All Forum Posts by: Alex Fenske

I complete a housing market update each month for my brokerage and for my clients; figured I would share it here in case it's helpful for anyone else. My data sources are Midwest Real Estate Data LLC (connectMLS/InfoSparks), MortgageNewsDaily.com and the St. Louis Fed. You can watch the video or read the outline.

Supply
- New listings down 19% from November 2021, the fewest new November listings as far back as my data goes, through 2008.
- 11% fewer homes for sale than November 2021, the lowest November on record.

Demand
- Pending contracts and closed sales are both down over 30% compared to November 2021 and are at their lowest levels in at least 7 years.
- If it weren’t for the severely limited supply described above, this would be UGLY.

Months Supply
- Fell from 2.0 to 1.9 months, a seasonally normal change. 2nd lowest November supply behind 2021.
- Median days to contract stayed flat at 13 days from October to November. The 12-month rolling average remains at 9 days, steady at that number since September 2021.

Prices
- Monthly home prices were down 1.8% compared to last November, marking the first year-over-year decrease since 2012.
- Seasonally adjusted prices remained flat for the 4rd consecutive month, 3.6% above one year ago.
- Many research institutions have adjusted their outlooks for nationwide home prices to fall slightly in 2023 rather than stay flat. However, housing affordability remains stronger in the Midwest than other regions, and one report ranked the 10 housing markets that will hold up best with 3 of the top 6 areas being right here in the Chicago area.

Mortgage rates
- Today’s (12/8/22) 30yr fixed averages 6.29%, down nearly a full point from its peak on 10/31/22 but still than double where it started the year. Government loans are a half-point lower.
- The Fed is expected to taper their rate increases to a 0.5 increase this month rather than .75, based on inflation moderating a bit.
- Expect continued volatility every time there’s a jobs report, inflation report, Fed announcement, etc.

What to do?
- Sellers: It’s a strange world, where there are more buyers than sellers, but prices are flat as a pancake. Price aggressively and invest the energy into preparing and staging your home.
- Buyers: The temporary easing of mortgage rates offers a fantastic opportunity to lock now. Examine less traditional loan products such as 5/1 ARMs, rate buydowns, and even assumable mortgages which present one of the most attractive opportunities imaginable in the current market conditions.

Hi Nash, 

It always works someplace. Given your perspective is from CA where the housing affordability index has hit nuclear levels, I can understand your doubt. I live on the other end of the spectrum in the suburbs of Chicago where entire homes cost the equivalent of your deeded parking spots. (I was just out teaching in the Bay Area recently and they told me their average commission was something like $17k. Whoa!)

There is still enough demand to suck the equity out of most (but not all) deals that hit the open market, so the most rewarding game is still to try to find the hidden gems through alternative sale channels, pre-market, etc. And of course your contractor relationship and renovation costs are the other big part of the puzzle that can make or break.

So, as with most answers unfortunately... It depends! Happy to discuss further if you'd like.

 If your basement is rented and is 750 sq ft, and the portion of the home you live in is 1,500 sq ft, that would mean 1/3 of the home is an investment. So 1/3 of your home's depreciable value can be depreciated, 1/3 of the utilities expensed, etc.

Generally you cannot deduct passive losses against active income and instead have to carry-forward the losses. Under certain circumstances you may be able to deduct $25k against active income, and if you meet the IRS definition of a "real estate professional" then you can deduct unlimited passive losses against active income. More info is here, but please ask a CPA. 

Should be able to expense or capitalize the work you do to the investment unit, and depreciate a prorated percentage of the property's value based on the sq ft of the investment unit relative to the whole. Same prorated deduction available for other expenses such as your insurance premium, utilities, etc. Ask a CPA to be sure though.

Welcome!!

Chicago area here! I lean a bit more towards Scotch than bourbon but enjoy them both. We end up stocking about 50/50 because my wife will drink my bourbon (she doesn't want her own glass, she just wants some of mine even if I'm not having some).

As far as Scotch goes, I really prefer the full-bodied, heavily-peated stuff from Islay and my favorite is the Lagavulin 16. Talisker 10 is an accessible single malt if you're coming from the bourbon side where things tend to be much smoother, like the Highland Scotches. 

Special warranty deed implies that there will be a title search, clean title, and title insurance provided at the closing table. I understand Michigan is not an "attorney state" for real estate closings, but given the circumstances (online auction, never bought one of these before), it may be in your interests to pay one a few hundred bucks to check everything over for you. 

Strongly recommend relying on an attorney to draft these documents, especially as a beginner but in my opinion forevermore. I've done a fair number of these transactions personally and would still have the attorney draft everything so I know it's done right. Been in court enough times to know I prefer to spend as little time as possible there.

Correct, you pay a year upfront at closing (either you pay out of pocket in advance of closing, or you pay at the closing table as a portion of all of your charges) and then make a monthly escrow contribution as well. When the bill comes due the next year, the money is there in the escrow account for them to pay it.

Taxes work similarly in that you are required to make an escrow deposit at closing and monthly contributions so that when the bill comes due, your escrow balance is sufficient to cover it.

If your escrow balance ever gets above a certain threshold they'll cut you a check. If it gets below a certain threshold they'll give you the option of chunking in the difference or spreading it out over the next 12 months (interest free).