Chicago-area home sales down just 19% in May

Chicago-area home sales fell almost 19% in May compared with last year but increased over the previous month for the fourth straight time, according to the Illinois Assn. of Realtors.

YEAR-OVER-YEAR DECLINES
Below is a monthly year-over-year comparison of home sales (single-family and condo) in the nine-county Chicago area.
Month	2009	2008	Change
January	2,965	3,927	-24.5%
February	3,082	4,326	-28.8%
March	4,260	5,759	-26%
April	4,747	6,094	-22.1%
May	4,747	6,927	-18.7%
	2008	2007
January	3,927	5,947	-34%
February	4,326	5,894	-26.6%
March	5,759	8,101	-28.9%
April	6,094	8,729	-30.2%
May	6,927	9,751	-29%
June	7,656	10,612	-27.9%
July	7,274	9,730	-25.2%
August	6,804	9,733	-30.1%
September	6,371	6,794	-6.2%
October	5,397	6,559	-17.7%
November	3,910	5,774	-32.3%
December	4,232	5,033	-15.9%
Source: Illinois Assn. of Realtors

“We are seeing more activity in the housing market with increased listings, more activity at showings, a surge in interest from first-time buyers as well as some improvement in time on market,” Pat Callan, president of the association and owner of Realty Executives Premiere in Wheaton, said in a release Tuesday from the association.

Mr. Callan also says in the release that first-time buyers need to close by Nov. 30 under current guidelines to get the $8,000 tax credit for first-time buyers.

The 18.7% year-over-year drop in Chicago-area sales in May was the smallest so far this year.

In the nine-county Chicago region, 5,634 single-family homes and condominiums were sold in May, compared with 4,747 in April 2008, the association said. May sales were up 18.7% compared with March.

In the city of Chicago, May sales fell 27.5%, to 1,537 compared with 2,119 in April 2008. Sales rose 11.5% compared with April.

The Chicago-area median price — where half the homes sold for more and half sold for less — was $200,000 in May, down 20.3% from $251,000 in May 2008, the Realtors’ group said.

In the city, the median price fell 29.5% in May, to $225,000 compared with $319,000 in May 2008.

“We’re encouraged to see the bank-owned inventory moving in the marketplace, indicating buyers are finding good bargains, especially in single-family homes and flats,” David Hanna, president of the Chicago Assn. of Realtors, said in the release. “The city of Chicago condominium sales numbers continue to reflect a critical need for governmental agencies to review the growing disparity in the ability to finance a condominium purchase in the city. This affordable housing will become unaffordable and unattainable to many qualified first-time homebuyers in the city of Chicago unless existing federal guidelines, which do not take into account nuances of the local market, are modified.”

Statewide sales fell 21.0% in May to 8,945 homes, compared with 11,326 in May 2008, the Realtors’ group said. May statewide sales rose 19.3% compared with April.

The Realtors group's sales figures include new and existing homes. The nine-county Chicago Primary Metropolitan Statistical Area consists of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will.

In Chicago, buyers in driver's seat

Amy and Dennis Han, with their children Nikki, 8, and Danny, 6, purchased a condo in Water Tower Place for $500,000 less than its original asking price. Photos by Erik Unger

Amid all the gloomy real estate news — plunging property values, rising foreclosures, houses that just won't sell — it's easy to forget that these are the best of times for a lucky few.

Home buyers with cash to spend and no house to sell are holding aces in today's market. Prices have receded to 2002 levels, with sellers often willing to knock off another 25% or more. Mortgage rates are rising but remain low at less than 6%. First-time buyers qualify for an $8,000 tax credit.

Add it up and buyers are landing bigger homes, in nicer neighborhoods and with more amenities, than they thought possible.

"Buyers are in the driver's seat," says Megan Jordan, an agent at Koenig & Strey GMAC Real Estate in Lake Forest. "Five to six years ago, sellers were at the wheel. Now buyers are saying 'touche.' "

Michael Pierson, president and chairman of Prudential Preferred Properties in Chicago, says, "First-time buyers are driving the market. They represent 50% of deals now; typically that's 35%."

Apart from them, Mr. Pierson says, anyone paying with cash or a fully approved mortgage "has the most strength. It takes risk off the table for the seller."

Barry and Rosalie Zaransky, both 57 and essentially retired, sold their Homewood house of 31 years and paid cash for a two-bedroom, two-bath condo in the Grand on Grand, in River North.

First listed at $599,000, last year it dropped to $550,000, "still a little out of our price range," Mr. Zaransky says.

With scant hope for success, the Zaranskys offered a low-ball, final bid of $475,000 for the condo and a parking space, and closed the deal.

"I'm sure the only reason they did (accept the bid) is we took financing out of the equation," Mr. Zaransky says.

The final score: a 20% discount overall and an enviable address.

"That part of River North, farther east, is one of the hottest areas of Chicago," says their agent, Jon Gerstein of @properties Inc., River North.

At 1,400 square feet, their condo is larger than others in the same tier.

"It has a lovely kitchen," says Ms. Zaransky, who works part-time at Ingalls Memorial Hospital in Tinley Park. She likes the stainless-steel appliances and extensive granite countertops.

The sizeable walk-in closet, "huge soaking tub and gorgeous shower" are pluses in the master bedroom, says Mr. Zaransky, a former psychologist.

It far outshines the condo they were planning to buy for nearly $500,000 in a new building nearby. That unit was smaller, with no window treatments, cheaper fixtures and a less attractive floor plan, he says.

Transferees are another strong group in this market, says Jane Field, an agent at Koenig & Strey's Gold Coast office, though companies are cutting back transfers.

"They're coming here whether someone buys their property or a relo company takes it over," she says.

Wealthy buyers also have an edge, Ms. Field says: "Especially if they are buying their third or fourth home, it makes sense for people in that strata to buy at these reduced prices."

Dennis and Amy Han, both 45, fall into that category. He is an ear, nose and throat surgeon in private practice. She is a psychologist at the Indiana University School of Medicine.

They live in Dyer, Ind., with their two children, 8 and 6, and own a weekend condo in Chicago's CityFront Plaza.

They recently purchased a 2,700-square-foot corner unit in Water Tower Place for $1.2 million, nearly 30% down from the original listing price of $1.7 million.

"It's a fixer-upper," Ms. Han says. "It has the original kitchen and bathrooms from the '70s. But at this price, the cost of renovating will still make it reasonable."

At pre-recession values of about $1.5 million, the Hans say they would not have purchased in the building, which they love for its North Michigan Avenue location, swimming pool and better views than CityFront.

The Hans are renting their other condo at a break-even rate, Dr. Han says, with a tax deduction for depreciation.

Their agent, Kim Jones, of Baird & Warner's Gold Coast office, says the Hans scored the lowest price per square foot in the building. After renovations, it could resell at $2.2 million, she predicts.

Alas, even those who strike a good deal sometimes suffer a smidgen of buyer's remorse and worry that their neighbors will resent them for driving down home values.

Because the unit was on the market for a year, the Hans wonder if they could have held out for less.

"I think we could have done a little better, but we didn't want to be jerks about it," Ms. Han says. "The person selling it lives in the building."

more at

http://www.chicagobusiness.com/cgi-bin/mag/article.pl?articleId=32114

New incentives to buy a house

there is currently an $8,000 tax credit (not deduction) available to any person with an adjusted gross income below $75,000 ($150,000 for joint filers) who buys a home for personal use before Dec. 1, 2009. The one stipulation is that he or she can not have purchased another primary residence within the last three years.

The current law replaced the earlier one from 2008, in which people who bought homes were given a $7,500 loan that had to be paid back over 15 years, and probably made a lot of people wish they had waited until the new law began in in 2009.

Now, however, Uncle Sam may be ready to serve up an even juicier-piece of legislation. Yes, it's true, Uncle Sam wants you to buy a home! And not just your primary residence.

This past week, Sen. Johnny Isakson (R-Ga.) introduced a bill that would provide not just $8,000, but a $15,000 tax credit to any person who buys a home of any kind.

Time to Stop Dreaming and Start Buying?

Furthermore, under the proposed legislation, there are no longer any income restrictions. That means that even the Donald Trumps of the world can add to their portfolio and receive a tax credit. The legislation would extend the tax credit for one year from the date of enactment, and would still allow homebuyers to claim the credit on their 2009 tax return for purchases made in 2010.

On Senator Isakson's Web site, he makes the following statement:

"I believe our economic problems start with the housing market and that we must restore the housing market if we are going to restore our economy. To draw buyers back to the market, I have introduced a proposal to invigorate housing demand and to boost the economy by expanding the first-time homebuyer tax credit passed by Congress earlier (this) year."

Isakson goes on to say that an illiquid housing market, decline in equity, and decline in net worth must be reversed, and that the recent high percentage of foreclosure and short sales is only contributing to the downward spiral of prices.

He had brought a similar bill to the Senate floor in February 2009, but the $15,000 amount and terms of the bill were reduced by a Congress under political pressure to cap their stimulus spending.

This is a very striking piece of legislation, and one that could have a major positive impact upon the housing market. The new legislation could:

1) Entice more first-time homebuyers to finally enter the market.

2) Stimulate current sellers (who have enough equity) to reduce their price, get it sold, and buy another home for the tax credit.

3) Motivate investors to add to their portfolios.

4) Appeal to those who have been waiting to buy second homes and vacation properties.

5) Help buyers recoup money spent on the larger downpayments that are now required.

How to keep your credit score high and your credit lines available

1. Keep your credit score high.

This is obvious advice, but a good credit score is the

single most important factor in maintaining a high credit

limit. If other forces are outside your control, this one

is in your hands. Paying your bills on time and keeping

your debt balances low is a key to maintaining a high

credit rating. Single late payments might have been forgiven

in the past, but no longer. — Emily Peters, personal

finance expert for Credit.com

2. Keep your cards.

Don’t close your accounts. Your FICO score is largely

based on the ratio of total balances versus total available

credit. Closing one card will lower your available credit

making your balance to limit ratio higher. Therefore it’s

very likely your FICO score will drop and your othercards may lower your limit. 

— Marc Chase, founder of My Credit Group

3. Use your cards.

Keep your cards active. If you’re not using your card,

the company isn’t making any money off your account.

Banks are lowering limits and closing accounts

that are underutilized. — Schwark Satyvolu, co-founder

of BillShrink.com

4. Know your limits.

Find out what your limits are. Credit-card providers are

not obligated to give you warning before changing your

account. Your limit may have been adjusted without

your knowledge. Most cards allow you to monitor and

track your balance online and set alerts if the situation

changes. — Ken Lin, CEO of Credit Karma

5. Carry a balance.

It sounds like bad financial advice to pay interest if

you don’t have to, but issuers don’t make money unless

you’re carrying a balance month to month. In the current

situation, it might make sense to carry a larger balance

to stay on the provider’s good side. In typical eras,

good practice is to keep balances under 30 percent to

40 percent of available credit to maintain a good FICO

score, but to stay in the good graces of the credit-card

companies, a user would be well-advised to use more of

her credit. The higher balance may motivate the bank to

keep your limit high, which could outweigh any negative

impact on your FICO score. — Schwark Satyvolu

6. Pay enough.

While you want to be carrying the balance, you don’t

want to be paying the minimum. Most card providers

have established profiles for users who pay only the

minimum. Such a pattern establishes you as only slightly

more desirable than a user who pays late or misses

payments. — Steve Conover, The Credit Guru, and Schwark

Satyvolu, co-founder of BillShrink.com

7. Know your providers’ practices.

Most companies report to the credit bureaus only once

a month on a regular schedule. Knowing what day they

report your card activity can give you the flexibility to

maintain a high balance, which can make you a more

profitable customer for the provider and still pay down

your balance by the date the data is reported to the

credit bureaus. — Marc Chase

8. Get more credit.

If your credit score is still high, if you’re still employed

but worried you won’t be, or if you just want to have

more credit available, you need to act while you have the

chance. Ask your card providers for higher limits, and

apply for new cards. Each new credit application dents

your credit score, so try to stick with current providers;

but if you’re preparing for a long winter of unemployment,

use every resource and get a new card or two.

— Emily Peters and Schwark Satyvolu

9. Choose your cards.

Few people were aware until recently that card providers

were profiling your credit risk based on your spending

behavior, but American Express and others have

been doing it for years. If you have a card associated

with high-income membership, don’t use it at discount

retail stores. They will consider that a deviation from

their standard profile, and they may lower your limit.

Keeping an assortment of cards to use at different

vendors and stores can help avoid sending up red flags.

— Schwark Satyvolu

10. Don’t move balances.

Trying to move balances from one card to another won’t

improve your overall FICO score or your standing with

providers. Only move balances between cards if you

believe you can obtain more beneficial rates and understand

all the fine print that comes with balance transfers.

— Emily Peters

11. More than FICO.

Card providers weigh factors such as unemployment

payments when considering your credit. Before you

decide to apply for unemployment, consider whether

the amount of money you might receive from unemployment

outweighs the ding accepting it might have

on your access to credit. It also might be wise to take

on part-time work to keep money coming in and credit

limits high. — Schwark Satyvolu

12. Right-sized cards.

Ensure that you are using the right cards. Certain cards

have nice benefits but are not meant to carry significant

debt loads. You may not need the card that earns you

airline miles if you’re no longer traveling regularly for

work. Another card may offer no rewards but will allow

you to carry a larger balance. If you want to obtain new

cards, consider it early in your layoff or while you’re still

employed. — Schwark Satyvolu

13. Consider your rewards.

Specific rewards cards offer better value than cashback

cards. If you know you frequently require certain

products or services, such as hotel points, you will get

better value earning points toward that service than

applying cash-back rewards to that purchase. If your

needs are more general, rewards are wasted, and cash

back is a better option. Applying rewards will help

keep your spending down and preserve your balance.

— Schwark Satyvolu

14. Find off-card debt.

Your credit-card debt may impair your ability to get a

home-equity loan; by comparison, your home-equity line

will cause you fewer problems getting and keeping high

limits on a card. Lenders and card providers consider

home-equity and other lines of credit less risky than

credit-card debt, so seek avenues of debt besides your

card or use those lines of credit to help pay your creditcard

bills. — Schwark Satyvolu

FHA loans

An FHA loan is a loan that is insured against default by the Federal Housing Administration (FHA). FHA does not lend the money, they simply insure the loans. The purpose of FHA is to promote home ownership for people who do not have a lot of money. Almost anybody can get an FHA loan, providing that you have reasonable debt to income ratios and decent credit. A few years ago, the FICO score needed for FHA and VA was only 580. Recently, however, lenders have tightened standards and raised the minimum scores needed on both loans to 620. A few months ago, FHA also raised the down payment necessary for an FHA loan from 3% to 3.5% (although, a borrower is permitted to receive the down payment money as a gift from a family member). At one time the down payment could also have come from a non profit organization that participated in Down Payment Assistance Programs, such as Ameridream. However, at the moment, the Down Payment Assistance programs have been eliminated by the Federal Government. Ameridream has been fighting this decision through the courts for many months. Most recently, the Obama administration has proposed that the $8,000 first time home buyer tax credit may be used as partial money towards the down payment. But the buyer must put some money up as well. These complicated rules are still being worked out. One disadvantage of FHA loans is that they require Mortgage Insurance Premium (MIP), which is 1.5% of the loan amount, and is paid by the buyer at closing. Presently, the maximum FHA conforming loan limit is $417,000, but in higher cost areas this can be adjusted to 115% of local median prices, not to exceed $625,000. FHA is quite lenient as well. If someone has lost a home to foreclosure, they are permitted to buy another home with an FHA loan as little as three years later. The interest rates on FHA are very close to those of the conventional loans.