Local area real estate market shows sign of warming up
June 5, 2009
Silver lining in current economy: many companies are hiring
City lends helping hand for house repairs, other property needs
By Julie Sammarco | June 2009
With growing consumer confidence, low interest rates, and help from President Barack Obama’s economic policies, local communities are seeing more positive activity in their real estate markets.
“The media is killing us with all of the negative coverage of the market, but every day it gets better,” said Carmen Gallucci of C.Gallucci Realty. “I’ve been doing this for 25 years, and it’s better today than it has been in a couple of years.”
Other realtors, bankers, and public officials agree that programs now available for first-time buyers are helping heat up the market.
One such program is the $8,000 Homebuyer Tax Credit, a provision of President Obama’s Economic Stimulus Package, which allows first-time buyers who earn less than $75,000 a year (or less than $150,000 if married and filing jointly) to receive an $8,000 credit if they buy a dwelling by Dec. 1, 2009. If they stay there three years, the money need never be repaid.
Unlike a tax deduction, which lowers the amount of taxable income, a tax credit directly reduces one’s income taxes. So those using this credit can subtract up to $8,000 from the amount they would owe the federal government in income taxes for the year. The tax credit applies to housing of any price, but the program caps each credit at $8,000 or 10% of the purchase price, whichever is less.
According to Gus Mauro of New West Realty, this program is helping the residential market, although other programs — such as Federal Housing Administration (FHA) insured loans — also are extremely helpful for first-time buyers as well as people who do not have much money to put down on a house, those trying to keep their monthly payments as low as possible, and those who do not have perfect credit or are worried about qualifying for a loan.
Insured by the FHA, these loans require only a 3.5% down payment, which can come from family members or charitable organizations as well as from the buyers. The FHA accepts those whose credit may be less than perfect, and because it insures the mortgages, lenders may be more willing to offer perks such as loan terms that make it easier for buyers to qualify. Grants from the City of Chicago also are helping people buy housing — and keep it.
Improving confidence
Programs like these create incentives to buy and help improve peoples’ confidence and opportunities in the real estate market.
Although Gail Lissner, from Appraisal Research Counselors, counseled that “Nothing is consistently positive yet; no one is doing real well right now,” she did notice a rise in sales rates across the city throughout April.
“Confidence in real estate has definitely improved over the past three or four weeks,” Mauro said. “There’s more traffic at our Taylor Street office, especially in firsttime homebuyers, and our traffic has doubled and tripled” in four New West developments located in the South Loop, Bronzeville, and the Near West Side.
The New West Realty development in the South Loop, located at 1555 S. Wabash Ave., is doing “pretty well,” according to Ted Mazola, a 30-year veteran with New West.
Although Kathleen Ryan of the South Loop’s Opera Lofts development said that recent months have been tough for everyone in this area because people are having a hard time getting loans, Mazola said, “We haven’t seen any fall-outs” — prospective buyers dropping out at the last minute — ”at the 1555 location, half of the building is already sold, and we’re going to start closing in about two weeks. People are getting in with 3% down, and the $8,000 Homebuyer Tax Credit is helping, too. Of course the velocity is a bit slower, but it [the development] is doing pretty well.”
Eastgate Village, a New West Realty development in Bronzeville, also is doing “very nicely,” according to Mazola. It will sit right across the street from the Olympic Village if Chicago gets the 2016 bid, which seems to be helping sell and rent these units.
Plus, the city has few townhouses and walk-up condominiums for both renters and buyers, “and Eastgate Village offers that,” he added, noting this feature is allowing Bronzeville, an area without much residential property for sale now, to be competitive.
The rental business “is extremely hot now, too,” said Bill Altier of Koenig & Strey. “If people can’t sell their homes, they are renting property. And there are a lot of young people leaving their parents’ houses for the firs time who can’t afford to buy yet, but still need an apartment.”
What this is ultimately doing, he said, is bringing new money into the area’s neighborhoods. “New buyers and renters are catching great deals because interest rates are so low,” Alteir continued. “People are renovating, making better apartments, which draws more people into the area, bringing in even more new money. It’s good for everyone.”
Aldermen hopeful
Aldermen Pat Dowell (3rd) and Toni Preckwinkle (4th) feel optimistic about the Oakwood Shores development and Robert Taylor Homes replacement housing coming in summer, but they agreed the housing market remains challenging.
Dowell said, “There are a lot of positive things planned for Bronzeville. There’s going to be a shopping center coming in fall 2009, new businesses have moved in, there’s a new Metra station and new retail outlets. We’re hopeful that these new businesses will lead to new interest in the area.”
West Village Homes, a development on the Near West Side, sold out at the beginning of this year, noted Mazola. Another Near West Side development, Heritage Homes, has just a few units left. Phase two of Heritage Homes will begin construction by the end of this year.
Roosevelt Square, one of the Near West Side’s biggest developments, also is enjoying plenty of positive activity. “We have seen an increase in traffic in the sales center over the past three weeks,” said Mike Kelly, director of marketing and sales. “Phase one sold out about a year ago, and 25 out of 60 units have been sold in phase two, two of which were sold this year. People are looking; people’s perceptions are changing. People think the bottom has come, and they think, ‘let’s buy now so we can get the best price before prices rise.’”
West Loop activity
In the West Loop, Renata Williamson, realtor for the 114-120 N. Halsted St. development, said developers just finished the model on May 19 but already had a contract from a buyer a month beforehand.
“With the way things are going, we didn’t expect to get a contract until after the model was finished, so it was a nice surprise,” she said. “But it’s tough. There is a huge inventory of two-bedroom, two-bathroom condos in this area, all for the same price — roughly $400,000 — and not enough people who can afford them.”
Jorge Sanchez, developer of 210-220 N. Halsted St., another West Loop development, is confident the market is picking up.
“It’s not as bad as people think,” he said. “None of our units is 100% finished yet, but a lot of people are coming in and looking, which is a great sign.”
Lexington Square, at its Bridgeport location, has been open for sale only since February but the sales staff has seen “very encouraging things,” according to Jeff Benach, co-principal of Lexington Homes. “We’ve been getting a lot of traffic and a lot of great feedback from buyers,” he said. “A lot of our prospective buyers are trying to sell the homes they have now to buy one of ours.”
Donna Murray of Gordon Realty in Bridgeport, however, said that, although she has confidence in the area’s potential, “The programs that are out there to help people buy homes [such as the $8,000 Homebuyer Tax Credit] won’t substantially heat up the market because the people it is designed for aren’t being helped by the banks. Banks aren’t giving loans.”
Easier to get loans
Lakeside Bank’s Juanita Perez, vice president of residential loans, said, “Many people were having trouble getting loans in the beginning of the year due to problems with the appraisal of property. But now, with Fannie Mae’s new refinance program called Keys to Recovery, you don’t need an appraisal. And even if you needed an appraisal, it is much easier to get one because more property is being sold due to all of the incentives — the $8,000 tax credit has been a huge help.”
Loan officer Margarita Trezza has noticed an increase in 30-year mortgage sales and mortgage applications. She said many people have been buying and applying for these mortgages within the past three months simply because they now have the ability to do so.
On the other hand, Donald Westberg, a lender at Harris Bank, said, “Every month the stipulations for lending seem to get tighter, and a lot of people are still skittish.”
While not everyone agrees the market has improved, many believe buying a house or condominium remains highly meaningful to buyers. This feeling, paired with buying incentives, is boosting people’s interest in what the market offers.
“Buying a home is more than a monetary investment, and I think people see that,” said Mazola. “This is a tough market. I’m not going to sugar coat it, but people are still looking for a good investment, a good deal, and a good place to raise their families. That will never change. People still value their homes.”
