The Chicago Jetty Blog

Architecture Billing Index – The Canary in The Coal Mine

union03g — Wed, 21 Apr 2010 20:51:37 +0000

If you want to get the earliest forecast for the commercial real estate (CRE) market, you have to find out what the architects are doing. The Architecture Billing Index is a 9 – 12 month leading indicator of construction spending in CRE. The index increased in March to 46.1 from a rating of 44.8 in February. An index above 50 represents expansion of investment.

This is a good sign for CRE considering everyone believes it’s the next bubble to burst. My thought is: how can CRE really be that bad if architectural business is seeing an increase in activity and a recovery. The ABI might even be above 50 by the end of summer! Can you imagine how hard activity will snap back due to the depleted pipeline???

Multi-Family Housing Research

union03g — Thu, 08 Apr 2010 19:16:53 +0000

James Shilling, PHD, Depaul released a good white paper on multi-family housing trends in Cook County. This is an essential read for any real estate investor. Click the link below.

Multifamily Housing Market
and Value-at-Risk Implications for Multifamily Lending
Institute for Housing Studies
APRIL 2010
DEPAUL UNIVERSITY

The Death of Armitage?

union03g — Thu, 08 Apr 2010 18:56:18 +0000

Check out this video that talks about how the hot Armitage corridor has changed and is in decline:

http://link.brightcove.com/services/player/bcpid66978500001?bctid=76216779001

Teachers’ Non-Residency Requirement Will Hurt Chi – Real Estate

union03g — Sat, 27 Mar 2010 14:17:12 +0000

There might be a local shock coming to Chicago real estate after the state Senate voted 40-to-7 to lift the residency requirement for teachers in the Chicago Public Schools. Think about the implications for a second. If teachers (and their families) get the green light to move outside Chicago then you will see a lot of migration from areas like Humbolt, Avondale and Uptown to places like Elk Grove Village, Bensenville and Western Springs. These families will sell their homes in the city and landlords will find it that much more difficult to fill vacancies after the exodus (lower rent = lower prices on properties).

Think about Humbolt specifically – I’m assuming a lot of Clemente teachers live in this neighborhood that would love to get a traditional house with a yard. All they have to do is move NW off of the Kennedy to find that dream. I’m not arguing morality here, just what the impact might be.

Mayor Daley is vehemently against this idea as Chicagoans will see taxes rise and a widening of the gap between lower and upper class. The teachers union argues that it’s not fair to keep teachers in the city because housing is expensive? Really? You can rend a nice place in many neighborhoods for 600-800 dollars/month – that’s really cheap in my opinion.

ARTICLE HERE

How Will Noverber Elections Affect Real Estate?

union03g — Tue, 23 Mar 2010 20:11:33 +0000

Real Estate is still very much at the center of the economy, even with all the controversy around Obamacare. Here’s a nice summary of how RE fits into the November Elections:

“For real estate, markets desperately need an improved jobs picture to start to improve occupancies across flagging property sectors and increase consumer spending in stores. The November elections all come down to the economic track and speed of recovery. High unemployment spells trouble for real estate owners just as it does for incumbent politicians—that’s why Democrats appear especially vulnerable and real estate investors and borrowers continue to struggle through this protracted downturn and so far pseudo rebound.”

ARTICLE HERE

GE Appliances In Chicago Homes: Coming Up Short.

union03g — Tue, 23 Mar 2010 15:41:55 +0000

Have you ever heard of the GE Monogram line of appliances? You might find them in high end condo’s and homes, but wouldn’t you rather have Viking, Wolf or Miele? There seem to be a lot of shortcomings with GE’s quasi-high end products, including brand recognition and little differentiation. It might even be a drawback to have GE appliances in you kitchen come time to sell!

“A quick look at GE’s website for Monogram shows that the products are just design knock-offs of Sub-Zero and Viking (the website itself is underwhelming). This only serves to reinforce Sub-Zero and Viking as the real thing and Monogram as a johnny-come-lately imitator.”

ARTICLE HERE

“Interest rates move up in elevators, housing moves up the staircase.”

union03g — Mon, 22 Mar 2010 16:49:45 +0000

Chris from Luett Mortage group has another nice post that breaks down (very clearly) how mortgage rates are affected by inflation, bond prices, the Fed and what we can expect in the near term. My opinion is that finding value in real estate is very easy right now and we need to remind ourselves that these historically low interest rates, tax incentives and cases of seller distress are all vanishing variables. If you’re a qualified buyer you still have a ton of power but the clock is ticking. Full Article Here

Below is a chart of historical interest rates back to 1963.

If you can’t feel good about buying property now, you never will.

Thoughts and Theories On Real Estate

union03g — Tue, 16 Mar 2010 02:19:01 +0000

Here are a few ideas that I have brewing on the real estate market:

The first time homebuyer credit is not currently supporting housing sales from a supply/demand view even though it may be influencing buyer psychology. The $8k credit is currently baked into the price of real estate and if it expires we will see an immediately correction in home prices to the tune of $6k – $8k. We learn in economics that the only causative exogenous shocks are those that are unexpected. Just like every other indicator and metric, the size doesn’t matter in the short run but only whether we can accurately predict/expect the size. Unfortunately, the government only had the opportunity to shock to the positive side by announcing the first time home buyer credit unexpectedly, and now all they can do is remain neutral and extend the credit again. It’s as if the government had no credit exit strategy and we are now waiting for the shoe to drop. In other words, the effects of the credit has lived its life and is now harming organic price growth and buyer faith.

When companies start hiring more aggressively and unemployment begins to decrease, real estate will be the first asset class to benefit. Newly employed homeowner’s will give their mortgages first priority in their budgets. To the extend that unemployment decreases, foreclosures will begin drying up and home-equity will begin to build again (relatively faster than 401k’s, IRA’s and spending on retail, etc.). One person getting a job means one bank is getting paid again, which means easier lending, which means there are more buyers and prices can creep up again.

2016 will be a tremendous year to be a landlord in Chicago.

Real estate technology will influence both agents and homebuilders much more than anyone expects in the next 10 years. The most successful agents will understand how to adopt searching and analytical technology and the homes with tech seamlessly designed into them will be all the rage. Homebuilders will race to stay on top of these fast moving trends. People will demand chargers, touch screens, wifi, twitter displays built into the fridge, remote management capabilities, etc. and real estate will be that platform for cutting edge tech. Since large stainless appliances don’t impress your friends anymore, you’ll now have an intelligent home to impress.

Thanks for reading, feel free to leave a comment.

ChartFest – Homebuilders Still Feeling Pain

union03g — Mon, 15 Mar 2010 22:06:03 +0000

From Inman News:

“Builder confidence slunk back to January levels this month, according to a report released today by the National Association of Home Builders.

The NAHB/Wells Fargo Housing Market Index for March dropped two points to 15, down from 17 in February, the report said.

“The lack of available credit for new projects, the large number of distressed properties for sale and the continuing hesitancy of potential buyers due to the weak job market are definitely weighing on builder confidence at this time,” said David Crowe, the association’s chief economist.

“That said, the inventory of new homes on the market is at an extremely low level, and we do expect a 25 percent improvement in new-home construction in 2010 over 2009 to rebuild inventory and meet expected pent-up demand.”

The impact of poor weather conditions on builders’ business was also a factor, the association said.”

Hidden in Plain Sight: Jewel’s From 1930′s Chicago.

union03g — Sun, 14 Mar 2010 14:37:53 +0000

Chicago history is all about buildings and how they have been re-purposed, redesigned and scaled up to fit modern times. In the 1930′s Jewel built a bunch of small stores all over Chicago with white art-deco fronts to reflect the trends in architecture at the time and their new catch phrase: “Clean and white and sparkling bright.”

I had no idea these were old grocery stores, they are so different from the new Jewels being built – it’s Chicago history hidden in plain sight. The first pic below is a shot of both a 1930′s Jewel and one from the 1980/90′s in the background. The other pics are also 1930′s Jewels. Hat tip to, A Chicago Sojourn.