Archive for July, 2010

Shadow Inventory and Its Affect On Chicago Real Estate

July 26, 2010

You have most likely heard the term “shadow inventory” and may well have wondered what it means. Interestingly enough, while the shadow inventory will certainly affect the Chicago real estate market, opinions vary as to its precise meaning.

foreclosureFor some the term means that lenders may be holding on to foreclosed properties for fear of flooding the market. Others believe that it describes the high number of homes in the foreclosure process which will eventually go up for sale. And still a third group includes the possible flood of properties which will hit the market when homeowners who have been holding off selling finally decide to do so. It is generally agreed, however, that the shadow inventory of Chicago real estate includes all delinquent loans and real estate owned (REO) properties that have not yet reached the market. In any event, there is a strong belief that a very large number of presently unlisted homes will soon cause an overabundance of available properties and thus directly affect prices.

Is There A Glut?

When this glut will occur or its actual impact is also debatable. The number of homes entering foreclosure has recently abated as owners and lenders have pursued loan modification and short sale alternatives. However, as lenders are more efficiently clearing out the backlog of properties in distress, the foreclosure process has quickened, and more and more REO’s are becoming available for purchase.

Many analysts use the “tip of the iceberg” analogy to describe the current situation, feeling that a massive number of distressed properties and underwater loans sits just below the surface. Some believe that the number of potential homes for sale greatly exceeds the number currently on the market, and a Standard and Poor’s recent report predicts that, at the current rate of sales, it will take at least three years to clear out all shadow inventory.

What Does It Mean?

So what does all this mean for Chicago real estate? Actually, two very different viewpoints are emerging in this regard. The first can be seen in a somewhat positive light: because business will increase in the next year, potential investment opportunities will also rise, and sales, too, will increase. It is also possible that competitive bidding will drive prices up, thus averting a second housing market collapse. On the negative side, however, many industry “experts” predict that the weight of the influx of homes for sale will drive prices down at least another 8% by the end of 2010.

And then add to the mix the unknown variable of the unemployment rate, and the future of real estate sales is really anybody’s guess.

Home Buyer Tax Credit Extended

July 20, 2010

The Home Buyer Tax Credit was set to expire last month, but because of the high number of buyers who purchased homes by the April 30th deadline but were unable to close on their Chicago real estate, Congress has extended the closing date to September 30, 2010. Apparently, the demand to close by June 30th was greater than expected, thus overwhelming mortgage lenders. In addition, short sales and foreclosure purchases require more time to process, and as their number increased, so did the backlog of closings. The National Association of Realtors estimates that at least 180,000 home buyers were unable to settle by the June deadline and thus missed the opportunity to receive the tax credit.

tax creditSo what does this mean for you? If you purchased your Chicago real estate by the April 30th, you now have until September 30th, 2010, to close on your property. (Note: the new legislation applies only to those who did so. The purchase deadline was not extended.) Other than date changes, the terms of the original program still apply, allowing tax credits of up to $8000 for first-time buyers and $6500 for repeat buyers.

Included in the current bill are special provisions for members of the U.S. military forces, the foreign service, and the intelligence community. For those who fall into these categories and have been ordered on an extended (90 days or more between after December 31, 2008, and before May 1, 2010) tour outside the United States, the new extension allows for a binding contract to be in place on or before April 30, 2011, and a closing to take place on or before June 30, 2011. In addition, a person who is forced to return to the U.S. for medical reasons before completing the 90 day tour may qualify for a one year extension.

What do you need to do to claim the credit for your Chicago real estate purchase on your taxes?

  • If your 2009 return has not yet been filed, claim it on Form 1040 for tax-year 2009. While you cannot file this return electronically, you can still use IRS Free File to prepare and print it. When you send it in, you must attach special documentation and IRS Form 5405.
  • If you have already filed for 2009, claim the tax credit on an amended return using Form 1040X. Remember to check the above site for specific documents to include with your new return.
  • You may also wait and claim the credit on your 2010 tax return.

Six Month Chicago Condo Sales Statistics for 2010

July 12, 2010

In the first six months of 2010, Chicago condo sales have dramatically increased compared to the first half of 2009. And June closings were up 26% over May.

According to figures generated by MRED, the regional MLS, year-to-date sales of Chicago condos through June 2010 are:

  • Up 42% in total dollar volume, to $1.8 billion
  • Up 45% in units closed, to 5,630
  • Down 6% in median sales price, to $263,700
  • Down 6% in average market time, to 148 days.

Comparing June sales to May:

  • Units closed were up 26%, from 1,083 to 1,365 closings
  • Dollar volume was up 27%, from $341 million to $434 million
  • Median sales price was up 2%, from $264,900 to $270,000
  • Average market time was flat, at 144 days

What’s your chicago condo worth?

Chicago Foreclosure Trends – May 2010

July 6, 2010

There were 38,718 Chicago foreclosure homes for sale with 3,818 new foreclosures in May 2010. The average selling price of a Chicago home was $279,623 in May and the average foreclosure selling price was $109,668, a savings of $169,954 according to RealtyTrac.com.

Chicago Foreclosure Geographical Comparison

May Chicago foreclosure activity was lower 0.07% higher than national statistics, 0.03% higher than Illinois statistics, and 0.04% lower than Cook county numbers.

Chicago Foreclosure Activity by Month

The number of Bank-Owned Chicago homes decreased from 1,312 homes in April to 1,106 in May. The number of Auctioned Chicago homes also decreased from 1,271 to 907 and Pre-foreclosure acitivity dropped for 1,982 to 1,805. The six month Chicago foreclosure trend is falling.

Are you or someone you know behind on your mortgage payments and facing a Chicago foreclosure? You do have options. A foreclosure is not the only way. A short sale may be the answer to saving you, your family and your home. I am a Certified Distressed Property Expert (CDPE). I have the training, knowledge and experience needed to help save your Chicago home from foreclosure. The clock is ticking. Don’t hesitate. Give me a call for a private consultation.

Learn more about selling your Chicago home.

What’s your Chicago home worth?