Mortgage guru Dan Green reminded us a couple of weeks ago that the newly passed Housing and Economic Recovery Act of 2008 is not all just “fun and games”. Aside from the obvious goodies such as the first-time home buyer credit of $7,500 and conforming loan limit increases in high-cost areas, there is a new provision that will change the way capital gains on home sales are going to be taxed (yep, for some of you home sellers, your cheese will be moved).

Thus far, the capital gains exclusion rule has been: If you’ve lived at your principal residence for two consecutive years within the last 5 years, you would not incur any capital gains taxes if your gains didn’t exceed $250,000 (single households) or $500,000 (married, filing jointly). Starting January 1, 2009, the formula for calculating your capital gains tax liability will change to account for a home’s actual usage as a primary residence over its qualified life. Head on over to Dan’s blog where he will provide you with the new formula and with an example of how the new rule might affect your pocket books.

Obviously, in Edgebrook and Sauganash we have a vast amount of relatively high-value properties, so this change might be of interest to you, and possibly even affect you. If you are selling your home before the end of this year, you are exempt from the new capital gains exclusion rule.

This post is not meant to be tax advice, so if you feel that you might be impacted by the new tax rule, please consult with a tax professional.

The image below has appeared on so many different Realtor and industry blogs lately that I don’t even know whom to properly credit for having captured it. Well, as I’m in doubt, I’ll credit Bill McSpadden Real Estate for it (not sure where they’re located). Notice the rider below the sign, though. They must have had their fair share of “low-ball offers”.

If you’ve just recently moved to Edgebrook or Sauganash, the annual Edgebrook Festival at Kinzua and Devon is a great way to learn about some companies/vendors/restaurants/hospitals that you may be frequenting in your new neighborhood. Heck, the exhibitors even come from as far as North Park.
I had a chance to take my family this past Saturday for a while. The sun was shining, the atmosphere was great, the kids had a good time (and the music was even better). Have a look.

Update 8/5/07: The permit status for the proposed 288-car garage at 6000 W Touhy has magically disappeared from the website of Chicago’s Dept. of Buildings. Meanwhile, on August 2, 2008, Brian Nadig from the Reporter & Journal Nadig Newspapers reported that the City is “seeking a court order to prevent the project.” Mr. Tountas in response, is apparently “planning to sue the city over its actions”, according to Nadig. Good luck with that, I say.

We’re three weeks into the second half of 2008, and it’s time for a recap of residential real estate activity in Edgebrook and Sauganash, as it happened in the second quarter.
While sipping my coffee this morning, I was reading an article on the front page of the Chicago Tribune, that talked about the “summer of discontent”, citing inflation, job losses, and financial industry meltdowns. I’m thinking, how much worse can it get (ok, if Starbucks or the Corner Bakery go belly up, we have a problem, Houston). “But seriously, it’s not like home values in Edgebrook or Sauganash are going downhill, are they”, asks Christina on the other end of the phone line? “Of course, home values in Edgebrook and Sauganash won’t … wait, what?”
This post, Edgebrook and Sauganash homeowners, I’m afraid to say, will do nothing to make your summer of discontent more bearable. On 60646 Blog, we don’t habitually serve the “The housing market is fine”-Kool Aid that some members of our national and regional Realtor associations often serve. You need to know the facts, because (a) as Realtors, it’s part of our job to confront you with the cold hard facts about home values, and (b) you need to be informed about general market conditions, prior to selling or purchasing a Sauganash or Edgebrook residence. And then there is the Comparative Market Analysis that we prepare, for when you’re really ready to “pull the trigger”.

Edgebrook ↓↑

Sales volume took a real beating in Edgebrook in the second quarter of 2008: Only 16 closed transactions which represents almost a 38% decline year-over-year, and less than half of what was closed in Q2 of 2005. Tighter lending guidelines? Buyer’s market? Sellers who are unwilling or unable to settle for anything less than what they perceive to be the market value of their properties? Your guess is as good as mine. It still doesn’t change my perception of Edgebrook as being one of Chicago’s top notch neighborhoods. My most recent updates on Edgebrook market conditions have always been of a “good news/bad news” variety, with declining sales volume being the bad news, and steady or rising home values being the good news. Alas, this time around, the party seems to be over on the home value front, as well. Q2 2008 ended with an average sale price of $436,338 (Median: $434,450) for a single family home in Edgebrook which for the first time, in a very long time, marked a decline, year-over-year. -18% vs. Q2 2007, to be exact. In Edgebrook, we’re almost back to 2005 average home values. This is not super tragic, as long as you bought your home before 2005 and have managed to maintain some equity in it. These data confirm what I’ve been informally observing (with my jaw dropped) on the MLS in the past few weeks: Price reductions of up to $50,000 on some active listings are not an uncommon occurrence in Edgebrook, any longer. To make matters worse, average market times have risen as well: 199 days in Q2 2008 vs. 152 days in Q2 2007, and 68 days!! in Q2 2006. With the current market conditions, sellers in Edgebrook should not be surprised to find their agents request a minimum 6-month term on the listing agreement. The only (dim) light at the end of the tunnel in Edgebrook was the fact that average sale price/list price ratios held somewhat steady at 94.6% in Q2 2008 vs. 94.8% in Q2 2007. In the spring/summer of 2005 however, sellers in Edgebrook managed to sell their homes for an average of only 2.5% below their asking prices. What goes up, must come down? With 87 single family homes currently for sale in Edgebrook (not including homes that are being sold based on a contingency), we are looking at a supply of inventory of 16.3 months.

Sauganash ↓↑

With 16 closed transactions in Q2 2008, sales volume in Sauganash was on par with that of Edgebrook’s. However, year-over-year, Sauganash suffered “only” a 20% decline, the reasons for which might be found in the same grab bag as Edgebrook’s. But again, if you’re a Sauganash resident, you know that crime, for example, is certainly not a reason why relatively fewer homes sold in your neighborhood in Q2 2008. What I’m trying to say here is that as a Sauganash homeowner you live pretty close to, if not in paradise. While home values in Sauganash followed the (downhill) lead of Edgebrook’s in Q2 2008, the decline in home values was not as unexpected and steep as it was in Edgebrook. In Q2 2008, average home values dropped by 5.4% year-over-year, after previous 0.7% and 5.2% year-over-year losses. Average market times in Sauganash continued to climb though, and registered at 227 days!!! in Q2 2008. For the third consecutive year, average sale price/list price ratios in the second quarter have been declining as well in Sauganash, to the point that in Q2 2008 home sellers in Sauganash on average were only able to sell their homes for 94% of their asking prices vs. 98% in Q2 2005. Definitely, the sign of a fierce buyer’s market. With 65 homes currently for sale in Sauganash (again, excluding CTG’s), it would take 12.2 months to sell off the existing inventory, assuming that no other homes would enter the market for sale.

Summertime, and the livin’ is easy…
Well, for a couple of days, at least. My family and I have been engaging in our annual Independence Day holiday ritual: Visiting extended family in the North Woods, where the air is clean, the boating is fun, kids’ laughter is contagious, and the darkness at night gives a whole new meaning to the term “black”. We’re re-charging our batteries, and I’ll be a new and improved Realtor, come Monday morning, no doubt.
To our readership, we hope that you may celebrate a happy and worry-free holiday weekend, and to our servicemen and women abroad and everywhere else, we wish you a safe Independence Day holiday. Thank you for all you do.