Monthly Archives: March 2012

StrawStickStone Chicago Rent Index: 1st Quarter, 2012

Just beyond the jump is a table containing the average rents and price ranges from the past 3 months in Chicago. There's definitely some interesting data. To me, though, the most interesting part of this whole article is what happened during the revision process from when I first started writing it in February until now. See, normally as the number of apartments rented in an area increases, the general average will drop. It's a simple matter of probability.

In the course of a month, every single average included in this table went up. Chicago rents are not just going up, they're skyrocketing, and it's happening in every sector of the market that I studied. I should note that this is Downtown and the North Side only, as I don't feel that I know the South Side market well enough yet to provide proper analysis. I'm hoping I'll be able to include it in the 2nd Quarter Rent Index, though.

I can think of a lot better ways to spend $207k per year than on an apartment. Can you?

Oh, and if you're curious, that $17250 per month 2 bedroom apartment wasn't even a penthouse. It was a 48th floor 2 bed, 2 1/2 bath rental at 11 E Walton St in the Gold Coast. It rented before it even made it onto the MLS. Someone signed a lease to spend $207,000 this year for a rental. (more…)

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Buying a Home and Keeping it Local

Vintage graphic of produce saying "Buy Fresh, Buy Local"

Keep as much of the cash from your home puchase in your local community.

As home-grown market leaders like Marshall Fields and Montgomery Ward vanish from the scene, local businesses in Chicago have become a source of pride. Chambers of Commerce have mounted preservation efforts for our indie employers similar to those seen in nature specials for endangered species. Big corporations have a bad reputation for sending their income overseas, bending tax laws to minimize their expenses, and bribing the government through SuperPACs and lobbying to expand their own influence.

There's a big push to keep Chicago dollars in the hands of small, family-owned and local businesses, rather than allowing the stream of currency to continue flowing towards big business. It's visible in many facets of shopping, from farmer's markets to Chicago-based independent record labels and the slow rise of independent gaming through efforts like the Humble Indie Bundle. Local deal-mongers like Chicago-based Groupon, review sites like Yelp and online mega-shops for homemade stuff like Etsy make it easier for the buyer to find and shop with local businesses.

A lot of people stand to benefit from your purchase of a new home. While a certain amount of the purchase will go to the government directly in the form of transfer taxes, water certificates and capital gains, there are many portions of the purchase where you can have some say in how much of your money stays in the community. Buying a house can be scary and it's all to easy to fall back upon the security blanket of a big, national brand when you're in a time crunch and stressed from contract negotiations. Even so, with a little prior planning and research you can make sure that the lion's share of this very large purchase goes to independent businesses in your Chicago neighborhood.

Here are some places where you can keep it close to home:


Myth: A twelve month lease means twelve months of rent

When is a year not a year? When you're moving. For tenants and landlords dealing with moving and vacancies, the year should not be calculated on a 12 month basis. In fact, from a moving perspective you should be doing some mental calculations every time you think about rent rates.

Tenants, anticipate spending more like 15 times your rent in a year if you're moving. Landlords, expect to get more like 9 months of rent in a year if your tenant moves out.

The true math for tenants

Let's start with the tenants first. Your magic number should be 15, and when you look at any rent rate, multiply it in your head by 1.25 in order to figure out the real cost to you in your first year. Why? Well, in addition to the rent that you will be paying out, here's where the extra three months go:


Chicago Real Estate Statistics: The rent vs buy contest according to Google

I think this might be my favorite chart ever.

This is the Google Insights graph comparing the use of the search term "apartments" vs the search term "real estate" in the Chicago Metro area over the past two years. While it will update over time, what I want you to look at is the divider between 2010 and 2011. Do you see what happened? Apartments completely overtook real estate and never looked back. (If you're reading the archives in 2013 or later and you can't see that date anymore, drop me a comment and I'll update the chart.

Do I need to explain further? I think not, but let me know in the comments if you don't get it.

Lessons from my Mom: Turn Coupon savings into Spending Money for Kids

Image of a generic coupon with scissors.

Coupons are a world of learning in a tiny piece of paper.

About 2/3 of what I know about being thrifty came from growing up with my mother. The rest is from a particularly stingy boss. (Basically, mom taught me what to do and the boss taught me where the point of "too far" lies.) Growing up I never had an allowance. If I wanted spending money, I earned it, either through chores or actually doing work. Thanks to mom I was paying income taxes for my graphic design work by fifth grade and had the cojones to start a theatre company while I was in high school.

Mom couldn't stand grocery shopping. She always brought me along to help. We would spend the Sunday prior clipping coupons from the newspaper together and putting them in an envelope. Once we got to the Stop 'n' Shop that envelope became my mission. While she made the rounds collecting everything else, I had to go pick up everything in the coupon envelope, taking special care to follow the instructions on the coupons and choose the best of multiple options if they were available. (e.g, one 32 oz of item A for $2, or two 15 oz of item B for $2.)

At the end of the trip we would look at the receipt, particularly to see the amount we'd saved by using the coupons. 10% of the savings (which I had to calculate myself) became my paycheck for the trip.

I learned the value of coupons, I learned how to read them, I learned to calculate basic percentages. My ability to figure out 10% in my head turned rapidly into 15% and 20%, for which I am eternally grateful every time I have to leave a tip. On top of it all, mom got help with her least-favorite chore and I stayed focused even though I was a very small child in a very large and distracting place.

What cool things did your mom teach you about saving money when you were little? Share it in the comments, and maybe I'll do an article on it in the future!

Open Letter to the real estate community regarding contingent rental listings

With the rental market getting progressively more intense in Chicago, it is time the Real Estate community paid more attention to the wild wild west of unregulated rental listings in ConnectMLS.

I would like to suggest starting by requiring agents to mark their listings as temporarily unavailable if they are refusing to show them to the public, regardless of if they have anything in writing from their prospective tenant or not.

I would add that the timeframe for marking the listing contingent should be far less than the 72 hours required for sales contracts. Given how fast the rental market moves on a regular basis - a search generally wraps in no more than a week - the timeframe should be more like 24 hours maximum to pull down a rental listing that's headed to lease.

Normally in a sales situation, once a written offer is accepted the listing can be marked as "Contingent" or "Pending" until such time as the deal closes so that other potential agents and buyers know that the property is no longer available for consideration and no longer accepting offers.

Leases can sometimes take up to a week to negotiate without anything in writing. With the rules in their current format, an agent is able to continue posting their advertisement to all of the publicly syndicated sites as a bait-and-switch tactic by keeping it valid in Connect even though they have no intention of showing it to any additional renters.

When a client has to call agent after agent only to be told that their first choice of listing has been unavailable for 6-7 days already, it is disappointing to the client and does nothing to improve the image of Realtors who are already fighting an uphill battle. Here in Chicago, Realtors who are dedicated to the rental market are surrounded by rental locator services who do not always license their agents. We are dealing with leases that often require major legal review in order to bring them in line with city ordinance. In many cases we are pushing back to legitimize rentals within offices that have never before seen them as a viable income stream. We are trying valiantly to educate our clients about the values of exclusive listings in a city fully dominated by non-exclusive and portfolio-only listings. We do not need anything or anyone working against us.

The negative effect upon the public is amplified in the rental market as so many prospective tenants are unrepresented and therefore more vulnerable to bait & switch. It makes me sad to know that the first question I will always get from a prospective tenant is "Is the property still available?"

Rental-focused Realtors are often the first introduction that many of these future home buyers and sellers have to the real estate industry. Agents working rentals are usually the newest of the new, or sometimes inexperienced in rentals despite years of practice in the sales market. They need the most guidance and support to help this next generation to understand the real estate market, but instead they're left with little enforcement, scant tools and very little supervision.

I realize that many agents make a considerable profit by leveraging this gap in the rules. However, I would encourage you to consider the best needs of the public and our mandate to provide our clients AND our customers with care and accountability.

Landlords, you can help to fix this issue by instructing the agents who represent you to take down the listing once you've accepted an application. Renters, you can help by providing earnest money with your application on the condition that the apartment be removed from all public listings for however long it takes to run the background check, draw up the lease and get it signed. Realtors, you can help by amplifying this request to MRED if you find it pertinent.

A copy of this request was sent by email to MRED, LLC, the company behind the MLS, on March 1, 2012. The response from MRED was that they would submit my request to a committee, consisting of Illinois Realtors. They did not give a timeframe for action. I have no doubt that this problem will continue to plague landlords and tenants for the next year at least. However, a greater number of voices speaking for the consumer in this situation could help to speed the process. The email address to add your voice to this request is

Thank you for your patience. Stay tuned for some great pointers on teaching kids to save money coming this Wednesday!

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Chicago Real Estate Statistics: Bedroom sizes in Chicago Apartments

Stack of mattresses showing comparative sizes

My, what a large mattress you've got!

Queen and King size beds were invented in the late 1950's. Before that time, a full size mattress was the largest you could purchase. According to City Data, the median construction date for houses in Chicago is 1949, and for apartments it's 1944. This means that the vast majority of the housing stock for both home buyers and renters was not built to house modern mattresses, let alone large beds with frames that extend beyond the mattress boundaries.

While some homeowners and landlords in Chicago have rearranged walls and in many cases, re-purposed old dining rooms into additional bedrooms with the addition of doors and closets, it certainly feels like most north side bedrooms will only fit a twin bed, or at most, a full size mattress.  I decided to do some analysis and see if this is true.

For each of the charts below, I used a benchmark of four times the area of each standard mattress size as a "comfortable fit." So, for a bedroom to comfortably hold a twin bed, it had to be at least 101 square feet. For a full, at least 110 sq ft. For a king size bed, it had to  be 171 square feet or more. (more…)

Hype Dodger: Zillow rent report provokes mass media faux-analysis

New Rent Report Suggests Possible Bubble - CNBC.

That article up there? It's written with one purpose - to make you panic and buy stuff.  Courtesy of comes some hype about the rental market. Apparently a new report from Zillow shows rents rising in almost perfect proportion to home sale price falling nationwide. They specifically talk about the high year-over-year rent growth for Chicago, as shown in this month's Rent Bacon.

Investing in the rental market requires a level head that can stay above the hype. If you feel like you're running to catch up with the investment market, stop and take control of yourself.

Of course, the media will take any statistics on the housing market they can get and turn them into hype. If they don't provoke your emotions, you might use your logic to make a decision, and that never works out well for them nor for their advertisers. But they are trying to manipulate investors in the rental market by using the same tactics as those that worked to make home buyers and sellers all crazy and depressed.

They're doing it wrong. (more…)

Myth: Home Sellers will make more money if they wait for the market to recover.

Suppose Mr. Jones bought a house in 2006 for $300k. He put 10% down, got a then current loan rate of 6.75%. He pays the bank $1750 per month for the mortgage.

Home values in Chicago have fallen off by about 20% since the peak of the market. According to JP Morgan Chase, they will drop 6-7% more in 2012. This means that the Jones house will be worth about $225600 this year.

Moody's Analytics predicts that values will increase at about 1.2% per year after 2012. At this rate it would take about 20 years for the house to turn an 8% profit over its original price of $300k.

Mr. Jones could wait until 2031 to sell, or he could sell now and buy the bigger house next door. It's listed at $440k. with 10% down at today's rates of 3.91% his monthly payment to the bank would be $1870. Let's see which scenario makes more money in the long run.

 Monthly PaymentEquity AccruedInterest Paid to Bank
Waiting until 2031$1750$181k$334k
Moving now$1870$195k$231k

If Mr. Jones sells his old home and buys a larger one, he will gain $14k in equity and save $113k in interest over the next 20 years.

Want more stats? Curious about my math? Let me know in the comments!

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Chicago Real Estate Statistics: Pet-friendly apartments

Chart of rent rates based on pet policies in Chicago from 2009-2011 in the MLS.

Is it better to allow pets? The results may surprise you.

Towards the end of last year I did a some research into the things that affect rent rates in Chicago. I used the MLS for my research. Some of this info has already been shared on my Facebook page but I want to share all of it with you along with some in-depth analysis.

Today I'll be talking about the effect of a landlord's pet policy on rent rates. The chart to the left shows the rent rates obtained for apartments that allowed both dogs & cats, cats only, and no pets at all in the downtown, near north and far north areas of Chicago from 2009 to 2011. (You can click on the chart to view it full size.)

You'll notice that the rates for cat-only apartments are much lower. Read on for my thoughts about the reasons for this. (more…)

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