As we enter 2021, we must take a look at the state of the real estate and construction markets amid the pandemic and subsequent economic shifts that resulted. Many companies have been able to weather the shift of the pandemic, while other businesses, especially those dependent on the public gathering in commercial real estate spaces, were forced to close. Since March of 2020 we have seen the use and enjoyment of real estate, transfer to the home.

Technology has played a pivotal role in allowing this to happen to ensure that the health and safety of individuals, employees, friends and families are at the fore front. Businesses have implemented health screenings to limit infectious disease exposure within essential-worker commercial properties, while places of gathering in Chicago have been creative in providing outdoor spaces comfortable for winter dining while touch-less menus have become the norm.

Median Sales’ Prices for single family homes are up 16% this winter to $272,650 and 3.7% higher at $325,000 for condominiums and townhouses. Inventory decreased a by a staggering 44.5% for single family homes while condominiums and townhouses increased by 36%.

Mortgage rates are at near-record lows, hovering at 2.5-2.7% for well-qualified buyers, making it an advantageous time for those utilizing debt to secure a home or investment purchase.

On the governmental front, on December 20th, Congress has approved a $900B COVID-19 Relief Bill which includes the following:

– A second round of stimulus payments of $600 to most Americans, including dependents.
– Extension of Unemployment Assistance through April 19, 2021 with a $300 weekly boost in payment.
– An additional $284B for the Paycheck Protection Program which will provide eligible businesses to receive a second PPP loan and creates a simplified forgiveness process for most borrowers.
– Provides $20B for Economic Injury Disaster Loans.
– Provides $25B to states through September, 2022 for rental assistance and allows landlords to apply for funds on behalf of tenants.
– Provides $7 to states for Broadband Expansion, including $300M for rural expansion.
– Extends the Federal eviction ban through the end of January.
– Provides funding for schools and vaccine distribution.

What’s happening in the construction market can be observed by how many cranes seen erected across the city. Crane counts have decreased significantly in Chicago from the start of 2020 vs the end, a decrease of 48%, signifying much less demand for high-rise buildings in the city. Residential high-rise buildings still show demand while transportation and governmental commercial projects have strong production amid the pandemic and economic shifts that have followed.

Although, the real estate market is operating with an adjustment, it is still essential and many businesses and individuals have and are continuing to make those adjustments to remain profitable, safe and healthy. We will see new businesses formed, while changes in real estate business and trading will make themselves known in the coming weeks, months and years.

Especially since the pandemic began, sitting down to read the daily newspaper in print form has been the highlight of my days. The reliable Chicago Tribune carrier leaves the paper outside the door early every morning. After breakfast, I make a pot of tea and settle into my reading chair for what’s become a long, leisurely ritual in these months of isolation.

The ritual may die out with my generation. Two in five people over age 65 read printed newspapers, according to the Pew Research Center, but not even one younger person in five does. Younger people prefer to get their news on their smartphones and laptops, where it’s available wherever they are and updated more than once a day. 

Newspaper reading would have been a habit of mine even if I hadn’t started my career as a reporter. My parents subscribed to both the Chicago Tribune and the hometown Joliet Herald-News, so I grew up thinking that a household typically read a daily newspaper or two. 

I’ve been a Tribune subscriber since I returned to the Chicago area 35 years ago. I resented the constantly increasing cost until I saw firsthand how the newspaper industry was declining as online news proliferated. My brother, the sports editor at the Herald-News for 35 years, lost his full-time staff. I did a five-year stint at the Herald-News in the late 1980s. The editor for whom I worked was let go when the features department was eliminated. Two of my friends stuck it out longer than I but, as the paper’s ownership changed repeatedly, left for more secure communication jobs. 

More than 2,000 US newspapers disappeared in the last 15 years, according to the Poynter Institute for Media Studies. Others switched to online only. Those still with print editions created websites.

I could read a replica of the printed Chicago Tribune online, but I enjoy seeing a full-size broadsheet. I prefer to scroll with my eyes rather than my fingers. I like feeling newsprint in my hands and hearing the crinkle of pages being folded. 

The digital edition contains the full text, yet I don’t read it thoroughly when away from home. Maybe I associate online reading with quick takes and clicking on only what interests me, for I skip many stories and read few others to the end.  

Wishing for a resurgence of print is futile, and I’ll even admit that digital has some benefits, including saving trees. Format is a personal preference; what matters are that the public has access to trustworthy local news and that trained journalists can find jobs. Today responsible news organizations are up against online sources with dubious commitment to ethical reporting and news standards. 

Digital journalism has also proven not a sure bet; many news sites have made less money from digital advertising than expected, according to the Poynter Institute. Since I’m not an expert on the news industry, I can’t predict what formats are likely to be viable. I’m just happy that a meaty newspaper is delivered to me daily. 

With so much free time during the pandemic, I’ve been reading sections of the printed edition that I used to skip, finding that the letters to the editor are often well written and thoughtful, the business pages aren’t just about the stock market, and the sports section is more than a rehash of yesterday’s games. Paying less than $1 a day, I wonder how I ever thought the newspaper was getting expensive. However much the price increases, I now think of a subscription as a contribution to print journalism, which hopefully will last out my lifetime. 

*****

REMEMBERING A FRIEND AND COLLEAGUE

My friend and former colleague Vickie, who died last Tuesday at only 54, was a private person, so she would have wanted this tribute to be kept short.

Vickie was an exceptional graphic designer whose interests ranged well beyond the visual. She sent me tips and newsletters about both human and cat nutrition and suggested off-the-beaten-path places that she and her husband, Doug, had enjoyed. My go-to person with gardening questions, Vickie identified plants from my sketchy descriptions and gave me perennials from her yard. She passed on what she learned about the feline digestive problems our cats shared. Belonging to both our publications department’s book group and a Great Books group, she schooled me in the Great Books philosophy. 

Working with Vickie meant never worrying about anything slipping through the cracks. Her meticulousness, computer expertise, and design savvy awed her coworkers. Her humor amused us. The courage with which she handled illness, and her acceptance at the end, offer an inspiring model. 

Vickie was up for joining our book group’s last Zoom meeting on audio. Chatting and joking, she gave us the gift of sounding like her calm self when we all knew we were saying goodbye.

Chicago is an urban lasagna, a city of layers: multi-level Wacker Drive; skyscraper apartments stacked one over the other; River Point tower — one million square feet of office space suspended above a public park above active Metra and Amtrak rails above the Blue Line.

Then there are the unseen layers: history itself. A recent Chicago Tribune photo of seven-year-old girls skating with their moms in Hyde Park evoked 1893 for me.

The Skating Rink at Midway Plaisance Park ices over what was the site of the biggest carnival attraction at the World’s Columbian Exposition: the world’s first Ferris wheel. Fair planners in Chicago wanted to one-up Paris’s 1889 Exposition Universelle, with its iconic Eiffel Tower.

Designed and built by Pittsburgh engineer George Washington Gale Ferris Jr, the Chicago Wheel began to take shape the winter before the fair. Workers thawed the ground with jets of steam. A massive grillage of steel and concrete supported the 71-ton wheel, its size impressive even by today’s standards. Each of its 40 cars could carry 60 people, enough to spin as many as 2,160 riders at a time. Compare that to the 2016 Centennial Wheel at Navy Pier, which can twirl a maximum load of only 414 passengers in its intimate gondolas. The top of Navy Pier’s wheel reaches 196 feet, but the original Ferris Wheel soared to 264 feet — about a quarter of the height of the static Eiffel Tower but taller than all but a couple structures in Chicago at the time, offering kinetic, eye-popping views.

View from the Ferris Wheel of the brand-new University of Chicago campus

The wheel outlasted the fair into the following spring, when it was dismantled and later rebuilt at an amusement park in the 2600 block of North Clark Street, now occupied by a McDonald’s — another layer of history. At that location the wheel made an appearance in a 1896 film shot by the Lumiere Brothers, but by 1903 it was dismantled again and shipped to St. Louis for that city’s 1904 fair, after which it met its end by dynamite.

Apple Michigan Avenue; photo by Eric Allix Rogers

Seeing the photo of the ice rink on the Midway, I thought of other Chicago stories hidden below ground. Apple Michigan Avenue, the snazzy emporium of all things Apple designed by Foster + Partners and completed in 2017, occupies the spot where after the Revolutionary War Chicago’s first non-indigenous settler, Jean Baptiste Point du Sable, established a trading post and married Kitiwaha, a Potowatami local.

Wigwam convention center

The Sauganash Hotel, which sprang up in 1831, has been called Chicago’s first hotel — although Chicago wasn’t incorporated until 1837. That hotel made way in 1860 for the Wigwam convention center, where Abraham Lincoln was nominated for president. The wood-framed Wigwam was a temporary structure that held on for a few years after the convention, when it was demolished to make room for something else. Today the Chicago Landmark plaque that marks the spot is affixed to 191 N. Wacker, an elegant 2002 office tower designed by KPF.

Chicago’s history is layered all around us. I won’t go on about it — OK, just a quick peek under the Stevenson Expressway for vestiges of the Illinois and Michigan Canal, later supplanted by the Chicago Sanitary and Ship Canal.

I’m not complaining about these changes. I’m glad that the park district operates a skating rink on the site of the world’s first Ferris wheel, and I understand why Apple would covet the same spot on the Chicago River that made Point du Sable want to put down roots. Sometimes the old must make room for the new.

Accepting transience is the bargain we make for being alive, a feeling heightened during this time of pandemic. What more can we do than look at lives lost and celebrate them? That first Ferris wheel was grand in its day. A community skating rink is grand in its own way.

As the Case Shiller index proved last week home prices across the nation, along with the Chicago metro area, have been taking off recently, with appreciation rates hitting multi-year highs. So, when Zillow and Pulsenomics recently did their 4th quarter survey of real estate experts it was no surprise that their national home price forecast moved up significantly from the 3rd quarter survey.

First, please note that the 4th quarter survey extends the outlook by one year – into 2025, which you can see in the graph below. The cumulative home price appreciation forecast through 2024 was raised from 16.3% last quarter to 22.1% now. A good chunk of that came from the forced realization that 2020 was already realizing higher appreciation than last forecast. Now the 2020 forecast is for 6.3% appreciation vs. 3.7% last quarter. In addition, 2021 home prices are now projected to grow by 4.2% whereas last quarter the experts were projecting 2.6%. Get the picture?

The forecast for US home prices has improved again as actual appreciation hits multi-year highs

Chicago Area Home Price Outlook

The outlook for Chicago area home prices has similarly improved since the last time I checked. However, for this perspective I have to go to John Dolan of Home Price Futures since the home price expectations survey doesn’t go down to the metro area. John is the market maker for the Case Shiller home price index futures and he provided the graph below. It looks much better than it did last time. What that graph tells us is that the futures market is anticipating 11.8% appreciation through the end of 2024. That is obviously a far cry from the 22.1% appreciation forecast for the nation by the real estate experts. But that shouldn’t be too big of a surprise since Chicago has been lagging the nation for years now.

The outlook for Chicago home prices is much less optimistic than what the experts see for the nation

While Home Prices Surge, Rents Plummet

There are some other interesting nuggets in the supplemental questions section of the quarterly survey. For instance (and this was not a question but rather background information) the graph below shows how rents have diverged from home prices since the pandemic struck. It’s dramatic and it can’t possibly be sustainable simply because low rents will force down the price of investment properties which necessarily leads to lower home prices.

Rents and home prices have recently diverged to the point that the gap cannot be sustainable

Mortgage Forbearance Outcomes

Survey respondents were also asked what they thought would happen to the 2.7 MM homeowners whose mortgages are currently in forbearance (most likely as a result of pandemic induced economic hardship). Fortunately, they only see 18% of those ending in foreclosure and even those might be delayed by up to one year from now.

Survey respondents were fairly optimistic that most mortgages in forbearance would not end up as foreclosures

#RealEstate #ChicagoRealEstate #Coronavirus #HomePrices #Foreclosures #Renting

Gary Lucido is the President of Lucid Realty, the Chicago area’s full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider’s view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.