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Home Values: The
media has both projected home value increases and decreases.  Both
sides are probably right.  On a national level, we could see a slight
slide fueled primarily by just a few markets.  On a Chicago level, many
signs point towards a balanced recovery.  In fact, many neighborhoods
were only nominally impacted when compared the rather bleak national
figures. 

Chicago is only one of twenty towns in the Case-Schiller index and
none of its neighborhoods are individually represented.  As always,
some neighborhoods will do significantly better than others. 

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Signs of Recovery: There was a good post over at Luett Mortgage Group’s blog the other day.

The Existing Home Sales information is a leading indicator of a
recovery.  With record low housing starts, the inventory is starting to
thin. 

This is actually much better news for Sellers than Buyers right
now.  Even if builders could start building new homes today, they wouldn’t be able to get
product to market before the housing inventory tightens up
significantly.  While this will ultimately benefit Sellers, many are
still highly negotiable.  Once CNN reports this news, the laws of supply and demand will have likely taken over.

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Affordability: Affordability is not a concept, it is a
calculation.  Homes are indeed more affordable, but significantly more affordable.  Let’s look at what has happened with home prices in the
past year and mortgage payments in the past month.  The median home
from the Case-Schiller Index cost $207,400 in December 2007.  It cost
$175,400 in December 2008.

Assuming 20% down payment, the difference between a $207,400 home
at December’s 6% rates and the $175,400 at today’s 5% environment:

	2007	2008
Price	175,400	207,400
Mortgage Rates	6%	5%
Mortgage Payment	$ 994.77	$ 753.27
Affordability Change	24%

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Neighborhoods: Neighborhood selection
is always a function of personal circumstances and life events.  The
trade-off between ‘value’ neighborhoods and ‘blue-chip’ neighborhoods
is very significant these days.

Long-term values are popping up in the fringe neighborhoods.  While Bucktown has remained stable, the fringe areas like West Bucktown have some phenomenal values if you are in your home for five years and can withstand some rehab while you live there.

For a shorter-term hold or someone looking for an established neighborhood, it is necessary to get the best value possible from a limited amount of motivated sellers.  With few motivated sellers in the more desirable neighborhoods, many are seeing multiple offers.  Winning these situations requires quick decisions and initial offers won’t be as low as in the fringe neighborhoods.