Rw Real Estate Advisors and Metrostudy Merge in Chicago

In case you missed the big announcement, RW Real Estate Advisors and Metrostudy have merged their services in the Chicagoland area. Lance Ramella is now the Director of Consulting for Metrostudy's midwest division while Chris Huecksteadt is the Director.

This merger will expand Metrostudy's services to include in-depth market studies for a variety of product types, including rental, commercial, resort, hotel and all residential categories.

We look forward to serving our existing client base and providing our expanded services to new clients.

Please do not hesitate to call Lance or Chris at (847)214-5291.

Status Quo or Housing is Back?

Earlier this week, David Crowe, The National Association of Home Builders' chief economist, reduced his previous forecast for 2011 single-family housing starts. Crowe now predicts 2011 will show no change over the 471,000 recorded starts from 2010. In fact, he also reduced his 2012 predictions by 19%, now saying that he expects 698,000 single-family starts (down from his 860,000 previous prediction). Crowe based his revisions on the conflicting economies of normalizing housing prices, historically low mortgage rates and housing affordability versus high oil prices, a weak US dollar, and the still high unemployment rate.

On the opposite side of the spectrum, 3 weeks ago in Fortune Magazine, Mike Castleman, Founder and CEO of Metrostudy, said "America needs to build a lot more houses. And in most markets the price of new homes is fixin' to rise, not fall." Metrostudy collects housing data across 41 markets in the US, including new housing starts, lot inventory, resale homes for sale and the number of months it takes to sell them. With current inventory levels of for sale, vacant and new construction homes totaling less than 1/4 of what they were in 2006, Castleman says we'd sell out in 2.5 months. He says we're heading for an incredible shortage of housing. To read the complete story from Fortune magazine, click here.

Last month's data for the Chicago MSA improved slightly as the unemployment rate dropped for a second month to 8.7. , inventory of existing homes decreased 10.8 percent from last year and our median home sales price increased to $158,000. We don't expect huge improvements overall in 2011, but it seems we're moving in the right direction. We'd like to think Mike Castlman's outlook is correct, and that next year at this time, we'll be talking about the severe shortage of housing.

Did We Miss The Spring Selling Season Again?

Illinois saw existing home sales increase 1.3 percent in February over the prior year, according to the Association of Realtors, which released the February sales and median price statistics today. Unfortunately for the Chicago Primary Metropolitan Statistical Area (PMSA), February brought a decline in sales of 8.8 percent compared to last February. As a nation, we saw a 9.6 percent drop in home sales for February.

We should be reminded that last year's numbers reflect the homebuyer tax credit that inflated sales by up to 16.5 percent. We expect to see an increase over the next couple of months in our median existing home price as it typically increases as we head through the Spring. As of now, the median existing home price is $152,500, which is the lowest level since the early 2000's.

The good news is that employment continues to strengthen, both nationally and locally. Illinois added over 64,000 jobs in 2010 and 2011 got off to a good start. We expect the state to add at least 100,000 new jobs this year. Eventually, this will lead to housing growth.

Spring officially arrived yesterday, and we've heard from some industry colleagues that traffic and sales are inconsistent in February and the first half of March. With inventory, pricing and mortgage rates at all time lows, will this be the spring that pulls us out of the hole? Stay tuned, we hope so.

We're Not Alone

Looking at how 2010 ended in the Chicago real estate market is not that bad, but it isn't great either. Our December median home sales price was $167,850, down 7.8 percent from the same month a year ago. You'll see the Zillow.com data in the picture, that many markets across the country lost a higher percentage than us in the 4th quarter of 2010.

Sales in December were actually up 15 percent from November, which is a little a-typical for the end of the year. However, the 5,204 sales in December were 9.5 percent below the tax-credit driven sales from the same month a year ago.

Many industry experts are talking about inventory, and ours is the lowest in at least three years, at 45,257 units in December. That's 7.1 percent below December of last year, and equates to 8.7 months of supply. That's almost unchanged from last December's 8.5 months of supply. In a balanced housing market, we typically see 4-6 months of supply.

Surprisingly, our December unemployment for Chicago decreased to 8.6 from 8.9 the two previous months. Compared to the 10.6 unemployment rate from the same month last year, we're in better shape. The bad news is that our foreclosure activity picked up again, and we really don't know how long it will take the banks to catch up on previously delayed foreclosure proceedings.

We don't have high hopes for 2011, but we think we'll see modest movement in a positive direction.

2011 Will Be An Improving Year

Happy New Year! As 2010 draws to a close this week, Chicago's housing market ended in what can be described as a "stable" state. Our unemployment held steady at 8.9 for the second month in a row, while the existing home median price decreased to $175,000 from the previous month's $177,000. The definition of the word stable is "the strength to stand or endure." We believe that our market will continue to stabilize as we head in to 2011, which is good. But today we read that some investors and industry executives are actually forecasting a much better future for us. Here are some morsels that may give you reason to break open a bottle of bubbly this weekend.

Charles Lieberman, chief investment officer at Advisors Capital Management LLC, says home construction will definitely improve in 2011 due to the increasing US population. This rise in homebuilding will lead to an increase in jobs related to construction and industries supplying stoves and sinks that go into new homes. Lieberman forecasts jobs will rise by an average of 200,000 a month next year. "The housing market is going to shock people," said Lieberman, former head of the monetary analysis at the Fed Bank of New York. "Once we get the ball rolling, it becomes easy to roll."

Douglas Yearly, the chief of index-member Toll Brothers Inc., said he believes the worst is over for housing. "The recovery is here to stay. I think 2011 will be an improving year, but I think 2012 will be a big year for us." To read the entire Dec. 28 Bloomberg article, click here.

Billionaire investor Warren Buffet also said recently he predicts the real estate slump would end by 2011. He's been personally investing in many building product manufacturing companies, getting ready for a big rebound in construction.

Let's hope they are correct and we can all enjoy a prosperous future. We wish you a Happy New Year and a 2011 filled with much joy, good health and happiness!

Navigating the Chicago Real Estate Market

We're pleased to report that our 4th Navigating the Chicago Real Estate Market seminar was a success with all three expert panels sharing a common message. The message is that we as developers, builders, attorneys, consultants, investors, etc. need to help educate our municipalities and provide well documented explanations of what they need from the municipality in order to get developments moving forward again. The fact that banks and land owners are giving potential buyers a very short due diligence window needs to be explained to the municipalities, so they understand that "demands" aren't being made to them, but rather, there are stricter constraints being placed on potential buyers today. In addition, cost structures have changed for everyone, including the end-user, and we all need to be more flexible. The more all sides can work together to share some benefits of a proposed project, the more likely the municipality will be willing to change their current processes to assist the buyers.

If you missed the event, we have placed the presentation slides here on our blog, under the Navigating the Chicago Real Estate section on the left tool bar.

Thanks to all the panelists, moderators and attendees. It was a half day of exceptional insight, real market examples and great conversation. Happy Holidays and we'll see you in the spring at the next real estate seminar.

Fewer Households For Now

We've all heard the continued bad news in the housing market this month. Housing starts and permits remain weak, foreclosures continue to rise, new jobs are non-existent and according the US Census Bureau, we've added the least amount of households since 1947 (March 2009 - March 2010).

Common knowledge also tell us that families are still forming, kids are still graduating from college and some couples are unfortunately divorcing. A recent article covering last week's ULI conference in Washington D.C. reminded me that we're also experiencing a unique situation with our population. Baby boomers (age 45-65) and their offspring, Gen Y (age 18-32) together account for half the U.S. population (150 million people). These two groups are at opposite ends of the home buying cycle. During a briefing at the conference last week, Maureen McAvey, ULI's executive vice president of initiatives said, "Both of these groups represent a lifestyle change, and those lifestyle shifts will spark demand for alternative types of housing. Both groups embody market preferences that break from recent past and pre-recession expenditures." To read the entire article "ULI Fellows Identify Forces Shaping the New Normal for Real Estate" from Builderonline.com click here.

There currently is pent up demand for housing, along with new, alternative demands for housing. We just need to continue to be patient, and our industry will come creeping back with a fresh new look built on its foundation of delivering quality products to all market segments.