The big talk that fall in Chicago was about the run of one of our revered sports teams toward a national championship, while the marginal talk included some snickering: Wasn’t Sylvester Stallone getting a little old to be doing yet another “Rocky” movie?
Quiz question: Which year was this, 1985 or 2005?
The answer: both. It was the glorious fall of 1985 when Chicago Bears fans dared to dream of a Super Bowl victory, and another great autumn, 2005, when the White Sox won the World Series.
And, yeah, Stallone seemed a little past boxing age in “Rocky IV,” which was a huge hit in 1985 — but at the time he was 39, a kid compared to the 59-year-old Sly who says he’s going to make “Rocky VI.”
So how much actually changes in 20 years? Pretty much everything, and that’s especially visible in real estate.
Two decades ago, new lows in interest rates were gratifying everybody from builders to buyers. But those “lows” were something like twice the rates we’re paying now. Back then, many houses were still being built with one-car garages; all-white kitchens were hot; and there was no such thing as living downtown, except in a handful of high-rises.
The year 1985 isn’t so far back in our history that it seems sepia-toned. (Hardly. That was the heyday of DayGlo), but it does seem to exist on the other side of some great divide in memory.
In real estate years, 1985 is part of the ancient pre-Boom era, a time when home price appreciation of 1 or 2 percent a year was a good thing, not a sign that your neighborhood was “out.”
Nobody but Nostradamus could have looked at the Chicago real estate market in 1985 and foretold what it would look like today. To wit: Tracy Cross, who has been making his living for more than 30 years helping builders determine where the housing market is going, notes that “in 1985 there were probably articles written where I was quoted saying it’s the end of the formal dining room — but it’s still there.”
Hindsight, however, is the best sight. And we now can see that Chicago’s middle-class buyers, the majority then as now, were looking at a profoundly different landscape than their counterparts see today.
Prices, of course, were way lower in 1985 than now. Data kept by the National Association of Realtors show that in 1985, the median price of an existing home in the Chicago area was — you might want to sit down if you aren’t already — $81,100, a 2 percent increase from 1984.
At the end of the first half of 2005, those data show Chicago’s median at $263,500, up 7.9 percent from the first half of 2004.
So, OK, prices are 3.2 times what they were in 1985, but they’re about as affordable now as they were then. That’s according to Richard Rosen, an economist at the Federal Reserve Bank of Chicago, who in July reported that in Chicago and Milwaukee, affordability “has not decreased significantly” in two decades.
Rumors of a preponderance of house-poor households to the contrary, Paul Bishop, an economist who is the manager of real estate research for the National Association of Realtors, says people aren’t committing significantly bigger chunks of their income to house payments than they were 20 years ago. What is known as the financial obligation ratio — the total we spend on mortgage, property taxes and homeowners insurance — was 9 percent in 1985 and 10.5 percent now. The figures include all homeowners, even if they have paid off their mortgage.
Salaries have risen, interest rates have been low, and there have been fewer Chicago-area industries shaking off huge numbers of workers, as steel was doing in the 1980s.
“We don’t have the big layoffs and people with an erratic work history because of that,” says Tom Tylutki, Chicago regional president for Kimball Hill Homes, based in Rolling Meadows. “Everybody has had a long string of employment and has discretionary income that can be spent, not held on to.” So, middle-income buyers are less hesitant than they were 20 years ago, he says.
In a 2005 iteration of the “trickle-down theory” of economics, many of the luxurious features of high-end houses have trickled down to middle-market houses in 2005, thanks in large part to the financial comfort Tylutki describes.
“Buyers in 1985 were very conservative, because the recession of the early ’80s had impacted Chicago greatly,” Tylutki recalls. “Now, they feel they can stretch a little more.” That has drawn thick granite countertops into kitchens and more space and more lavish fixtures into bathrooms of mid-priced housing, he says.
Buyers in 1985 were also letting their hair down somewhat — and remember, in the ’80s there was a lot of big hair.
Prevailing interest rates had been 13 to 14 percent for most of 1984, down from 18.6 percent in 1981, but still a heavy burden for homeowners.
Early in 1985, they dropped below 13 percent, and by the end of the year they were at 11.09 percent.
“Buyers were coming into the market thinking it wouldn’t be that way again anytime soon,” says Sid Wood, partner and vice president in the Mid-America region of Keller Williams. In 1985, he was selling for Century 21. “You laugh now at how we thought those rates were so low, but it meant buying a house had become much more affordable for many people.”
Even so, buying was still difficult for many people, which Wood says explains the then-common tactic of buying a two-flat so the rent on one apartment would help the owners, living in the other, cover their mortgage. “It was a way to get into the market,” he says.
The national mood of the go-go Reagan years was far more optimistic than the malaise that had lingered in this country for as much as a decade before. Cross ties that peppy zeitgeist to the mid-1980s proliferation of “volume space,” such as cathedral ceilings and two-story family rooms. “We were coming out of the recession of 1980 to 1982 with tremendous fury,” Cross says. “You started seeing the yuppies with the suspenders and the big spending. So the builders responded with the showy volume space and more design emphasis, the windows all stacked up one two-story wall.”
And, oh, the colors. The 1980s was such a color-saturated time, with the Miami Vice turquoise and the John Hughes pink. Houses showed that way, too, remembers Mary Berg, who at the time was a partner in North Shore Realty in Bannockburn and now is an agent for G&A Realty in Glenview. “They went in for the gray, maroon, turquoise, and the black and white,” she says of mid-’80s buyers. Their kitchens, a response to the avocados and chocolates of the 1970s, were pristine white on white, and they were fond of installing skylights and mirrors in their homes, she says.
Kitchens were more utilitarian in 1985, Berg and others say. Most often it was a separate room, not open to the family room or dining room, and had workspaces along the walls; an island was unusual then, Tylutki says, while now it’s almost everyone’s desire because it makes for a more social room where you can make dinner and talk to the kids or guests at the same countertop. “There have been so many products added to the kitchen since the mid-’80s,” Tylutki says. “It’s not just the granite tops but the undermount sinks and stainless appliances and pull-out faucets and vegetable sprayers. We weren’t there yet. The kitchen was simpler. Even the microwave wasn’t considered an essential yet.”
Data from the National Association of Home Builders for houses built between 1987 and 2004 show how our priorities have changed. The proportion of houses with 2.5 baths or more has grown markedly. So has the share of homes with four bedrooms or more. The number of fireplaces has been gliding downward the whole time.
Locally, the sizes of bedrooms, family rooms and kitchens have all grown, while living rooms have shrunk, Tylutki and Cross say. In Tylutki’s own home, the living room and the family room have swapped sizes in 20 years, probably indicating the shift to the open-plan life that is also evidenced by the fact that most family rooms his company builds now blend with the kitchen and possibly the dining room, rather than being a separate box.
While a lot of attention has been paid to the increasing sprawl of master bedrooms and master suites, a less noticed change has been in the size of the secondary bedrooms, by Cross’s estimation from a range of about 110 to 120 square feet in 1985 to 145 to 175 square feet.
Room count also has gone up, Cross says, as those old volume spaces have given way to new second-story rooms where there used to be nothing but air and spider webs. Though visually appealing, volume spaces ad nothing in the way of utility, and several sources say that especially with prices seeming so high these days, middle-priced buyers are more interested in maximizing their space than showing off their cathedral ceilings.
In that upper space above the family room, many new-home buyers now would rather have a second-story family room, an extra bedroom or a media room. The space is there in most floorplans; building second-floor rooms there doesn’t jack up the price dramatically but seriously drops the price-per-square-foot, Tylutki notes. That boosts a house’s bang-for-the-buck quotient.
Our two years, 1985 and 2005, bookend one big room need that seems to have mostly come and gone within the period. Computer rooms weren’t much needed in 1985, because very few families had a computer at home. They were important in the 1990s, but seem far less so now, Tylutki says. The reason: Most people have gone to laptops and in-home wireless. There’s barely a need for a dedicated room just for the computer anymore.
Outside, a one-car garage was common in 1985.
Tylutki, who has been at Kimball Hill since 1987, says the first company project he recalls was Lake Arlington Towne, and there, town homes typically came with a one-car garage. Municipalities generally require two-car garages now, not to mention that it’s what most families expect (Real Estate, Oct. 30). But in 1987, according to the home builders association, 18 percent of all homes were built with no garage, not even a carport. That figure has dropped to 9 percent, while the number of new homes with two-car garages has risen to 83 percent from 65 percent.
It’s not only the garages that are bigger, but also the whole house. The average square footage of a new house grew from 1,905 to 2,349 from 1987 to 2004, according to the home builders. Lot sizes went in the opposite direction, from 17,600 in 1987 to 15,788 in 2003 (the last year for which association has published data). This explains the impression we get in many neighborhoods that the houses take up more of the ground than they used to, that they might have been squeezed onto the lot with the help of a shoehorn.
Cross, though, says the shrinkage has been decidedly smaller here than in most of the country. “Chicagoans seem to be absolutely terrified of density,” he says, “so they have held onto a minimum lot width, in the main, of 70 feet. In other parts of the country, they’re getting 50 feet and smaller.”
Also much smaller are the limitations buyers and sellers place on themselves as a result of the increasingly remote days of neighborhood racial and ethnic change.
Even as late as 1985, buyers who were not white were still constrained by prejudiced attitudes; for the most part, real estate agents steered them to minority neighborhoods, look only in neighborhoods that had “already gone black,” says Frank Williams, whose firm, F.J. Williams Realty, has offices in the South Side neighborhoods of Beverly and Woodlawn.
More significant, he says, white buyers would rarely consider buying from black sellers.
“How much things have changed,” Williams says. “Over the last several months, I have sold four properties that were owned by African-Americans to Caucasians.”
Twenty years is a very long time, after all.
