Time to buy a home. In spite of the fact that the Case Schiller Price Index is falling again, market activity is up substantially. Inventories are falling, especially distressed homes. Some towns, like Glenview, are seeing low inventory, multiple offers and price increases. If the economy continues to improve this trend will only expand. We have a long way to go before a recovery but if want to buy in a particular area, now is the time.
Chicago-area home prices skid to nearly 12-year low
April 24, 2012
(Crain's) — A closely watched index fell in February for the sixth straight month, hitting its lowest level since May 2000.
The Standard & Poor's Case-Shiller index of Chicago-area single-family home prices fell 2.5 percent from January to February and was down 6.9 percent from the year-earlier level, according to a report released Tuesday. (Click here for more).
Tuesday, April 24, 2012
Wednesday, April 4, 2012
The New Fabulous
The Chicago real
estate market is starting to improve. That is a statement that will be easily
dismissed by many for being as naïve as it is premature. Sales
are up over 29% for the 9 county Chicago area and 16% for Chicago proper versus
last year. But due to the enormous overhang
of distressed properties prices continue to slide, being down 6.6% over
2011 and 37% off the market highs in 2007. Inventories in some areas are very
low mostly because anyone who doesn’t have to sell is simply not doing so. Loans
are still hard to get but there are signs that credit is easing.
So economic progress is glacial and no sales records will be broken in 2012. The decline
in average sales price is depressing revenues. But we are seeing significantly more transactions
and that is not something we were seeing last year. This trend will eventually soak up the distressed inventory. “Getting better” is a vast
improvement over 2009 where we were staring into the abyss of a dystopian real
estate world. It is even better than 2011 where sales and prices continued to
fall. Unemployment is down a tiny bit, GDP is growing slightly, and real estate
sales are up a smidge. Chicago's economy and so the real estate market is headed in the right direction, up! Getting better may just be the new fabulous.
Wednesday, October 26, 2011
Mark Pullinger in the Wall Street Journal
Home Prices Show Sector Still Ailing
By S. MITRA KALITA(WSJ) U.S. home prices inched 0.2% higher in August but declined 3.8% on an annual basis, according to a closely watched index released Tuesday.
"Ten of the 20 cities in the S&P/Case-Shiller composite index also posted gains in August, signaling some improvement in the battered real-estate sector...."
...."Indeed, in the Case-Shiller index, Detroit and Washington were the only cities to post annual growth; the Midwest—specifically Chicago, Detroit and Minneapolis—showed sharp monthly increases. Economists attribute this to some pickup in hiring in the automotive sector. In Chicago, first-time and luxury buyers are jump-starting the market, says Mark Pullinger, a spokesman for Koenig & Strey Real Living, a large brokerage in the area. "Inventory is down substantially, so it's being driven by…bargain hunters," he said. "There are areas that if you ever wanted to live in, now is the time to buy because the prices are relatively low. … The people in the middle are a little bit stuck. Their homes are not worth what they paid for them recently, so it's tough to move up.""
So now I guess I'm famous, (HA!) now being quoted by the Wall Street Journal. I noticed that they changed the title of the article since yesterday, from Little Hope for Home Prices to Home Prices Show Sector Still Ailing.
The article focused on some dour predictions by the Bank of America Merrill Lynch Global Research report about the overhang of distressed inventory. But the inventory in the Chicago area according to MRED is down 29%, which is very positive. This goes beyond the impact of more distressed properties on the market and in my mind all the news put together (prices, sales activity, inventory) signals a turnaround. Not the vibrant turnaround we might like to see, but a turnaround nonetheless.
My theory is that if the world financial markets can negotiate their way through the European banking crisis without a major collapse, we are on track for better times in real estate.
Friday, September 23, 2011
iPhone 5--Now This is Cool!
It is rumoured that the iPhone 5 will have a holographic image display and a laser keybord that will make it much easier (and more fun) to type messages. Check out this concept video from Aatma Studio in San Francisco:
Note to self: buy more Apple stock.
Note to self: buy more Apple stock.
Housing Slump Hits New Mortgage Loans
By NICK TIMIRAOS and ALAN ZIBEL
(The Wall Street Journal) Mortgage lending declined last year amid weak demand and tight credit standards, with particularly sharp credit contractions in neighborhoods with many foreclosures, according to the Federal Reserve.
In its annual analysis of mortgage data provided by thousands of financial institutions, the Fed found that lenders originated 7.9 million mortgages in 2010, down 12% from 2009. The only year they were lower in the past decade was 2008, when they hit 7.2 million. The Fed analyzed data from more than 7,900 mortgage lenders that are reported to regulators under the Home Mortgage Disclosure Act. Click here for more...
Not surprisingly, despite the lowest interest rates since almost the 1940's, the mortgage business is down because 1. Fewer people are buying homes, 2. Few people can refinance because the equity they have in their home has fallen too far, & 3. Underwriting requirements have become positively draconian.
Should lenders make it easier to get a loan?
(The Wall Street Journal) Mortgage lending declined last year amid weak demand and tight credit standards, with particularly sharp credit contractions in neighborhoods with many foreclosures, according to the Federal Reserve.
In its annual analysis of mortgage data provided by thousands of financial institutions, the Fed found that lenders originated 7.9 million mortgages in 2010, down 12% from 2009. The only year they were lower in the past decade was 2008, when they hit 7.2 million. The Fed analyzed data from more than 7,900 mortgage lenders that are reported to regulators under the Home Mortgage Disclosure Act. Click here for more...
Not surprisingly, despite the lowest interest rates since almost the 1940's, the mortgage business is down because 1. Fewer people are buying homes, 2. Few people can refinance because the equity they have in their home has fallen too far, & 3. Underwriting requirements have become positively draconian.
Should lenders make it easier to get a loan?
Thursday, September 22, 2011
Bloodbath?
Just as The National Association of Realtors reported that national total existing home sales increased 18% versus August 2010, and 7.7% versus July 2011, and the Illinois Association of Realtors reported that Chicago area home sales increased 26.7% versus last year, the stock market tanks 700 points in the past two days. Shall we write off any chance of a housing recovery before 2015 and pull the sheets over our heads until then? It's very hard to say.
There are definitely some good reasons to be wary: from a European debt crises that threatens the global banking system, China's manufacturing numbers coming in lower than expected, to our own Government announcing that our economy doesn't look so good. Part of this week's correction can be written down to Wall Street finally recognising that the last year of gains were based on false hopes and the Fed pouring vast amounts of cash into the markets. It is also profit taking as investors flee to the safety of bonds.
The real money, some $2 trillion or so, is resting on the sidelines waiting for our Government to figure out what taxes are going to be, what health care costs are going to be, and what the regulatory environment is going to be. These are significant unknowns that are preventing investment from occurring in a way that might spur job growth. Add to that a President who, in his rhetoric, seems to be going out of his way to pick a fight with business leaders and you have the perfect environment for a cautious investment climate.
The Wall Street Journal said today, "Home prices are expected to drop 2.5% this year and rise just 1.1% annually through 2015, according to a recent survey of more than 100 economists to be released Wednesday. Prices have already fallen 31.6% from their 2005 peak, as measured by the Standard & Poor's Case-Schiller 20-city index." About 20% of mortgages nationally and 27% locally in the Chicago area are underwater. This is a big drag on the housing market since it is very difficult to trade up to a new home if you can't sell your existing home. Much less if you are not sure that you will have a job.
So where are the silver linings? Actually there are quite a few. All predictions point to growth but forecasts vary in their optimism. The Congressional Budget Office originally forecast a GDP increase of 2.3% in their August 2011 Economic Update, but expect that to be revised to 1.3% at least for 2011. The reason? The inability of a meaningful budget deal, the US Government's inability to deal with its debt burden, inflation (on mostly gasoline & groceries) that is battering already black and blue consumers, high unemployment, low consumer confidence...do I need to say more? But the CBO is predicting GDP to increase sharply (3.6%) in the 2013 - 2016 period with unemployment falling to 5% by 2016. Ah, those halcyon days to come!
Additionally, as mentioned above, home prices seem to be stabilising and sales are increasing. Mortgages are extremely low and with the Feds new "Twist", may go even lower. A 30-year fixed conforming in the threes????
Despite the fact that they are reporting a lack of confidence, consumers are spending. Consumer spending, 70% of GDP, is up as evidenced by the fact that credit card debt has increased 368% year on year.
The price of oil is also going down because of global oversupply. This is a very encouraging sign, for the consumer because most consumers are also commuters, 128 million of us, who will have more money in their pockets to buy other things.
Even though investment is not all it could be, business investment is increasing at double-digit rates. While it accounts for only 10% of GDP, in 2011 it accounted for two-thirds of the growth in GDP. And businesses are paying loan rates last seen in the 1960's, making investment less painful.
But the key to housing is employment and the key to new hiring is confidence in the future. For businesses to hire more people, they need to know what their costs are going to be. If you don't have a clue about your ROI, there is not going to be any I. Until President Obama and the Congress can agree on a direction for fiscal policy we will have economic stalemate. Given all of the other headwinds for the economy we are unlikely to see an improvement any time soon. Everyone is waiting on Washington, if not Brussels. Given the climate, however, it is hard to see that much will happen before the election. And worse, the election is likely to be another cliff-hanger. That means small majorities to the right or left, and more stalemate.
What we have seen in recent weeks is nothing but pain as the world's major economies try to gain a footing on their debts. Until the the unnecessary budget crisis wrought upon us by Congress & the President last summer, most economists were predicting a slow glide upward in GDP and employment. Nothing dramatic mind you, but heading in the right direction. An economy apparently on the mend is now being undone by policy makers in what will be remembered as an historic lack of leadership. Europe stumbles, America argues, China slows and Rome burns.
The real money, some $2 trillion or so, is resting on the sidelines waiting for our Government to figure out what taxes are going to be, what health care costs are going to be, and what the regulatory environment is going to be. These are significant unknowns that are preventing investment from occurring in a way that might spur job growth. Add to that a President who, in his rhetoric, seems to be going out of his way to pick a fight with business leaders and you have the perfect environment for a cautious investment climate.
The Wall Street Journal said today, "Home prices are expected to drop 2.5% this year and rise just 1.1% annually through 2015, according to a recent survey of more than 100 economists to be released Wednesday. Prices have already fallen 31.6% from their 2005 peak, as measured by the Standard & Poor's Case-Schiller 20-city index." About 20% of mortgages nationally and 27% locally in the Chicago area are underwater. This is a big drag on the housing market since it is very difficult to trade up to a new home if you can't sell your existing home. Much less if you are not sure that you will have a job.
So where are the silver linings? Actually there are quite a few. All predictions point to growth but forecasts vary in their optimism. The Congressional Budget Office originally forecast a GDP increase of 2.3% in their August 2011 Economic Update, but expect that to be revised to 1.3% at least for 2011. The reason? The inability of a meaningful budget deal, the US Government's inability to deal with its debt burden, inflation (on mostly gasoline & groceries) that is battering already black and blue consumers, high unemployment, low consumer confidence...do I need to say more? But the CBO is predicting GDP to increase sharply (3.6%) in the 2013 - 2016 period with unemployment falling to 5% by 2016. Ah, those halcyon days to come!
Additionally, as mentioned above, home prices seem to be stabilising and sales are increasing. Mortgages are extremely low and with the Feds new "Twist", may go even lower. A 30-year fixed conforming in the threes????
Despite the fact that they are reporting a lack of confidence, consumers are spending. Consumer spending, 70% of GDP, is up as evidenced by the fact that credit card debt has increased 368% year on year.
The price of oil is also going down because of global oversupply. This is a very encouraging sign, for the consumer because most consumers are also commuters, 128 million of us, who will have more money in their pockets to buy other things.
Even though investment is not all it could be, business investment is increasing at double-digit rates. While it accounts for only 10% of GDP, in 2011 it accounted for two-thirds of the growth in GDP. And businesses are paying loan rates last seen in the 1960's, making investment less painful.
But the key to housing is employment and the key to new hiring is confidence in the future. For businesses to hire more people, they need to know what their costs are going to be. If you don't have a clue about your ROI, there is not going to be any I. Until President Obama and the Congress can agree on a direction for fiscal policy we will have economic stalemate. Given all of the other headwinds for the economy we are unlikely to see an improvement any time soon. Everyone is waiting on Washington, if not Brussels. Given the climate, however, it is hard to see that much will happen before the election. And worse, the election is likely to be another cliff-hanger. That means small majorities to the right or left, and more stalemate.
What we have seen in recent weeks is nothing but pain as the world's major economies try to gain a footing on their debts. Until the the unnecessary budget crisis wrought upon us by Congress & the President last summer, most economists were predicting a slow glide upward in GDP and employment. Nothing dramatic mind you, but heading in the right direction. An economy apparently on the mend is now being undone by policy makers in what will be remembered as an historic lack of leadership. Europe stumbles, America argues, China slows and Rome burns.
Friday, July 8, 2011
A Chicago Real Estate Agent Survival Kit
When the economic crash happened back in 2008, I remember someone saying “This is going to last for years.” At the time I didn’t want to believe him and as the Marketing Director I was not in a position to repeat his prediction as gospel. After all, I was the morale officer, the guy everyone expected to be positive about our prospects. But I knew he was right. Three years on and we are looking at much of the same terrain: weak GDP, high unemployment and weak jobs growth, slow home sales and falling prices, a financial sector apparently unwilling to loan money, and foreclosures out the wazoo. Selling real estate in the Chicago area is a real challenge. Economists polled recently are predicting more of the same for (gulp) “years to come.”
The most positive change from the fall of 2008 has been that our economy has at least stabilized. Thank goodness we are no longer looking at a total economic meltdown. What we now face is a tepid and slowly building recovery. In this environment silver linings must be embraced.
So welcome to the new reality, which is unlikely to change anytime soon. To survive in Chicago real estate sales you must embrace this new economic reality. But how?
Here is your survival kit:
Stay Positive. Your success depends on you. Regardless of the economic realities, homes are selling. Koenig & Strey agent, Joe Stacy commented, “I think [agents] need to accept the market as it is and expect the market to not change. If they aren’t busy selling homes now they need to look at what they are or aren’t doing and make changes, otherwise they will get the same results.”
For years we have all been reading books about keeping a positive mental attitude. Never was a positive mental attitude more needed than right now. Whatever you do to move yourself to a better place (whether it’s Yoga, exercise, going to dinner with friends, attending concerts, gardening or practicing your faith) take care of yourself and get into a routine of doing things that help you establish a positive attitude. If the news upsets you, stop watching the news. But you should also avoid negative people and focus on your own activities. When you start taking steps to improve your situation you will feel in control.
Have a business plan. Studies show that the vast majority of businesses that fail to have a plan, fail. Work with your branch manager to come up with a business plan, that’s what they are there for. Ask yourself what you want to earn, what is the worst case scenario, what will you spend on marketing and other expenses. List all of the activities that you will use to generate more business. Create a realistic budget that you can commit to. Stick with your plan unless changing circumstances demand you make a change. Monitor your progress frequently and stay “on plan.”
Have a marketing plan. Dove tail your business plan with a marketing plan that takes into account how you will get your name out in the area you service, who is your most likely customer, what organizations are you going to use as networking platforms, and what are the most effective marketing channels for reaching them (print media, web media, postcards, etc.) Be flexible in the execution of your marketing plan. You need to give it a few months. Reinforce those things that prove the most successful and drop things that show no or little return. You can also use your marketing plan as a listing tool by telling your selling clients how you go about your marketing. This will put you in charge.
Brand Yourself. Did you ever notice how some agents have remained busy throughout the downturn? Some even have more business than they had before. That’s because they are well known brands and trusted by the public. There is a flight to quality, or at least perceived quality. Clients would rather play it safe and work with industry leaders than an agent who may not know the market as well or provide as high a level of service.
Jeani Jernsted, of Koenig & Strey’s Gold Coast Office, recommends “Just like the big corporations you need a brand. Have all your marketing materials look professional. McDonald’s doesn’t kind of look like Burger King! Stand out from all the other “look-a- like” agents. Make your website some place people go for great information.”
Think about what makes you different in your experience, education, the way you serve your clients and the skill set that you offer. Play that up in your marketing. Of course, this means you have to DO personal marketing.
Only work with clients who are serious. If you find someone who will only list their home at pre-Lehman Brothers price, move on. They are fishing for buyers who will likely never materialize. Spend your time on clients who are realistic partners. As to buyers, get an exclusive buyer agreement up front. Sell your buyers on your experience and service and why you need a commitment from them. Let them know that a buyer’s agent has a fiduciary responsibility to represent only the home buyer’s best interest in all aspects of the home buying transaction. By getting a commitment up front you avoid spending untold hours (and gasoline!) driving clients around, only to have them bail out on you at the last minute.
Arm yourself with the latest marketing tools. If you don’t have a personal website that generates leads, get one. Having a web presence that includes a social media strategy (even a simple one) is essential. You must have a presence where your clients spend most of their time in order to generate leads and awareness. Your website could be a simple blog or a basic website, but it must have relevant content that will come up in searches. Clients interview you nowadays by Googling your name before the first appointment. If your only web presence is a complaint on Yelp.com you’ve got problems.
Stay in touch with your client base. Use Market Advantage or other email marketing system to stay in touch with your base. Send Market Watch reports to your clients. They are informative and easy to use. Make sure that you have your client’s names and all of their contact information saved on Client Connect. As Jeani Jernsted recommends, “Through emails or phone calls, let [your clients] know you are thinking about them: share some success stories you have had; tell them about an interesting property or project you have seen; let them know about market trends.”
Too many agents do not keep a reliable list of their contacts and do not stay in touch with them. Remember that the person most likely to do business with you is someone who worked with you previously. You should contact your client list at least once a month.
Improve your market knowledge. Being competitive means knowing your market cold. “If [agents] aren’t busy,” Joe Stacy recommends, “they should spend some time to attend seminars or advanced training for marketing or sales. They should also be out and about each day touring and looking at homes, learning about different areas to expand their knowledge.”
Be on top of your transactions. With lenders and appraisers being much more critical and buyers willing to back out on the drop of a hat, you must work harder on each transaction. Emily Sachs Wong affirms, “I have found that more so than ever, my immediate availability and constant involvement is needed to keep every deal together.”
Appraisals are especially difficult, as Emily relates:
“One important issue that I am running into are appraisals. I have had 12 properties over 2 months not meet contract price...and significantly so, resulting in over 30,000,000 in lost sales and hours of agonizing phone calls. It is important to really understand how an appraiser will look at the comparables on behalf of the bank. 6 months is the longest time now for comps, and it's important to know how they view square footage. We agents have long gone with "developer square footage" of exterior wall to exterior wall, on houses and condos, but lenders take inside only. It is so important to be sure the sellers understand that even if someone is willing to pay X, a bank may not lend on that. The comp has to be of exact like kind, not rehabbed vintage to new, for example. If there are no comps, the banks don't care. They ding the value. Discuss this upfront with agents making offers so they can prep their buyers.”
It is not easy being a real estate agent in Chicago in 2011. It's not easy in the good times either, as we tend to forget, but the pay checks are bigger. If you follow the steps above you will have more business and position yourself for an even better future. The time to start is today.
The most positive change from the fall of 2008 has been that our economy has at least stabilized. Thank goodness we are no longer looking at a total economic meltdown. What we now face is a tepid and slowly building recovery. In this environment silver linings must be embraced.
So welcome to the new reality, which is unlikely to change anytime soon. To survive in Chicago real estate sales you must embrace this new economic reality. But how?
Here is your survival kit:
Stay Positive. Your success depends on you. Regardless of the economic realities, homes are selling. Koenig & Strey agent, Joe Stacy commented, “I think [agents] need to accept the market as it is and expect the market to not change. If they aren’t busy selling homes now they need to look at what they are or aren’t doing and make changes, otherwise they will get the same results.”
For years we have all been reading books about keeping a positive mental attitude. Never was a positive mental attitude more needed than right now. Whatever you do to move yourself to a better place (whether it’s Yoga, exercise, going to dinner with friends, attending concerts, gardening or practicing your faith) take care of yourself and get into a routine of doing things that help you establish a positive attitude. If the news upsets you, stop watching the news. But you should also avoid negative people and focus on your own activities. When you start taking steps to improve your situation you will feel in control.
Have a business plan. Studies show that the vast majority of businesses that fail to have a plan, fail. Work with your branch manager to come up with a business plan, that’s what they are there for. Ask yourself what you want to earn, what is the worst case scenario, what will you spend on marketing and other expenses. List all of the activities that you will use to generate more business. Create a realistic budget that you can commit to. Stick with your plan unless changing circumstances demand you make a change. Monitor your progress frequently and stay “on plan.”
Have a marketing plan. Dove tail your business plan with a marketing plan that takes into account how you will get your name out in the area you service, who is your most likely customer, what organizations are you going to use as networking platforms, and what are the most effective marketing channels for reaching them (print media, web media, postcards, etc.) Be flexible in the execution of your marketing plan. You need to give it a few months. Reinforce those things that prove the most successful and drop things that show no or little return. You can also use your marketing plan as a listing tool by telling your selling clients how you go about your marketing. This will put you in charge.
Brand Yourself. Did you ever notice how some agents have remained busy throughout the downturn? Some even have more business than they had before. That’s because they are well known brands and trusted by the public. There is a flight to quality, or at least perceived quality. Clients would rather play it safe and work with industry leaders than an agent who may not know the market as well or provide as high a level of service.
Jeani Jernsted, of Koenig & Strey’s Gold Coast Office, recommends “Just like the big corporations you need a brand. Have all your marketing materials look professional. McDonald’s doesn’t kind of look like Burger King! Stand out from all the other “look-a- like” agents. Make your website some place people go for great information.”
Think about what makes you different in your experience, education, the way you serve your clients and the skill set that you offer. Play that up in your marketing. Of course, this means you have to DO personal marketing.
Only work with clients who are serious. If you find someone who will only list their home at pre-Lehman Brothers price, move on. They are fishing for buyers who will likely never materialize. Spend your time on clients who are realistic partners. As to buyers, get an exclusive buyer agreement up front. Sell your buyers on your experience and service and why you need a commitment from them. Let them know that a buyer’s agent has a fiduciary responsibility to represent only the home buyer’s best interest in all aspects of the home buying transaction. By getting a commitment up front you avoid spending untold hours (and gasoline!) driving clients around, only to have them bail out on you at the last minute.
Arm yourself with the latest marketing tools. If you don’t have a personal website that generates leads, get one. Having a web presence that includes a social media strategy (even a simple one) is essential. You must have a presence where your clients spend most of their time in order to generate leads and awareness. Your website could be a simple blog or a basic website, but it must have relevant content that will come up in searches. Clients interview you nowadays by Googling your name before the first appointment. If your only web presence is a complaint on Yelp.com you’ve got problems.
Stay in touch with your client base. Use Market Advantage or other email marketing system to stay in touch with your base. Send Market Watch reports to your clients. They are informative and easy to use. Make sure that you have your client’s names and all of their contact information saved on Client Connect. As Jeani Jernsted recommends, “Through emails or phone calls, let [your clients] know you are thinking about them: share some success stories you have had; tell them about an interesting property or project you have seen; let them know about market trends.”
Too many agents do not keep a reliable list of their contacts and do not stay in touch with them. Remember that the person most likely to do business with you is someone who worked with you previously. You should contact your client list at least once a month.
Improve your market knowledge. Being competitive means knowing your market cold. “If [agents] aren’t busy,” Joe Stacy recommends, “they should spend some time to attend seminars or advanced training for marketing or sales. They should also be out and about each day touring and looking at homes, learning about different areas to expand their knowledge.”
Be on top of your transactions. With lenders and appraisers being much more critical and buyers willing to back out on the drop of a hat, you must work harder on each transaction. Emily Sachs Wong affirms, “I have found that more so than ever, my immediate availability and constant involvement is needed to keep every deal together.”
Appraisals are especially difficult, as Emily relates:
“One important issue that I am running into are appraisals. I have had 12 properties over 2 months not meet contract price...and significantly so, resulting in over 30,000,000 in lost sales and hours of agonizing phone calls. It is important to really understand how an appraiser will look at the comparables on behalf of the bank. 6 months is the longest time now for comps, and it's important to know how they view square footage. We agents have long gone with "developer square footage" of exterior wall to exterior wall, on houses and condos, but lenders take inside only. It is so important to be sure the sellers understand that even if someone is willing to pay X, a bank may not lend on that. The comp has to be of exact like kind, not rehabbed vintage to new, for example. If there are no comps, the banks don't care. They ding the value. Discuss this upfront with agents making offers so they can prep their buyers.”
It is not easy being a real estate agent in Chicago in 2011. It's not easy in the good times either, as we tend to forget, but the pay checks are bigger. If you follow the steps above you will have more business and position yourself for an even better future. The time to start is today.
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