Rent vs. Buy Question Still Favors Purchasing
August 16th, 2010 categories: Chicago Real Estate News
During the housing boom, no one debated much whether it was better to rent or buy. Because home values were increasing so steadily in Chicago, buying seemed like a great financial move.
Today, though, as housing values fall, the rent vs. buy question has popped up again.
It’s not difficult to understand why. The median value of a home in Chicago stood at $230,000 in the second quarter of 2010, according to the latest numbers from the National Association of REALTORS®. That’s even with the median sales price of the second quarter of 2009, but still a big drop-off from where housing values stood in 2004 and 2005 in the residential boom years.
Today, in fact, home values have fallen so far that many homeowners owe more on their mortgage loans than what their homes are worth. This condition, known as being underwater, is now impacting about 25 percent of homeowners.
Still, even with these troubling numbers, I believe that it makes more sense financially to buy than it does to rent.
And here’s why: Today’s real estate market is an anomaly. It’s a correction from the days in which housing values rose too high too quickly. Historically, homes have appreciated at steady rates over longer periods of time. This means that if you buy a house today, 10 years from now it should be worth significantly more than what you paid for it.
The key to buying a home is to remember that residential real estate was never meant as a way to make quick money. There have been very few markets over the years in which buyers have been able to purchase a home one month, renovate it and then sell It six months later for twice the price.
To make money off residential real estate today, you’ll have to be patient. But history shows that patience pays off when it comes to investing in residential real estate.
Don’t forget, too, that now is a great time to buy a Chicago condominium or single-family home. Homes in even the best Chicago neighborhoods, places like Lakeview, Lincoln Park, Wicker Park and Lincoln Square, can be found at great prices. Buyers can purchase more home today for their dollars. They’ll be in good shape once housing prices start rising again.
Renting does make sense for some people: Those who only plan on living in an area for five years or less, for instance, would do well to rent. People with low credit scores should rent while they take steps to repair their credit.
For people who plan to stay in one place for a long time, though, buying, in my opinion, is still the way to go.
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Chicago College Students Have Plenty of Places to Call Home
August 13th, 2010 categories: Chicago Real Estate News
Part of the excitement of attending college is exploring a new city. That’s why Chicago is such a great place for college students. There’s plenty to do here, everything from great shopping to eclectic restaurants to trendy night spots. There are movie theaters, museums and plays everywhere you look.
It’s fortunate, then, that Chicago offers plenty of places for college students to call home. The Chicago Tribune recently wrote a feature story about the many place in which Chicago university students can live while taking their classes.
The story specifically focuses on an exciting new development for students at Chicago’s Roosevelt University. According to the feature, the unnamed building, which is under construction now at 425 S. Wabash Ave., will feature a 32-story vertical campus that will serve as home to a food court, fitness center, classrooms and labs. The top 17 floors will be home to a 600-bed residence hall. The living units are composed mostly of two-bedroom and four-bedroom suites.
This building is just one of the many options college students in Chicago have. Many of the universities in downtown Chicago, including DePaul, Robert Morris and Columbia offer residence towers for their students. Some of the buildings reserved for students are open to those attending just one institution while many are open to all students.
Of course, students don’t have to live in any of these residence halls. They can live in condos, two-flats or apartment buildings near their schools. One of the advantages of attending school in a world-class city like Chicago is the myriad of housing opportunities available to students. The parents of some students, for instance, will buy condos in downtown high-rises for their children to use while studying. After their children graduate, they’ll either hold onto the units or sell them.
The key is for college students to select the student housing options that are right for them, whether that means living in a university-provided residence hall or in an off-campus condo. Both options come with pluses and negatives. University residences can help keep students connected to their university, and are conveniently located. Off-campus private housing allows students to experience more of the neighborhoods surrounding their campus.
Choice is good, though. And in Chicago, one thing students don’t lack is housing choice.
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More Substance Than Hype Behind Green Building?
August 11th, 2010 categories: Chicago Real Estate News
Green building is hot right now. Developers of new housing projects tout their buildings’ green features such as low-flow plumbing, bamboo floors, geothermal heating and the use of recycled building materials.
Here’s the question, though: Is green building here to stay? Or is it merely today’s trendy real estate marketing tool?
Mary Umberger, a real estate columnist with the Chicago Tribune, recently covered this. In her opinion? Green building is more than just hype. It’s here to stay.
That’s good news. Green building isn’t just environmentally friendly. It’s also good construction. The green-built homes in Chicago are some of the best-constructed residences that I’ve seen.
In her story, Umberger cited a Chicago Tribune/WGN poll that showed that two-thirds of residents in the Chicago area have changed their daily routines to become more environmentally friendly. She also points to a report from a trade magazine that showed that the total value of U.S. green-building projects will increase from $71 billion this year to $173 billion by 2015.
That’s not to say, though, that consumers will buy one home over another just because of its green features. Buyers still care most about price, location and quality of construction. Green building, though, can make a difference: If two homes in the same neighborhood boast the same basic price and amenities, environmentally conscious buyers are more likely to choose the green home.
For builders and developers, this is important. These professionals recognize that green building is good for the planet. But they also need it to be good for their wallets. If green building proves to be profitable, Chicago-area developers and builders will continue to embrace environmentally sound construction processes.
That would be good news for Chicago home buyers. Not only are green-built homes examples of top-quality construction, they’re also less expensive to own. Energy efficient appliances save homeowners a significant amount of money over the years. In today’s tough economy, all savings are important.
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National Association of REALTORS®: Expect Slow Months Ahead
August 9th, 2010 categories: Chicago Real Estate News
The message from the top economist at the National Association of REALTORS® is clear: Expect some sluggish home sales in the coming months.
Lawrence Yun, the association’s chief economist, said that he expects lower home sales in the next few months. The culprit? The economy.
Yun pointed to job growth as being the key to increasing home sales. If the country starts adding jobs, home sales should increase. If the job market doesn’t improve, home sales will remain down.
Yun also pointed to the expiration of the federal government’s move-up and first-time home buyer tax credits as a reason for the upcoming months of slow sales. These credits – the first-time buyers credit gave buyers a tax credit of up to $8,000, while the move-up buyers credit gave them one up to $6,500 – persuaded many consumers to purchase homes. Unfortunately, they expired at midnight on April 30. Since then, pending home sales have dropped on a consistent basis.
Yun predicted that housing sales activity would pick up late in the year. That probably sounds a bit depressing to many. After all, when the housing market is strong it gives a significant boost to the entire economy. And today’s economy needs all the help it can get. Unemployment is still too high. Foreclosures are barely slowing. Home values are falling. People are still struggling out there.
A boost in home sales would have been nice. Unfortunately, it looks to be something that won’t happen any time soon.
Yun did have some good news, though. He mentioned that interest rates should remain near historic lows. This will allow buyers to continue purchasing more home for less money. Lower interest rates can shave the cost of a mortgage loan by hundreds of dollars every month. This gives buyers more spending power.
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Job Losses Continue To Make Life Difficult For Chicago Homeowners
August 4th, 2010 categories: Chicago Real Estate News
It’s no secret that job growth and falling housing foreclosure rates are connected. That’s why it should be little surprise that a rising number of foreclosures continues to hurt the Chicago housing market. Simply put, we’re not seeing many new jobs in the city. In fact, we’re seeing job losses here.
A recent Associated Press story highlighted this grim news. According to the story, the Chicago-Joliet-Naperville area lost 76,000 jobs from June of 2009 to June of 2010. That job-loss figure led the country.
At the same time, the number of Chicago housing foreclosures rose. Foreclosure activity in the Chicago area rose 23 percent in the first half of 2010 when compared to the same six months in 2009, according to RealtyTrac. That comes to 78,000 properties that have received foreclosure notices in the first half of this year. If you think that seems like a high number, you’re right. The Chicago area ranked third in the country for housing foreclosures.
There is help for Chicago homeowners facing foreclosure. Unfortunately, this help isn’t working fast enough to stem the tide of foreclosures in the area. This, of course, is doing no favors to the local housing market.
If you are one of the many Chicagoans struggling to pay their mortgage payments each month, do the smart thing: Call your mortgage lender as soon as your mortgage payments become a burden. Your mortgage lender does not want to evict you. It doesn’t want to have to sell your house, especially in a housing market as challenging as this one.
Your mortgage lender might be able to restructure the terms of your mortgage loan, making your monthly payments smaller. It might lower your interest rate, give you a short break from paying your loan or forgive a portion of your principal balance. All of these moves can help keep you in your house.
If you don’t do anything, though, you’ll eventually fall into foreclosure. And no one wants that. Foreclosure is devastating to families. It’s also devastating on housing markets.
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