4 March 2010

Jones Lang LaSalle, Inc, just published the 2010 Chicago Skyline Review, its graphic report that highlights the downtown rental market. While vacancies in some key buildings are limited, including Willis Tower and several others, there is plenty of space available in prime locations.

Vacancy rates currently run at just under 15%, which is up 5% from a year ago, and rents have decreased about 25%. Three new office buildings joined the market in 2009, but no additional units are expected in the next several years. According to Jones Lang LaSalle, no significant influx of tenants is expected until at least 2011, since most employers want to see a much more stable economy before expanding operations or changing space. While this combination has building owners concerned about their maturing debt and building value. However, Jones Lang LaSalle managing director Bruce Miller projects that most lenders will extend terms before suing for foreclosure, and that more of these buildings will be marketed in the near future.

To Use a Lock Box or Not to Use a Lock Box

As an active agent I am in the field every day meeting clients, submitting contracts, showing my listings or viewing other agent’s listings. To me real estate is not just a job or a career, it’s a lifestyle. I’m “at work” from the moment I wake up until the time I go to sleep. One of the beauties of my profession is that you can put as much or as little of yourself into it depending on how much you have to give and how much you desire to get out. As with many things in life this flexibility is also one of real estate’s most formidable curses. In this series I will attempt to portray examples of how we as Realtors earn our commission and where we have room for improvement. One of the largest problems I see is that while new agents have to go through a class and a pass a couple tests to obtain a license, these tests are strictly about real estate law. Nowhere in the curriculum is there anything that has to do with how to succeed at real estate and be a positive member of the community of Realtors. The result often times is an agent who thought they would succeed simply by obtaining their license. This may have been true before the bubble burst, but the times they are-a-changing!

Earning Your Commission – Part 1: Lock Boxes are for Lazy Realtors

As we approach the end of the Home Buyer’s Tax Credit, business has been picking up quite a bit. Buyer’s agents are busy showing listings to prospective buyers and listing agents are busy showing their listings… or are they? Speaking from personal experience, I am more and more frequently greeted by a lock box at the door instead of an actual agent. I find this a little concerning for several reasons.

Call me old fashioned, but when I want to sell something you’d better believe that I’m going to be in attendance leading the presentation! As Realtors we have a fiduciary responsibility to our clients to keep their best interests in mind at all times. When selling a listing this means that we owe it to our clients to earn them the highest net price possible for the sale of their home and in the shortest amount of time. In my humble opinion failing to show up to present a unit, especially a single family home or one that is in a building rich with amenities, is a violation of that responsibility.

A Few Exceptions

I know that a lot of people reading this diatribe will be thinking of situations where a lock box is perfectly acceptable. Here are a few I can think of:

1. You’re doing a favor for a friend selling their dilapidated old investment property and the listing is a $20k foreclosure in an area that is 45 minutes one-way from your office. On top of that 90% of the interested parties are cash investors that have such a long list of properties to view that half the time they don’t even show up for the appointment, and the other ten percent are those poor misguides souls that are hoping to buy that property with a loan of some kind. I get it! To me putting a lock box on this property makes sense. There’s nothing to sell about this property, it’s distressed, it has mold, it smells, most likely there are no appliances and some of the copper pipes have been removed. No presentation in the world is going to shed any light on this property. Just make sure that you regularly get out to the property and test the lock box to make sure it’s still there (no joke) and functioning properly. I can’t tell you how frustrating it is to trudge around a snow bank looking for a lock box that isn’t there with a car full of clients watching or trying to open the lockbox with a screw driver even though it’s frozen solid because you hung it underneath the overflowing gutter.

2. You’re going out of town. This makes sense too. Though when I’m going out of town I always find a fill-in, I understand that some agents working very much on their own may not have the luxury of a friend in the business. In this case, it seems understandable.

3. You have two showing appointments at the same time and can’t be in two places at once. This is one area where I feel, as a whole, we can improve. If someone calls me for a time to view my listing, and I’m busy at their requested time the response by the buyer’s agent is usually, “okay thanks anyway.” Typically this is followed by me attempting to figure out an alternative time that I may meet them during their trip. If this is not possible, a lock box makes sense. Many times though we are able to work something out where I can be present. One key to earning your commission is flexibility!

If I’ve left something out, I encourage feedback from those reading… Please leave your comments below.

Typical Showing with a Lock Box

I show up to a multi-unit building. My clients and I locate the lock box (hopefully) and access the unit (hopefully). Now that we’re in the unit looking around my client is interested but has some questions. Having no listing agent around or available by phone we write these questions down and continue looking. We notice some discoloration on the ceiling tile in the bathroom. This could have been the result of a leaky toilet above that was resolved a year ago, but without an agent there to explain this to us, all we see are signs of water damage. Now my clients want to know about amenities. The listing sheet mentions that there is a roof top deck but there was no key in the lock box for this, and no directions on how to locate it. It also mentions storage, again no key, and no directions. Often times these lock boxes are not big enough to fit multiple keys in so the lazy Realtor will just leave them out. As a result, my clients who are very interested in the amenities never get to see the pool, recreation room, movie theater, or whatever else could have been unlocked by the key that was not included. On top of that many times the full list of amenities is not even included on the listing sheet. Because of a lazy listing agent, my client takes a pass on this unit and buys elsewhere.

Combating this challenge

As I encounter (or don’t encounter) lazy Realtors often these days I have found it necessary to become something of a detective while on site – I stop residents and ask them about the building, and if there is a doorman, I’ll ask him as well. Almost every single time I show a home in a multi-unit building I find out something noteworthy that was not on the listing sheet. Surprisingly enough it is usually something important such as a fitness room, a dog run, or even a pool on the roof! Not all buyers have unlimited weekends to shop and therefore may only get one chance to view your listing. It may or may not surprise you but the fact of the matter is by being absent from the showing, the listing agent is hurting themselves, their client and the prospective buyers. Too often, when acting as a buyer’s agent, I am left to do my job and that of the listing agent (yet only collect half of the compensation!). One of the ironies is that after a showing I will be put on an auto-email feedback campaign that repeatedly asks for feedback once a day until I respond.

How it should go

When someone shows up to one of my listings, I give the buyer a full brochure detailing the unit’s benefits. This brochure also contains a list of the building amenities as well as a site guide (a map and list of common interests such as neighborhood hot spots, restaurants etc) for the surrounding area. I then show them the unit, pointing out every part of it that may not be caught on first glance; the level of fixtures, the quality of the construction, the exposures of the windows and how that will affect the light in the unit, etc. If they are still interested after seeing the unit, I will then take them to see the building amenities all the while attempting to learn more about the buyer’s needs and make an effort to relate how those needs may be met by my listing (let’s see a lock box do that). Along the way I answer any questions the buyer has on the spot instead of leaving them to wonder or hopefully remember to ask later. There is no question that giving a full presentation increases the chance of obtaining an offer.

Even if these buyers are not interested in my listing, I did my best to present it to them. I also was able to get feedback based on their reactions to my listing to report back to my seller.

Working Smarter not Harder

I am all for working smarter not harder. I just don’t feel that lock boxes qualify for this designation. I am sure that many of you reading have an experience or twenty where a lock box prevented you from doing your job. I have too many to recall without sounding like I’m on a rant… suffice it to say, if you are a Realtor who regularly uses a lock box even though you know in your heart that you could and should be there to present your product it may be time to re-think your strategy. Without having statistics to back me up, I would like to speculate that units that are shown by the listing agent have lower market times and higher sale price verses market value than compared to units that were sold using a lock box. I challenge anyone who disagrees to please speak up!

Please bookmark TheChicago77.com and return for more of my series “Whatever Happened to Earning Your Commission?” I would like to thank all of the excellent Realtors out there including the people who taught me the right way to do things. I would also like to thank those lazy Realtors out there for giving me something to write about.

We would like to thank Iowa_Spirit_Walker for kindly sharing today’s photo via the Creative Commons License.

3 March 2010
Campaigning for more Wal-mart stores continues as store closings & job losses rise. This time, with the Lord on their side. The Chicago alliance of just over 200 ministers representing a congregation of over 100,000 plan to put the pressure on Mayor Daley to grant approval for construction to start on a new Wal-Mart at the Chatham Market shopping center. Their hope is that it will save the project from falling into foreclosure. Also part of the plan is to pressure aldermen to approve this store and other stores needed in retail starved neighborhoods like Englewood and Pullman. If this approach fails, the ministers & their mobile congregations plan to mount a campaign against alderman who oppose the Wal-mart expansion and in turn support those candidates who are in favor through political advertising and strongly urging a vote against dissenters. Alderman need votes and churches offer lots of congregants so the ministers feel they have a powerful weapon. For their sake, I hope so. Because even if they get the thumbs up from the aldermen, it’s still possible to hit a road block with the city council and the department of zoning.

1 March 2010
The two federally insured companies that purchase mortgage backed securities, Fannie Mae and Freddie Mac, have announced 2009 fourth quarter losses of approximately $15-Billion. The two companies are reportedly planning on asking the Federal Government for more bail out funds. While some might say… “let them go under,” think about this first. Fannie Mae and Freddie Mac make up 70% of the mortgage loans throughout the United States today. On average, this year,  there are about $53,000,000 in mortgages across the country. Fannie Mae and Freddie Mac hold about $31,000,000 of the $53,000,000, with only a 3% default rate. If the Federal Government allowed Fannie Mae and Freddie Mac to go under, the housing market would not only slow down, it would disappear, and the impact on the overall economy would be devastating. Alternative solutions should be considered, solutions that would offer gradual changes to the system, rather than economy-killing one-time events.

The Spire

Garrett Kelleher, the Irish developer who was the visionary for Chicago’s proposed newest landmark, the 150-story Spire, is now being sued by Bank of America for $110,000 in unpaid credit card bills related to the stalled construction project. Allegations have been added to a lawsuit filed in August by Bank of America to recover an additional $4,900,000 lent to Shelbourne Development, Kelleher’s development company. Kelleher personally guaranteed two credit cards issued by Bank of America in 2006 and 2007.

The Spire Developer Defaults on Loans

Additionally, in December 2006 Bank of America provided Shelbourne with $3,000,000 in the form of a revolving line of credit for the project, designed by the world renowned Spanish architect Santiago Calatrava. In June 2007, the bank extended a $7,000,000 term loan to Shelbourne for the Spire, the terms of which were later amended to give the developer until November 2008 to line up a syndicate of investors to provide construction financing for the project. Shelbourne missing the deadline and defaulted on the above loans as the real estate market cooled and capital markets froze.

Landmark Single Family is on the Market

In April 2006 Kelleher bought a 1912 Arthur Heun designed Georgian with Palladian windows at 1416 N Astor Street for $8.5MM. The personal residence has 5 bedrooms, 6 ½ baths and sits on a 75 x 110 lot with English garden and 4 car garage. The property is now on the market for $20 million, and rumor has it that Kelleher is moving back to Ireland.

Panic at the Bank

There have been a lot of people speculating on what will happen to the market once the Fed stops buying mortgage backed securities and interest rates start to rise… It is logical for me to think that once the tax credit is over and the interest rates start to climb that buyer’s will be scared away from making a purchase. However, I cannot help but notice that often buyers and their buying habits are illogical and therefore I am moved to wonder if buyers will react in an illogical way to the news that it is becoming more expensive to buy a home.

I have had similar concerns as Robert John Anderson’s Article, “Up UP and Away…” and the more I read on the subject the more I start to wonder how much I may be caught up in a trap of logic. For instance, I read a significant amount of blogs from homeowners that are worried that their house is upside down, and want to walk away from their mortgage even though they had no plans to do so before the “bubble burst.” As any seasoned agent will attest real estate is a long term investment. If the home owner stays put and keeps making their payments they will probably weather the storm except in extreme cases. People’s houses are only upside down if they try to sell in this market. Buying high and selling low is a byproduct of panic and doubt in a market driven by hype.

Have We Hit the Bottom?

I wonder if once interest rates start to go up and housing prices continue to rise (in some markets) will people see that the bottom has passed them by and RUSH to catch the “up trend” before prices and rates get too high. I find in may ways people are largely motivated by the taxation of their own procrastination and as such, once they see what their procrastination has cost them in interest rates and housing prices, they may move quickly to avoid missing out even more.

Think of it like this: Joe Smith gets a parking ticket for parking on the North side of the street during the second harvest moon of a leap year (Joe lives in Chicago). Knowing he has time to pay, he does nothing. Then he gets a reminder in the mail a week later telling him he owes the city $60 and he still does nothing. After a couple weeks go by, Joe gets another reminder from the city telling him that in a month the ticket will double. Knowing he has a month Joe still does nothing until the day before the ticket is due and he finds the reminder buried under a pile of other documents and then, with the thought that his procrastination is about to cost him even more money he decides to pay.

In this vein, I hope that Joe Housebuyer starts to see the rates and home prices going up and decides, “gosh I’d better buy that house I’ve been meaning to buy before things get too expensive and I ‘miss out even more.’”

Home Buyer Tax Credit Helps Spur on Sales

As I don’t believe in coincidences, here are some things I have noticed – last year, entering real estate’s slow, season the government announces the first Home Buyer tax credit. At a time of the year when sales usually slump many people hit the market to take advantage and right before it expired there was an enormous flood of buyers pulling the trigger. Then, right in the middle of the slow season, the government decides to extend the credit and even open it’s doors to repeat buyers. Even though buyers were given five months we didn’t see an immediate reaction from them (December and January were slow). February has already started to pick up and it just so happens that this extension will end right at the beginning of what is traditionally the “busy” season in real estate. I’m sure we can all agree that March and April will be a very busy for the same reason that October and November were. I wonder if the flood of last minute buyers that hit the market will pass the baton to the buyers who have been waiting to shop for nicer weather (if anyone doubts this look at any year’s sales numbers Summer vs Winter when a huge tax credit wasn’t involved). These same buyers may also be motivated by the fact that the bottom passed them by while they hibernated over the winter.

Another thing to consider is that even though the Tax Credit is going to expire, many people will still be looking for a home. I have several clients now that, even though they qualify for some portion of the tax credit, have made it clear that finding the right home is more important to them than claiming their portion of the tax credit (many people do not qualify for the full $8,000). In addition, this tax credit has attracted a huge number of people to the market who have no chance of qualifying to buy a home simply to try and “get that money!” After the tax credit is over, many of the “buyers” that decide not to buy will be those people who had no hope of buying in the first place. This could be a boon for us going into the summer when the number of buyers is traditionally higher because agents will not be distracted by “dreamers” and can focus on serious buyers who actually qualify to buy without the hopes of an $8,000 bridge loan, etc. All of this on top of the enormous amount of low-priced Short Sale inventory on the market and even more to come, combined with the Short Sale Guidelines set to kick in on April 5th of this year (another timing “coincidence”) I predict that buyers will have enough motivation to keep the trend on an upward rise and the policies in place to make their purchase go more smoothly.

While there are too many variables to be sure… I remain hopeful.

We would to thank Dominic’s Pics for sharing today’s photo vie Creative Commons License

25 February 2010 –

Tuesday was a big day for one of Chicago’s newest skyscrapers, located at 225 N. Columbus in the Lakeview East development. The Aqua, a 82-story residential building was named 2009 Skyscraper of the year by Emporis, a firm that sells data about tall buildings and annually judges the best new projects. Second place went to O14 in Dubai, third place went to the Met in Bankok. Chicago Trump International Hotel & Tower finished 5th.

The Aqua was designed by Jeanne Gang, of Studio Gang Architechts. While this is her first hi-rise structure, Gang relied on principles she uses to design smaller buildings. Her philosophy is to focus on function first, then design a structure to fit that function and the surrounding environment.

The judges praised the building for its curvy design that changes depending on the angle of the view, and its eco-friendly features, including coated concrete to reduce heat-islands, balconies that strategically shade units during full-sun hours, and windows that deter birds from flying into them.

24 February 2010 –

Centrum Properties has been served a foreclosure notice from Wachovia Bank for the parcel located on the corner of Ashland, Lincoln and Belmont. Centrum purchased this 80,000 square foot site in 2005 for $18,700,00 with the intention to build a $100-million retail/residential project called the Lakeview Collection. In 2008, Centrum restructured their plans dropping condo development for 130 apartments. Unfortunately, financing for new developments ceased to be available as the financial crisis intensified, leaving developers like Centrum stuck with land loans that they cannot pay back.

Centrum is working with another equity partner, and has had productive discussions with Wachovia to restructure the loan.

According to Crains “Centrum has no plans to give up the property and still plan to build a scaled-back project on it with about 100,000 square feet of commercial space but no residential. CVS Corp. has signed a lease for a roughly 13,000-square-foot drugstore there, while Bank of America N.A. has a lease for a 7,500-square-foot branch.”

You Compare When You Buy Groceries...Why Not When You Finance a Home?

The purpose of this article is to discuss the difference of obtaining a mortgage through either a bank or a mortgage broker/banker and the importance of shopping around.

Many of my clients get into home buying in much the same way. Eager to get out looking at properties with no idea how much money they qualify to spend. As any seasoned agent will testify encouraging new clients to take this step is a prickly pear. While the importance of this step is obvious to those in the industry, some buyers are more exited about shopping than they are about figuring out whether they can afford what they’re shopping for. The test for the agent is how to encourage the latter without extinguishing the motivation of the former. While this article is not meant to explain the prudence of pre-qualification, let it be said that this step is enormously important for an efficient home shopping and buying experience.

Shopping at the Local Bank

Many home buyer’s start with the bank they have their checking account with when looking for a mortgage. “After all, I’ve banked with them for 30-years, I’m sure they’ll give me the best rate.” While this is a perfectly acceptable first step, to stop here would be erroneous for several reasons. First of all, a bank has only one option for their clients, their product line. A borrower will either qualify or not. If a borrower qualifies for a mortgage through their bank without shopping around, they have no idea if they are getting a good deal. In a situation where the slightest adjustment can equate to many thousands of dollars paid in interest by the borrower as well as how much house they can buy, it is a wonder why many people stop at the first bank they go to. These are the same people that will go to three different grocery stores in order to get the cheapest price on eggs! Assuming the borrower is approved and decides to shop, they must go through the same labor intensive process of calling three or four banking institutions and engaging in the application process three to four times in hopes of obtaining the best deal.

If a borrower is turned down at a bank for one reason or another, they have to start from scratch. Not giving up, say this borrower goes to another bank and applies there and is denied again. This process could repeat indefinitely because of a small criteria on their application that many banks would say no to. The rub is, there may be a bank out there that would salivate at a chance to loan this person money and since the original bank is a small or regional bank with few branches the potential borrower may never know about the other possibilities.

In addition, many major banks have much stricter lending guidelines regarding the property a buyer is attempting to purchase. In major metropolitan areas this is a significant concern as many properties for sale are in multi-unit buildings and the guidelines vary greatly.  Such as  percentage of owner occupancy to the type of ownership. Try asking Chase for a loan in a co-op. (Cooperative: meaning the buyer is purchasing personal property as is therefore buying stock in the association).  As such a borrower may qualify for $200k loan from their bank, but they will be limited to the buildings they can buy in. If a building has a 100% occupancy and more than adequate reserve cash, some banks will still reject a loan for a unit in that building because it has only 69% owner occupancy. In this case an under educated buyer would be turned away from a property that meets their needs. The worst part is if they would have elicited the services of someone who is paid to know where to shop their file, they would have been able to purchase that unit without a hitch. It is sad to think of how many people were turned away from their dream home because because they didn’t shop around.

Working with a Mortgage Broker

The easiest way for me to describe what a mortgage broker does is to use an analogy. I typically explain that a mortgage broker is like a Geico for mortgages. They work with many banks; big and small, credit unions, private lenders and more in order to find you the best possible deal with the most options. In some cases they can get you a better rate through your bank than you could get! You apply once with them and they do the shopping for you. As many agents do, I have a preferred lender (a Mortgage Banker) that I recommend to my clients as well as a back-up or two just in case. Because my preferred lender works with 30-plus lenders and knows the in’s and out’s of their requirements, he is able to take our client’s file along with the property information and submit it to the right lenders the first time. Based on my experiences and those of my clients I have found an improvement in not only the rates and fees, but a significantly higher level of customer service. Of course there are always exceptions, and I have had my fair share of bad experiences with brokers and banks alike. The simple truth is that you should consider your Realtor’s referral of a mortgage professional as a strong candidate. If you don’t trust your Realtor, why are you working with them? I cannot tell you the number of times my clients went with a lender they’ve never worked with before, and because of poor customer service and insufficiently explained loan guidelines they missed out on their first choice. In some cases with clients who had low, out of pocket funds, a bad lender ruined their chances of buying all together (write me privately if you require an explanation). The reason I choose my lender is not because he is a nice guy, though he is, it is because he works with a reputable Mortgage Banker, is willing to be competitive with pricing, and he has the level of customer service and responsetime that is needed to get the job done quickly and correctly the first
time.

Mortgage Bankers

Mortgage Bankers have the best of both worlds when compared to Banks and Brokers. Like brokers they work with many lenders of various types to fit as many loan scenarios as possible while also shopping around for the lowest rates. Like banks they have the ability to write loans in house. Since Mortgage Bankers are considered a lending institution they are held to a higher level of accountability on the loans that they originate. As we endure the aftermath of an under-regulated economy largely driven by the bad loans written over the past few years, more accountability is never a bad thing!

See For Yourself

While researching this piece I have come across a lot of hearsay about who’s fees are more or less and who’s rates are better or worse. To that I say, the proof is in the pudding. Rather than listen to spin one way or the other, call a bank, call a broker, there is no fee for pre-qulification. Because rates and terms change daily, make all of your calls on the same day. This is extremely important when trying to see who is giving you the best deal. Also, ask them all for a “Truth In Lending Statement.” This will make sure you are getting the same information from everyone you talk to. This will include fees, interest and APR (educate yourself about the difference between the two). Remember that almost everything you are being charged for your mortgage, be the fees or rates, may be negotiable. I would recommend making it known up front with all parties you engage that you plan to shop, and give them one shot to give you their best number. Let them know that customer service and timely response is a factor. Service is critical. If you get the lowest number from someone that takes a week to return your phone call you may want to use their number to whittle down the price of someone who has better customer service. In the time sensitive business of real estate, the difference a couple of days can make could mean the difference of you getting your dream home or not. In my humble opinion, a slightly higher up front fee (if applicable) may be worth the value of service you are getting.

We would like to thank Omar Omar for kindly sharing today’s photo via Creative Commons License.

23 February 2010 –

After an abysmal year, 2009 proved to be the worst year in Chicago condo sales history. With that said, new construction condominiums will be hard to find in 2012. No new construction buildings have been proposed to the City now or for the future.

According to The Chicago Tribune, “This year, six new buildings will be completed and ready for occupancy downtown, bringing 1,200 units to the marketplace. That compares with a record 3,600 new units finished in 2009, according to Appraisal Research Counselors’ year-end report.
But in 2011, only two high-end properties, the 86-unit Ritz-Carlton Residences and the 198-unit Lincoln Park 2520, both Lucien Lagrange-designed projects, are scheduled to deliver. As of right now, there are no condominium developments scheduled to be completed in 2012 and beyond.
The firm’s survey covers an area bordered by North Avenue, Cermak Road, the Chicago River/Ashland Avenue and Lake Michigan. How do those numbers compare to what the area has already seen? On average during the past 19-years, 2,400 for-sale units have been added to the market each year.”

There will no longer be new construction competition therefore there will be a stronger re-sale market within the city. This is good news for those that currently own. Now is the time to buy to take advantage of the buyer’s market as well as to take advantage of the re-sale market down the road.

The sky is falling?

Between the Fed’s FOMC minutes from its last meeting and the raise in the discount rate on Friday, prices in the mortgage-backed securities market have decreased by 1% and many banks have raised their 30-year fixed rate mortgage rate by .125% to .250%.

Is the Sky Falling?

Does this mean that rates are heading to the moon? Do you need to drop everything and refinance your home or purchase a new home right now? Have you lost out on the low rates that many borrowers and new home buyers have enjoyed for so many months.

The short answer is “No”….at least in the near term. There is no need to panic. The minutes of the FOMC meeting had a lot of back and forth on when and how the Fed will sell $1.25 trillion of mortgage-backed securities. If the Fed were to dump all of these securities today, it would raise the rates on new mortgage-backed securities because there would be more securities than investors. Rates of new mortgages would rise because most home mortgages in the US are funded by mortgage-backed securities. It is simple supply and demand.

But the Fed is not going to dump $1.25 trillion of securities. The Fed is slowly going to begin selling these securities, and there may be no additive change in rates. In fact, the Fed has been talking about this for so long that some of the change in rates is already priced into the market. Just the same, investors felt shocked and mortgage-backed prices went down by 0.28%.

What is the Impact of the Discount Rate Increase?

Well, what about the Fed raising the discount rate by 0.25%? Quite honestly, the Fed has been talking about eventually raising rates for months. This is not a surprise, but that does not stop the markets from over-reacting which drove down the price of mortgages by 0.68%.

But investors do that. The mortgage-backed market, like any market, is driven by fear as much as any other market (see stock market in 2008). No matter how many times the Fed indicated that it had to start raising rates at some point, investors and traders always like to show their shock, which causes prices to drop. Banks are still getting their bearings so when the prices in the mortgage-backed market go down, banks raise their mortgage rates to consumers by 0.125% to 0.250% to cover their market risk. Just because the Fed said it would happen, does not mean that people don’t panic when it does happen.

Rates Are Still at Historic Lows

So what does this mean? Well, in the short term, nothing! Mortgage rates are still at historical lows. There is no reason to panic. Even if rates on 30-year fixed rate mortgages rose by 0.50% to 1.00%, it is still a pretty good deal versus historical rates.

Whatever you do, do not panic! If you were thinking about refinancing, then you should probably start looking for a lender. If you are looking at buying a home and you think your personal finances can handle a mortgage payment, then now is a good time. If you need another 6 months to shape up your credit score and save some money for a down payment, you have time to do it.

Do Not Panic, But 5% Mortgage Rates Won’t Last Forever

There is no reason to panic, but keep in mind that the trend for rates is going to be toward the upside. The Fed began raising rates to signal to the markets that the gradual tightening of credit has to begin at some time. This raising of rates and selling of securities has to begin. Rates will go up. Not today, but within a reasonable time frame.

We cannot count on 5% mortgage rates forever. This is something you have to realize. There is no reason to panic and jump in with a new home purchase, but you will not have forever to enjoy this rate climate.

We’d like to thank damonj74 for kindly sharing today’s photo via the Creative Commons’ License.

Will rates float up and away?

To date, the Federal Government has pumped over $1.25 TRILLION into the mortgage market in an attempt to boost slumping activity and aid the overall economy. However, the end may be in sight – the Federal Reserve is considering ending aid as of March 31.

The Real Estate Market Drives the Economy

The housing market has been a form of life support to the economy—without this activity the economic crash would have much more severe. If the government withdraws their support we will very likely see significant upward movement in mortgage rates, causing another decline in the housing market.

Most mortgages are not held long term by banks. Instead, they are packaged and made attractive for sale to Wall Street. This creates liquidity in the banks, and frees up money to be lent again in the mortgage market. After the credit crunch erupted in 2008, many investors lost their appetite for mortgage backed securities, and the Federal Reserve stepped in to fund purchases on the secondary market and keep money flowing back to banks and ultimately to home buyers.

The Federal Government Plans to Pull from Mortgage Baked Securities

In January 2009, just after the 2008 credit crunch, the Fed started buying securities back by Fannie Mae, Freddie Mac, and Ginnie Mae, with the original plan of continuing this activity through January 2010. They have since extended the program an additional three months to continue support of the housing market. The ultimate outcome of this program will not be known until the government sells off these securities to other investors. The degree of profit or loss remains to be seen.

Experts agree that if the Federal Government stops the assistance program, mortgage rates will rise. Right now, they are absorbing about $12 billion a week in excess supply. When they stop, the market will have to pick up the slack.

First Time Home Buyer Tax Credit Set to Expire

My personal concern is that with the home buyer’s tax credits of $8,000 first time buyers and $6,500 for repeat buyers expiring on April 30th, what will motivate the buyers? Those people who were on the fence may have bought a little earlier than they had planned due to the incentives, but what happens May 1st? No more tax credit, combined with rising interest rates, certainly limits the incentives and motivation of potential buyers. The cost of buying a home will rise significantly and we may expect early summer sales to slow.

If sales do slow what will the Federal Government do? Will Congress simply activate a third tax credit (or as I like to call it, tax crutch) for another 6 months… as it did it once before? And what after that?

We would like to thank James Canby for sharing today’s photo via Creative Commons License

18 February 2010 – In 1979, producers of “The Blues Brothers” brought to life and then destroyed the old Dixie Square Mall in Harvey. The mall had been closed for a short period before the film’s famous car chase wound its way through the stores and shoppers. Today, the mall sits in ruins, redevelopment plans have risen and fallen over the years. But a new life for the site may be more of a reality now than ever before. A group of local business owners and industrialists has tagged the site for potential development of a discount retailer shopping center, with the possibility of additional industrial and residential construction. Flood control would also be part of the plans, as the site is prone to flooding. The idea was generated by the current owners of the site, Main Street Capital. Investors have put up $3MM to clear the title of the property, but needs at least $5 MM for demolition. The group is looking for government help to complete the project, but information on the type of funding has not been made public. If funding is obtained, demolition could start as early as March.

17 February 2010 – For nearly 100 years, the prime piece of real estate that was once home to Edith Rockefeller McCormick, located at the intersection of Michigan Ave, Oak Street and Lake Shore Drive has been known as 1000 Lake Shore. However, much to the aggravation of the residents, the U.S. Postal Service sent a letter on February 1st that included the following: “Your official street address as established by the City of Chicago is 130 E. Oak Street. No one is exactly sure why this was brought to the attention of the Department of Transportation now, perhaps there was confusion for emergency vehicles responding to the wrong building. While many of the residents are outraged the  general public may think there are way more important things to worry about! Rest assured residents of 130 E Oak, your catalogs, mail and packages will still be delivered to you.

Old, but Loved, Parking Meters

While the national economy has been on everyone’s mind for a very long time now, recently I have been wondering about the health of the local Chicago economy. Specifically, I have been contemplating the trickle-down effect the new parking meter system has on local businesses.

Last year Mayor Daley made the controversial decision to privatize the parking meters in the city. In a matter of 48-hours he rammed his decision through City Hall and sold the rights to Morgan Stanley Communications and Chicago Parking Meteres LLC. With the new system, Morgan Stanley is allowed to keep all revenue generated from the meter machines, while the city keeps the revenue generated from tickets issued to vehicles with expired tickets.

What Impact Do the Meters Have on the Economy?

Here is where the larger state of the City’s economy comes in to question. While driving around Chicago yesterday I decided it would be nice to have a hot latte from Starbucks. I pulled up outside, and luckily, I found a spot right in front of the store. I then realized the parking meter pay kiosk was halfway down the block. I sat in my car for a second and thought, “if this were the old days, I could throw a quarter in a meter run in and I would have my wonderful hot latte in my hands.” The walk to the meter in the cold weather led me to pull away without my hot latte.

I then began wondering how Starbucks would feel knowing they missed out on a sale due to the fact that the parking meter station was too far away from their establishment. And, I wondered how many sales they miss on a daily basis due to this setup. To take it further, I started asking friends and colleagues if they make shopping decisions based on the meter situation. I found a resounding “yes.” One person stated that she will go out of her way to avoid the Walgreen’s with no parking lot and find a store that has free parking. I also repeatedly heard people say they avoid carry-out restaurants without a drive-through or a loading zone. I used to park at a meter right outside my office. I was happy to run out and feed my meter every couple of hours. It only cost me $1.00 for one hour of parking. Now, because the pay kiosk is almost half way down the block, I will drive around to find free parking within the neighborhood. Again, the parking revenue is lost.

The Small Loses May Add Up

If you add up a simple latte from Starbucks and multiply that by the number of people that avoid the meter, that number could be astounding. Small businesses must be thrilled. I would like to see a “before and after” analysis of the revenue to the City, including all costs. I would also like to ask small business owners their feelings, but I am confident I can predict their response!

We’d like to that Swanksalot for kindly sharing today’s photo via the Creative Common’s License.

Katie Anderson & Stacy Braack
16 February 2010 –

In today’s gloomy real estate market, things seem to only get gloomier for property owners. With an oversupply of rental inventory on the market, condo owners and developers are looking at creative measures to save time, money and their property. With that said, there are currently just under 1300 apartments available for rent in the downtown Chicago market and an additional 2294 set to be added to that number with condominium owners placing their units up for rent. This supply/demand imbalance is good news for the average renter. The tenant is in the driver’s seat. Landlords are drastically reducing rent, offering several months rent free, or reducing the amount of a security deposit just to get a renter into their unit. Times are tough across the board, unless you are a renter looking to score a great deal in a great location.

Importance of Communication in Property Management

Community association management companies play a vital role in both the financial and physical health of client buildings. Their role has become increasingly more difficult, and increasingly more critical, in the recent weak real estate market. Achieving success as a community association manager ultimately comes through proactive management and effective communications. However, many community association management companies fall short when it comes to meeting the expectations of their client associations.

The era of not listening to the customer is gone. Effective association managers must partner with the association, become more flexible, and have an open mind. Associations’ problems have changed and increased with the recent economy – budgets are tight, and community boards have become much savvier about their arrangements with management companies.

Technology is Playing a Large Roll

New managers should observe their communities and consult with experienced industry professionals to help them gain a better sense of how to adapt their personal business style to accommodate different clients. Knowledge is power, especially when it comes to understanding each community. No matter how large or small an association might be, they all have essentially the same problems.

Frequently, a community manager will contract with a new association under an all-inclusive flat fee arrangement, then charge additional fees without regard to the impact on the association’s budget. This approach will cause nothing but trouble in the relationship. Management firms should also keep associations up-to-date on critical technologies and practices. Rapid technology growth has contributed to the continual evolution of the industry, and companies need to stay current and utilize technological tools such as paperless records and electronic planning and organizing. Firms must be open to utilizing new systems and embracing change along the way.

Involvement is Key

For community managers, patience is a virtue. Don’t always look for the short answer – a better understanding of why things are done a certain way may take more time and effort, but will ultimately result in a better solution. Always encourage the board to participate in the solution process. When everyone works, learns, and grows together, they contribute to a more thorough, shared knowledge of the community association management industry. Buildings, boards, and management firms will benefit from this outcome.

As an association board member or building resident, pay close attention to how your association is being managed. If your management company is lacking these virtues in any way, participate in meetings and on committees to help guide the management approach. It is very appropriate to ask the tough questions. Is your management firm being proactive? Are they effectively aiding you in the day to day management? Are you as a board member spending too much time with association headaches? Finally, this should not be your second job, but a very part time effort.

We’d like to thank Paul (Dex) busy@ work’s photostream for kindly sharing today’s photo via the Creative Commons’ License.

Photo taken from Cortland Avenue looking into Finkl & Sons

The word is that Depaul University has been considering the Finkl & Sons Steel Mills at Clybourn Avenue and Cortland Street as a place to build a new 10,000 seat basketball stadium so that it could be in the proximity of their Lincoln Park Campus. They are also considering an alternative site just south at Divison and Clybourn.

Site not suitable for Residential

There has been much discussion about a new Depaul basketball stadium in the media as of late, but it’s only recent that they have been naming site locations. The Finkl & Sons site is located on the east bank of The Chicago River at Southport Ave, and Cortland Street within steps of DePaul’s main campus and due to its heavy industrial use over the past 100 years the site is believed to be to contaminated for many real estate re adaptations. So it seems the current thinking is that instead of removing all the over-sized foundations so closely positioned by the rivers edge that it might be far simpler and safer to just remove all the top soil, pave over the site and any possible contamination.

Its has always been a touchy subject for DePaul athletes that their venue is 15 miles off campus in Northwest Suburban Rosemont over a more local stadium

Finkl to move to the South Side

Finkl Steel in the meantime will continue their move from their longtime site to the south east side of the city. In November they bought 13 acres of land in the Stony Island neighborhood from the City of Chicago for $1.00 (Glad I wasn’t their broker) Work had begun quickly after for their arrival. The $250 million a year Finkl and Sons is the world’s leading supplier of forging die steels, plastic mold steels, die casting tool steels and custom open-die forgings, processing over 100,000 tons of steel each year, and then distributed domestically and to more than 18 countries worldwide all while sitting quietly on the banks of the Chicago river between the beautiful neighborhoods of Depaul, Lincoln Park and Bucktown.

We’d like to thank Payton Chung for kindly sharing today’s photo via the Creative Commons’ License.

Saving Your Pennies?

The struggling real estate market has forced sellers to look for creative solutions to squeeze dollars out of their sale to break even or minimize their loss. More and more frequently, listing agents are asked to “share the pain” and cut their commission to cushion the blow to sellers caused by lower property values. The dollars saved on the lowered commission may appear to be an easy solution. However, there are significant costs to this approach that sellers may not see immediately.

No Standard Commission Rate in Illinois

While there is no standard commission rate charged in the state of Illinois, 2.5% of the selling price is commonly expected by buyers’ agents. When a property is offered at a lower rate driven by a lower total commission paid by the seller, buyers’ agents may choose to eliminate the property from their buyers’ viewing schedule. This is very easy to do in a high inventory market where there are plenty of properties offering higher commission. Is this ethical? Maybe not, but if the buyer still finds a home they like, some buyers’ agents believe this is acceptable. Most good buyers’ agents do not look at commission rates, but in this environment when agents may find it challenging to fit all available properties into a viewing schedule, commission can be the determining factor when deciding which properties to eliminate.
Listing agents’ costs increase in times of slower sales. It takes more time and exposure to sell a property, more effective and costly marketing, and there are usually more showings required to generate a contract. It also takes a significant amount of effort to hold deals together after initial negotiations due to complex and unpredictable mortgage and closing processes. So, while sellers may ask an agent to “share the pain,” active listing agents may be forced to take short cuts to make a lower commission listing worthwhile. Additionally, successful and active agents may choose to reject listings whose owners want to cut commission. This leaves the seller with less skilled and experienced agents who need to “buy” their listings rather than earning the business through superior qualifications. For quality agents, listings are relatively easy to come by in this market – selling the property and holding deals together has become the difficult part. Sellers need every bit of experience, knowledge, and commitment from their agent to negotiate the best possible price and attractive terms, and to manage a process that culminates in a successful closing.

Sellers Should Demand Exemplary Service

The cliché “you get what you pay for” can be a tough lesson learned when this important, high-dollar transaction is at stake. Small glitches and oversights can generate costs that far outweigh the potential savings in commission. Sellers should demand exemplary service and expertise from their agents in both the buying and selling process. The best agents will not cut commission, and sellers need top agents to tackle the challenges of today’s market.

[Editor's Note] We invite opposing opinions!! Please comment below or if you’d like to write a post, Contact Us!

We would like to thank Pfala for kindly sharing today’s photo via the Creative Commons’ License.

11 February 2010 – Chicago City Council voted yesterday to grant the Lorraine Hansberry House landmark status, a result of the home’s critical role in early desegregation movements. In 1937, the Hansberry family’s peace was shattered when a concrete chunk was thrown through the window of their new home, sending a racially charged message that the family was not welcomed by white neighbors. The family fought to stay in their home at 6140 S. Rhodes, and three years later in 1940 the US Supreme Court passed a decision ending racially discriminatory housing covenants in Chicago. Before this ruling, African-Americans were limited to living in crowded and run-down neighborhoods on the city’s south side. The segregation was enforced by property covenants that restricted non-whites from moving into white neighborhoods. While the Hansberry family was a leader in this housing, they were not unfamiliar with taking a stand against discrimination. The family frequently ate at establishments known to discriminate, and if denied, would sue for equal access. While the current home owner could not be reached by the Tribune for comment, Mamie Hansberry, now 86 and living in Los Angeles, says she’s honored that the city is considering this recognition.