Chicago-area home prices climb 14% from last October

11-21

Home sales and median prices in the Chicago area continued to beat year-ago comparisons in October, and the time it took to sell a home plunged as a result of a lack of inventory.

October sales of existing homes in the nine-county Chicago area rose 9.6 percent from a year ago to 9,303 homes sold, at a median price of $175,000, up 14.4 percent, the Illinois Association of Realtors said Tuesday.

Market time declined 26 percent, from an average of 84 days in October 2012, to 62 days last month in the Chicago area. Within the city, it took an average of 52 days for a property to go under contract. That compared with 71 days in October 2012.

Within the city of Chicago, sales rose 7.5 percent year-over-year, to 2,231 properties. The median home price in the city was $218,500, up almost 25 percent from October 2012’s $175,000.

Much of that improvement can be tied to better sales prices of condominiums. Last month, the median price of a condo sold in the city was $260,000, up almost 24 percent from a year earlier.

There was concern that the partial federal government shutdown would temporarily derail the housing market’s recovery, and the market’s pace of improvement did slow markedly in October.

“To me, it feels like the normal, seasonal slowdown,” said Yuval Degani, president of Dream Town Realty. “But we still have clients that are waiting for the right property to pop up. I’d be worried if we didn’t have clients who wanted to buy, if we had banks that didn’t give credit, but that’s not happening.”

Last month was the first month since June 2011 that the year-over-year increase in sales volume did not show a double-digit percentage gain. Also, on a month-over-month basis, median prices fell for the fourth consecutive month.

“It’s definitely slowed down a little bit, but the year as a whole has been spectacular for residential real estate,” said Michael Parent, president of the MainStreet Association of Realtors. “Having a little bit of a slowdown, the concern becomes if it becomes like that month over month. I don’t think this is alarming. There’s still a little bit of concern about jobs.”

Sales and pricing improvement are expected to show greater improvements during the next three months, according to Geoffrey J.D. Hewings, director of University of Illinois’ regional economics applications laboratory.

Nationally, existing-home sales totaled a seasonally adjusted annual rate of 5.12 million properties sold in October, up 6 percent from October 2012 but a decline of 3.2 percent from September, reported the National Association of Realtors. It was the second consecutive monthly drop in national home sales.

Lawrence Yun, the association’s chief economist, attributed the decline to decreased affordability as a result of higher prices and mortgage interest rates.

Also on Wednesday, the Mortgage Bankers Association reported that mortgage applications for home purchases increased 6 percent from last week.

 

(Source: Chicago Tribune)

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Young and smart, but Millennials face homebuying hurdles

11-20

High debt levels and weak job prospects have made it hard for many young, educated Americans to buy homes, and that could be a drag on the housing market for years to come.

Missed payments on student loan debt damage credit scores, making it harder and more expensive to get mortgages.

Debt also counts against Millennials when lenders calculate how much money they’ll lend: Every dollar of student debt payments means less available for housing.

In addition, more grads are moving home to live with their parents — 36%, according to a recent Pew survey. While that saves on living expenses, it limits their ability to build the credit histories they need to eventually get a mortgage.

The result is a decline in the percentage of 18-to-32 year olds heading up their own homes — just 34.3% as of this past March, according to Pew, versus 36.1% in 2007.

The New York Federal Reserve reported recently that, for the first time, the homeownership rate among college graduates was less than non-grads.

Danilla DiMartino graduated from college at 25 in 2012 with $35,000 in debt and has lived with her parents in a Westchester County suburb of New York ever since.

She makes $33,000 a year as an account executive with a PR firm, which would be enough to move someplace except for her $700 a month loan payments.

“I love my job and I love my parents, but I am an adult and want a place of my own, but won’t be able to have that for at least four to five years,” she said.

Shane McClelland, 27, a divorce attorney in Columbus, Ohio, is more than two years out of law school, has his own firm and is making a good living. But he has nearly $200,000 in student loan debt.

“It’s really delaying the adult milestones I should be hitting,” he said.

He does not have to live at home with his parents but the debt, which costs him about $2,000 a month, has prevented him from buying a home, even though Columbus boasts affordable prices.

One lender told McClelland they didn’t even want to process his loan application.

Danielle DeBacker, 24, is originally from Houston and works as a clinical research coordinator at Georgetown University Medical Center, a position that took a lot of expensive schooling, including a Masters degree from Case Western Reserve University School of Medicine in Cleveland.

She owes $80,000 in school loans and homeownership is a distant dream. She shares a house in Alexandria, Va., with three others and can’t even afford a car.

“Buying a home will be a mid-30’s project for me at the earliest,” she said.

 

(Source: CNN Money)

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Eldorrado Chicago Real Estate Market Update—All 77 Neighborhoods—South Loop Showcased

11-19

Monthly, on our Website and Social Media sites, we post enhanced statistical reports for all 77 Chicago neighborhoods showing market trends. The data for our reports is pulled directly from the MLS – Midwest Real Estate Data and encompasses every closed Sale and every listed property. We publish mid-month for the prior full month to get 100% complete and accurate data. Each month we showcase one neighborhood. We analyze the highlights of the report for a neighborhood that has done exceedingly well. This month we are spotlighting the South Loop, officially known on the 77 Chicago Neighborhood Map as Near South Side. The South Loop statistics are phenomenally impressive showing a strong market recovery. The positive stats for the South Loop neighborhood are indicative of well-educated Millennials and empty-nest Baby Boomers wanting many of the same things: access to cultural and civic activities, unique restaurants, walkability.

s-loopWe are analyzing from our visual graph Attached Single-Family, which includes all condos and townhomes.

  • On a year-over-year basis, the South Loop saw a 32.8% median sale price increase, $350,000 median price vs. $263,625.
  • On a month-over-month basis, October 2013 compared to October 2012, the median sale price increase rose up by 53.9%, $382,000 median sales price vs. $248,250.
  • Year-over-year closed sales were up 26.3%, 657 closed sales vs. 529 closed sales; month-over-month were up 44.2%, 75 Closed sales vs. 52 closed sales.
  • Market time year-over-year was down -51.0%, down to an average of 65 days vs.133 days. Month-over-month market time was down -60.7%.

Please click here to find the stats for your neighborhood. If you are not sure which of the 77 neighborhoods your “pocket neighborhood” is part of, consult our interactive map to find out. This Eldorrado designed interactive map has been used with permission by request from CPS, Chicago Public Schools. Many of our web searchers find us via our map. We hope you find it as useful.

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Sale Pending: What Does It Mean & Should You Make an Offer?

11-18

Before the days of online real estate listings, you knew a home sale was pending because you’d see a big red sticker across the “for sale” sign on the front lawn. But for home buyers searching listings online, it’s common to discover the words “pending” or “sale pending” only after you’ve already fallen in love with the photos, kitchen and location.

Many buyers assume that “sale pending” means the property is no longer available. The truth is, that’s not always the case. “Sale pending” can mean a few different things, depending on how a local market or a real estate agent works.

Here’s what you need to know to decide if a “sale pending” home is still worth pursuing.

Understanding ‘subject to’ and ‘contingent upon’

To understand what “sale pending” means, it helps to understand how a basic real estate transaction works.

A buyer generally makes an offer “subject to” or “contingent upon” a property inspection, a bank appraisal or full loan approval. In these situations, the buyer plans to close on the home but wants to be certain the property is in good condition and that financing can be secured. If the buyer can’t get financing, or there’s an issue with the inspection that can’t be worked out, the buyer has the right to exit the contract, subject to one of those terms.

A property with an offer may still be for sale

In some places, a home with some sort of contingency may be labeled as “active with conditions” or “active contingent.” Assuming all goes well, the buyer will move ahead with the sale. Typically, the buyer would have a week or two to complete the inspection and a few weeks to get an appraisal and loan, depending on the local market.

During this period, the seller is unable to enter into an agreement with another buyer, but the sale is not a “done deal.” What this means to another interested buyer is that there’s an opportunity for a “backup” offer. If the first offer falls through, the seller would prefer to go with another buyer who’s made a backup offer and is ready to go. Otherwise, the seller has to start over again — not an attractive proposition.

No more contingencies = ‘sale pending’

A sale that’s truly pending is one in which all contingencies have been removed. In that case, the buyer has had inspections and is ready to move ahead. The property appraised appropriately, and the buyer’s loan was fully approved.

At this point, the buyer removes all contingencies and is now “locked in” to buying the home. The final step is to move toward closing. This can take anywhere from a few days to a few weeks. Most agents won’t label a home “pending” until the buyer has removed all contingencies and the sale is a done deal. In this case, the sale is pending the final closing.

Still an opportunity?

Can a buyer walk away after removing all contingencies? Absolutely. The buyer isn’t the legal owner until the property has closed and the deed is recorded. From time to time, a buyer has an emergency and needs to exit the contract. Most likely, the buyer risks losing the earnest money deposit.

Is a ‘sale pending’ home worth pursuing?

If you love a property with a “sale pending” sign, it doesn’t hurt to give it a shot.

Find out about the status of the property. Has the buyer had the inspections? Did they go well? Any issues thus far? Have your agent ask the listing agent these questions to understand the current deal on the table. This will help you understand whether there’s a potential opportunity here.

Don’t get your hopes up when the home of your dreams has a “sale pending” status, of course. Instead, put the home on the back burner and follow the sale. Particularly in changing markets, buyers get cold feet or banks’ lending standards get more rigid, causing deals to fall apart. A smart buyer will make his or her interest known, so that if a deal falls apart, the buyer is right there, ready to step in.

(Source: Zillow)

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Housing recovery stumbling block: Weak household formation

11-15

What happens to real estate prices if new households don’t form?

It’s an interesting question. One that many economists prefer not to think about.

Jed Kolko, chief economist for Trulia, an online real estate listing site, says the prospects are “alarming.”

Of course, it isn’t just the prospects for pricing that are alarming. There’s an undercurrent of concern about what a lack of household formation means for the larger economy as well.

Let’s start at the top. In a normal year, roughly 1.1 million new households form. There are many reasons households form. Some are recent college graduates who move out on their own. Sometimes families split up, forming two households out of one. There are immigrants who move to this country who, after a period of time perhaps living with relatives, move out to their own home, sometimes purchasing real estate in as little as three to five years after moving to the U.S.

Since the recession, trends have changed. According to the latest Census figures, roughly 380,000 new households were formed in the last 12 months. And worse, the number of young adults living with their parents ticked up as well.

The latter trend is about young people not getting jobs, Kolko explained. “And even if they get jobs, they don’t move out right away,” he added. “You need to save up, to build up a cash cushion and the financial confidence to move out. You need to be able to pass a credit check and have the first and last month rent.”

At this point in recovery, Kolko believes we should be seeing household formation back not only at normal levels but higher.

“All those young people who moved in with their parents over the past few years and didn’t move out during the recession, there should be pent-up demand for household formation. Everyone was thinking once they move out, they will form lots of new households,” Kolko added.

It’s the worst sort of news for the new construction industry, which is still operating at about 50 percent of where it was during the height of the housing boom. Roughly 450,000 new homes are expected to be sold this year, compared with more than 800,000 in a more normal year.

Even if new household formation picks up, it will be awhile before hiring picks up in for new home construction because most of these individuals will rent before they buy. And if there are plenty of foreclosures, short sales, and vacant properties available to buy, it’s possible that the construction industry won’t get a boost for several more years.

It all comes back to young people and their employment prospects, which aren’t great, Kolko said.

“The share of young people working (now) is almost as low as during recession. Wages aren’t really rising. Student debt is up. Young people face tough circumstances today,” he noted.

Unfortunately for the housing industry, those tough circumstances are turning into alarming trends that bear close watch.

(Source: Chicago Tribune)

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