October 27, 2008
It looks like good old fashioned market economics has helped the real estate industry begin its crawl back to normalcy. NAR reported last week that existing home sales (which would include single family homes, townhomes, condos and co-ops) has risen to a seasonally adjusted rate of 5.18 million, up 5.5% from August and 1.3% from September.Home prices fell 9% in the last 12 months, according to the report. Lawrence Yun, NAR chief economist, said more markets are seeing year-over-year gains.
“The sales turnaround which began in California several months ago is broadening now to Colorado,
Kansas, Minnesota, Missouri and Rhode Island.”
In addition, the average mortgage rate for a 30-year fixed rate was 6.04% in September ’08 v. 5.38% in September ’07. For our neck of the woods – The Midwest existing home sales went up 4.4%, although they still remain 2.5% below a year ago. Why is this relevant for our relocation market? By definition, relocating transferees are coming from “somewhere else” and that somewhere else is more likely to be domestic than international. Increased affordability is a good thing for all markets, and is one of the important factors in reviving the industry.
October 20, 2008
The current financial crisis is being compared in the press to The Great Depression of the 1930’s. Visions of breadlines and shuttered businesses make everyone very nervous. The next nearest financial crises in terms of scope was the failure of the Savings and Loan industry in 1987. To put 2008 in some perspective, I spoke with my colleague Mark Pullinger at Rubloff. He suggested we consider the following statistics:
- The Stock Market: The plunge that began on Thursday October 24th, 1929 resulted in a loss of 89% of the market’s value. In 1987 the market fell 25%. The recent market sell-off resulted in a loss of 20%.
- Unemployment: In 1930 unemployment was 25%. Unemployment in 1990 nationally was 6%, or about where it is today, and remained stable throughout the crises. The gloomiest forecasts for 2009 project 7% unemployment.
- Bank Failures: In the year following 1929 more than 5,000 banks failed and depositors lost all of their money. Ultimately by 1940 more than 9,000 banks failed. In the period from 1986 through the end of 1989 over 650 Savings and Loan institutions and 1,530 banks failed creating total losses of $833 billion and cost taxpayers more than $500 billion. Since July 2008, eleven banks have failed with total losses at approximately $310 billion. Deposits were insured by FDIC up to $100,000 and are now temporarily insured to $250,000.
- Government Response: In 1929 the government deepened the crises by allowing banks to fail with depositors losing all their cash, cut the money supply, & initiated a global trade war by raising tariffs against imports. In 1990 the S&L industry was at first recapitalized and the Federal Government created the Resolution Trust Corporation, which effectively sold off the assets of failed S&L’s. In 2008 our government immediately and massively intervened by extending capital to banks, increased the money supply, and, as the recent G8 conference showed, international leaders are cooperating on monetary policy and lowering trade barriers.
Obviously challenges lay ahead in coming months. But panic is clearly unjustified. The world we live in is very different than 1929, or even 1987. The World survived each of these difficult periods and thrived afterwards and will again this time.
October 12, 2008
Being a devotee of Asian food and cooking, I have heard that Chicago’s Argyle Street offers visitors a taste of Vietnam. So, on a rainy Saturday, I donned my Wellies and headed out. Armed with my recipe for Pork Vermicelli Rice Bowls, I thought that I would pick up my supplies at one of the area’s well known Asian food markets.
My first stop was at Patisserie P., where word on the street is that this bakery’s chocolate croissants will give true Parisian cafes a run for their money! I walked in and was immediately greeted by Peter Yeun, the owner who is a world renowned chef trained here in Chicago at the French Pastry School. I decided to try one of the chocolate croissants, and after indulging, I can say that it was the best that I have ever had!
My next stop was to Tai Nam, an Asian grocery directly across the street. There, I scooped up all my ingredients for dinner which included fresh sugarcane and the exotic Gangala root. After a few hours of exploring the market, I was ready for lunch. I wandered down the street peering in the many gift shop windows and along the way, I came upon “The Roots of Argyle Mural.” A masterful work of art completed in 2006, this mural chronicles the people and industries that have impacted and shaped the community surrounding Argyle. Strolling further, I ended up at Baile, a French influenced Vietnamese sandwich shop where I was introduced to a pork “Po’boy.” The sandwich is a take on the New Orleans favorite but with the additions of pickled carrots and cilantro. As unconventional as it sounds, I gave it a try and it was outstanding!
After my afternoon on Argyle, I came away with a new perspective. I realized that Chicago has even more to offer than I ever expected-you just need to get out there and explore.
For anyone looking to relocation to Chicago, one of my broker associates, Connie Engel, was just featured in Chicago Tribunes “sell it to me” feature with a beautiful condo at 4444 N. Wolcott in the Ravenswood neighborhood.
Long a stable market with sturdy single family homes and rehabbed condos, it’s just the place for a family transferring to Chicago. Check out the entire article.
The optimists say 2009, the pessimists say 2013…..A moderate just came out with 2010. The National Multi Housing Council recently released numbers estimating approx 825,000 vacant SFHs and 125,000 vacant condos (in EXCESS of normal vacancy levels) in the US today. That’s an EXTRA 950,000 units to be absorbed. Unfortunately, that’s not the worst of it, this doesn’t factor in an add’l 2,000,000 in OCCUPIED homes on the market.
From a relocation point of view, what does that mean for Chicago real estate? No surprise, it means longer days on market and the need for more competitive pricing. Although Chicago is doing relatively well, transferees are (by definition) coming from/going to somewhere else. So when they’re coming from somewhere else there will be a lot of pressure for them to delay until they have secured a buyer at origination, or received a corporate buyout for their property.
Well, Arthur Rubloff was an optimist (as our ads point out) – Who wouldn’t be if they opened a real estate company in 1930 during the great depression!? Chicago’s relatively stable real estate market will help see us all through this situation as we take blows from the financial markets; credit markets; and areas harder hit by the housing meltdown.
Good thing we’re known as the city of broad shoulders!
October 6, 2008
In a 263-171 vote, the house of representatives passed a massive bailout program last week that Mr. Bush very quickly signed into law. (How) does this affect someone wanting to relocate into or out of Chicago?
Well, with some really really bad loans being taken off the books of many institutions, the theory is that they’ll have money to lend again — Presumably in a more cautious and responsible way. As much as it’s no fun to take the burden for those no-doc loans, it probably was necessary to keep our economy working. Thanks to the FDIC no one has lost cash in a bank in a long time – but to see money market fund values dip below $1/share was a bit dicey to take.
Baird & Warner sees many many relocation buyers and sellers each year, and at the end of the day the more people who are available to buy your place, the easier it is for entire system to work. And it certainly can “trickle up.” For example, when a responsible young buyer gets a loan for that first home condo in Lakeview, they give the opportunity for the seller to buy a step up larger condo in Ravenswood. That seller in turn can buy a larger townhome in Andersonville. Etc. etc. until you are buying a $1000/sf luxury home at The Ritz Carlton on Michigan Ave. in Chicago’s Goldcoast!
October 1, 2008
Chicago-based agent Doug Fox was recently cited in Forbes Magazine’s article on the Midwest market slump. He very accurately points out that Chicago, and the upper bracket in general, is holding strong –Read the article here