Why your Realtor may be the biggest threat to you….

When I first obtained my real estate license in 2007 the real estate market was a very interesting place. The real estate market was teetering on the verge of collapse after a decade of record year over year gains in almost every market in the country.  If you had asked someone on the street if they knew a Realtor chances are they were one or someone standing right next to them was. Once the market crashed one of the best things happened to the real estate business; lots of real estate brokers got out. Many of these brokers were part time and couldn’t put enough deals together to pay their license dues let alone make a living. They went back to whatever jobs (or hobbies for the part time folks) they held before real estate boomed. The days of sitting one open house and picking up 5 new buyers were over. Reality quickly sunk in.

In recent years we’ve seen a resurgence in the housing market throughout the country; some markets stronger than others. We’ve also seen a resurgence in new real estate brokers. Shows such as Million Dollar Listing not only make the business look easy and lucrative, but they make it look “cool.” It has never been so “cool” to call yourself a broker. Everyone wants to pull up to lunch in a new Range Rover to meet a client. Sit outside on a Wednesday afternoon, sip a martini, and discuss the real estate market with a potential client. Who wouldn’t want to do that? Not only do I want to do that, I actually do it. I’ll also be frank. This business is relatively easy and lucrative. It has it’s fair amount of stress but that is what two martini lunches and happy hours are for. But at the end of the day there is a threat to our industry, to the real estate market, and to you the homeowner; that threat is some of us. Real estate brokers. The only reason why some of us may call the business “easy” is because we know what we’re doing.

Too easy to get licensed…

The barrier to entry into the real estate business is quite minimal. You take a class, you take a test, you pay some fees, and you’re in. Actually being successful in the business takes much more work but being good not in terms of sales volume, but in terms of protecting and advising your clients, takes experience, knowledge, and the ability to understand market forces that most people don’t possess.

I’ve seen countless people on social media dive into the real estate business. They then spend money on on-line advertising, magazine ads, and even someone to manage their social media profiles. They’ll start posting articles such as “What Today’s Fed Actions Mean for the Mortgage Market” but if you asked them what it meant they’d stare at you like a deer in the headlights. When you ask them about the real estate market they’ll quote something our association has sent out as a talking point “Next year Chicago is projected to be up 3%” but when you ask them specifically about the two bedroom luxury condo market in the Gold Coast you might get that deer in the headlights look again. They’ll talk up the real estate market to you and tell you why now is a wonderful time to buy, despite the fact they may not know what area you’d even be interested in buying in. Every day they’ll post photos of a new property they visited on a brokers open talking about how wonderful it is and how it is “gorgeous, stunning, amazing location” even though it might be on a desolate street bordering an industrial complex. These people are a threat to you.

You might be thinking these agents can’t survive in this business. They won’t make enough to sustain themselves and they’ll die out and move on to other things. But let me ask you this, how many people do you know who have bought homes actually interviewed their buyers agent? Conversely, how many people who have listed their homes for sale interviewed multiple agents? Why do people insist on interviewing listing brokers when they’ve already acquired the asset and the sales price is essentially set by the market, yet when it comes time to acquire an asset (their home) they’ll let almost anyone help them? After all, as the old saying goes,  you don’t make money when you sell, you make it when you buy.

So why do I mention all this and take the time to write about it? Am I against new brokers? Absolutely not. We all have to start somewhere. As a matter of fact part of my day to day job is training new brokers and mentoring existing ones. What I am against is stupidity. I’m not going to sugar coat it. I’m against people who quite frankly do not have any business being in my business. I’m not saying this because I’m afraid they’ll take business away from me personally. I’m saying this because their stupidity and apathy hurts you, the consumer which in turn tarnishes the Realtor brand and what we stand for and believe in.

As a broker it is our responsibility to educate ourselves to the fullest to protect our clients. It is our responsibility to be honest with our clients and not repeat sound bites we’ve heard only to make ourselves appear much more educated than we really are. Some of the clients we deal with are wealthy and their home is a small asset to them. However, most we work with, their home is their largest asset. It will be the largest purchase they make in their lifetime. The money they make from their home (or lose) may determine what age they retire, what college they can afford for their children….or bigger yet, how much stress they’ll have in their lives. We cannot control market forces, but we can do our best to educate our clients to help them make the best decision with the information available. That is what we’re here to do. That is our obligation above all else.

So if you’re in the market to buy or sell, or even to rent, be sure to work with someone who knows what they’re doing. A new agent may be a completely fine person to work with, but make sure they have the backing of a team or a partner with experience. Make sure they’re committed to their job, to understanding the market, and understanding economic forces in general. If you’re looking to buy a new home, interview multiple brokers just as if you were interviewing someone to sell your home. Because at the end of the day how you buy your home today will determine how good of an investment it really is.

What to watch for in Real Estate in 2017

What should we expect in real estate in 2017 across the Chicagoland area? Will 2017 prove to be a year full of growth in Chicago or will rising interest rates temper growth? Will rent prices decrease due to excess multi-family building or will demand rise and keep up with supply? We all have our own thoughts and opinions; I’m sure you know I have mine. However, regardless of your opinions of the future of the economy, Chicago real estate or the real estate market as a whole, here are a few things to keep an eye on in 2017 in Chicago real estate.

1) Interest Rates

The Fed raised rates in the last quarter of 2016 and is expected to do so two to three more times in 2017. Sub 4% interest rates for a 30yr fixed is no longer in our vocabulary, but how high will interest rates go? Keep an eye out for how consumers react to rising rates. While the economy appears to be very robust and we are at what is considered full economic employment, it will be interesting to see how rising interest rates affects home buyer sentiment. In order to get a feel for the market talk to Realtors and talk to mortgage brokers to see how rising rates are influencing their clients decision making process.

2) Increased programs for low down-payment buyers

In the recent year we’ve seen several new programs come out that are what I call, FHA alternatives. They’re essentially low down-payment programs or programs that give rebates or closing cost credits that allow you to purchase a place with as little as 3% down. As these programs gain more momentum and awareness it will be interesting to see a couple things

a) How long will these programs last

b) How these programs are influencing demand in certain price ranges and areas

3) Keep an eye on how rental supply will influence both the rental and sales market

Increased supply on the rental market can greatly affect both the rental market and the sales market. Rent prices have increased drastically in the past 5 years in Chicago but they’re currently peaking and vacancy rates have increased in multi-family. New buildings are offering concessions as high as 2 months free. With more than 4500 units coming to the market in 2017, will people put off buying in favor of taking advantage of rent concessions? What happens if not only concessions increase but rent prices decrease as well? This coupled with rising interest rates could have first time home buyers thinking twice.

4) Supply….

Depending on the price range you’re looking in, supply is still low relative to the amount of buyers in the market place. We’re seeing increased supply of new construction in areas such as Ukrainian Village and increased high end supply in the Near North area but besides this supply has remained low which has help prices increase over recent years. Keep an eye on two things

a) New construction has been selling at a huge premium. Watch it’s market time in 2017

b) Will we see more existing construction come on the market to compete with new construction in 2017? Existing construction has been selling much cheaper than brand new construction. With rising interest rates existing construction may be more appealing given its lower price point.

5) Everything is wonderful…keep an eye on everything wonderful

Unemployment is at all time lows. Interest rates are still at all time lows despite recent rises. Property values in prime neighborhoods are at 2006 levels. The equities markets are booming. Startups are everywhere. Getting VC funding for new companies is like taking candy from a baby. Everything is going well. Keep an eye on leading indicators in all sectors of the economy that may signal a slow down. In real estate I am specifically watching the following in Chicago

A. Market Time of both existing and new construction

B. Absorption rate (How long does it take to sell all properties on the market if no new ones come on the market).

C. Price to rent versus the price to buy the same property. Currently it makes sense to buy given the increased rental prices. If rent prices decrease this could become a slippery slope.

 

The above is not meant to be a negative outlook or a “debbie-downer” of the real estate market. Personally, I think there are some areas that are a bit over valued but others that are very much under valued. I think the Chicago real estate market is strong, however, I do believe we’re now in a normalization of the market where prices will increase minimally to moderately each year and I think we will see rent prices decrease in the coming years.

Does this mean I shouldn’t buy? No, it doesn’t mean that. In some situations some people maybe should not buy. In others they definitely should. Each persons situation is different and that is why working with a Realtor that is completely transparent and honest with you is always the best policy. Anyone who tells you that buying is always the best option is nothing more than a salesman.

 

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is part of the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pblackburn.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

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!

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

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.

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