As originally posted online at CCIM:
Commercial real estate investment returns are expected to remain steady through year-end, according to Expectations & Market Realities in Real Estate 2014 —- The Future Unfolds, a forecast released jointly by Real Estate Research Corp., Deloitte, and the National Association of Realtors®.
Although uncertainties remain, the economy will continue its slow ascent this year. With capital becoming more available for commercial real estate investment, investors continue to seek quality assets across all five major property sectors in secondary and tertiary markets.
“We have seen steady if slow progress since the commercial real estate market collapsed in second quarter 2008, and as the future unfolds, we expect that the positive returns for commercial real estate will continue,” said Kenneth Riggs Jr., CCIM, president and CEO of RERC. “The value increase from the trough is now about 30 percent, just slightly less than the value lost during the past six years. Although returns are likely to be positive in 2014, we forecast them to be a little lower than in 2013, but still a very reasonable approximate average of 8.75 percent.”
Continued stability in the commercial real estate market has given investors a reason to be “cautiously optimistic,” according to Matthew Kimmel, principal and U.S. real estate sector leader for Deloitte Transactions and Business Analytics LLP. “Overall, we see the potential for moderate and continued growth in the volume of commercial property transactions and in property prices,” Kimmel said.
The commercial real estate recovery is expected to continue throughout the year as a result of the slightly stronger economic growth, noted Lawrence Yun, NAR chief economist. With an estimated 2.2 million jobs expected to be added by year-end, the demand for all commercial real estate sectors should increase as well, according to Yun.
As originally posted online at the Chicago Tribune. Written by Mary Ellen Podmolik.
It’s a sweet time to be a condominium owner in downtown Chicago.
With a lack of new product for sale, other than ultra-luxury units, appropriately priced condos are selling fast, and values continue to recover.
Compared with the tail end of 2012, resale prices at 65 condo buildings downtown rose 9.3 percent in 2013, putting them only 6 percent below the market’s peak in 2008, according to a year-end report by Appraisal Research Counselors. Annual sales volume rose 8 percent from 2012.
“We’re hearing from brokers there’s a shortage of product,” said Gail Lissner, a vice president at Appraisal Research Counselors. “Definitely we are in recovery mode.”
Among new projects, the success stories include Trump International Hotel & Tower, where only 15 of the 486 condo units remain unsold, according to a year-end report released Thursday by Appraisal Research Counselors. Also faring well are the three-building South Loop condo project taken over by Related Midwest, where half of the 500 units are sold and the company is raising prices, and Belgravia Group’s CA Condos on Adams, which will not be completed until later this year but 42 of the 50 units are already under contract, Lissner said.
There are expectations that pricing will continue to be in seller’s favor, benefiting not just developers but also current owners considering a sale.
In January, the median price of a condo sold in Chicago was 26 percent higher than in January 2013, and on average, sellers received 95.2 percent of their original list price, according to data provided to the Chicago Association of Realtors by Midwest Real Estate Data LLC.
Meanwhile, the number of condos under contract for the week ended Feb. 1 was up almost 28 percent from a year ago.
As originally posted, by Dennis Rodkin, online at Chicago Magazine.
Home values are increasing quickly in high-foreclosure areas, but they’re only up to 1997 prices.
The latest data about the Chicago-area housing market underscores two things about our market’s recovery: (1) Recovery is happening. (2) There are actually two different recoveries going on here, behaving in two different ways.
When DePaul’s Institute for Housing Studies released its look at the third quarter 2013 data for Cook County on December 12, the headline figure was the almost 13 percent spike in the sale prices of houses (condos and townhouses not included) since the same period in 2012.
It’s very good news, but in my usual way, I want to point out that this silver lining has a dark cloud. The IHS’s study shows that the biggest price increases were in areas that have had a high rate of foreclosure during the housing crisis. In those neighborhoods, prices were up 13.4 percent, third quarter 2012 to third quarter 2013. Areas with a low foreclosure rate—typically, these are affluent neighborhoods or suburbs—had a significantly smaller bump in their home values: up 9 percent.
Nine percent is great, considering the doldrums we were in for several years prior. But the point here is the different speeds at which low-priced and high-priced neighborhoods are moving.
Because the thing you need to know after that is the one that is moving fastest is still the one that’s farther behind.
Even with a year of double-digit recovery, IHS’s report notes, home values in high-foreclosure neighborhoods have only climbed back to about where they were in early 1997. Their prices are more than 50 percent below where they were at the peak. Meanwhile prices in low-foreclosure neighborhoods are back to the level of 2004. Here, prices are about 15 percent off the peak.
“If you live in those stronger neighborhoods, there’s been much more price stability and they’re closer to being at full recovery,” says Geoff Smith, IHS’s director. In the other areas, “there’s still a long way to go.”
IHS’s report covers the third quarter and Cook County only; more recent data for a larger geographical arrived last week from Midwest Real Estate Data. It showed a similar pattern: sale prices on foreclosures in the entire Chicago region in the month of November were up 6.8 percent from a year before, while prices on what MRED calls “traditional” or non-distressed homes were up 2.5 percent.
A big spur for foreclosure prices has been the influx of money from large institutional investors. The Tribune’s Mary Ellen Podmolik reported earlier this month that eight deep-pockets firms have bought about 3,200 houses in the Chicago area so far this year. Smith says that these homes aren’t usually the bottom-of-the-barrel foreclosures but those that are slightly better in quality and located in neighborhoods where they can be made desirable for renters.
Buying by institutional investors spiked this year—in the first half of 2013, it accounted for 20 percent of sales in Cook County, up from 14 percent the year before, Smith says—but remember, investors only go where the deals look good. That’s why they’ve been less attracted to saturated Phoenix and Las Vegas recently, and it could happen here.
And if it does, the repercussions could be severe. “If you see investors pull back, then you’re going to see price [growth] slow down,” Smith says. That could widen the gap between moderate and affluent neighborhoods even more.
Meanwhile, back in those affluent neighborhoods, there’s the threat of rising interest rates in the wake of the Federal Reserve’s decision last week to taper its stimulus program. That could put a kink in the steady recent improvement in home prices. But either way—whether prices get hurt or don’t—it’s pretty clear that the housing recovery will be two different animals for a while longer.
As originally posted online at the Chicago Tribune.
Story by: Ilyce Glink and Samuel J. Tamkin
Mortgage interest rates jumped last week as the economy seemed to lurch forward.
According to the weekly Freddie Mac Primary Mortgage Market Survey (PMMS), interest rates for a 30-year fixed rate loan averaged 4.46 percent, with 0.5 percent in points, up from 4.29 percent the prior week.
A year ago, the interest rate on a 30-year fixed rate mortgage averaged 3.34 percent.
Interest rates on a 15-year fixed-rate loan have similarly jumped, averaging 3.47 percent with an average 0.4 point, up from 3.30 percent a week ago. A year ago at this time, the 15-year FRM averaged 2.67 percent.
“Fixed mortgage rates increased this week following stronger than expected economic data releases,” noted Frank Nothaft, vice president and chief economist at Freddie Mac.
On Thursday, the government said economic expansion in the third quarter grew at a faster rate than previously thought. The government said the economy grew at a 3.6 percent rate in the third quarter, an upward revision from the earlier estimate of 2.8 percent.
It’s the best quarter for economic growth since the first quarter of 2012, when GDP grew at 3.7 percent. Other economic data released this week seemed to prove faster growth was in the works as well.
Private companies added 215,000 new jobs in November, according to the ADP employment report, well above the consensus. In addition, revisions to the employment numbers added 54,000 jobs in the prior month. Lastly, new home sales rose 25 percent in the month of October to a seasonally adjusted 444,000 annual pace, though this followed a weaker than expected September report and downward revisions over the summer months.
While the October new home sales number is a positive step, sales over July, August and September (traditionally strong months for new home building and sales) averaged only 368,000. And while the October figure returns sales to a level consistent with sales for the rest of the year, new home sales are still running at a rate that is about half of normal.
CoreLogic, a residential property information, analytics and services provider based in Irvine, Calif., said home price gains have slowed dramatically all over the country, if you factor in distressed sales. In October, home prices including distressed sales slowed to 0.2 percent. The company predicts no home price increases in November.
“In October, the year-over-year appreciation rate remained strong, but the month-over-month appreciation rate was barely positive, indicating that house price appreciation has slowed as expected for the winter,” noted Mark Fleming, chief economist for CoreLogic.
“Based on our pending Home Price Index (HPI), the monthly growth rate is expected to moderate even further in November and December. The slowdown in price appreciation is positive for the housing market as almost half the states are now within 10 percent of their respective historical price peaks,” he added
Please join us in celebration of our 8th Annual Naughty or Nice Charity Event. Enjoy drink specials and hors d’oeuvres provided by Chicago Real Estate Resources.
For admission please bring an unwrapped toy or sporting good to support the Marine Toys for Tots Foundation.
Rockit Bar & Grill @ 22 W. Hubbard
Wednesday, December 4th from 6pm – Last Call
As we all know, Chicago winters can be rough. This applies to weather as much as it does the housing market. Unfortunately, we all can’t choose to sell our homes during the prime selling season, typically beginning around March.
CRER’s Residential Broker Neil Hackler knows the coming months can be rough for those trying to sell their homes and has answered a the common questions being about the market this winter:
Why is typically harder to sell your home during the “off season”
It is generally more difficult to sell a home during the winter months, simply because less people are looking. In addition to the winter weather making house hunting undesirable, many families and individuals who might otherwise be looking for a home are busy prepping for the holidays. Additionally, someone looking to transition from renting to owning will be bound by the terms of their lease, which typically expire April through September.
Following the new year, many soon-to-be buyers may continue to hold off until they file taxes so they can use their return as part of their down payment.
How will this year’s fall/winter “off season” differ from last year’s?
In some ways, this is where it begins to look up for home owners looking to sell their homes over the next few months.
Heading into the fall – though it already seems like winter – we saw a much lower inventory than compared to last year this time (largely due to the fact that home sales were abundant over the summer). As such, many buyers who lost out on opportunities during the summer or even those who have just started to look (hoping to utilize the low interest rates) are competing on homes and eager to purchase property.
What are the pros and cons of attempting to list and sell a home during the fall/winter months?
- There are buyers in the market place looking to jump on newly-listed properties and, due to the lower inventory, sellers may see higher levels of activity compared to normal.
- Buyers want to take advantage of the current lower interest rates
- Single-family homes are flying of the shelf in the good neighborhoods, so there will be many buyers still looking throughout the winter.
- If a property is listed but does not sell through the winter, then the high number of days listed will still be showing on the property information sheets. When a property has a higher number of days on the market, buyers start to wonder if there is something wrong with the property or that the seller is not very negotiable on the price.
- Activity may be lower through the holiday season and buyers may wait until the beginning of the year, or even until after tax season, to purchase.
- Upkeep on the home throughout the winter to keep it ready for showing can take more time and energy.
What advice do you have for sellers that can help them list/sell a home faster and more successfully during the winter/fall months?
My number one piece of advice: be more aggressive with your listing price, meaning asking for a slightly lower price, and keeping your home properly staged throughout the showing process. You don’t necessarily have to stage it throughout with a full set of furniture, but at minimum, do a walk through with the broker, add/remove things to keep it simple, have the property looking as nice as possible and always make sure the sidewalks and front stoops have been shoveled and salted.
What mistakes should the sellers avoid during the winter months?
Unless necessary, try to avoid listing your home during the off season in general. You’ll get quicker results if you wait until February and March to list. If listing your home is inevitable, make sure that you keep up on any and all repairs. Existing repairs will be written into the property disclosure form and may become difficult to fix as the weather worsens (mainly referring to exterior repairs).
When it comes to staging the property, remember to keep it clean and clutter free by tidying up the rooms, removing a majority of your personal photos and utilizing storage if you have an abundance of belongings. Additionally, though you may be tempted to decorate for upcoming holidays, it’s always better to keep the décor to a minimum.
Growth in Chicago’s startup community has led to a very tight market for appropriate office space, particularly in the River North neighborhood, according to a new report by CBRE.
The analysis of what the real estate firm called the “technology submarket” sprung from internal discussions about the increasing number of local startups hunting for space, said David Egan, director of research and analysis. Many of these companies seemed to be alums of 1871, the collaborative hub for digital startups that opened last year in the Merchandise Mart. Built In Chicago, an online community for the tech sector, counts nearly 200 digital startups that launched locally in 2011 and 2012.
Egan said his group set out to determine whether “we really have hundreds of new companies growing in Chicago with real estate needs.”
CBRE counted 42 downtown Chicago office buildings with a startup tenant. The vacancy rate of this subset is a slim 6 percent, much tighter than the 14.9 percent rate for Class B downtown buildings and 13.9 percent for Class C. In 2010, the vacancy rate for the technology submarket was nearly 14 percent. Gross rents, which includes expenses, have risen sharply during in the last two years. CBRE said the average gross rent for this submarket was $26.07 per square foot in the second quarter, up 17.2 percent since 2010 “with further upside potential.”
CBRE’s analysis showed that most of the startup offices are clustered in River North, although tech firms have also established a presence in the West Loop and Fulton Market areas, along with North Michigan Avenue. Egan said Google’s plans to move its Chicago office to the Fulton Market Cold Storage building by early 2016 “provides a roadmap” for more tech companies to migrate westward, especially as supply dries up in River North.
“There’s going to be a force of gravity that will exist with Google,” Egan said.
CBRE’s report noted that landlords seeking to rent to startups must “carefully strike a balance between the best economic deal and meeting the needs of a growing company.” High-growth tech firms typically look for short-term leases of fewer than five years and want room to expand. River North lofts have been particularly hospitable to startups, not just because the neighborhood’s landlords are accustomed to tech companies’ needs, but because the spaces themselves are suited to the non-conventional office layouts that the firms prefer.
As the market continues to tighten in River North and its surrounding neighborhoods, “trying to get yourself on the right deal is harder than it looks” for many startups, Egan said.
He added that the market conditions indicate “the strength of what’s happening in the tech space in Chicago…This is not just a blip. This is real.”