A piggy bank, an investment vehicle or both?

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.