Keeping up with Chicago's North Shore Real Estate Market!

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Tuesday, December 31, 2013

Welcome 2014 -- Wishing you health, joy and prosperity!

How's the Market? End of Year Recap for 2013

Happy New Year!
Hope your 2013 was a year of blessings and much happiness. Once again, I am writing my end of year recap for our local housing market on the North Shore ... 

Across the US, the housing recovery was a very welcomed bright spot for the economy in 2013.   In general, fewer homeowners are underwater and builder confidence continues to improve.   

And wow -- did we feel the impact of the recovery on the North Shore.  
In fact, there were actually some shortages of inventory as well as situations with multiple offers!  Consumer confidence has seemed to returned to our market -- hallelujah!!    

There are a couple of numbers that I like to study, when determining how the market is performing. Are we selling more or less properties than last year and what is happening to the median prices? 

The attached charts present the relevant information.  As you can see we had double-digit recovery in terms of volume of sales in most every community.  While the median price has not gone up as quickly as the volume of sales, we're still seeing some definite and remarkable improvement.   Kenilworth was really the only community that saw a decrease in the median price.  
The good news is, we're clearing out the overhang of inventory that has been building up over the last seven years.   As the supply dwindles back to reasonable and normal levels, prices have stabilized and are on the uptick again.  GREAT NEWS!!!!

The numbers that most Realtors like to follow are the inventory levels. Inventory is measured in months. What a "month's inventory" means is this: if sales were keeping pace with new properties coming on the market, how many months would it take to sell the outstanding inventory? It's a better way of interpreting the unit count, because it reflects how quickly certain price points are moving or stagnating.

A healthy balanced market is around 6-10 months of inventory. An unbalanced sellers' market is about 0-8 months of inventory. And a buyers’ market is considered anything over 8 months of inventory. 

Overall, the trend is fantastic.  We saw some remarkable improvements this year. (One caution, though, is that sellers often take their homes off the market in December, so inventory levels are generally lower during the winter months and start to go back up in the Spring.  These numbers are absolute and not seasonally adjusted to reflect this reality.)

 source of data for the charts: Midwest Real Estate Data

These charts only present the numbers in aggregate. Various price points have higher or lower levels of inventory.  To get a sense of the high end homes, check out my post, Moving on Up.  

To track the market in much more detail, I encourage you to sign up for The Rubloff Report. These reports provide an excellent analysis within a price range and by property type and zip code. 

In summary, 2013 showed some wonderful, positive gains on the North Shore.  The market appears to have not only stabilized but also realized some gains.  

What about financing?  Even with the fluctuation of interest rates this last year, the mortgage rates continue to be at remarkably low levels.   Regardless, these rate swings could have an impact on the 2014 market.  There was a good article in the Wall Street Journal on Monday, that highlights this issue:  Mortgage Rate Swings May Mean “Bumpy” 2014 Housing Market.

Another big question about mortgage financing coming into 2014, is the effect of the Federal Housing Finance Agency’s plan to slash the maximum size of mortgages eligible to be backed by Fannie Mae and Freddie Mac.  This is as a result of the government trying to reduce its role in the mortgage market.   

Concurrently, new mortgage rules by the Consumer Financial Protection Bureau go into effect, which will restrict the types of mortgages lenders can provide. These changes could leave mortgage applicants with fewer and more expensive financing options to choose from than what’s currently available.  

It’s unclear what the impact of these changes will have in our market, since many of our buyers seek jumbo loans.  In fact, jumbo loan rates have become increasingly more attractive with less stringent requirements as lenders are developing a growing appetite for the larger loans.  

Conversely the applicants, who will be getting rejected for Fannie Mae and Freddie Mac loans, will have to turn to the private market. Private lenders originate mortgages under their own terms and are very selective, seeking out affluent borrowers who present little risk of default.  These changes will be interesting to follow in the months ahead.  (There was a good article in MarketWatch, It’s about to get harder to buy a home.)

While very enthusiastic about this year's progress, it's difficult to predict what's going to happen in 2014 – there are just so many outside variables that will determine how the housing market will play out on the North Shore this year. 

However, I do know this: Buying and selling real estate is local and I continue to believe the major indicator to follow is the unemployment levels in Cook/Lake County. If people feel insecure about their employment or don’t have jobs, they aren’t going to be willing and/or able to move to new homes. 

I thought this article in Chicago Agent was worth sharing: 6 Housing Trends To Watch For in 2014: Is This The Year Of Recovery?  To me, the point of interest
was #4: Housing affordability is on the decline because wages aren’t keeping pace.   This keeps getting back the overall health of the economy… especially in Illinois.   The US Bureau of Labor Statistics released their unemployment rates recently and Illinois was ranked #48 with 8.7% unemployment.  I find this statistic most disturbing.  

The latest release from the Illinois Department of Employment Security indicates while things are improving from 2012, unemployment levels remain high.  

Unemployment levels:

As of November 13, 2013 – 
  • Illinois 8.3% (increase of .1% over 2012)
  • Lake County 7.0% (decrease of .3%)
  • Chicago Metro area 8.1% (decrease of .2%)
Watching the unemployment rate is key to seeing how sustainable and healthy our housing market will be.

In spite of Illinois's employment situation, there are other signs that are quite encouraging.   

For example, 2013 had a significant uptick in the number of land sales across the North Shore.  During the housing slump, new construction took a big hit.  This chart would seem to show that builder confidence is definitely improving and we’re seeing some new spec houses.  Land sales went up substantially this year. 

There was interesting article in the Chicago Tribune on Sunday that reflects this situation.  

Cheaper homes, but more repairs as U.S. houses age.

The other encouraging sign was the increase in sales of high end homes.  We saw a number of $3M+ homes sell.  When high end homes sell, it reflects greater buyer confidence in the housing market. 

Regardless of the health of the market, my hope for 2014 is that people move and change homes based on what is in the best interest of their own families. I’m a big believer that decisions should not be driven by fears or uncertainty -- if getting a bigger house or if downsizing are the right answers, then I think it’s best to move forward and live one's life.   One of my favorite quotes along this line was by investor/publisher, Knight Kiplinger, "I regard my home as a place to live, not as an investment."

As some of my readers know, I publish a monthly newsletter, How's the Market? Here's an example of one of my newsletters. If you'd like to be on my mailing list, I encourage you to sign up. (You can always opt out at any time.) 

Finally, on a personal note, I would like to thank my clients who have helped to make 2013,  a very successful year for me.  I have appreciated your business, support, and friendship.  As Warren Buffett has said,  
“A home is one of the most important assets that most people will ever buy. Homes are also where memories are made and you want to work with someone you can trust.” 
As a real estate broker, there is no greater privilege than to have earned that trust, and to have the satisfaction of knowing, you’ve made a difference in peoples' lives.

Wishing you and yours all the best in 2014! 

* * * *

”We spend January 1 walking through our lives, room by room, drawing up a list of work to be done, cracks to be patched. Maybe this year, to balance the list, we ought to walk through the rooms of our lives... not looking for flaws, but for potential.” – Ellen Goodman

Why 2013 Might be Housing’s Best Year Ever

Why 2013 Might be Housing’s Best Year Ever

Sunday, December 29, 2013

Evanston celebrates 150-year anniversary

Did you see the article in the Trib this morning?  

Chicago's nearest North Shore suburb celebrates its sesquicentennial

Also, Evanston brings back First Night Evanston!

As the City of Evanston celebrates its 150th year, the public is invited for a night of music, poetry slams, art-making and dancing with First Night Evanston, happening Dec. 31, at several locations throughout town. 

To Stage or Not to Stage…

I recently read an article in the Wall Street Journal; perhaps you saw it:  Home Staging Effect? Not Much.
“While good staging does influence a home buyer's overall impression of a house, staging alone doesn't result in buyers willing to pay more for the house, says Michael Seiler, professor of real estate and finance at the College of William and Mary, who researched how home buyers responded to six house tours that varied in paint color and furniture quality.”
It got me thinking and actually reevaluating, whether I should encourage my sellers to stage their homes. I posed the question to my colleagues to see what their thoughts were. Here’s a sampling:
  • I think appropriate staging creates a higher perceived value in almost every instance across the board. It's a basic concept of merchandising in general... I am not sure I can buy into the validity of the study with the info provided. I think a more accurate test would be to track similar homes appropriately staged, not staged, dated, not staged and messy, etc. then track the interest and actual activity with real buyers … The simulation seems flawed in and of itself. 
  • I agree that staging is unlikely to bring more money. But the house may sell faster. And time = money.
  •  I think staging is a spatial home run. Most people think their king size bed won't fit in a room that could handle two. I agree with emotional ... I think the home will sell faster but for more…doubtful.
  • I don't really agree with the article. I think staging is more than changing paint colors. I think it's more like de-cluttering and furniture placement. Not sure if it always needs to be a professional staging company. We see enough houses and can make a determination on what needs to be done. 
  • I think that the effects of staging are most relevant when a prospective buyer walks into a home and can stand in the space and appreciate the home.  The idea of a virtual case study doesn't ring valid to me.  Buyers need direction and visualization in the space, vs. viewing a picture of the space. 
  • Proper staging certainly helps with marketing, but I also believe it can create a higher capture rate of showings-to-offers; which often relates to sales price.
  • Staging may make a home sell faster but not necessarily at a higher price. If a buyer is considering two homes, the one that is staged better may win the contract.
My personal belief is: a property, in general, will usually sell for market value regardless of staging.   Therefore if it's staged nicely, it may not sell for more, but it will be more marketable.   Therefore it will probably have more frequent showings, will have a better perceived value and thus sell more quickly. 

However, to me, an even better reason to stage is the importance of the Internet experience for homebuyers. In any earlier WSJ Article, In Real Estate a Picture is Worth $1,000 or More, the quality of the online photographs seem to make a difference to the sales price and somewhat contradicts this staging article.  Further, according to the National Association of REALTORS®2013 Profile of Home Buyers and Sellers:
  • For 42 percent of home buyers, the first step in the home-buying process was looking online for properties.
  • The use of the Internet in the home search rose slightly to 92 percent.
I believe the main reason for staging is to create exquisite photographs for the buyers online viewing experience.   For example, which photograph would draw you in  and invite you to come and view this house in person?

(For a good laugh, check out Terrible Real Estate Agent Photographs.)

Which gets back to the root of the issue – staging is a merchandising tool

Say you were to go and buy a used car. You were choosing between two similar cars at the same price: one was washed and detailed; the other had trash inside and was dirty. Which one would you buy?

Friday, December 27, 2013

Struggling homeowners could be hit with an unexpected tax bill in the new year

"Struggling homeowners could be hit with an unexpected tax bill in the new year.

A law that spared people who owe more than their homes are worth from being saddled with extra taxes when their banks provide mortgage relief is expiring next week. Congress hasn’t extended it…"

Underwater homeowners could face extra tax burden in 2014
The Washington Post

Thursday, December 26, 2013

Home ownership rate climbed in 2013

More Chicago-area residents are favoring mortgage payments over rent checks.

The local homeownership rate climbed to 68.1 percent in the third quarter, up from 66.9 percent a year earlier, according to the U.S. Census Bureau.

A key indicator of homebuyer confidence, the local homeownership rate peaked in 2006 and quickly fell once the housing market turned. The foreclosure crisis then took hold, forcing many homeowners into renting.

Still, though the homeownership rate fell as low as 66.3 percent in 2011, it never dipped to 1990s levels. The current rate is roughly where it was about 10 years ago, before the bubble started inflating.

But unlike the subprime-fueled buying spree that drove the market in the prior decade, this rally is boosted by a shifting philosophy among qualified buyers.


“They're now getting comfortable with the notion that a house is a safe asset to invest in,” said Kim Barnes, a senior vice-president at Chicago-based real estate firm Draper & Kramer Inc. “It encourages me.”

The national homeownership rate fell slightly to 65.3 percent in the third quarter, compared with 65.5 percent in the third quarter of 2012. In a note, Stan Humphries, chief economist at Seattle-based real estate firm Zillow, said he expects the national homeownership rate to dip below 65 percent for the first time since the mid-1990s.

The question is whether the rising for-sale residential market will hamper demand for apartments, one of the hottest real estate sectors the past few years. The downtown apartment occupancy rate dropped to 92.6 percent in the third quarter, down from 95.3 percent a year earlier and the lowest rate since the end of 2009, according to a report by Appraisal Research Counselors, a Chicago-based consulting firm.

Meanwhile, downtown developers are preparing to add 5,000 new rental units within the next two years.

The broader economy continues to show signs of strength. The Federal Reserve recently said it would start tapering its bond-buying stimulus because of the improving economy. That move, along with home prices and interest rates expected to rise next year, will likely dampen home affordability next year.

Yet despite their gains, Chicago-area home prices remain 24 percent below their 2006 peak, and rising prices actually could spur homebuying if more sellers list their homes and builders put up new ones.

“I think (homeownership) is going to go up,” he said.

Source: Crains Chicago Business

Saturday, December 14, 2013

Smart Moves for Homeowners

"With just three weeks left until 2014 and the holidays upon us, it’s a busy time of year. But there are a few things last-minute things homeowners should be sure to squeeze in to maximize their homeowner tax benefits for 2013…."

Smart Tax Moves Homeowners Should Make Before 2013 Ends

Friday, December 13, 2013

Tuesday, December 10, 2013

Winter is on the way!

General contractors, home builders, and more ∨

From designer chairs and desks to the perfect bulletin board and credenza, create your dream home office.
With the help of a bath designer, revamp your bland bathroom with a walk-in shower, multiple bathroom sinks and a new bathroom vanity.

Sunday, December 8, 2013

Change in housing market...

Decorating Secrets

"Pick your paint colors last, choose mismatched seating, and don't forget the closet lighting. Here are the best tips and tricks that nobody ever tells you about decorating..."

20 Decorating Secrets
House Beautiful

Wednesday, December 4, 2013

support the hospital!

Tree Lighting Ceremonies in Winnetka and Northfield

Northfield will kick off the holidays with a tree lighting celebration in their business district, 300 Happ Road on Thursday, December 5th at 4:45 pm. The switch will be flipped at 5 pm.

Winnetka holiday lights will be lit on Friday, December 6 at 5:45 pm in Station Park, 754 Elm Street, Elm Street to Oak Street, East of Green Bay Road in front of the Winnetka Metra train station.

Check out all the activities....

Check out this week's I-list

Tuesday, December 3, 2013

Story Time With Santa

Saturday, December 7
1:00 - 3:00 p.m.
Mellody Farm Nature Preserve
350 N. Waukegan Rd.
Lake Forest

Enjoy an afternoon of holiday cheer at this fun family event! Ride a horse-drawn wagon through the preserve with jolly old St. Nick. Listen to a seasonal story and craft a winter wildlife ornament. 

Take a family portrait.  Indulge in delicious treats. A wonderful winter tradition.

Register online at Lake Forest Open Lands Association

High-end home sales pick up on North Shore

"The local housing recovery started from the bottom, but buyers and sellers on the North Shore are feeling it now, too.

A total of 197 homes have sold for at least $1.5 million this year in North Shore suburbs, up nearly 22 percent from 162 such sales through the same period last year, according to the North Shore-Barrington Association of Realtors (NSBAR). Including homes at all price points, the North Shore market has already surpassed 2012 sales totals…"

See the whole article in Crain's Chicago Business

Changes coming in getting a mortgage...

"With big changes coming to the mortgage industry at the beginning of next year, many consumers will want to evaluate their homebuying plans. Regulations drafted by the Consumer Financial Protection Bureau will change the definition of a qualified mortgage for any loan applications received on and after Jan. 10, and many consumers may find themselves unable to meet the new requirements..."

Sunday, December 1, 2013

December is here!

Kitchen designs, bathroom designs, and more ∨

Home improvement can start with something as minor as installing track lighting or a unique ceiling fan.
Share photos of the cabinets and kitchen sink you like with a top kitchen remodeler in your area.