“These low interest rates are a once-in-a-lifetime opportunity. Anyone standing on the sidelines will miss out,” Dr. Lawrence Yun, Ph.D., managing director and senior economist for the National Association of Realtors said at the Chicago Association of Realtors 2007 Economic Forecast, held Jan. 19. Other panelists included Gail Lissner, VP, Appraisal Research Counselors and Sara J. Walker, Senior VP and investment officer, Associated Bank.
The main focus of Yun’s presentation boded well for Chicago. “There is no bubble in Chicago; it is sound fundamentally.” Yun supported this statement with graphs comparing Chicago to other markets across the nation in relation to home prices, mortgage obligation to income, and prevalence of adjustable rate mortgages.
“We do see the bottoming out of the market, so if consumers can overcome the psychology of negativity, it will be fine,” Yun said. He cited existing/new home inventories falling, mortgage applications stabilizing, housing affordability improving and renters getting squeezed.
Nationally, Yun had positive information to share on steady job gains (1.8 million in the past 12 months), wage growth picking up and falling oil prices. For 2007, Yun projected the GDP to be at 2.5 percent, unemployment rate at 4.8 percent, CPI inflation at 2.2 percent and the 10-year treasury at 4.9 percent.
Sara Walker spoke on the economy globally and nationally. “We are seeing strong global growth, generating a lot of cash,” Walker said. “Many corporations are experiencing double-digit earnings growth, despite hurricanes and terrorist activity. This is creating corporate optimism in CEOs, which is causing continued investment in business construction.”
She also noted the high level of consumer confidence, with strong wage growth and job creation at nearly 2 million new jobs. Walker also touched on the fact that Americans are getting hit hard with negative savings rates, though the news isn’t all bad. “Debt levels have been growing, but so have assets,” Walker said.
Gail Lissner gave a thorough insight into Chicago’s downtown market, which covers the Gold Coast/Near North, River North, West Loop/River West, Streeterville, Loop/New East Side and South Loop neighborhoods. She highlighted recently announced condominium projects, providing information such as average price per square foot to the percent under contract.
“Last year, 4,200 new condo units were delivered in downtown; deliveries of 6,700 units in 2008 are expected,” she said.
Lissner admitted that $300 per square foot is now entry level, though nearly 30 percent of new construction condos in 2006 were $500-plus per square foot. Legacy, a new project in the Millennium Park/Grant Park area, commands a price of $600 per square foot, and is more than 85 percent sold. Another new project, Aqua, is 80 percent under contract at about $500 per square foot. However, Aqua is unique in that it will be 80 stories comprised of condos, rentals and condo hotels. Other projects are even fetching $800 per square foot.
“We are seeing a depletion of rental inventory due to condo conversions,” she said. “Last year more than 50,000 jobs were created in Chicagoland, which helped to firm up the rental market.” Lissner said that rentals are at a 97 percent occupancy rate, but that doesn’t include investor-owned condos.
“In 2007, I expect to see fewer speculators,” she said.
The Chicago Association of Realtors (CAR), “The Voice for Real Estate in Chicago” since 1883, represents the business interests of more than 15,500 real estate professionals in the Chicagoland area. CAR is led by a voluntary board of directors, elected by the membership, who works in partnership with a professional administrative staff.