WHEN WILL THE 2020 SPRING REAL ESTATE MARKET START IN CHICAGO?

I’m asked often “When is a good time to list?” when talking about the spring market. Or when is a good time to start looking at houses? Some of my clients will think the spring market is literally just that, in the spring time. Others will think it is when the weather warms up which in Chicago could be June or even July. But the reality is the “spring market” has been starting earlier and earlier in Chicago for years. This has nothing to do with the weather. Surely, we all know the weather is not getting any warmer in January or February, at least if last year was any indication. So when does the spring market really start?

I advise all the agents on my team to be ready for the spring market January 2nd. January 1st people are still hungover from the night before, but January 2nd people start making moves on whatever they talked about over the holidays. You know this. Walk into any gym on January 2nd and its packed. A similar mindset takes place in real estate. However, that mindset can quickly change, just like New Years resolutions fade into memory so too can the idea of moving. However, with real estate there are a few additional influences that will cause the spring market to start in January this year and why you should be ready as a buyer or a seller sooner rather than later.

Low Inventory Inventory continues to remain low throughout the city, especially good inventory. There is some junk on the market, sure. Especially a good handful of places that have not been updated in 15/20 years but are priced too high to justify rehab work. But for the most part, good quality inventory is limited. Therefore, the old saying “the early bird gets the worm” comes into play here. You have to be ready early. Hence, January 2nd.

Low Inventory Might Not Last Too Long… This year I think we will see low inventory numbers but we will start to see a slightly increased influx of inventory sooner rather than later. Last year for instance in January we saw a lot of pocket listings that were coming to market at the end of February or March, but were not actually on the MLS. Under new NAR guidelines, such pocket listings (unless only marketed in-house) are now illegal as of January 2020. Therefore, if someone wants to get early exposure to the whole market they have no choice but to list on the MLS. So while inventory levels will start off low I do think we will see an increase because of this new regulation. With this being said, it means that instead of just competing against a handful of buyers for a “pocket listing” you’ll now be competing against the entire market. Be ready!

If you’re looking to list your home it means you need to be ready sooner. As a pocket listing we can get away with no photos or imperfections because the listing is “special,” it is “exclusive” so buyers will go out of their way to see it because they feel like they’re privy to information no one else has. When you have to go live on the MLS you better have all your ducks in a row.

Social Media is more powerful in the real estate business than ever before. Real Estate brokers cannot wait to post what they have put under contract. We’re a fragile bunch. We like our egos inflated as much as possible. But here is the thing…sales forecast for this upcoming year are relatively flat for the overall market, even chicago expects a small decline in sales with less than a 1% growth in prices in 2020. This means Realtors are going to be networking harder, posting more on social media, and doing more to drum up business to compete with last years numbers. I think this year Realtors will come out of the gates running earlier than ever before and I do believe this will have an affect on the start of the spring market.

Lease End Dates Over the past 5 years more and more landlords have refused to take leases ending in the winter time and have pushed tenants to take longer term leases or odd lease lengths in order to end in the spring time. There are more leases now ending in March, April, and May then we ever have had before. This means if you want to purchase and close on a home before the end of your lease that end in April, you really should start looking at the start of the year. Listing agents know this and are starting to push sellers to list early because of this, especially with properties that are attracting first time homebuyers.

Now I’m not saying January 2nd we’re going to see an influx of inventory or lines at open houses. What I am saying is that now more than ever you need to be PREPARED early for the spring market. Be ready to jump on what you like if you’re a buyer and if you’re a seller make sure you start making arrangements in your home. Get those improvements made if you’ve been putting them off. Make those small repairs. Figure out your plans and where you want to move next.

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

Competing Against Multiple Offers in Chicago’s Spring Market!

Competing against multiple offers is nothing new, but for inexperienced agents and new buyers it can be quite a challenge, especially as the competition heats up to snag some of Chicago’s most desirable listings. Multiple offers will continue to dominate the spring market especially in Chicago’s most desirable areas. Crain’s recently posted an article “Four things you might need to do to get that house.” While the article gave a few ideas, I thought I would give my own opinion on their suggestions and provide you with the advise I provide my clients when competing against multiple offers or when trying to get a property taken off the market before multiple offers can be submitted!

Let us pretend you’ve found the perfect home and you are seeing the property the first day it is on the market. Let us say that day is Tuesday. The agent informs you they are planning an open house for the weekend and expect to wait until then to review all offers. This is not just a sales tactic, but it is now becoming more common place in Chicago. So if this is your scenario, what can you do?

Price: Don’t BS on the price. Have your agent evaluate comps in the area to make sure the asking price is fair. When you submit your offer you better be submitting at list price OR HIGHER! Have your agent guide you so you don’t overpay for the property.

Earnest Money: Earnest Money is typically turned over in two stages: Initial stage, when the offer is accepted and the final stage, once inspection and attorney review are complete. INCREASE YOUR EARNEST MONEY! A greater amount of initial earnest money and a greater amount of final earnest money shows you are serious and have confidence in your current financial situation and in the property as a whole.

Shorten Attorney Review and Inspection Periods: The Inspection and Attorney review period can range anywhere from 5 to 10 business days or whatever the buyer and seller agree upon. Shorten these days if you can. 5 Days at the absolute most if you are in a multiple offer situation or trying to snag the property off the market.

Quick Deadline: If your offer is strong with the above points then put the nail in the coffin and don’t allow them to wait until the weekend. Give a 12hour deadline in your offer. Tell them its a take it or leave it situation.

Other items to consider:

Flexible Closing Date: Many sellers want a quick close date, but some may want some flexibility so give them that in your offer. Offer to close quickly but mention you can extend the closing if needed.  You never know the seller’s situation…they may need more time to find their next home.

Quick Mortgage Contingency: If you have a mortgage contingency in your contract, end it is as soon as possible. The quicker you can get a clear to close the quicker the contract “goes hard” and is ready to close. Move up your mortgage contingency date (Commitment Date) to the soonest date your lender says is possible.

Escalation Clause: This is one of my favorites. This is a very simplistic way of explaining it, but the clause is quite simple….”Our Highest & Best offer is $2,000 above the price of any other offer you receive up to $500,000 with proof of other offer.” It is called an escalation clause because as other offers come in your price escalates up to a certain point. If you ever bid for things on eBay you may remember there are similar systems in place on that auction site that allow you to do something similar.

 

Paul Blackburn is an Illinois licensed realtor and broker with @properties in Chicago. For information about buying or selling in Chicago he can be reached at Paul@PKBlackburn.com

MY ADVICE TO FIRST TIME BUYERS IN CHICAGO

First Time Home Buyers always have a lot of questions. Listed below are some of the most common questions and concerns I hear working with home buyers in Chicago.

What Neighborhood in Chicago is the best investment?

Chicago is extremely diverse with so many different neighborhoods each offering their own “feel.” The old saying is real estate is “Location, Location, Location.” This saying continues to be very true, but not just for your pocket book. If you are buying a home to live in, then YOU need to enjoy the location. Try not to get too wrapped up in “How much will this area appreciate in the coming years” but instead focus on “What will I enjoy about this neighborhood while I live  here?” Many buyers don’t give themselves enough credit. The things in a neighborhood that you love or hate, are likely the same things that the next buyer will love or hate as well. Focus on what you will love about the neighborhood first and then focus on what appreciation you may see in the future. After all, if you don’t like the location, then are you really getting your money’s worth?

How much space do I really need in Chicago?

Do you want a two bedroom or a one bedroom? What is more important to you: Space or Quality? Sure, it is great to have both but if price remains the same quality will decrease as space increases. Many people may say “One Bedrooms are not good for resale” In some areas this may be true, but overall I do not find this to be the case. Instead, you need to ask yourself the question “OK, this is only a One Bedroom but what do I like about it over some of the Two Bedrooms I have seen?” Chances are the quality is better, the living room space may be larger, the view may be better. Are these things important to you?

Transportation

How close are you to Transportation? Do you use the CTA or no? While that six block walk to the red line may seem wonderful in the summer time, it will feel like hell in the winter time so keep that in mind. If you are the kind of person that doesn’t mind walking a mile to the train in the freezing cold then your options can be much broader. If you are like me a despise walking even two minutes in the cold then your options will need to be more constrained.

Stay within your means

You may love the amazing condo that is pushing your budget but what good is it if you can’t afford to furnish it properly or enjoy the wonderful restaurants and bars down the street. Be conservative with your budget. Sometimes you can spend less money on a purchase and then some money on great renovations or furnishings and end up with a place that is perfect for you.

Gut rehabs the next wave in Chicago Real Estate?

New construction condos in Chicago are few and far between. Large scale new developments were mostly halted in 2008 and even though demand for new construction is high in Chicago banks are not willing to take the risk and offer developers construction loans on a 300 or 400 unit condo project. With the majority of new buildings in Chicago at least 5 years old the question is “What is next for Chicago condos?”

Gut Rehabs

With no new construction condos in the downtown neighborhoods many are turning to older buildings and buying “dated” units with the plans of gutting and rehabbing the units with all of today’s modern finishes and conveniences. Newer construction buildings (built between 2003 and 2008) are still selling at a premium as the finishes are “nice” and still acceptable. However, over the past decade tastes in finishes have changed a great deal. Those wanting the most updated and modern look in the downtown neighborhoods are really left with only one option: Do It Yourself….well hire it out but still “rehab your unit.”

Many older buildings have also started modernizing their hallways, amenity floors, lobbies and elevators. These capital improvements along with a cheaper price point, which allows buyers to customize their own units, are allowing old buildings to give new ones a run for their money.

If I am thinking of buying in an older building and customizing a condo; what should I look for? What should I watch out for?

 

Buy in a building that is not afraid to spend money:

It is important to buy into a building that is constantly modernizing itself. Buildings that haven’t completed any capital improvements in over 20 or 30 years are not and will not be able to compete in the market place. Updated hallways, lobbies and amenities are key. While these updates do cost money and may mean higher assessments, you will see a greater return on your investment in such buildings. Buildings that choose not to update will eventually have to (at some point new elevators and new fitness equipment will be a must) and that cost may come as a special assessment anyway. In the meantime however those buildings start to develop a reputation of “old and tired.”

Structural obsolescence caused functional obsolescence!

Consult the building engineer, an architect and a great contractor on exactly what you are able to do with your unit before buying. Many older buildings may have large living spaces but small bathrooms and small kitchens. Current trends are open, expansive kitchen spaces, large closets and well sized bathrooms. Make sure plumbing, electrical and structural walls are able to be modified to allow the reconstruction you so desire. You can update a unit all you want, but if the floor plan is poor then you will not see a good return on your investment. Many times a small change in the floor plan will earn you your greatest return.

Take advantage of what old buildings have to offer!

Location, Location, Location. Many times older buildings have some of the absolute BEST locations and BEST views in the city. Take advantage of this! If you are interested in a building on Lake Shore Drive then make sure you have a great view of the lake. If you are interested in a building in the heart of the Gold Coast then get a south view so you can see the entire skyline and the lake. This may seem like a no-brainer but you’d be amazed at how many people look at only the price tag when they’re rehabbing a unit versus looking at the entire package of what a unit has to offer.

Wider is better!

One of the biggest downside to some of the newer construction buildings are the long and narrow floor plans. Many times this is done to maximize the number of units in a building. Many older buildings have wide floor plans. Wide floor plans are almost always preferred as they offer much more window space. In addition, newer buildings have taller ceilings (9 or 10ft) whereas many older buildings only have 8ft ceilings. A wider floor plan, which allows for much more light will make ceiling height feel taller versus a long narrow floor plan which will make a unit feel “closed in.”

Assessments

Older buildings typically have higher assessments simply because they are less efficient and more costly to maintain. It is very important to see how an association is spending their money. High assessments are not necessarily bad so long as you are getting something in return such as a building that is constantly updating and modernizing itself. A building that has high assessments because they are always “fixing things” versus “improving things” is a building that you will likely want to stay away from.

 

Paul Blackburn is a licensed Illinois Realtor and Broker with @ Properties in Chicago. He can always be reached via phone or e-mail at Paul@PKBlackburn.com

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.

Chicago Real Estate Market Update!

 Chicago Market Update

I am sure you have seen market updates in the news and in the paper over the past months speaking of the positive trends in the real estate market. While these market reports can be very valuable in understanding the current market conditions, however, I prefer to write my own to explain in my own words with regard to what is taking place in the current real estate market.

Buyers

Buyer traffic has increased dramatically not only for my own business but for that of my colleagues. When the market first started to stabilize we saw first time home buyers primarily driving the numbers up. However, in recent months we have seen an increase in second and third time buyers as well as those purchasing in-town and vacation properties in Chicago.

While individual markets within Chicago are highly localized with respect to demand levels, we have seen increased demand throughout Chicago’s most popular neighborhoods.

Inventory

Believe it or not the largest challenge currently facing the market place, from the Realtor perspective, is the lack of inventory. While great deals can still be had and property prices are phenomenally low, demand has gobbled up excess inventory in most markets. This decrease in supply levels has caused multiple offer situations and some properties to sell in excess of the list price.

Investors Getting Back Into the Market

We have seen a tremendous amount of investors get back into the housing market, which is more than likely due to the low return in other areas such as treasuries and equities. Foreclosed properties, particularly in the downtown market are often selling for well above list price and are receiving multiple offers within hours of hitting the market.  This has greatly helped the market overall as it has started to increase prices in some of Chicago’s most troubled buildings such as 10 E. Ontario, 440 N. Wabash, 345 N. LaSalle, etc.

We are even starting to see areas that were dramatically over built during the boom, such as the South Loop, regain excellent traction. Specific areas within the South Loop (short walking distance to Roosevelt & Michigan/State) have seen a great Increase in buyer demand. These buyers have depleted inventory in several of the South Loop’s most established buildings.

Sellers

Some seller’s are under the assumption that since the market is picking back up they can now obtain the price they paid years ago. This is definitely NOT the case. While the market has picked up significantly we are only seeing marginal increases in pricing at the current time.  While demand is strong it is not strong enough to sustain excess levels of price increase or interest rate increase.

Financing

Financing has eased slightly and is heading in the right direction but obtaining a mortgage still requires good qualification on the part of the borrower. We have, however, seen increased lending options for investors as well as owner occupants in “troubled” buildings. These financing options are definitely more expensive as the lender must take into account the increased risk, but we are starting to see a glimmer of hope for some buildings that were impossible to finance years ago.

Is it a Good Time to Buy?

It is actually a great time to buy! Currently this market requires patience, as inventory levels are low. The positive side is that interest rates and prices are still extremely low.  Builders are slowly starting to enter the market again and are delivering High Quality product that in 2007 would have cost anywhere from 20 to 50% more.

 

Rental Market

The rental market in Chicago remains strong and we have seen double digit rent increases over the past several years. As the job market recovers we are seeing increased demand for rental property as young professionals seek housing in the downtown market place. However, developers are quick to answer that call and currently have 15 high rises under construction in downtown Chicago which will add over 5,000 units to the market in the next year.

My concern for the rental market is with interest rates low and a stabilized housing market we will see a decrease in demand growth for rental property. While I do believe that rental demand will increase in the coming year it will do so at a slower pace than expected and I do believe that developers are outpacing demand with supply for 2014.

SHOULD I BUY OR RENT A CONDO IN CHICAGO?

Has the market bottomed in Chicago? Is the real estate market in Chicago on a rebound? Where do I see the condo market in Chicago? These are questions asked to Realtors on a day to day basis. Unfortunately we are not fortune tellers but we do know the market quite well and understand its pulse. I am happy to say it does have a pulse, a good one! Here are my thoughts on the market and whether or not you should be a buyer right now or a renter!

My overall feeling of the condo market in Chicago is positive. When I am speaking of the condo market I am speaking of the most popular areas to purchase a condo. Everything from South Loop up north to Edgewater and as far west as Wicker Park and Bucktown and everything in between.

If you are a renter right now you will see that inventory is scarce. More people are renting now than buying and this has pushed prices up. Over the past 10 years we did not see any new construction for apartments. We saw the opposite; condo conversions. This lessened the supply of rental property. Now that the economy has rebounded and those out of college have employment again we are seeing increased demand for renters. We then add into the fact that much of the public were afraid to buy over recent years, or could not obtain financing, and we have a perfect storm for increasing rental prices.

However, since the economy has stabilized so has consumer confidence. We couple this with increasing rent prices and BAM! People want to start buying again! Investors and first time buyers started entering the market (on a more consistent basis) about 2 years ago. Most notably, in the past 6 to 9 months buyers have been coming out of the wood work and eating up all the excess inventory. Renters have finally become fed up with paying high rents and also having the lack of places to choose from. It is one thing to pay high rent prices but it is another to pay high prices but not have any GREAT options. This has forced many to BUY.

Inventory levels of condos in Chicago have dropped to record lows (record since the crash). The challenge is that quality inventory for purchase is actually scarce, at least condos priced properly. If a condo is priced right it will easily sell with in 30 days in today’s market. Versus 3 years ago when exceptionally priced properties still took months to sell.

So what does this mean? Is it a good time to buy? Yes and no! If you know where you want to live and plan to be there for at least 3 full years before you need to put the property on the market, then yes I would say it is a good time to buy. I also recommend to all my buyers to look at their property as a true investment. Instead of asking the question “What can I sell this for in 3 to 5 years” ask the question “What can I rent it for?”  Why do I say rent it?

Prices won’t be skyrocketing anytime soon! While prices have stabilized they won’t be increasing at “normal levels (3 to 5% a year)” for a while. Sure, you may snag a great deal and your return may be great, but the overall market is going to recover slowly. Here is why:

Remember how I said inventory levels were low right now? The reason inventory is low is not because people LOVE their homes and refuse to sell. Inventory is low because many people still don’t want to take a hit on their homes. Many people may be under water or near the edge of the water. What we will see happen is the market start to tick up and then some sellers unload their property because they finally can cover their mortgage or put enough in their pocket where it is worth them selling. This doesn’t mean the market is unhealthy nor does it mean that it is not the right time to buy. It simply means the market is walking slowly in the right direction.

Lets say the market just had leg surgery and is in physical therapy. It is walking again and moving forward…just at a very slow pace and every one in a while it will need to rest for a few minutes. Eventually, however, the market will return to normal. We are on the right path and I’m happy to say we can finally breath again!!

Paul Blackburn is a licensed Illinois Realtor and associate Broker with @ Properties in Chicago. He can be reached via e-mail at Paul@PKBlackburn.com  For more information about purchasing a home in Chicago please visit www.BuyingInChicago.com