http://www.guidemehome2chicagoluxury.com/2008/8/18/where-have-all-the-irish-investors-gone

http://www.guidemehome2chicagoluxury.com/2008/8/12/low-fed-rates-mean-there-is-still-value-in-luxury-investments

By Jim Kinney

The total number of sales in Chicago for single family homes and condos were down 25% for the first seven months of 2008 versus the same period in 2007.  As a silver lining, the average sale price has climbed 7% to $378,618 for the same period.  The weaker market in 2008 is further underlined by the fact that there are currently 26,310 properties listed in the MLS as available, an almost 11 month supply based upon the absorption rate for 2007.

It is interesting to see how the various areas downtown have been affected.  The traditional Gold Coast/Streeterville area was down 14% in actual sales but saw an 11% increase in average sales price.

Lincoln Park took it on the chin more than any other area with actual unit sales down by over 35% but still garnering an almost 12% increase in average sale price to $631,963.

Lakeview faired little better with a 21% decline in actual sales and a more modest average price increase of 7.6% to $430,794.

The bright spots were in the Loop and South Loop areas, reflecting the delivery of several larger projects in this period.

The Loop area registered a sizeable 30% increase in closed homes and a whopping 46.5% increase in average sale price to $581,874!

The Near South Side area saw the largest increase, 47.5% in units, with an average sales price increase of 22.8% to $487,983.

It was in August of last year that the subprime mortgage problem started to accelerate and the downturn began.  It will be interesting to see if the remaining months of 2008 can begin to show improvements in the Chicago housing market. If not, we may be looking to 2009 for signs of a better market.

Housing bill to alter tax break for owners who live in homes before selling them

Kenneth R. Harney | Washington Post Writers Group

August 10, 2008

 WASHINGTON—Deep in the nearly 700 pages of the housing bill just signed into law is a complicated tax-code change that could affect substantial numbers of people who buy second homes or rental-investment real estate in the coming decade with an eye to occupying them as their main residence later.

The bill narrows the use of the code’s tax-free exclusion that allows sellers of principal residences to escape taxation on the first $500,000 of their profits (married joint-filers) or $250,000 (single-filers). Under current law, sellers can claim the full exclusion if they have used a property as their principal residence for at least two of the five years preceding a sale.

They can also claim the exclusion if they convert an investment property or vacation house into their principal residence and live there for at least two years. This has been a boon to many tax-wise owners of multiple houses.

Property owners in markets with high appreciation rates could sell their principal residences for hefty profits, pocketing the first $250,000 or $500,000 tax free, and then move into their rental condo or vacation property for a couple of years and repeat the process.

In effect, it was a form of financial alchemy where taxable profits could be transmuted into tax-free gains—up to the $250,000 and $500,000 limits.

That practice caught the eye of tax reformers on Capitol Hill. Last year the House approved a bill that would ratchet down the rules on such transactions by distinguishing between “non-qualified” periods of rental or investment use and “qualified” periods of principal residence use. It resurfaced this year in the housing bill as a “revenue offset,” a way to raise $1.4 billion over the next decade.

Here’s how it’s expected to work: If you buy a second home or investment property on or after Jan. 1, convert it into your principal residence and then sell, you’ll need to allocate any gain from the sale between periods of qualified and non-qualified usage. Rental or second-home usage before 2009 won’t count as non-qualified use in the equation.

The minimum period for qualified principal residence use will remain two years out of the five preceding the sale.

The congressional Joint Tax Committee prepared a hypothetical example: Say you are a single taxpayer and you buy a house Jan. 1 for $400,000. You rent it out for two years and take $20,000 in depreciation deductions. Then on Jan. 1, 2011, you make it your principal residence. You live there for two years. On Jan. 1, 2013, you move out and put the place up for sale. On Jan. 1, 2014, you sell the house for $700,000.

As under current law, the $20,000 of depreciation write-offs is treated as gross income. The two years of use as a principal residence qualifies you for some amount of tax-free exclusion on the $300,000 gain. But how much?

Divide your aggregate period of non-qualified use (the two rental years) by your total period of ownership (five years) and multiply that fraction (two-fifths or 40 percent) against your gain of $300,000. The resulting number—$120,000 in this case—is subject to capital gains tax. That leaves $180,000 tax free.

The current tax code would have allowed you to claim the maximum $250,000 exclusion for singles. The $70,000 difference in the tax committee’s hypothetical illustrates why the tougher rule is expected to raise millions in tax revenues. If you purchased and lived in the house for five years, you’d get the full $250,000.

Bottom line: If you plan to buy, reside in or sell a second home or rental investment property after Jan. 1, be aware of the new formula. And talk to a professional tax adviser before making any moves.

Note: In a recent column about a home-purchase tax credit created by the new housing bill, I said that if you have not owned a house in the last three years and can close before the end of next June, you might be eligible for up to a $7,500 credit against your federal taxes for 2008 or 2009, or $3,750 if you file taxes as a single person. I should have said $3,750 each if you are married and filing singly.

Contact Kenneth Harney by e-mail at realestate@tribune .com or send letters to: Kenneth R. Harney, Chicago Tribune, Chicago Homes, 435 N. Michigan Ave., Chicago IL 60611. Sorry, he cannot make personal replies. Answers will be supplied only through the newspaper.

Neighborhood offers vibrant lifestyle and comforts of home–with prices to match

By Susan Diesenhouse | Chicago Tribune reporter

August 8, 2008

 As home buyers, Nina Patel and Shari Hagedorn have strikingly different profiles.

Patel, 25 and single, relocated from Boston last fall to work as a pharmacist at Northwestern Memorial Hospital. Hagedorn, 62 and a longtime Chicago suburbanite, is a retired school teacher eager to enjoy city diversions with her family.

But both recently found condominiums to suit their needs in Streeterville, a Near North neighborhood delivering a bumper crop of designer high-rises that are taking it far from its historic roots as a salty shipping and industrial enclave. While the neighborhood’s northern and middle tiers have older housing, both luxury and some moderately priced, much of the new development is in its southern tier. The pricey new condos are bringing more people than ever into Streeterville, which has long drawn crowds to Navy Pier, the John Hancock tower, Michigan Avenue shopping and the Museum of Contemporary Art.

Buying into the mid-section of the neighborhood bordered by Lake Michigan, the Chicago River, Oak Street and Michigan Avenue was an easy call for Patel.

“I don’t have to worry about commuting,” she said of her two-bedroom, one-bath home in a just renovated 1963 building on Pearson Street. “I’m exposed to the tourist things and can walk to restaurants in River North.”

Hagedorn and her husband Ed, 65, homeowners in Bloomingdale for 33 years, will savor weekends in their new three-bedroom, 21/2-bath unit at the Park View on Illinois Street built by MCL Cos., a major area builder. “We like the theater, restaurants, biking along the lake and taking our granddaughters to festivals at Navy Pier.”

“Streeterville’s location is phenomenal for housing, and the jobs created by Northwestern [University and its affiliates] are the economic backbone,” said Mia Wilkinson, a real estate agent at Rubloff Residential Properties. “In the south, some new retail popping up is making it more of a village, but it still needs green space.”

“Streeterville is a work in progress,” said Jeff Hagedorn, 41, who like his parents, Shari and Ed, bought a condo at the just completed Park View high-rise. His is a two-bedroom, two-bath unit. “In time, I expect a strong return.”

He has sound reason for high expectations.

The average asking price of existing and new Streeterville condos jumped to $815,884 during the first quarter of 2008 from $409,349 in late 2002, according to Rubloff Residential.

But all the growth and activity has a down side.

Some buyers, like attorney Violet Warner, 27, have been priced out of the neighborhood. This spring, she shopped for a two-bedroom condominium in the $460,000 range. New construction was too small. “They were half-million-dollar closets,” she said. “Older units needed updating I couldn’t afford.”

Meanwhile with seven high-rises under construction, including the 150-story Chicago Spire, some residents like Scott Deatherage find their once- glorious lake views gone.

“Now, I look at a brick wall and have to go online to find out the weather,” bemoaned Deatherage, 45, who bought a loft near Navy Pier in 1999. “When the market recovers, I’ll probably move.”

But he likes the Streeterville hubbub so much he may stay in the neighborhood, he said.

The construction and tourism adds dynamism, but it can also be a bother, longtime resident Karen Burnett said.

“The neighbors have worked to keep the construction and traffic under control,” she said. “But everyday, tourist buses park at my front door, unload and leave their engines running.”

Long a travel destination, the neighborhood got its name from the seafarer and huckster George Wellington Streeter.

In 1866, his ship ran aground on a sandbar where Superior Street and Chicago Avenue now intersect. In the vessel, Streeter set up house for himself, opened a bar and a brothel. As the city rebuilt from the Chicago Fire of 1871, he had debris from the cleanup dumped between his ship and the shore, eventually filling in 186 acres he called the District of Lake Michigan. He tried but failed to claim it as his private domain separate from the city. But the revelry that he and others promoted served workers in the area’s shipping and industrial businesses.

Housing stock

In the northern tier, with its wide array of older stock from classic to modernist, condos of all sizes sold for an average of $801,875 in the second quarter. In the mid-section, where high-rises built from the 1960s through 1990s proliferate, the average sale price was $661,230 and in the southern tier $661,091, according to Jameson Real Estate LLC, a broker and developer.

In south Streeterville since 2000, the pace of growth has accelerated with about 3,000 new housing units completed. Other recent additions include an AMC cinema, Lucky Strike Lanes bowling, a Dominick’s supermarket, Walgreens and Fox & Obel Market Cafe.

Average asking prices in seven towers under construction range from $1,568 a square foot at the Spire to $454 a square foot at 160 E. Illinois St., according to Appraisal Research Counselors, housing consultants.

“Until five years ago, south Streeterville was overlooked because sites were large, requiring big investments and long sell-outs,” said Gail Lissner, an Appraisal Research vice president.

The sleek glass towers going up have been designed by well-known architects such as the Spire’s Santiago Calatrava and 600 N. Fairbanks Court’s Helmut Jahn.

Although first quarter sales of 158 new and existing units fell about 20 percent from 2005, prices won’t decline, said Daniel McLean, president of MCL Cos..

“We’re here for the long term; there’s no reason to hurry,” said the developer, who has sold about two-thirds of his Park View condominiums to suburbanites seeking a second home.

sdiesenhouse@tribune.com

Evanstonow.com: Submitted by City of Evanston on Mon, 07/28/2008 - 9:56pm.

Clean Air Counts and the Metropolitan Mayors Caucus recently announced that Evanston was designated a Platinum Level Clean Air Community, the highest designation in the Clean Air Counts initiative.

The city originally applied to be a Gold Level Clean Air Community, one level below Platinum. The city more than fulfilled the requirements to earn the Platinum title.

In a congratulatory letter to Evanston Mayor Lorraine H. Morton, president Thomas J. Murawski, chair of the Environmental Committee for the Metropolitan Mayors Caucus, wrote, Evanston’s “decision to implement the same strategies we promote to businesses - such as using low-VOC cleaning products and energy efficient products - demonstrates your leadership in the community and is appreciated.”

Murawski continued, “To date, the Communities Campaign has reduced smog forming pollution by over 401,000 pounds. We hope you will continue to be a leader in the Communities Campaign by continuing to implement air quality improvement strategies and sharing your success stories with other communities.”

The City of Evanston earned the new designation by implementing outreach efforts to promote clean air initiatives.

Examples of the city’s efforts include articles and information in the city’s newsletter, local media, and web site to educate the public and feature the city’s green efforts; providing business license and zoning applicants with information on energy efficiency and emission reduction strategies; hosting lawn care buyback and gas can replacement events; co-sponsoring the First Annual Evanston Green Living Festival with the Evanston Environmental Association; and using bio-diesel for the past three years in all 149 City trucks.

The city is also in the process of creating purchasing guidelines or policies that address the use of low-VOC-content paints, natural cleaning products and Energy Star-approved office equipment and lighting.

Clean Air Counts is an innovative, non-regulatory approach to reducing smog-causing emissions in the Chicago metropolitan region to achieve compliance with standards of the federal Clean Air Act.

Joining Clean Air Counts means individuals and/or organizations are making a commitment to undertake voluntary efforts to reduce smog in the Chicago region. CAC adopters assess opportunities to reduce emissions and conserve energy in areas related to transportation, energy, operations and maintenance, and development.

Expect continuing cuts in newspaper industry, says analyst

The Los Angeles Times has ceased publication of its weekly real estate section — born more than a century ago — amid major staff cuts.In mid-July, newspaper managers began to carry out the “largest staff and production cuts in the newspaper’s history,” according to an article in the Times, citing “a continuing slide in advertising revenue.” The newspaper has a circulation of more than 1 million and ranks among the largest newspapers in the nation.Staff and content cuts are certainly nothing new for newspapers, and a media analyst told Inman News that similar downsizing will likely continue to plague the industry as ad dollars continue to shift online.

The cutbacks initiated last month at the Los Angeles Times had initially targeted about 150 newsroom employees, or 17 percent of the company’s newspaper and Web site editorial staff, according to the Times article, with plans to cut 100 positions in other departments.

Times Publisher David D. Hiller resigned the day after the cutbacks began. Times Editor Russ Stanton announced on July 30 that 135 newsroom employees were laid off, and content cuts have led to 14 percent fewer pages.

Such major cuts at that paper and others have triggered questions about how the industry can properly inform readers about community news in the face of staff cuts, the article notes.

Stanton had earlier stated in a letter to readers that “The future of the Los Angeles Times, in print and online, rests in our ability to meet the needs of our readers and deliver news and information that is unique, far-reaching and indispensable. In-depth journalism remains our hallmark and we are committed to that mission in the face of economic challenges to our industry and our nation as a whole.”

He announced that the newspaper’s “Home” section would move from Sundays to Saturdays and would combine with “Real Estate,” amid other changes — “Book Review” was merged with an “Arts & Books” section to become “Arts and Books,” for example, and the Times had earlier announced the termination of its weekly magazine, among other reductions in content.

Lauren Beale, real estate editor for the Los Angeles Times, wrote in a July 27 blog post at the newspaper’s L.A. Land blog, “because of reductions in staff and space, the Sunday Real Estate section has printed its final edition.”

She noted that the newspaper would continue to publish real estate coverage throughout the week and a few regular features of the section would continue in the Saturday “Home” and Sunday “Business” sections.

Beale began working for the newspaper’s Real Estate section almost 29 years ago. “There’s a journalism term for finishing an edition’s work: You put the section to bed. When I started as a part-timer in this department … under then-editor Dick Turpin, I never dreamed that one day I’d be putting the section to bed for good,” she wrote. The newspaper’s Real Estate section had launched in 1901.

She told Inman News that some other major newspapers have abandoned editorial-produced real estate sections in favor of advertising sections that she referred to as “advertorial,” or ad-based real estate content.

Readers’ online comments about the end of the weekly Real Estate section ranged to the extremes, from anger at its cancellation and the media company’s owner Sam Zell to ugly condemnation of the section.

A supporter of the section wrote, “it was informative (plenty of question-and-answer columns for renters, condo and home owners), presented the facts, and provided some entertainment.” That reader planned to cancel the newspaper subscription over the loss of its Real Estate section, according to the post.

“I’m more of a news, business, sports guy, so I didn’t read the Real Estate section,” wrote another Times reader. “But I am disturbed by the prospect of some of our big city papers being dramatically downsized or going away. The Internet (is great at) distributing other people’s content, but not so much at originating it … papers like the L.A. Times, imperfect though they may be, still frequently play an important role in keeping our other institutions honest.”

Meanwhile, another wrote, “I’m probably not going to miss the Real Estate section. The only thing I ever read in the Real Estate section was the story of how some self-absorbed celebrity is selling his mansion for $10 million, which was always curiously $8 million more than similar-sized homes in the same area.”

Helene Lesel, a real estate writer whose syndicated “Rental Savvy” columns have run in the Los Angeles Times for the past seven years, said her column is one of the casualties in the demise of the weekly section.

“They’re not going to accept anymore syndicated material — there’s not anywhere to put it,” said Lesel, whose columns are distributed by Inman News. “I had read that section since I was a little kid.” The Times seems to be focusing more on the Web these days, she said. “It’s a whole new world out there.”

Stanton’s letter last month did state that the newspaper’s Web site “just recorded its biggest month ever in June with 115 million page views, a 50 percent increase over last year,” and Stanton also noted that readers “embraced” some of the Web site’s new blogs.

Real estate ad budgets are shifting toward online media — and that shift is likely permanent, said Colby Atwood, president for Borrell Associates, a media research and consulting firm.

“Real estate advertisers during this downturn are going to be trying the Web, some of them for the first time, and once they do they won’t go back,” Atwood said.

There has been a drop-off in real estate advertising spending in print publications, owing to the housing downturn and this shift to online media, which can be “more efficient, more trackable” and offer a better return on investment.

“It is not surprising that newspapers are starting to scale back their real estate sections. The decision by the L.A. Times is an example of things that we’re going to see more of as (newspapers) manage the contraction of their business — which is what metro daily newspapers are going to be about for the foreseeable future,” Atwood said.

And while some of the ad problems newspapers are facing now with the severe downturn in the housing market are cyclical, Atwood said not to expect ad money to flow readily back into print when the market recovers and rebounds.

“Truly fundamental shifts are taking place in the advertising industry and a lot of advertising media are not coming back. (Advertisers) are going to be hard-pressed to justify spending money on things they now know are inefficient,” he said.

A Borrell report released last week states that the newspaper industry suffered a record decline in revenue from classified print ads in 2007, “driven largely by a 23 percent fall in real estate classifieds.”

The report also states, “Newspapers are beginning to understand that their most valuable franchise is not local news, but local sales information,” and about half of the people who buy a newspaper do so for the advertising content.

Local news may not be a big selling point for local advertisers: “The epiphany that newspaper managers are beginning to experience is that local news and community information (as opposed to national news) may not attract a large or particularly attractive audience for small advertisers,” according to the report, noting that the Internet is quickly growing in popularity among small advertisers, with local online advertising increasing at a rate of 61 percent this year.

Residential real estate agents and brokers are expected to spend about 25 percent of their ad budgets with newspapers this year, with 12.8 percent going to online sources and 24.2 percent toward television ads.

Meanwhile, residential real estate developers are projected to spend about 47.9 percent of their total ad budgets with newspapers and about 30.2 percent online; and mortgage providers are expected to spend about 8.9 percent of their ad budgets in newspapers and 22.1 percent online this year.

–Inman News reporter Matt Carter contributed to this report.

What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

Copyright 2008 Inman News

 

There is something wonderful about living in a brand new piece of Chicago real estate – call it that new property smell. However, there are some precautions you should take before you purchase a newly constructed Chicago condo, so be sure to go through this checklist before you sign on the dotted line.

1. Research the Developer’s Background – Has the development company has ever had to return a project to the bank? How are their recent projects selling? Take the time to examine the firm’s background and previous projects (the internet makes this easy) before you fall in love with their new buildings.

2. Work with the Right Realtor – When you are purchasing new construction, it is important to work with a realtor who has experience in that area and understands its idiosyncrasies, because there are key details like layout plans, finish selections, and other nuances that only come with a background in new construction.

3. Compare and Contrast Cost per Square Foot – Comparing the cost per square foot to other, similar new construction projects gives you an idea of the relative worth of your unit and ensures that you are getting good value for your money.

4. Floor Price Differential – It is important to recognize that the price of otherwise identical units changes per floor, as this will give you insight about the views and how the existing buildings surrounding the property might affect a future resale.

5. Check out the Neighbors – The buildings surrounding your new home not only have an effect on your current view, other new developments may appear in the future so be sure to inquire about the zoning and any future construction nearby. Keep in mind that buildings with views that will forever be unobstructed usually have fantastic resale value; two Chicago examples are 2520 Lakeview and 340 On the Park. Be aware that if a unit is located just one or two stories above the rooftops of neighboring buildings, this may be an aesthetic issue that affects resale as well.

6. Height Matters – A ceiling height of at least nine feet is preferred, however, you can expect to find ten and eleven foot ceilings in luxury new construction developments. Also, notice the unit’s entry door height - eight foot doors are typically found in the more expensive luxury units, and if the condominium has larger doors, the finished product will feel more elegant.

7. Open the Door - Many of the sales center model units do not include doors, because the lack of doors make the unit look larger - so it important to ask if the doors in your unit are going to be solid core. If yes, you will know that your doors will be more soundproof and that the unit has superior finishes.

8. Look for Millwork – This is one of the many important fine points that separate mediocre construction from a luxury product. Custom-made nine inch high baseboards with architectural detailing is a definite sign of luxury, while finely crafted custom crown mouldings and door casements make a luxury statement.

9. Examine the Appliances and Cabinets - Upscale brand names are obviously the most desirable, and the big names certainly help identify the quality level of the new construction development. Snaidero cabinetry, SubZero refrigerators, Wolf ranges, Viking microhoods and Miele dishwashers are names associated with high quality and luxury. Many developments feature alternative brand names so be sure to consult your realtor for the particulars of the appliance and cabinet package offered.

10. Look At the Windows - Will the size and shape of windows in the model reflect exactly what will be in your unit, or will there be variations within the building? Some buildings do have variations in window height, so it is important to find out which floors exceed the average as these apartments will ultimately be worth more (and larger windows are more aesthetically pleasing for you!).

11. Look Up at the Ceiling – Ask what kind of ceilings will be in your unit. If they are reinforced concrete, it is essential to determine whether the concrete will be finished or if the ceiling will be showing the rough seams.

12. The Finishing Touches – If you enjoy the look and minimalist feel of rough concrete finishes, go for this design features. Also, be aware that if you paint the concrete areas post-purchase, the value of the unit may be compromised.

13. Appraisal Research – When purchasing newly constructed property, it is important to work with a realtor who has access to the new construction information from the Appraisal Research Counselor compiled report. This contains a wealth of information about all the developers and their finishes as well as the percentage of units sold. In addition, you can also determine sales velocity for a project and when the development started its marketing campaign.

14. Heating and Air Conditioning – Ask if the building is going to be on a four pipe system and where the ducts (ceiling or floor) will be for both the heat and air.

15. Where to Park? - If the building is already constructed, check the exact location of the parking lot. Make certain you can park without being forced to back into a spot, or if it is up against a wall or any columns. Remember that ease of entry and exiting are critical. If purchasing parking off of construction plans try to stay away from walls unless the parking spot is extra wide.

16. Escrow Money - Most developer contracts require ten percent of the entire purchase price down, including the cost of the parking. On the contrary, your objective should be to put as little money down as possible. Try to have the contract written with five percent down, at least initially. If the developer will not accept the smaller escrow, you may try an incremental dollar strategy over a period of six months or five percent immediately after attorney approval and then five percent once construction begins. Note that all escrow money should be provided only after you own attorney has approved the contract – their offer should be modified to state that the escrow money should be provided one or two days after you and your lawyer have agreed to all the terms.

17. Contract Modifications – If you want to be more conservative, you should consider possible “what if scenarios”, namely loss of your job or another catastrophic situation which would change your ability to move forward with the closing of the property. Have your attorney examine the contract to see if there are any written provisions and if the developer is willing to make these modifications.

18. Property Report and Condo Declaration - This is a document that you will receive and you will have to sign a receipt for it – you do not have a contract with the developer until you receive and sign for this document. It is essential that you review this material because it provides important information about what you can and cannot do once you own the property, such as whether you can rent the condo out, what procedures and fees are involved if you do, how soon you can sell the unit after you close, and if you can sell the parking to an individual who does not reside in the building. Last but not least, you also want to make sure that your parking is stated as garage covered parking.

Sheldon Salnick is a Realtor with Rubloff Residential Properties. He has worked with new construction buyers for over 19 years and has represented over $200 million in new construction. For more information on new construction single family homes, townhomes or Chicago condos, he can be reached at 312.264.5853 or email him at SSalnick@Rubloff.com

July 11, 2008