Housing Assistance Tax Act of 2008

There's been another change in tax laws which will benefit homeowners this year. The IRS will allow up to $1000 in real estate tax deduction for non-itemizers. What this means to you is:

When you do your taxes each year, you have the option to either itemize, or use the standard deduction.

Usually you'll itemize if you have a significant number of tax deductions, such as mortgage interest, property taxes, or significant medical or dental expenses. You'll add these deductible amounts up and subtract them from your income in order to figure your taxable income.

However, the IRS also gives you the option to take a standard deduction amount - no questions asked, no receipts needed - without itemizing. These amounts differ depending on your filing status and a few other factors, but for a married couple filing jointly this year, the standard deduction is $10,900.

This means that if a married couple's itemized expenses are less than $10,900, they're better off taking the standard deduction.

So, for someone who just purchased a home this year, this can be frusturating. "I thought I would be able to deduct my property taxes and mortgage interest this year!!" they say. Well, if you bought the property in, say, October, you might not have paid enough in mortgage interest & taxes in 2008 to exceed the standard deduction amount.

However, this year, the IRS is giving you a little present :-) Even if you are not itemizing your deductions because they don't exceed the standard deduction amount, the government will allow you, as a homeowner, to deduct an additional $500 ($1000 if married filing jointly) for property taxes you paid.

Add that to the list of "why now is a great time to buy"!

Happy Holidays From Fannie & Freddie

Fannie Mae & Freddie Mac issued orders suspending foreclosures from Nov 26 - Jan 9 just in time for the holiday season! This suspension is intended to help implement the new Streamlined Modification Program which will be launched in a few weeks.

The newly announced loan modification program is aimed to help high-risk borrowers who have already missed at least 3 mortgage payments and haven't filed for bankruptcy. Loan modifications can be done by either reducing the interest rate, extending the length of the loan, or temporarily reducing principal payments.

The suspension on foreclosures only applies to occupied properties, not to vacant homes and should help 6000 borrowers avoid foreclosure at the end of this year.

I think this is a great step in the right direction....

End Of Wall Street's Boom

This little diddy was emailed to me today by an old co-worker. It's a really interesting look at how the past 20-30 years in Wall Street banking led to the financial crisis we've been hit with today. It's a pretty long article but definitely worth the read for some insight. It's written by Michael Lewis, author of Liar's Poker who is now being validated in his qualms about Wall Street 20 years after the book's publication. Much of this is relevant to the condition of the housing market today so I'll pick out a few such excerpts:

There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.”

In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why.

He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

Read the full article here: http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom#page1

Obama Drama

I think the fact that our next U.S. president comes from Hyde Park on the South Side of Chicago may have a teeny bit of influence over whether we get the Olympics in 2016, don't you? The only real drama at the Obama rally in Grant Park on Nov 4 was Oprah crying on the shoulder of a random stranger; there were no "incidents" or any form of violence. The crowd was estimated to be somewhere in the ballpark of 250,000 people, so he's already proven that Chicago can handle crowd control.

I was there (not in the special people section, but in the overflow areas watching Senator Obama speak on the big screen), and this place was PACKED. Zack and I rode our bikes down there on a whim after his flag football game, and were glad we went. Really, this was a historic event and it was very exciting to be able to be there for it in our very own city of Chicago. On the bike ride down, most streets were blocked off. But for whatever reason, there were still cars on State Street, and you could hear the echo of honking horns from blocks away. There was honking, waving of flags, crying, cheering, chanting, screaming like crazy people, and much more. I can't even explain the sound of it... you really had to be there. But as soon as Obama took the stage, the crowd fell silent to watch and listen.

Either way, I'm glad we maintained a tame atmosphere in Grant Park on Nov 4 and I'm also crossing my fingers that our "good behavior" gives us brownie points when it comes to picking the location for the 2016 Olympics next year.

I know this is a terrible picture of the Obama rally, but it was the best I could do with my camera phone! I'll get better photos off Zack's camera later...

CTA Strikes Again

Start saving your pennies, commuters. The CTA is planning on raising fares again in January. The increase will be up to 50 cents per ride, depending on which card you use.

Bus rides will be $2 instead of $1.75, and el train rides will go up to $2.25 from $2.00. They're also eliminating the discount that Chicago Card users now receive. Prices of multi-day passes are also going up.

The CTA blames the increases on Governor Blagojevich for allowing seniors to ride free.

For The First Timers...

As we get closer to the end of the year, it's time to consider tax incentives for buying a home. If you are a first time buyer, you may be eligible for the first time buyer tax credit being offered by the federal government through July 1, 2009! If your income is $75,000 or less (double that if you're a married couple)and you bought a home after April 9th this year, don't let this credit pass you by when you're filing your tax return next year!

How it works:

If you're a first time buyer with a home purchase between April 9, 2008 and July 1, 2009, you may qualify (see income criteria above).

When you file your tax return, you'll get up to a $7500 refundable tax credit (you'll get less than that if the purchase price was under $75,000), as an interest-free loan from the government.

The tax credit is to be repaid over the course of 15 years, or earlier if you sell the home. If you don't have a capital gain on the sale of your home later, repayment of the loan is waived!

You don't have to begin repaying the loan until 2 years after the credit is claimed.

For example:

You bought a home in September 2008 and qualify for the tax credit. In early 2009 when you file your tax return, you will claim the $7500 credit on your tax return.

This means if, for example, you'd otherwise owe $1000 in taxes to the government, the first time buyer's credit will actually get you a $6500 REFUND!

In 2010, you'll begin repaying the government back at $500 per year for the next 15 years. If you sell the home before it's been fully repaid and don't have a capital gain on the sale, the rest of the loan repayment is forgiven.

Don't let this fantastic incentive pass you by if you're thinking of buying in the next year!

The Donkey & The Elephant Discuss Housing

In the weeks just prior to the election, you can't help but wonder...how do the candidates stand on home ownership? What will they do to crack down on predatory lending? Here are some brief details: Obama/Biden

~Universal Mortgage Credit - This credit will provide an average of $500 mortgage tax credit to 10 million homeowners, the majority of which earn under $50,000/yr.

~STOP FRAUD act - This act will officially define "mortgage fraud" in the law books as well as increase funding for enforcement programs and provide stricter penalties for those convicted of mortgage fraud.

~HOME score - Obama/Biden want to create a Homeowner Obligation Made Explicit score which will allow buyers to easily compare loans and understand the actual cost of borrowing.

~Bankruptcy Loophole - Currently, bankruptcy courts cannot modify mortgage payments for an individual. Obama/Biden want to eliminate this provision in federal law.

McCain/Palin

~Federal assistance to borrowers should not bail out speculators who took unnecessary risk.

~Increasing financial assistance should go hand-in-hand with increasing transparency and accountability.

~HOME plan - homeowners who meet certain guidelines will be given the opportunity to trade their mortgage for a manageable FHA loan reflecting their home's current market value. The McCain camp estimates this will keep up to 400,000 families from losing their home.

Spooktacular Haunted Houses

Every year around Halloween I try to hit up at least one, if not more, Haunted Houses. Here are some that I've been to in the past in Chicago:

Haunted Sanitarium at Theatre On the Lake (Fullerton & Lake Shore) - kind of your standard haunted house with a strobe light room, haunted graveyard, and mangled monsters carrying chainsaws that try to freak you out while you wait in line; not horribly scary but still frightening enough to be entertaining and definitely a good length. Guys - great for a date!

Disturbed at the Oracle Theatre (Broadway & Grace) - Let's just say the name is an understatement. Each year's show is a different short "interactive play" where the audience stands in the middle of the scene and the show is enacted around them. Last year's was too disturbing to even describe the plot line... let's just say this is not really as scary as you'd think... but very "I can't believe they're allowed to perform that"-type-of-disturbing. Guys - NOT great for a date!!

In the past, I've also been to a "adults only" haunted house at the club formerly known as Cherry Red (now one of my favorites, Uncle Fatty's Rum Resort) on Sheffield just north of Diversey. Unfortunately we thought it was "adults only" just because you were allowed to mingle at the bar beforehand and bring drinks through the haunted house, followed by a free shot of liquor at the end; we learned the hard way that "adults only" meant "adult themed" and was geared more towards necrophiliacs.

My Favorite Virtual Tours

These are some places that my team and I have listed for sale. Take a look at these beautiful homes using a 360 degree virtual tour...very cool stuff!

Beautiful 5BR/5.5BA Custom Built Home

HUGE 3BR Restored Vintage Condo In Lakeview

Another Enormous and Beautiful Home 6BR/5.5BA (potential short sale!)

Mark-to-Market

What determines the market value of property? Think about what the term market value means... Market value is the highest amount that someone in an open market is willing to pay for something.

That's why today's real estate market is very tough for sellers. Many fail to realize that market value is not determined by how much was originally paid for the property, or by how much the property's value "should have" increased since you bought it. A property's market value is equal only to what the market is willing to pay for the property NOW. This is dependent on a number of factors, specifically factors related to the economy. When unemployment is increasing, credit (lending) is tightening, the dollar's value is falling, people are losing equity in other investments, and cost of living is still rising... the market value of a given property will decrease. Why? Because in a market like that, people have less buying power and tighter budgets. Unfortunately this is the case today.

The best way to determine the market value of your property is to get as many potential buyers in for showings as possible. The more people that see it, the more opportunities you have to receive offers.

Of course, before you get showings on your property you have to decide on a listing price. Sounds like a catch-22, right? Not really. Your realtor should be familiar enough with the market to know what properties similar to yours have been selling for in recent months. This is why it is very important you sit down with your realtor and have them do a comparable market analysis (CMA) for you before listing your property for sale.

I'd rather have a seller price their property lower and leave minimal negotiation room, than price the property too high (to leave room for negotiation) and not get any showings. With as much housing inventory as there is right now, people do not have the time to see everything. So they'll start from the lowest priced properties and work their way up. Don't let your property be the last on the list for viewing!

I'd also rather see a seller get 5 low offers that they have to turn down and finally get one good offer, than not get any offers at all because the property was priced too high to attract showings.

My point? Price your property reasonably and you may even end up with a better offer than if you'd priced it too high!

Buyers' Security Blanket

Despite my teeney bit of experience in the banking industry, I certainly would not consider myself an economist by any means and therefore don't want to delve into my opinions on the pros and cons of the so-called government bailout we're hearing about every day recently.

One thing I'd like to point out, however, is the real estate market tends to be largely driven by consumer confidence. Take, for example, the "home flippers" of a couple years ago who were buying & flipping homes left and right on the confident whim that the market would keep going up. Or look at now, when job security is shaky, we're all uncertain about the future, and essentially people have lost confidence in the economy - the high end real estate market has become a desolate landscape of multi-million dollar mansions left vacant and on the market for months and the other ends of the market aren't doing much better either.

U of M Consumer Confidence Oct 2006 - Present

What am I saying? I think that no matter what the government intervention does to the economy, this intervention in itself will be enough to boost consumer confidence and see a pick up in home sales. Prices can't drop forever and it is uncertain how long mortgage rates will remain so low, so these facts, along with the government acting as a "security blanket" for buyers, should have an encouraging affect on real estate sales.

I'm Back! ... with some info you might find interesting

After a little blogging hiatus, I am back in full-force. Since the last update, I have switched to Coldwell Banker to join a team of two women who have been successful in the real estate business for 30+ years. Also, since the last update, there have been a number of monumental occurences in the real estate market. Most notably, last Sunday, the government took control of Fannie Mae and Freddie Mac. Effectively this has decreased mortgage rates for conventional loans by a significant amount in just a matter of days. Why is this, you ask? Let me break it down.

Fannie Mae was a child of the Great Depression, followed by the creation of Freddie Mac in 1970. For a very simple dissection of how Fannie Mae & Freddie Mac work to support the mortgage banking system, see below.

Banks make money off the interest they charge on the loans they make. The reason they even have money to lend is that they hold cash in the form of deposits & savings from people like you and me. So basically when a bank loans money to someone as a mortgage, they are lending out a portion of the money you've deposited into your savings (or some other form of) account.

The problem is that mortgages are generally long-term - so if a bank loans out all of its money in the form of mortgages, it would have to wait many many years before it can make another profitable loan since it won't have any more cash to lend. Also, if it lends out all of it's money, you and I wouldn't be able to cash out our savings accounts. Not a very sound business plan, right? Also, with this structure, very few people would actually be able to get a home loan since money would be so tight.

That's where Fannie Mae & Freddie Mac come into play. Our government believes that home ownership is very important to our economy and quality of life. Without being able to get a home loan, it's very difficult for many people to own a home. So they created Fannie & Freddie. Fannie & Freddie purchase mortgages from banks - essentially, they purchase the right to receive the monthly payments from the borrowers. When the bank sells these mortgages to Fannie & Freddie, it gets cash which allows them to make more loans and remain liquid. Fannie & Freddie then "securitize" the loans - they package the loans into bundles based on credit risk, and sell these packages called Mortgage Backed Securities (MBSs) to investors. So Fannie & Freddie get their cash, and the investors have a variety of credit profiles to choose from in order to meet their investment strategy. Fannie & Freddie then guarantees the MBSs so that if any of the homeowners default on their mortgage payment, the investor still gets paid by Fannie or Freddie due to the guarantee. Therefore, as long as Fannie & Freddie are financially solvent, the investor gets paid.

The problem comes into play when it looks like Fannie & Freddie might not be able to back all the loans that are defaulting. With an increasing number of mortgage defaults over the past year, investors began to wonder...

Interest rates are based on credit risk. If you were going to loan $1000 for a year to someone who had a good job, a history of timely loan payments, and a good credit score, you might ask for $1030 (AKA 3% interest) at the end of the year. But if you were going to lend that $1000 to someone you know has a history of losing his job, failing to pay bills, missing credit card payments, etc., you might ask him to pay you $1100 at the end of the year (10% interest) since the only thing that would be worth the risk of not being paid back would be the potential for the extra cash at year end.

With credit risk increasing on Fannie & Freddie backed loans, interest rates increased. But when the government took over the two entities, all of the loans backed by Fannie & Freddie became risk-free. That's because the government has taxing authority and will always be able to fund its obligations. So, when the government took over Fannie & Freddie, interest rates went down.

So overall, banks need money to make loans. People need loans to buy homes. Fannie and Freddie buy mortgages from the bank which frees up money to be lent. Without Fannie & Freddie, we'd be in trouble. So good thing the government has stepped in to avert a more serious crisis.

Make sense?

How Long Should It Last?

If you've been home-shopping recently, you may have heard comments such as "the roof is 8 years old"... but for some buyers this doesn't mean much. Is that old? Is that new? How long should a roof be expected to last anyway? Well, the National Association of Homebuilders (NAHB) has some answers for you.

The NAHB did a survey to determine the average life expectancy of a number of household items and appliances. Of course these are just average expectancies, and some other factors play a major role in how long something will last, such as quality of installation, frequency of use, and standard of maintenance.

Here are some common household components and their life expectancies (in years):

Dishwashers - 9 yrs
Washing Machine - 10 yrs
Dryer - 13 yrs
Electric Water Heater - 11 yrs
Gas Water Heater - 10 yrs
Refrigerators - 13 yrs
Microwave - 9 yrs
Electric Range/Stove - 13 yrs
Gas Range/Stove - 15 yrs
Electric Furnace - 15 yrs
Gas Furnace - 18 yrs
Brick Masonry - 100+ yrs
Stucco Siding - 50 to 100 yrs
Cultured Marble Counter - 20 yrs
Natural Stone Counter - lifetime
Wooden Decks - 20 yrs
Fiberglass, Steel, or Wood Doors - lifetime
Screen Door - 40 yrs
Vinyl Door - 20 yrs
French Door - 30 to 50 yrs
Copper Electrical Wiring - lifetime
Whirlpool Tubs - 20 to 50 yrs
Carpet - 8 to 10 yrs
Concrete Flooring - 50+ yrs
Marble Flooring - 100+ yrs
Slate Flooring - 100 yrs
Tile Flooring - 20 yrs
Laminate Flooring - 15 to 25 yrs
Linoleum Flooring - 25 yrs
Vinyl Flooring - 50 yrs
Wood Flooring - Lifetime
Engineered Wood Flooring - 50yrs
Exterior & Interior Paint - 15+ yrs
Asphalt or Modified Bitumen Roof - 20 yrs
Coal & Tar or Wood Roof - 30 yrs
Slate Roof - 50 yrs
Clay/Concrete Roof - lifetime

Believe it or not, these are only a selection of what I find to be most useful for buyers to know... if you want the complete list, do not hesitate to contact me!

Investment TacTICs

Tenant-in-Common (TIC) arrangements are one way that as an individual, you can have an interest in a large real estate investment. The investment can be any type of real estate, from large retail spaces, to offices, multi-family buildings, industrial properties, and much more.

In a TIC arrangement, you own a fractional share of the property. Similar to a share of stock, you are given a fractional share of the whole investment. A group of investors is organized into a TIC structure and is then able, as a group, to aquire a large property. Up to 35 owners can enter into this sort of partnership and each owner gets voting rights. Each partner is given a percentage interest in the property, and then receives this fractional share of cash flow, tax benefits, appreciation, and depreciation on the asset. The fractional interest in the investment is passed along to the owner's heirs, rather than being absorbed by the remaining owners, as a joint tenancy arrangement would work.

A TIC arrangement can satisfy the requirements of a 1031 exchange, if done properly. In 2002 this type of ownership started becoming popular after the IRS issued guidelines on how a joint property venture can satisfy a 1031 exchange. A 1031 exchange, for those who don't know, is an investment timed and structured in such a way that it allows the owner to legally defer the capital gains taxes on the sale of another property.

A TIC arrangement allows you to avoid the hassles of property and asset management (since a third party will have this responsibility), while reaping the benefits of real estate ownership. Additionally, by only owning only a small portion of one large property, this leaves the investor with additional capital to enter into other TIC arrangements in order to diversify their property holdings.

If you're interested in hearing more about how a TIC investment can benefit you, or how you can get involved in one, contact me! I have contacts at a company with a proven track record in structuring these types of deals.

MONTHLY MARKET STATS - APR 08

In the month of April, we saw an almost across-the-board increase in market supply, in what I believe to be a correction to the sudden supply drop of the previous month. A number of buyers were hit hard in April as mortgage restrictions tightened again, decreasing demand for homes. My prediction is that May will yield an overall stabilization in market supply, with the exception of the Near South where supply will significantly drop from this month. I attribute much of the Near South Side's increase in market supply to several developments that listed a number of units for sale in April, including 1555 S Wabash and 1211 S Prairie.

Based on currently available home inventory and units which sold & closed in the month of April, below you'll see the current amount of housing supply in various Chicago neighborhoods. Next to each neighborhood, I am indicating whether the supply has increased or decreased from MArch. The information I'm including is based on attached housing (condos/town homes). If you'd like another type of information, please contact me and I'd be happy to help.

North Center = 7 months (decrease)

Loop = 7 months (increase)

Lakeview = 8.5 months (increase)

Logan Square = 8.5 months (decrease)

West Town = 10 months (no change)

Uptown = 10 months (increase)

Lincoln Park = 11 months (increase)

Lincoln Square = 14 months (increase)

CHICAGO ENTIRE MARKET = 14.5 months (increase)

Near West = 15 months (increase)

Near North = 15 months (increase)

Near South = 23.5 months (increase)

Ever Wondered About... Closing Costs??

Especially for a first time home buyer, but also for a repeat home buyer, it may be difficult to estimate all of the costs involved in purchasing a property. Below I have itemized all of the approximate costs involved in closing a home for your reference.

Note that it usually costs you nothing to use a realtor when buying, except that if you don't, you might unknowingly overpay or miss some necessary details and paperwork.

Also, before getting scared away by the length of this list, keep in mind that this is an extremely detailed breakdown and many of these charges are VERY MINIMAL, some under $100. Add these to a mortgage financed over the span of 30 years and the additional burden is hardly noticeable.

- Loan Application Fee is paid to the mortgage company for the appraisal and credit report $350-550

- Final Inspection and Recertification of Value $75-$100

- Points may be paid to the lender at closing in order to "buy down" your interest rate

- Private Mortgage Insurance (PMI) is required when the loan is greater than 80% of the home's value. It runs about 0.52% of the loan amount annually, or higher if the loan is over 90%.

- Prepaid Interest - you pay interest on the mortgage from the date of closing through the end of the month

- Underwriting Fee is charged by the lender $250-$400

- Processing Fee is paid to the mortgage broker to process the loan $150-$200

- Document Preparation Fee is the cost to prepare the closing documents $200-$250

- Tax Service Fee is charged by the lender to obtain tax bills and monitor payment of taxes $60-98

- Flood Certification Fee is charged by the lender to determine if the property lies in an area at risk for flooding $25-$30

- Lender's Title Insurance Policy insures your lender's interest in the property is a first mortgage $150-$400

- Settlement & Escrow Closing Fee is paid to the title company to act as a lender's agent in handling the closing $100-$350

- Transfer Taxes vary by local ordinance but are $7.50 per $1000 of purchase price in Chicago

- Escrow/Reserves vary by month of closing

- Tax Reserve Fund, if required by the lender, will be a couple months worth of taxes put into escrow

- Attorney Fee varies by attorney $400-700 total or an hourly rate

- Recording Charges to record the mortgage and assign a mortgage and deed or release $60-$130

- Property Inspection is optional (but usually recommended) $250-$500

- Lead Based Paint Inspection is optional $200-$350

- Homeowner's Insurance varies by location and property

- Service Release Premium is compensation paid by the lender to a mortgage broker 1%-1.5% of loan amount

FHA/VA Loans may also include:

-Commitment Fee charged by the lender to lock the rate and points $250

-Mortgage Insurance Premium paid to HUD to insure mortgage against default. A one-time premium is required on all single-family and 2-4 units of 2.25% of loan at closing. Annual premium is .5%, paid monthly on all property types.

- Origination Fee charged by the lender 1% of loan amount

Chicago 2016!

The major contenders for the 2016 Olympic bid include Rio De Janeiro, Tokyo, Madrid, and my personal favorite - Chicago. The final vote won't be for about another year and a half (Oct 2, 2009), however there is much planning that must take place before we even know for sure who the winner will be.

Holding the Olympic Games has historically proven to improve the city's economy drastically. The Games injected $7 billion to Sydney's economy, bumped Barcelona up to a tier 1 tourist destination, added 140,000 additional jobs in Vancouver, and increased Beijing's residential property values 59%.

In Chicago, about $1 billion of venues would be built to accommodate the Olympics. Experts predict that the games would bring an additional 250,000-500,000 tourists to Chicago for 5-7 years after, and would create 1/2 - 1 million square feet of additional downtown absorption due to the need for sales offices, vendor locations, support sites, etc. In other words... while the city might be crowded with tourists for a couple months, just IMAGINE the immense economic benefits our city will gain for many years thereafter.

The exciting thing is if Chicago gets the Olympics, the plan is to integrate most of the events into the city limits, rather than setting up a megaplex structure 50 miles out like many other host cities have done or plan to do. Notable locations planned for various events and support sites include:

- Lincoln Park: Tennis center, triathlon start

- United Center: Basketball

- McCormick Place: Paralympics, press center

- University of Illinois Pavilion: Boxing

- Soldier Field: Football

- Northerly Island: Beach volleyball, BMX biking

- Jackson Park: Hockey

- Washington Park: Olympic Stadium (will be built for a 70k capacity, which will be downsized after the games to a 5-10k capacity)

- South Loop along the Lake (near McCormick): Olympic Village where the athletes will live (this will be comprised of 2300 four-bedroom units, which will later be retro-fitted to mostly 2 bedrooms and sold to the public)

Check out volunteer opportunities to help promote the Chicago bid at http://www.chicago2106.org/ and keep in mind the great benefits you'll reap should the Olympics end up in our city eight years from now.

Invest Creatively

You know it's a buyer's market. You think it's a great time to invest in real estate because you know that prices are low and are bound to turn around at some point. But you don't have enough cash. Or you're not sure the rent you'd receive would cover the mortgage. But you know the appreciation over time would be worth investing now. If you're interested in investing in real estate for the long-term but aren't sure how to fund it, consider an often-overlooked asset that can be used for investing in property. Your retirement fund.

Since 1974, the IRS has permitted individuals to self-direct their Individual Retirement Accounts (IRAs). The majority of the population will open a brokerage account and buy some equity shares (stock) in a company they think will be a winner. They'll buy shares of a mutual fund or invest in the money market. Or they'll invest their 401K in a few of a handful of funds offered by their company. And the more conservative investor will choose notes and bonds. But a retirement account allows you to invest in ANYTHING that is held for investment purposes. So why limit your investments to financial securities? It is unbelievable to me that only 3-4% of existing IRAs are invested in alternative assets!

Before I go further, let me clarify to avoid any confusion. Please understand that what I am talking about is different from BORROWING from your IRA in order to purchase a home. I'm referring to actually investing your IRA funds in a piece of real estate which is to be held as an investment only. You don't borrow from the IRA and pay it back; you are directly investing the IRA funds into the property itself, rather than a stock, bond, or other similar security.

There are a number of restrictions on investing your IRA in real estate, however if you find a great opportunity, it is well worth speaking with a qualified person on whether this can be done or not. You'll need to speak with several professionals, including an attorney, CPA, financial advisor, custodian, and of course a realtor to help you find the property and deal with processing the transaction. But it can be done!

Your options span from a rental property in Malibu, a strip mall in Arizona, vacant land in Montana, pre-construction in Chicago, a fixer-upper elsewhere, or even a hog farm in Iowa. Anything goes. The basic rules require that the property must be held for investment purposes only - that is, you and/or your family cannot live in it or gain any benefit other than the cash flow (which flows back into your IRA) and appreciation it provides.

Next time you open your retirement account statement and cringe at the dwindling numbers due to today's economy, think about what other options you have as far as investing in a tangible asset that will provide long-term appreciation.

Contact me for more info.

Summer in the City

One of my absolute favorite things about Chicago is the SUMMER! North Avenue Beach is a massive party all weekend every weekend. You'd be hard-pressed to find a neighborhood that wasn't having a festival at least once. If you want entertainment but you're on a tight budget, you'll have no trouble finding free events. Music, food, dance, athletics, and culture abound in the warmer months of Chicago. I'll touch on some of my favorites:

1) May 2: Looptopia - OK, I'll be honest. I haven't actually been to it and I don't quite understand it but it sounds spectacular and is something I won't miss if I'm able to go. The best part about it is it's an overnight extravaganza in the heart of the city celebrating arts, culture, music, and everything else we all love, including staying up past our bed times. Oh and did I mention it's inspired by similar events that take place in faraway lands such as France & Spain?

2) May 31-June 1: Belmont & Sheffield Music Festival - In the heart of Lakeview you'll find a number of bands from the nationally well-known to the local. Live entertainment this year will be provided by Trippin' Billies, Sugar Wall, Why Store, School of Rock, and Underwater People.

3) July 11-Aug 16: Grant Park Music Fest - FREE CONCERTS. Throughout the summer the Chicago Park District offers a plethora of music-related events free to the public.

4) June 14-15: Old Town Arts Fair - A great time for the lover of both arts & beers! 260 artists display paintings, sculptures, photos, jewelry, crafts, and more! And a boatload of easy-going Chicagoans just out for a good time.

5) June 20-22: Taste of Randolph - Mmm, here's where you get to try out all of the delicious restaurants that call the West Loop home. Feel free to feast in front of the live entertainment provided by a lineup that is still TBA - however in the past, some notable names have included the John Butler Trio & Fountains of Wayne.

6) June 27-July 6: Taste of Chicago - Somehow this usually turns out to feel like the hottest weekend of the summer.. of course that may be due to the 1 million visitors this festival attracts through the two week duration. Come hungry and leave stuffed.

There are a LOT more festivals I haven't mentioned here for the sake of space but please Google "Chicago Festival Guide" for a complete list, and you'll notice that not one weekend this summer will be festival-free.

Let's be serious here, who doesn't like funnel cake?! Go to a festival this summer and find some for yourself.

Monthly Market Stats - Mar 08

Based on currently available home inventory and units which closed in the month of March, below you'll see the current amount of housing supply in various Chicago neighborhoods. Note the significant decrease in overall market supply from February. Next to each neighborhood, I am indicating whether the supply has increased or decreased from February. The information I'm including is based on attached housing (condos/town homes). If you'd like another type of information, please contact me and I'd be happy to help.

Loop = 4 month supply on market (decrease)

Lakeview (includes Wrigleyville, Southport Corridor, Boystown) = 7 mo (decrease)

Lincoln Square = 7.5 mo (decrease)

North Center = 8 mo (decrease)

Lincoln Park (includes Depaul area) = 8 mo (decrease)

Uptown = 9 mo (decrease)

Near South (includes South Loop, Printer's Row) = 9.5 mo (decrease)

West Town (includes Wicker Park, Ukrainian Village, Humboldt Park) = 10 mo (increase)

Logan Square (includes Bucktown) = 11.5 mo (decrease)

CHICAGO ENTIRE MARKET = 11.5 mo (decrease)

Near West (includes West Loop, Medical District, Tri-Taylor) = 11.5 month (decrease)

Near North (includes Gold Coast, River North, Streeterville, River West, Old Town) = 12 mo (increase)

As you can see, all but two neighborhoods decreased in amount of supply for March. Before you dust off your high school economics book, I'll just tell you what this means:

1) You won't see price drastic reductions as frequently as you have seen the past year

2) There are less options for buyers

3) There is less competition for sellers

4) If you're a buyer waiting for prices to "hit rock bottom"... you already missed it. Start your search now before the supply shrinks even more.

Read Me, I'm Irish

Well... it's that time of year again. In Chicago things start to get a little crazy in March. It's that time of year when we're almost over that last bump in the rollercoaster ride we call winter... spring break is just around the corner and once in a while we get a glimpse of the sun again. We are teased by a day here or there above 50 degrees, to be followed by snowfall the day after. Basketball season takes a very serious turn as March Madness begins, and most importantly we begin a 2 week celebration for a one day holiday... St. Patrick's Day.

One thing you cannot miss if you live in, around, near, or even far from Chicago is the annual South Side Irish Parade. Unfortunately - and I hate to say it - I am missing it this year. Since my job requires me to usually be working on Sundays, I unfortunately can't partake in this year's green-clad, bagpipe-playing, luck-'o-the-irish vibed, all day drink-a-thon. But I have been before so I can assure you it's well worth your while, even if you're not Irish.

You'll find the parade in Chicago's historic Beverly neighborhood. If you're going for a family outing and will be attending with the little ones, stick to the east side of the street. Head west and you're in for a rowdy ride.

The Beverly area is a unique icon in the City's landscape due to its large lot sizes, numerous single family homes, neighborhood feel, rolling hills, and of course its abundance of Irish pubs. The strong Irish-American population and heritage in the area is what has drawn the country's largest neighborhood parade.

Well, I hope you made it to the parade today, and if so, I imagine you won't be reading this post anytime today. If you're like me and were unable to go, I suggest you polish up your blarney stone and get ready to make up for all you missed next weekend when you celebrate St. Paddy's with a night (and day) on the town.

[The first photo is of my Uncle Ed Kane of the Emerald Society in the 2007 South Side Irish Parade, of course taken from the west side of the street :-) ]

MONTHLY MARKET STATS - FEB 08

Based on currently available home inventory and units which closed in the month of February, below you'll see the current amount of housing supply in various Chicago neighborhoods. I'll continue to update this each month so you can see the market dynamics. The information I'm including is based on attached housing (condos/townhomes) . If you'd like another type of information, please contact me and I'd be happy to help.

Loop = 9 month supply on market

West Town (includes Wicker Park, Ukranian Village, Humboldt Park) = 9 mo

Near North (includes Gold Coast, River North, Streeterville, River West, Old Town) = 10 mo

Lakeview (includes Wrigleyville, Southport Corridor, Boystown) = 10.5 mo

Uptown = 12 mo

Near West (includes West Loop, Medical District, Tri-Taylor) = 12 month

Logan Square (includes Bucktown) = 13 mo

Lincoln Square = 13 mo

CHICAGO ENTIRE MARKET = 13 mo

Near South (includes South Loop, Printer's Row) = 14 mo

North Center = 15 mo

Lincoln Park (includes Depaul area) = 16 mo

What the market supply means: at the current rate at which homes are closing sale, it will take X months for all of the homes currently on the market to be sold & closed. This is an indicator of the current DEMAND for attached housing in these neighborhoods. You can compare these statistics to future months to help you understand how demand is changing over time.

For information on the boundarylines of each of these neighborhoods, good old Wikipedia should help: http://en.wikipedia.org/wiki/Chicago_neighborhoods

Market Stimulus

Part of the economic stimulus package that President Bush signed into law last week is going to positively impact the real estate market. In addition to the tax rebates many individuals can expect to receive in the springtime, there is another benefit of this package that is more directly related to real estate.

Fannie Mae and Freddie Mac are government sponsored enterprises that help keep the mortgage market liquid by purchasing mortgages from banks & lenders; they then sell those mortgages to investors. This keeps the lending institutions from "running out of money to lend" and allows them to continue to provide financing to homebuyers like you and me. Fannie & Freddie currently cap the size of the loan they will purchase at $417,000. Part of the economic stimulus package is to increase this "conforming loan" size to $729,750. These "jumbo" loans usually draw higher interest rates, but with the passage of the law, interest rates on these larger loans are expected to decrease.

NAR forecasts that the increase in the conforming loan limit will result in:

~500,000 refinanced loans and could help reduce foreclosures by as much as 210,000

~300,000 additional home sales potentially generated

~reduced housing inventory

~home price increase by 2-3 percentage points

Additionally, part of the plan is to increase the size of FHA-backed loans to the same limit of $729,750 from a previous $362,790. FHA provides insurance on various loans and is backed by the U.S. Dept of Housing & Urban Development (HUD). The insurance on these loans allows more homeowners to purchase homes with low or no downpayment due to the decreased risk to the lender. Increasing the loan size limit on these loans will make home purchases more affordable for many.

Just Listed! Gold Coast!

1br/1ba in coveted Newberry Plaza in the heart of the Gold Coast! $289,900.

The Real Estate Papparazzi #3

At least not everyone is hesitant to invest in the real estate market today. The most saavy investors realize that the "buy low, sell high" adage applies right now to the housing market. Anyone who is waiting for "prices to hit rock bottom" already missed it.

Shares of the S&P Homebuilders Sector Spider (XHB), an ETF of the largest public residential homebuilders has risen 7% this year! In a year when house prices are down about 4% for the Chicago area and much more in other parts of the country, a 7% increase in real-estate derived investments is a serious sign of what's to come!

Just Listed! Edgewater Neighborhood!

SUNNY, SPACIOUS & BEAUTIFUL 2 bed/1 bath near the lake and beach for $195,000! Click HERE for more info!

Please Refer to...

My line of business is heavily reliant on referrals. So for my post today I am going to refer you to someone else's blog post that I think will be interesting to anyone curious about the real estate market's affect on the availability of financing.

http://www.themortgagereports.com/2008/02/how-the-declini.html

Transfer Taxes for Transportation

If you live in Chicago, you're sure to be familiar with the hotly debated CTA funding issue. The City has threatened to raise fares and cut bus routes if they don't get the additional funding they need. So on Feb 6, next week, the Chicago City Council will be voting whether to raise the city's real estate transfer taxes in order to fill the transportation funding gap.

The vote is for a 40% increase in the real estate transfer tax. This would mean that buyers of real estate would pay $10.50 in taxes per $1,000 of each real estate transaction, compared to the $7.50 that they currently pay. For a $200,000 real estate purchase, this would increase the transfer tax by $600 to $2100!

Why would we increase real estate taxes by 40% in order to fund transportation? The tax will actually be funding CTA pensions and retiree health care plans. The tax won't add a single additional bus or train line or pay for upgrades or maintenance. The market is already struggling to come up with enough buyers to absorb the supply of housing... why make it even more difficult?

Visit http://wrongtax.com/ to voice your opinion on this issue or contact your alderman.

The Real Estate Paparazzi #2

Some updates on much-anticipated Chicago downtown developments:

Trump International Hotel and Tower: Today's opening of the 92 story luxury development on the Chicago River at Wabash may be picketed by the hotel workers' union Local 1 of UNITE HERE. Five floors of the building will be staffed by 300 workers. Hotel officials and Local 1 have failed to come to agreement on whether the hotel's workers will be allowed to decide if they'll be a part of the union.

The Spire: Just two weeks ago sales opened on the over-1000 unit, 150 story building expected to be completed in 2012 at 400 N Lake Shore Dr. Prices range from $750,000 to $15 million, starting at about $1400/square foot. Expectations are that nearly half of the buyers will be from overseas. The low value of the U.S. dollar to many foreign currencies is sure to help meet that expectation. Construction of the building is still in a sub-ground phase where workers are drilling foundational supports into the ground.

The Real Estate Paparazzi #1

Today's blog post is going to be the first of a group of posts titled "The Real Estate Paparazzi". Real estate is in the news so often these days that we almost seem to know what's going on in the market at all hours of the day, similar to how the paparazzi allow us to keep tabs on the daily lives of almost any celebrity we wish. I'd like to cover these topics and point out anything relevant to the Chicago market, as well as break them down into organized explanations. If you read any of today's headlines, you're sure to have noticed that they were chock-full of articles about how the housing market has plunged and has hit record lows and so-on. This was due to reports released by a few sources:

1) The Census Bureau report showed that 68.7% of all occupied homes were occupied by homeowners (versus renters). Last year, the number was 69.8%. This was the largest one-year drop on record. Not-so-good news for those unable to obtain a mortgage and are stuck renting, but not-so-bad news for landlords.

2) The SP/Case Schiller Index reported that this was the 11th consecutive month of negative annual home price returns nationally. This data is through Nov 2007. However, of the 20 major metropolitan areas surveyed, Chicago posted the 7th best annual return of -3.9%. Leading the pack was Charlotte who experienced a positive 2.9% annual return. Most hard-hit were Miami (-15.1%), San Diego (-13.4%), and Vegas (-13.2%).

3) Realtytrac, a real estate website which I subscribe to, reported that total foreclosure filings in 2007 increased by 75%. I just closed a bank owned foreclosure property last week which I got for my buyers at 18% below list price PLUS a $10,000 closing credit to them. If you're thinking about purchasing real estate right now for any reason, foreclosures might be the place for you to start looking. I have access to foreclosure listings; contact me so I can find you a great buy.

FOMC Emergency!

Early this morning the outlook was gloomy for stocks, with the Dow expected to end the day down 600 or more points on global fears of a U.S. recession. Enter the Fed. For the first time in 7 years, the Fed voted for a non-meeting rate cut. They slashed the overnight rate by 75 basis points to 3.5% and signalled that a further rate cut was likely and could potentially occur at the next meeting, scheduled for just next week. Not only was this the first mid-meeting cut in 7 years, but it was the largest one-time cut in 17 years. The Dow ended the day down a "mere" 130 points.

What does this mean for you? While mortgage rates - long term rates - aren't specifically tied to the Fed Funds rate - a short term rate - we'll still see some effects on the costs of home ownership.

1) Those with adjustable rate mortgages (ARMs) due to reset soon will benefit from a slightly lower reset rate. It won't be sufficient to bail out anyone in serious trouble, but it will help them stretch their dollar a little further.

2) Banks dropped their prime rate after the Fed cut, which will benefit consumers with home equity loans, credit card debt, and auto loans.

3) The market has already priced in a rate cut, so mortgage rates are already very low!

4) The rate cut is likely to increase mortgage applications as buyers attempt to find the best rate possible and more people begin to consider home ownership as a possibility.

5) The down side is... don't expect your savings to grow as fast as it was before! Banks lower the interest rates they offer on savings and CDs at the same time they lower the rates at which they lend to you.

Is Now The Time To Buy?

I've gotten this concern very frequently from hesitant buyers. "I don't want to buy now because I'm afraid prices will drop even more in the coming months." Here are two things to consider:

1. Real estate is a long-term investment. If you plan to buy a place and then sell it in a year, then yes, you should be concerned about where prices are heading soon. However, if you are like most buyers and expect to hold onto your property for 3-5 or more years, there are sure to be natural ups and downs to the value of your property anyway. There is nothing you can do about that and you'll NEVER know when the price is at its absolute lowest. Waiting for prices to drop and drop and drop could potentially leave you in a situation where prices suddenly skyrocket, and where does that leave you?

2. Home prices are not the only thing to consider. Mortgage rates change just like home prices change. What if you KNEW that home prices will drop in 6 months? Well, then you might wait 6 months to buy your home. But what if you also KNEW that mortgage rates would rise in 6 months? Then what would you do? For instance, a P&I payment on a mortgage for a $300,000 home at 5.5% interest would be $1703/month. However, if the price of the home FALLS 3% but at the same time, mortgage rates go up 0.5 percentage points to 6%, your monthly P&I payment would be $1744. So, you'd actually be paying MORE per month for a home that cost less.

View this blog from a respected mortgage industry leader for more insight to the mortgage market and where rates might be headed. And this article from NAR will help you understand how the real estate market is predicted to fare this year.

New Years REVOLUTION

It's the first full week of 2008 and I'm sure many of us have already given into our cravings to eat junk food, sleep in and skip the workout, or wait another day to quit that bad habit. Of course, if you're a trying-to-quit smoker, Chicago's new smoking ban will help you out a bit by keeping you from lighting up in public places.

Since I am not a big fan of New Years Resolutions (who really keeps them anyway?), I'd instead like to talk about something else - Chicago's New Years Revolutions - not the things we resolve to do in our lives, but the changes that we'll witness over the course of the next year.

1. Green home ownership on the rise. As oil prices spike (last week it actually hit $100/barrel), even those less-concerned with the environment will begin to adopt more environmentally-friendly concepts for their homes such as energy-saving light bulbs. If anything, it will at least save some "green" on the utility bills as gasoline costs cut into the budget.

2. Increased celebrity sightings. With the increase in paparazzi trailing celebs and the explosion of TMZ TV and such over the last couple years, those who aren't currently working on a Hollywood project are likely to want to find a summer getaway. Chicago is a relatively undiscovered hub for shopping, attractions, fine dining, business, and night life. The only thing we are lacking in the Windy City are the exorbitant housing costs of Manhattan and the environmental disasters of Cali. And we have the Lake - how many of them do you really think are swimming in the Pacific Ocean? We've got sand and we've got sun; isn't that all they really need? Not to mention that just last year there were at least 2 major motion pictures shot in Chicago.

3. Southward movement. The South Loop is growing at an unbelievable rate considering the serious market constraints other parts of the U.S. are experiencing. Driving down Roosevelt Rd. you'll see more than 15 cranes putting up new buildings all in one 360 degree view through your car windows. And you thought developers were having problems? That wouldn't explain why Donald Trump is currently putting up a 92 story Trump International Hotel & Tower right downtown. Its close proximity to the lake, museums, Soldier Field, Columbia College, School of the Art Institute, Grant Park, McCormick Building, the Loop, 3 CTA trains, and major highways promises a thriving South Loop economy.

I wish everyone the best in keeping their New Year's resolutions. However, if all else fails, at least you still know you live in the best city in the world!