Low Inventory Causes Market to Favor Sellers In Real Estate

Jack Wangelin - Monday, March 24, 2014

The Real Estate Concierge

A new real estate market blog series from Betancourt Realty

Low Inventory Causes Market To Favor Sellers In Real Estate 

Recently, the real estate market has been on a slow and steady incline. However, the newest obstacle in a full recovery appears to be the lack in inventory. “The lack of inventory is a big obstacle for the housing market right now,” says Jed Smith, managing director of quantitative research for the National Association of Realtors. 
Inventory is being reported at 18% lower than it was in 2013. As a result of this lack in inventory, the market is temporarily becoming one favoring the seller.  It is matter of supply and demand. The less homes that are available translates to the prices of homes continuing to rise. Sellers are taking full advantage of the current state of the market and increasing the sales price of their homes.    According to Smith, a normal housing market brings about 1.5 million new housing starts a year, but only around 800,000 new homes hit the market last year, meaning supply is not keeping up with demand. 

“The Great Recession forced many of the smaller builders to go out of business because they didn’t have access to the credit market and those builders tend to make up about 50% of new home construction.”


The National Association of Realtors reported housing inventory fell 9.3% at the end of December, to 1.86 million available homes, which is about a 4.6 month supply at the current sales pace. According to Smith, a normal market has about a six-to-seven-month supply available. Existing homes, are now the driving force behind inventory levels with previously-owned homes selling more than 10-to-1 to new homes. Smith also states that the number of days a home sat on the market in December 2013 jumped to 72 from 56. However, he suggests that this particular increase may be due to the cold weather.

   
While much of this may sound like good news for current sellers, what this lack in inventory means for potential home buyers is possibly being faced with exorbitant prices for homes. However, it is not time to panic just yet. Some suggestions for potential home buyers in this market is to start your house hunting early. Starting as early as possible will put you in a better position in a market that is not presenting a mass amount of choices. Refer to a knowledgable real estate agent. Also, consider expanding the area you would like your desired home to be in. Lastly, be very realistic about the type of home you are in the market for. Determine what factors are an absolute necessity versus those that are negotiable.   


Information:  

  • http://www.foxbusiness.com/personal-finance/2014/01/23/housing-biggest-obstacle-inventory/
  • http://www.usatoday.com/story/money/business/2014/01/01/home-prices-2014-housing-starts/4181021/
This post was written by Betancourt Realty for the educaction & benefit of the WPB Chamber, it's members & those otherwise interested in today's real estate market. We warmly thank Betancourt & welcome the monthly post, keeping us updated on all things real estate. 

Small Business Finance: SBA Loans Part 1

Jack Wangelin - Monday, July 08, 2013

SBA or Small Business Administration provides loans, loan guarantees, contracts and counseling, along with other forms of assistance to small businesses since its founding in 1953. If you don’t mind the paperwork and work with a SBA preferred lender, the process can be a bit smoother than anticipated.  

For startup businesses, especially ones where Real Estate is being acquired, or for someone looking to acquire an existing business, SBA loans may be worth the time and effort.  Current rates vary of course, but in MOST CASES the maximum current rate are PRIME +225 bps, or approximately 5.50% (you can lock in a fixed rate as well depending on loan type).  

Besides the attractive rates, another nice feature of SBA loans are the terms they offer, again depending on the loan type can be anywhere from 10 to 25 years in length.  The loans are fully amortized over the life of the loan and there are no balloon payments, or calls, so you lock in your rate for the term of the loan.  I will discuss the two most common forms of SBA programs for small businesses but this month I will start with the most common SBA program for small business.

 

SBA 7(a):

Purpose: Used for the purchase of commercial real estate, refinancing existing commercial real estate properties, new construction, and business acquisitions.  Examples of business acquisitions included medical practices, accounting practices, law practices etc. The loans can also cover working capital needs and other business assets.  SBA 7 (a) loans are also a common and cheaper form of financing for Franchise Owners both existing owners and new owners.

 

Loan Amount:   

The maximum loan amount for the 7(a) program is $5,000,000 and the minimum is approximately $250,000.  There are other SBA loan programs that cater to loan amounts down to $100,000 in size (sometimes even less).

 

Closing time:    

7(a) loans usually close within 45 to 60 days of a signed commitment letter

 

Interest rates:   

Usually they are floating rate coupons where the PRIME rate is the index or benchmark.  Currently the MAXIMUM interest rate amount is PRIME +225 bps  (or approximately 5.50%).  There are also certain SBA preferred lenders that will offer fixed rate loans as opposed to floating rate.  Obviously the rates are subject to change at any time, but essentially they are very competitive.

 

Term:    

10 to 25 yrs. based on the loan purpose, but no balloon payments or calls-they are fully amortized over the life of the loan.  Generically speaking the loans tied to business acquisitions where Real Estate is involved is usually the ones that have longer terms, whereas the restaurant owner is usually the one given the shorter term if there is no real estate involved.   There are always exceptions, but generally where Real Estate is involved the terms are longer.

 

Prepayment Penalty:     

There is a prepayment penalty but they decline over the 3yrs for loans with terms of 15yrs or more. 

 

Fees:     

No loan origination fee.  One time SBA loan guarantee fee based on loan size.  Usually there is a good faith deposit to be used for loan closing costs. 

 

Collateral:           

First lien on all assets being financed.

 

Recourse:            

Personal guarantees for all individuals owning 20% or more, corporate guarantees of affiliated companies may be required. 

 

Debt Service Coverage:                

The more aggressive SBA lenders usually let you get away with a lower DSCR score, maybe around 1.25 times, figure 1.25 to 1.35 times debt service coverage to qualify. 


Industries eligible:         

All for profit businesses that meet SBA eligibility standards (eligible on SBA website but essentially no loan companies, life insurance companies, passive investments, foreign entities etc..)

 

Next month I will discuss another SBA program known as SBA 504 which is for larger loan amounts for larger businesses.  BlueJacket Financial hopes everyone had a happy and safe Fourth of July and wishes all a great rest of the summer.  


The Small Business Finance blog is graciously written by Francis Kestler of BlueJacket Financial on behalf of the Wicker Park Bucktown Chamber of Commerce.


Tale of Two Cities- Bucktown vs. Wicker Park pt. 10

Wicker Park Bucktown Chamber of Commerce - Thursday, December 06, 2012


The following blog entry was contributed by: Sam Marts and Dina Petrakis - he's Bucktown, she's Wicker Park - who compare their two ‘hoods.




Urban density created the townhouse - attached homes strung together on a series of lots, to maximize land usage (or profit to the developer, depending on who you ask).  

Some townhouses aren’t any bigger than a single story apartment, but offer the feel of a stand alone home plus an individual address.  Today we look at two newer townhouse developments, one in Bucktown and one in Wicker Park.


This Bucktown townhouse development uses modern materials and contrasting color to emphasize both verticality and rhythm.  

The red corrugated metal (typically used industrially) both defines the separate units and ties them together like marching soldiers.  The chimney stacks mark the centers of each townhouse and punctuate the sky.

The rhythm is A-A-A-A, a modern, almost industrial approach.  


This Wicker Park townhouse development was informed by the historic architecture in its surroundings.  

The brick material is uniform overall but has different cornice details and window styles to distinguish the units. The building exhibits the renaissance tradition of different windows on each level- creating base, piano nobile, and domestic (bedroom) levels. The arched openings book-end the sides and the rectangular, metal canopy delineates the center. Further distinguishing the units is a difference in elevation, with the center units set back.

The rhythm is A-B-A, a beaux-arts tradition.


So- just like your neighbors or just a little different- how do you like your ducks in a row? Bucktown or Wicker Park for you?

 



Tale of Two Cities- Bucktown vs. Wicker Park pt. 4

Wicker Park Bucktown Chamber of Commerce - Friday, April 27, 2012



The following blog entry was contributed by: Sam Marts and Dina Petrakis
- he's Bucktown, she's Wicker Park - who compare their two ‘hoods.




Today we take a peek at two homes of more moderate size, for those of you working your way up to a Bucktown or Wicker Park Mansion- or who prefer a smaller footprint.  The approach of these two homes is dramatically different, in part due to their location- and the timing of their “remodelation”.  




This Bucktown cottage has been enlarged and modernized, maintaining most of the original façade.  The slot window at the top and the picture window at the parlor both increase the visual scale of the cottage and announce their modernity with new shapes.  The most dramatic element is the second-story addition with a contrasting glass and metal wall in totally contemporary mode.  This would not be allowed in a Landmark District and wouldn’t look congruous there.  Had this renovation been more recent, it might have been a tear-down- or certainly would be a larger addition.  Today, the modest scale has a place in the market again.












This Wicker Park two-flat has elements which actually make it appear cottage-like by reducing the scale of the upper level; the roof of the bay window and the canopy over the entrance come forward and the second story visually recedes.   The cornice is original but the porch was reconstructed using picturesque elements as fitting this Landmark District and similar to surrounding buildings.  An addition on this property would most likely be limited to the rear of the structure by Landmarks- and a tear-down would be prohibited.  The scale of properties in Landmark Districts is more static- and appeals to those who appreciate both size and aesthetic.





So which is YOUR pick, “anything goes” Bucktown or “my way or the highway” Wicker Park?

Wicker Park & Bucktown: A History of Diversity in Cultures and Architecture

Wicker Park Bucktown Chamber of Commerce - Thursday, March 15, 2012

This blog was contributed by Demetrius Simpson. He is a Chicago native, sits on the Wicker Park & Bucktown Chamber Board of Directors, sits on the Bucktown Community Organization (BCO) Board of Directors, and is a Realtor with Sergio & Banks Real Estate.


Since the 1800’s, the Wicker Park & Bucktown communities have been a melting pot of cultures.

German, Scandinavian, Eastern European, African and Spanish descended cultures all played a role in shaping the Wicker Park & Bucktown neighborhoods and the architecture that we know today.

In 1800, the neighborhoods now known as Wicker Park & Bucktown were a dense, marshy forest full of wildlife. It was an isolated area on the outskirts of the City of Chicago, connected to the City primarily by the Indian trail known today as Milwaukee Avenue. 

It was The Great Chicago Fire in 1871 that sent a wave of settlers into the WPB areas,

As the fire left seventy three miles of Chicago streets and 17,450 buildings destroyed and a third of the city’s population homeless.Affluent German and Scandinavian immigrants settled in Wicker Park, away from the ashes of the once thriving neighborhoods to the east. They built large homes made almost entirely of brick and stone, as a response to the vulnerability of wood frame homes to fire. By 1895, homes built in the Italianate and Victorian Gothic styles, to name a few, circled the four acre park donated to the city by developers Charles and Joel Wicker, after which the park, Wicker Park, and eventually the neighborhood were named. Wicker Park was the showplace of architectural styles during the 1890’s. Many of these homes still stand today and are located within Wicker Park’s Landmark District.


By the end of the 19th Century, in addition to German and Scandinavian immigrants, Wicker Park was home to African and Eastern European descended cultures. These working-class immigrants, primarily Ukrainian, lived in small cottages on Bell Avenue. The area south of Division Street at Bell Avenue eventually became known as Ukrainian Village.

By 1930, Bucktown was home to a very large population of Polish immigrants. It is said that Bucktown got its name because goats kept by these Polish immigrants ran wild in the streets. A Buck is the male of the species. Bucktown became known as Little Poland or the Polish Downtown.






World War I sent a wave of Russian and Jewish immigrants to WPB.

The large mansions that were built by the affluent German and Scandinavian immigrants were converted to multi-family dwellings, especially after World War II and during the housing shortage.

By 1950, Spanish-speaking immigrants moved into the area making WPB a true melting pot of cultures.















The Wicker Park & Bucktown neighborhoods were shaped by a Great Fire and two World Wars.

These events sent immigrants here who built homes, built lives and ultimately shaped these communities into what we love them for today, the rich flavor of different cultures and beautiful buildings.



Tips for Navigating in Today's Real Estate Market

Wicker Park Bucktown Chamber of Commerce - Friday, February 17, 2012
This blog entry was contributed by: Betancourt Realty.

As we begin 2012, we still find ourselves currently in a Buyer’s Market when it comes to the real estate industry. As with so many things in life, a Buyer’s Market can be looked upon in two main ways--- glass half empty, or half full. 

A Buyer’s Market can be seen as a great time to buy a house, especially for new and first-time homebuyers. Prices are lower, and mortgage rates are falling as well. There are countless homes on the market, and sellers are ready for a turn-over.  
On the other hand, in a Buyer’s Market it is often uncertain whether prices may go down even lower in a few months, so many people choose to “wait it out.”

It is my opinion that a positive outlook on the market is the best for everyone. With that in mind, if you do plan on buying a home in today’s Buyer’s Market, follow these tips to help guide you along the way.
 

When It’s Right, It’s Right

If you have found your “dream house,” buy it. When you are serious about buying a house (or condo, or what have you), this is the ultimate goal. With that mentality, if you believe you have found the perfect property for you and your needs, do not hesitate to make an offer. You have to make the decision whether you want to be a passive home “browser” or an active homebuyer. 
You will find that you are more likely to succeed by being an active homebuyer, rather than possibly waiting in vain for prices to drop or change to the liking of your pocketbook. 

Negotiate

You must remember there is always room for negotiation, and there is ample room now more than ever! Don’t simply negotiate with the seller. Nowadays many buyers agents are also willing to negotiate a portion of their commission to the buyer upon closing. The important thing is to know your own limits and sway others to help you maintain those limits. 

Get Online

Everything is on the internet. Your home is no exception to this. If you are selling your property, market your home online through websites such as Zillow or Craigslist. You can even promote your property on social networking sites. If you are looking to buy a home, or any property, these online sites can be amazing resources for your home buying search. 

Gimmicks Don’t Sell Property

You are buying a home, not trying to win a goldfish at a carnival. In some cases, when markets are less prosperous, agents and selling parties may resort to certain gimmicks in attempt to “sweeten the deal.” Gimmicks can also take the shape of “magic loans.” Avoid ay-option ARMs and interest-only loans. 
 
Like anything else, it is important to stick to your guns and trust your instincts.

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