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 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

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!

What to do in a Multiple Offer Situation – Chicago

So you’ve found the perfect place but guess what, so did someone else! Multiple offer situations in Chicago are becoming increasingly common. Many properties are selling for above list price. So e question then becomes “What should we do to become the winning bidder?”

Keep your offer clean: Avoid asking for repairs at the beginning, avoid asking for closing costs to be covered, etc. The sellers want a nice clean offer so give them one! Don’t add any additional stipulations outside of the normal contingencies unless they are absolutely necessary.

Price: If you are in a bidding war it is probable that the unit will sell for over the asking price. What you need to do is forget everything you remember bout real estate over he past few years and focus on the present. Look at the property and compare it to other you’ve seen. What is it worth to you? Rely on your Realtor here to make sure you a not grossly over paying for the property but at the end of the day you need to figure out what it is worth to you and stick to that number. Put your absolute best price forward right away.

Shorten contingencies I typically ask for 7 business days or longer for attorney review or home inspection. If you are in a multiple offer situation you can lessen the time it takes for you to complete these items. It will allow the seller to get past all the contingencies quicker which is always a good thing

Closing Date: Dear Mr/Mrs. Seller, What works best for you? Sometimes a quick closing isn’t ideal for the seller of the property as it may not give the sellers enough time to find a place. Therefore I always ask the listing agent what the sellers prefer.

Solid Pre approval:For the love of all that is good use a decent mortgage broker. Don’t use some random person or someone who is a mortgage lender “on the side.” Using a well established mortgage lender can let the sellers rest knowing there will not be unexpected delays with the mortgage.

Earnest Money Put your best foot forward on earnest money if need be. In chicago we typically turn over earnest money in two stages: First, is the initial earnest money that gets turned over with the contract and the Second is turned over after the completion of attorney review. If you are can increase your amounts on earnest money you will again make the seller feel much more comfortable.

Remember price is important but many times it is not the most important thing when negotiating a sale.

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 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.

Buyers are back in the Chicago Real Estate Market!

What is the state of the current real estate market in Chicago? Well, if you’re a buyer you may be happy with low prices but not crazy about the selection. Right now I am working with several first time buyers as well as some repeat buyers and inventory is actually low! Overall inventory has dropped but still remains high. However, inventory of quality condos in Chicago continues to lessen which is great news for sellers sitting on desirable properties but also slightly frustrating news for buyers.

I have recently seen several properties go under contract in the South Loop before my clients could even see them. These were not foreclosures or short sales either!

I also have another client who simply can’t find anything she really likes. While she knows what she wants she really isn’t being that picky however. So our solution to this problem is simple: We are going to direct mail owners of units she likes hoping we find someone who may be looking to sell in the near future. Do you remember when people were doing that during the boom?

The market is still not what it once was but it is starting to return to health. Values are still depressed but buyer activity is increasing heavily as rent prices continue to tick up. This is why today is the PERFECT time to be a buyer. The timing of record low interest rates and home prices is fueling this market.

 

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