No new jobs, no housing recovery.
So says a national home-building industry consulting firm: The dearth of jobs being created — along with general consumer wariness — is keeping Chicago home building from gaining traction.
The Chicago-area office of Metrostudy says job formations in our region hit a five-year low in June, with unemployment rising to 6.8 percent in the second quarter from 5.5 percent in the first.
“Unequivocally, it’s been a real drag on our housing market,” said Mark Gianopulos, a senior consultant at Metrostudy, whose second-quarter report says that though builder incentives and discounts are having some effect, other factors — tightening credit, uncertainties surrounding Fannie Mae and Freddie Mac and general consumer skittishness, among them — are casting a longer shadow. And in Chicago, add jobs to that list.
The company said that at the end of the second quarter, its tally of starts for single-family homes, townhouses and duplexes fell to the lowest level in 25 years: 12,427. (The report doesn’t count condo starts.) Since first-quarter of 2006 — the peak of the boom — home construction has fallen 66 percent here, Metrostudy says.
But in a glimmer of encouragement, Gianopulos says the rate of closings here is outpacing starts. Though the inventory of unsold homes continues to rise, the rate of growth may be in check, he said. Metrostudy expects that Chicago will see fewer than 2,500 starts in the third quarter, down from 8,000 to 10,000 in the second- and third-quarter (historically, when most starts occur) of the boom period.
“The positive side is that it doesn’t appear to be continuing the spiral,” he said. “It seems to be leveling off.”
All the while, builders continue to dangle incentives and freebies, though many of the larger ones said months ago that they couldn’t and wouldn’t keep giving things away. But many find they must, and some consumers are responding favorably, Gianopulos said.
“The thing is, how low can they go? I don’t think they can go too much lower,” he said. “To stay in business they need to continually move inventory.
“That’s where it is. They’re not in a ‘making money’ mode, they’re in a survival mode.”
Mothball the lowball
Online brokerage Redfin recently crunched sales data for three metropolitan areas for clues to which homes sell for a big discount and which don’t. The results reflect common-sense views of the marketplace, but it’s interesting to see them.
Redfin analyzed more than 9,000 single-family home sales between April 15 and June 15 in Fairfax County, Va. (Washington suburbs); King County, Wash. (Seattle); and Los Angeles County. Seeking homes that sold for “a lot” less than the asking price, the company found that even in this distressed market, relatively few sold for more than 10 percent off the asking price. One conclusion: If you’re “lowballing” the seller, you’re probably wasting your breath 90 percent of the time.
Characteristics of homes likely to sell for the biggest break, according to the study: Those that have been on the market more than 90 days, those marketed as fixer-uppers and those seller-owned for 20 years or more. There’s little likelihood you’ll get much listing-price traction from homes that have had noteworthy remodeling jobs, have been seller-owned for less than five years or are “short” sales or bank-owned.
The details are at www.redfin.com/scientist.
The closer
When you sign a contract to buy a home, a down payment is only the beginning. Every buyer has to be prepared for closing costs, which can include fees to the mortgage lender, an appraisal, title insurance, land survey and many other items.
Across the county, buying a $200,000 house generates an average of just over $3,000 in such fees, according to Bankrate.com. To get that number, the financial Web site surveyed at least eight lenders in 50 states and six metro areas. New York state placed first: There, the $200,000 home buyer can expect to pay more than $4,000 at the closing table. Chicago ranked 48th, with an average around $2,900.
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Hear Mary Umberger at 12:49 and 11:15 p.m. Tuesday and Thursday and at 10:30 a.m. Saturday and Sunday on WGN-AM 720. Write to her at Real Estate, Chicago Tribune, 435 N. Michigan Ave., 4th Floor, Chicago, IL 60611 or send e-mail to housingnews@comcast.net.
