By Sally Duros
Real estate is a commodity with a market, in the past most identified with the great building cranes and diggers, the towers of commerce downtown. Real estate is also a place, the neighborhood where we live, which is felt more as being precious, unique and of emotional value.
In the past 10 years, these two ways of experiencing real estate have merged in dramatic and unexpected ways. In Chicago, residential towers and towers of commerce increasingly stand side by side, creating communities downtown where none existed before. Meanwhile, in our neighborhoods, our houses, condos and the land they stand on — forever it seemed staid rows of piggy banks for life-long savings — have increasingly become commodities to be bought and sold in a market of rapid exchange.
Last year, the pace of exchange slowed, but the value held steady.
Economists tell us the value will hold as long as consumer confidence holds, and that depends in part on the those national indicators like the interest rate set by the Federal Reserve and other economic indicators followed religiously by the media. On the local front, economic confidence in the Chicago area has improved significantly, and is two points above the index of national confidence, according to findings of a telephone survey by pollster Rasmussen Report, sponsored by the Chicagoland Chamber of Commerce.
But here in idiosyncratic Chicago, I follow a different kind of indicator. It’s “da price” index. That’s da price Joe paid for his condo, his house, his two-flat. And I’ve found that da price is nearly always paired with the “who can afford dat?” index.
We ask: Who is buying those $400,000 condos in Uptown and those $900,000 condos downtown? What do they do for a living? With the follow-up question: How do I get that job? There sure seems to be a lot of this expensive new stuff out there. Are there really enough buyers for all this construction?
“Most of the cities are seeing a resurgence,” real estate investor Doug Crocker said in an interview last fall. “The biggest problem that could happen over a 50-year period of time could be the whole social-economic fabric of Chicago could shift, so that it’s all elitist, it’s all high-end, wealthy people downtown. That’s not good. We need to figure out a balance of low-income and moderate-income housing.”
Although Chicago is not the most expensive place to live in the U.S., it ranks high in terms of housing costs. Research released last week by the Center for Housing Policy found that Chicago, at $901 for the average cost of renting a 2-bedroom apartment, ranked 46th of 210 cities; the $254,000 average price of a house or condo ranked 62nd of 210.
Arguably, those prices are a comparative deal for buying a piece of a city as vibrant and livable as Chicago. But they are exorbitantly high for people starting out and for many professionals. It takes an annual income of $84,957 to qualify to purchase the median priced home of $248,000, according to the Center for Housing Policy’s Paycheck to Paycheck study. In Chicago, many working people, such as teachers, police and medical workers — practical nurses, for example — not to mention those in retail sales, will never earn that much per year.
Over time, our homes had become a new type of hybrid investment vehicle, and for those of us who have owned for a while, they still are. But now that the market has cooled for the long-term, we’ll have to put on our thinking caps to ensure that the diverse wage earners of Chicago have a place to live.
Credit: The Chicago Sun-Times -COPYRIGHT- Â© 2007 Chicago Sun-Times.