Monday, February 02, 2009

ARE CHICAGO HOME AND CONDOMINIUM RESALE VALUES LEVELING OFF AT LAST?

Is there a ray of hope in Chicago real estate amid the nation’s gloomy housing outlook?

The median home and condominium resale price in Chicago for 2008 was $290,000, down only 0.5 percent from $291,500 a year earlier, reported the Illinois Association of Realtors (IAR).

The median is a typical market price where half the homes sold for more, half sold for less. Some 20,589 homes and condos were sold in Chicago in 2008, down a whopping 25.1 percent from 27,503 sales in 2007.

Battered by the worst real estate market since the early 1980s, Chicago developers say they are beginning to grow weary of negative headlines that paint a bleak picture of the housing market, often without taking into account some of the positives occurring in the marketplace.

“One of my pet peeves is the business press always goes for the sweeping sensational headline and ignores the pockets of stability in the Chicago housing market,” said veteran Chicago condominium developer John M. Mullen of The Morgan Group, Inc.

“This week one headline reported that Chicago-area home sales tumbled 26 percent last year, but when you read the article you learned that median prices in the region only were down 5.5 percent, and in the city prices only eased a half of 1 percent,” Mullen said.

“What homeowners really want to know is: ‘What’s the value of my home? Give me the good, the bad and the ugly.’ They don’t care if home resale transactions are down 26 percent,” said Mullen, who personally would prefer resale data on average sale prices, not median prices, and average resale prices per square foot within “particular pockets in the metropolitan market.”

Mullen said, and most Realtors would agree, that home and condo resale prices have remained relatively strong in such high-demand city neighborhoods such as River North, the South and West Loop, the Gold Coast, Lincoln Park and the North Side lakefront. Thanks to the Olympic Games buzz, values also are strong on the Near South Side.

On another positive note, the IAR reported that in December of 2008, home sales in Illinois were up 7.38 percent to 6,590 units sold, compared with 6,137 units in November of 2008. For the year, a total of 107,680 home sales were reported in Illinois in 2008, down 23.3 percent from 140,378 sales in 2007.

“Some home buyers jumped in to get the great deals in the housing market as interest rates hovered near 5 percent for most of December,” said Pat Callan, president of the IAR.

Benchmark 30-year, fixed-rate mortgages for the North Central region averaged 5.19 percent in December of 2008, down 0.94 points from the 6.13 average rate during the previous month, reported the Federal Home Loan Mortgage Corp.

“Low interest rates and flexible pricing are bringing buyers into the market,” agreed David Hanna, president of the Chicago Association of Realtors.

“For the Illinois economy, the next few months will be critical, especially in the degree to which the state will be able to respond to funding initiatives associated with President Obama’s recovery package,” noted economist Geoffrey Hewings, Director of University of Illinois Regional Economics Applications Laboratory (REAL).

Meanwhile, experts say the Obama Administration plans to move quickly to tighten the nation’s financial regulatory system to prevent a repeat of the current economic meltdown.

Wide ranging regulatory changes are planned, including stricter federal rules for mortgage brokers, credit-rating agencies and hedge funds, reports Paul A. Volcker, a senior member of President Obama’s economic team.

Proposals include requiring the Securities Exchange Commission to become more involved in supervising underwriting standards of securities that are backed by mortgages. Also, federal rules would require derivatives and insurance-like credit default swaps be traded through a central clearing house.