see market times increase for rentals and vacancy rates slightly increase as well. We will see a great deal of units hit the market toward the end of spring through the beginning of fall 2015. We will see in additional 5500+ units hit the market in 2016 as well.

I believe low interest rates and a now steady inventory of for sale properties in Chicago will continue to act as a ceiling for what rental buildings can charge for rent in Chicago.

While we may see base prices high at many of these new buildings opening up, keep an eye out for concessions such as 1 to 2 months free, free parking, along with free utility packages, discounted move in fees, etc. I believe the biggest price declines for rentals in Chicago, however, will not happen until middle / end of 2016.

Some recent articles have been released stating that the current demand for high end rentals in Chicago is sustainable. The sustainability, however, of current demand is almost irrelevant. What is relevant is how the current demand relates to supply. Supply for rentals in increasing heavily in Chicago and continues to do so, not only on a large scale (300 to 500 unit buildings in downtown) but also on a much smaller scale (20 to 40 unit buildings in outlying Chicago neighborhoods away from the city center).

While job growth does continue in Chicago, we need to understand that incomes are not increasing on a citywide level which has determined the ceiling of rent prices in the downtown market.

What rent price range will do well in 2015? We will continue to see the $1,000 to $2,000/mo price point do well. This price point is perfect for those recently removed from college and those transferring to Chicago who plan to purchase in the next year or two but want to save money. The area I believe that will be hardest hit by the new rental supply in Chicago will be the higher end 1 Bedroom prices, priced between $2,500 and $3,500/mo. I believe it will be these units where we will see the largest concessions in 2015.

 

Paul Blackburn is an Illinois licensed Realtor and Broker with @properties in Chicago. He can be reached anytime via e-mail at Paul@PKBlackburn.com

400 W. HURON – River North’s Newest Luxury Condo Development

400 W. Huron, located in the heart of Chicago’s River North neighborhood is being developed by Smithfield Partners, the same developers as SoNo and 30 W. Oak. 400 W. Huron is slated to rise 16 stories into the air. Luxury residential units will start on the 5th floor and rise up to the 15th floor. The 16th is comprised of private roof deck for 15th floor units.

The condominiums at 400 Huron start at 2,144sf and go up to 4,931sf for the largest unit. The smallest unit is a Three Bedroom, Two and Half bath home, while the largest is a Four Bedroom plus Den, Library and Family with Four Full baths and Two half baths.

The amenities at this new luxury building in River North include everything from a state of the art fitness center to a heated garage and 24hr door staff. The finishes of the actual units will be top notch. They’ll include Valcucine Kitchens and Baths, Miele appliances, custom closet built ins, 10ft ceilings throughout, Floor to Ceiling Windows, Toto plumbing fixtures and upgraded Grohe faucets.  Pricing is set to range from roughly $1,250,000 (3 Bedroom condos) up to $4,000,000 (4 Bedroom + Condos).

New construction developments have been rare in recent years. While 400 West Huron is not a large development at only 26 units, it does help satisfy a much needed demand for new construction in River North. Floor Plans have not been released on other websites as of yet, but I have had a chance to review them. The architect has done an incredible job at maximizing the square footage and use of space per unit. All kitchens open up to large great rooms and bedrooms are situated properly away from the main living areas. Outdoor space is a key feature in this building with many units having balconies (terraces might be a better word to use) that run the length of the unit. Penthouse units even have access to private roof space.

For more information about this building, to get detailed information and a private presentation of floor plans, renditions, etc. please contact: Paul Blackburn with @properties. He can be reached via e-mail at Paul@PKBlackburn.com or via his cell at 773.771.7502

400 West Huron

400 West Huron

Trump Tower and Other Developments Almost Sold Out!

Trump Tower at 401 N. Wabash once had hundreds of units on the market….but now they’re close to sell out with roughly 18 units left in their inventory. According to Crain’s Chicago Business 159 new construction condos sold in the 3rd quarter in 2013 which is up from the 2nd quarter and up slightly from the 3rd quarter of 2012. But why haven’t more new construction condos sold? After all the real estate market has been on fire all year! The answer is in the inventory numbers; there is simply very little new construction to choose from! As a matter of fact we are the lowest levels of new construction inventory since 1997. This is a big change from 5 years ago.

235 W. Van Buren led the way with sales in the third quarter according to Crain’s with 41 units sold. I’m not sure how many units are left in this building but I hope they’ve put a nice dent in their inventory. In total the building has 714 units most comprised of 1 and 2 bedrooms.

1201 S. Prairie Museum Park Related Midwest has been selling at two towers in Museum Park and have been doing extremely well. Between the two buildings they sold 64 units this past quarter. 1201 S. Prairie is their highest end (flagship) building in the development. Related, at least in my own humble opinion, has done a phenomenal job at revamping not only sales but the units themselves. Of course their absolute impeccable timing of this project didn’t hurt!

401 N. Wabash – Trump Tower As I said Trump Tower only has 18 units left to sell according to Appraisal Research…I’ll see if I can verify these numbers and post an update. Inventory in Trump, even in the resale market, has decreased dramatically. Those who purchased in this building in 2010 and 2011 already have equity in their units. It’s a beautiful thing!

2550 Lincoln Park Tower Chicago’s newest luxury building has been doing exceptionally well. They closed 30 sales in the third quarter and did so with an average square foot price of $840 per foot! The developer brought on Terri Proctor to head up sales at this development and she has and continues to do an excellent job.

225 N. Columbus – The Aqua Well there is not much to say here except it is sold out!

 

What’s Next? Since new construction inventory is so low why don’t they just building more?!

New units are currently on the way! Financing is still difficult for larger buildings and even though the condo market has seen a resurgence, selling out a 400 unit building would still be a very very difficult task.

CMK Development, the same developers who built 235 W. Van Buren are planning a building at 1345 S. Wabash which will contain 144 units. Soon we will also see plans announced for a luxury condo building in the gold coast (small and boutique) and another developer is trying to building 60 units in the West Loop.

 

Paul Blackburn is an Illinois Licensed Realtor & Broker with @ Properties in Chicago. He can always be reached via e-mail at Paul@PKBlackburn.com

Chicago Real Estate Market Condo Market Update!

Well, it is that time of year again. The season is changing which means it is time for me to send out my quarterly letter to my past and present clients. Here is what is being placed in the mail this weekend.

 

Chicago Real Estate Market Update

Fall is here. How will the real estate market react?

The spring and summer real estate market in Chicago was very interesting. Inventory levels were at record lows and buyers were coming out of the woodwork. Multiple offers became the new norm. Listings that sat on the market for more than a couple weeks were assumed to have something wrong with them. It felt like 2006 all over again!

While the market rebounded nicely this summer it was also nice to see that hysteria did not take hold. While many places sold for above list price with multiple offers there were still many places sitting on the market for months. Listings that have poor floor plans or were simply not in “ideal locations” still were not selling. While demand did pick up with great force, it did so with caution and common sense, something that was greatly lacking during the real estate boom. The new question is: Will this market continue as we head into the fall and winter season?

I believe the market will remain strong through the fall and winter mainly because inventory levels will remain low. While prices have increased year over year they have not increased enough for many people who purchased in 06 and 07 (the peak of the market) to cover their losses. While demand will remain high, I do believe we will see less multiple offers and less units selling at or above list price this fall and upcoming winter. There were many buyers who had been sitting on the sidelines for a while and many decided to take the plunge this past spring and summer. This surge of buyers in the market, coupled with rapidly depleting inventory, is what fueled the crazy buying frenzy we saw. I do believe strong demand will continue, just at a slower pace. This in turn should make a healthy market for both buyers and sellers as we enter 2014.

What is going on with interest rates?

Just in case you don’t follow the bond market much, interest rates have increased significantly over the past few months. Rates on a 30yr fixed went from the 3.7% range up to 4.8% and even higher. What caused this? As you may remember the fed starting pumping more money into the system….again! This time it was called QE3.  The fed did this by purchasing X amount of Mortgage Backed Securities each month which in turn pushed down interest rates to the crazy lows of 3.7% and 3.6% for a 30yr fixed. A few months ago the fed started running its mouth and said it may “taper” their bond buying; in other words buy less, if the economy continued to improve. Naturally the bond market freaked out and almost instantaneously started trading as if bond buying by the Fed was already screeching to a halt.  The Good News? The good news is the fed recently announced that they will continue their bond purchasing and will not “taper” for the time being. Long story short interest rates on 30yr fixed mortgages should start to hover around 4.25 to 4.5. At the time of me typing this letter rates are averaging around 4.37% APR for a 30yr fixed. Hopefully these rates will last into 2014.

What is going on with the rental market?

The rental market is still strong but I believe we have definitely hit a price ceiling. New inventory is starting to hit the market downtown and inventory levels will continue to increase through 2014 and even 2015 as new projects are announced on a weekly basis. I’ve personally noticed that market times for rentals have started to increase even in some of the most desirable neighborhoods and buildings. This does not yet mean we will see rents falling however, it does mean is we are at the peak of the rental hysteria that we have seen since 2011.

Is it a good time to buy or sell?

In typical realtor fashion I will say it is a good time to do both! What is most important, however, is to understand your goals and your time constraints. If you are a buyer in today’s market you need to understand that inventory is low. Therefore, you will likely not be able to find that perfect place in only 30days so be sure to budget plenty of time to find the right place. How much time? I would say budget at least 3 months plus 30 to 45 days to close.

If you are a seller now is a good time to test the market since inventory levels are low. Prices have increased year over year and should continue to do so. Keep in mind pricing has not sky rocketed, however, most areas of the city have weeded themselves of the pesky low priced short sales and foreclosures that were killing values and lender appraisals. While buyers are out in the market in full force they still do not want to over pay. Pricing your listing 20% above your competitor won’t get you any more money. If anything, it will only hurt you.

 

I hope you enjoyed the summer and enjoy the fall weather that is slowly falling upon us! As always if there is ever anything I can do for you, your friends, or your family please do not hesitate to reach out or pass along my name and number.

 

 Paul Blackburn is an Illinois Licensed Realtor and Broker with @ Properties in Chicago. He can always be reached on his cell or via e-mail at Paul@PKBlackburn.com  Also visit http://www.BuyingInChicago.com for information if you are a first time buyer in Chicago!

New Apartment Buildings Still Going Up In Chicago!

Well, the craziness continues. Another apartment developer just acquired a piece of land in the west loop on Jackson and plans to break ground by November on a new apartment building. Buildings that broke ground at the beginning of the rental boom are now finally open and filling up quickly but the question still remains how long will this craze last?

Personally, I’ve seen market times increasing for rentals in Chicago. I’m observing this from my own personal listings only and have not run my own data analysis but I would assume market times are slowly increasing across the board. Prices increased a great deal over the past couple years but I cannot see any large year over year increase in 2014 as thousands of new class A rental units hit the market.

What I find most amazing are the amount of developers who continue to push forward and investors who continue to acquire large scale apartment projects as cap rates continue to decline as prices rise….when will it end? Many apartment developers continue to use to the phrase “apartment demand is sustainable” but for those of us who have a half way decent memory we heard this phrase plenty of times from developers in 2005, 2006 and even at the end of 2007 when the condo boom was coming to a screeching halt. Will we ever learn?

Smart Money: I saw smart money move over a year ago from apartment buildings back into condo development. Right now they’re sitting pretty selling out even before completion of their small projects.

Sure, there will always be demand for apartments but if there is one thing the real estate market has taught me, it is that when demand is for 2,000 units developers love to build 4,000.

The Chicago Housing Market and The Media – What you NEED to Know

As I follow recent articles regarding the Chicago Housing Market and the Chicago Condo Market I’ve come to the conclusion that in order to be a journalist in this city you do not need to have the ability to interpret economic data nor do you need to have an understanding of the market place in which you are writing. I find it deplorable that major news sources in Chicago simply quote raw statistics and distort the true state of the Real Estate market. Though this is evident in all areas of the media.

The reason I mention this in my Real Estate Blog is because the average reader needs to be aware. All media coverage needs to be taken with a grain of salt or better yet a shot of tequila and a lime. Here are some basic things to look for or keep in mind when you are reading any article about Real Estate:

Focus on Year over Year Data:  Reporters love to quote an index and compare “January to February.” They do this not because they want to mislead you but more than likely because they fail to grasp the basic economic evaluational skills to interpret the data. You are smarter. Instead, you want to look at Year over Year data. Month to Month fluctuations happen all the time for various reasons. If we try to explain each variation from month to month we will drive ourselves mad and will not have any definitive results. Year over Year data is always want you want to evaluate.

Understand Supply & Demand Levels: We need to understand sales relative to supply levels. For instance if “New construction condo sales are down from last year” this could simply mean there are not many new construction condos left to sell! However, if the reporter simply quoted a statistic you could be mislead to believing the condo market is again sluggish.

Who is Buying? If you see articles that quote “Sales up 25%” then you want to ask yourself who the buyers are. Are they sustainable buyers? What I mean by sustainable is are these buyers part of a new trend that will continue or were many of these buyers institutional and simply picking up foreclosure/bank inventory which can cause a quick “spike” in sales data.

What is the goal of the article? Lets face it; the goal of any article is to get readership. The more attention grabbing the headline the better, even if it is out of context with reality.

 

Paul Blackburn is an Illinois licensed Realtor & Broker with @ Properties in Chicago. He can always be reached via e-mail Paul@PKBlackburn.com

The New Reality of Real Estate in Chicago

The housing market in Chicago has taken a dramatic turn from where it was a couple years ago. Condos and Single Family Homes in Chicago’s hottest neighborhoods are moving fast in all price ranges. Where is the sweet spot? The hottest section of the market is currently between$300,000 and $500,000 but we are also seeing higher end properties sell in only a matter of days.

Over the weekend I put a 2/2 loft under contract. My clients had to pay more than $7,000 above list price. We put an offer in after the property was only on the market for a day. Our goal was to get the property under contract by the weekend. We were up against one other buyer but we knew if it dragged into the weekend we could easily be up against multiple buyers. This property was in Bucktown.

Another property down the street in Bucktown had 22 showings in a 2 hour period last weekend. My buyers looked at this property on Sunday (the first day of showings for this new listing). On Wednesday they e-mailed me saying they wanted to make an offer. Unfortunately it already sold. Of the 22 showings the property received 3 offers from buyers. More than likely it sold for above list price as well.

A colleague of mine was showing a home in the $600,000 to $700,000 range in Old Town. She was one of 6 agents with buyers submitting offers. Her clients went $30,000 above list price….guess what? They didn’t get it. While we don’t know the exact sale price it has been eluded that it likely sold for almost $50,000 above list.

The most obvious question people may have is “What the h*ll is going on?!” Is this sustainable? Well here are my thoughts on the subject.

Currently in Chicago, in the more desirable neighborhoods, we have an inventory problem. Inventory has decreased to all time lows and buyer demand has increased dramatically. Lets start with demand, however. Why has demand increased?

The Hangover Effect: After 2008 everyone had a hangover in the real estate market. Just like in real life, when you wake up with a hangover the last thing you want is another shot of tequila that you had the night before. This hangover lasted in the market for several years. People simply wanted nothing to do with the market. Granted, many people did not have the finances to buy and many were worried about their jobs and lending (the bars) were not very open.

Now the “hangover effect” has mostly lifted. The economy is rebounding and consumer confidence in the housing market is back. During this hangover period many people rented and saved cash. Now, as they have seen the market stabilize we are seeing a rush of buyers into the market. With increased confidence we are also seeing record low interest rates and property values are back to normalized levels.

It is important to note that in distressed areas most of the demand is made up of investors. However, in prime “Class A” areas the majority of demand are first time, Second time and second home buyers who plan to use the property.

Where is all the supply? There are a couple reasons for low supply. First, we haven’t seen any new construction for condos or single family homes in almost 5 years. Only now is construction starting to pick up again and it is doing so at a slow pace.

The largest reason supply is low is due to many homeowners still underwater on their values. Many “would be” sellers simply cannot afford to sell their homes. Many homeowners are still refinancing using HARP and similar programs and some are still completing mortgage modifications. These homeowners are not selling anytime soon.

Who is selling now? I’ve noticed that many current sellers were buyers back in the early 2000’s before prices ran up. Some were buyers at the peak in 06 but put more than 5% down so they can at least walk away from the sale with some cash.

What is most interesting are tenant occupied properties selling. Many of the condos I have been showing in Lakeview, Lincoln Park, Near North, etc. have tenants in them. These are not standard “investment” condos for the owners but instead were their primary residences they could not sell back in 08, 09 so they rented them. They are now able to unload them for what they feel is a “decent” price.

What does the future hold? The inability for developers to obtain financing on large buildings is a good thing. This will help supply remain low. Interest rates will likely stay low for a while. The FED is talking about slowing or limiting their purchase of MBS however they will likely continue for a short while. The MBS market is in recovery mode especially with treasuries at record prices (low yields).

At the end of the day interest rates should remain low through 2015 and supply will likely remain low. This will start to push up pricing in your better markets which will slowly allow those who could not sell before to start to sell. The hope is that supply will be introduced slowly into the market.

Chicago Housing Market – Spring Market Update!

2013 Spring Market Update!

Inventory is at all time lows and demand has surged as new buyers have entered the market. The pendulum has swung the other way and we do not have enough properties on the market. Do you want to sell? Now might not be a bad time. With demand so high and inventory so low the question then becomes: “Why are more people not selling?”

I hoped that we would see more properties come to market this spring but we have not. The main reason is that many homeowners are still underwater on their homes. There are also those who do not want to sell because they cannot get what they WANT for their homes.  This has lead to many multiple offer situations and properties selling within only a few days on the market if priced appropriately.

Have prices increased?

Yes and no. It depends on how you measure price levels. Some foreclosures sold at very cheap prices in recent years. So if we are comparing current sales to distressed sales then yes prices have increased. However, if we look at the market as a whole, year over year prices have only increased a small amount.

Aren’t investors the main cause for demand?

If you’ve watched the talking heads on CNBC and all the “real estate analysts” you may have the impression that investors are the main cause of increased demand. This may be true in certain markets and may even be true in certain buildings in Chicago but as a whole, in Chicago’s more desirable neighborhoods, investor demand is not driving the market. First time and second time home buyers are what currently make up demand.

What are the hottest neighborhoods in Chicago?

The Near North side is doing very well which includes Streeterville, River North, and Old Town. However the hottest areas have been Lincoln Park, Lakeview, Wicker Park, Bucktown, West Loop and even the South Loop. Areas such as River West and West Town have also seen a great deal of demand.

If demand is so great why aren’t developers building condo buildings?

Financing is next to near impossible to obtain to build a large condo project. But, it is very easy to obtain to build apartment buildings. This is where developers have been focusing their energy especially with the rents increasing throughout the country. There are still developers building condos but they are doing so on a smaller scale focusing on 4, 8, and 12 unit style buildings. Some larger projects, up to 40 units are in the plans for areas such as the West Loop. Chances are they will do fairly well.

What about rentals? What is going on with rent prices?

Rent prices remain in an upward trend. While they are not increasing by double digit gains they are increasing steadily. We will probably see a 3 to 5% year over year increase in 2013 and perhaps slightly higher in the downtown / near north side market. Rental inventory remains low but may spike soon as roughly 5,500 Class A rental units hit the market between now and the end of 2014 in the downtown area.

My recommendations

If you have been holding off on selling and want to “test” the market, now is a good time to list your home, as you will get instant feedback on the pricing and desirability of your home.

If you are looking to buy it is still a great time to buy, as prices haven’t jumped. However, you must be prepared to view places as soon as they come on the market. You also need to be working with an agent from a large firm that has access to “off market” properties as these are some of the better deals that are transacting.

Still pay particular attention to the condo association you are buying into. While most have recovered from the issues of the crash there are still some broken associations dealing with repairs from poor construction to poor management. It is extremely important to understand when you buy a condo you are also buying into the association.

The Chicago Housing Market – No Inventory, No Inventory!

The Chicago Housing market has changed dramatically, at least in Chicago’s most desirable neighborhoods. In areas such as the Gold Coast, Lincoln Park, Lakeview and yes, even the “over built” South Loop, inventory has almost all but disappeared. The problem facing buyers today is one that we haven’t seen in years. The question that many people have is “Why can’t we find what we’re looking for?” Why is inventory low?

The first and most obvious reason why inventory levels are low is because we are seeing a large amount of buyers, many first time home buyers and empty-nesters buying second homes, entering the market. These buyers have nothing to sell and have quickly soaked up excess inventory. Investors have also come into the game and have picked up the less desirable properties even in problem buildings where financing is difficult. These investors are flush with cash and most foreclosures in the desirable areas of Chicago are seeing 10, 15 or even 20 offers in a matter of days.

Rising rent prices and low interest rates have spurred first time home purchases while low yields in other investments has spurred investors to throw cash into the housing market. So this covers the increase in demand but what about supply? Why is supply not keeping up with demand?

While demand has increased prices have only slowly started to rise. Many home owners are still either under water or cannot sell their home for the price they feel is “fair.” Many “would be” sellers are simply not putting their home on the market because pricing has not reached the level is needs to be at for them to feel comfortable selling their home.

What does this mean for the future of the market? As long as interest rates remain low prices will slowly start to increase. As pricing increases we will see those sellers sitting on the side lines start to list their homes. It will be a very slow process but it will be a healthy one.

Will developers get back into the market in Chicago? Developers have already entered back into the market but not on a large scale. We probably won’t see any new high rise condo buildings anytime soon since financing for such projects both on the construction loan side as well as on the buyers side is still very difficult. Instead, we will see smaller projects (3, 6, 8, 12 units) built in high demand areas. We are also seeing developers entering the single family home market. They’re not building spec, but they are building to suit.

I see all these buildings going up in Chicago, what are they? Chicago is filled with construction cranes once again but NONE of these are condo buildings. They are, instead, rental apartments. With rental prices at double digit % gains year over year, developers are jumping into the market. Some may say all these buildings seem excessive. These people would be right. Naturally developers over build. If there is a demand for 3000 units, they build 6000. But that is a conversation for another day.

WHAT DOES THE FISCAL CLIFF MEAN FOR HOME BUYERS?

I’ve received some e-mails recently from those who have read my blog asking my thoughts on the fiscal cliff and whether or not the outcome will greatly affect the housing industry. In other words they are asking “is it still a good time to buy?” Here are my thoughts on the “Fiscal Cliff.”

First off the fiscal cliff has been blown out of proportion by the media, by the current administration and by both parties. Basically all the fiscal cliff is, is the need to balance a budget and reconstruct some tax laws and policy. Hypothetically if nothing happens and congress cannot come to an agreement we will NOT go into recession January 1st. It is simply not possible. It is not economically possible to wake up one morning and suddenly be in a recession. That is not how the economy works. You may have a small market disruption, a quick sell off, etc. but housing would not see any affects of this.

If you remember a little while back there was talk on raising the debt ceiling. If it was not raised the US was not going to have the legal ability to pay its debts. The markets were panicked, the media was eating it up, our bond rating was on the verge of a downgrade and the international press was having a field day. However at the very last hour a deal was passed. I’m sure something very similar will happen here.

The housing market is currently recovering nicely due to low interest rates, rising rent prices but most importantly renewed consumer confidence. Despite the fiscal cliff all my buyer clients are very excited to purchase and cannot wait to close on their home. It is this confidence that we need to watch and will remain an indicator of the strength and resiliency of the housing market.

Interest Tax Deduction: The Home Mortgage Interest Tax deduction has come up in the news recently. For those of you who don’t know what that is, it is a tax policy that allows you to deduct your home mortgage interest on your taxes. This policy has been in place for years and years and has become one of the biggest selling points in today’s market for buying a home. Even if home prices remain flat for years the ability for you to deduct your interest can save you thousands year after year. The media has recently made comments that this sacred cow of a tax policy may be taken away. Nothing can be further from the truth. While media has spoken of it and a few idiotic congressmen/women have mentioned it; it is NOT something being considered by congress as part of a revenue generation plan. We may see the deduction limited to $750,000 or $1,000,000. This would mean that the interest on your mortgage of 750k or 1 Mil would be deductible but nothing beyond that could be deducted. Such a cap would have very very little affect on the market if it is passed so I am not worried about it.

At the end of the day lets just look at what congress has done for decades. They’ve just kicked the can down the road. Many times they wait until the last minute to kick it and worry the market but they will always give it a kick and this time it will be no different.