The Jason Theory
Jason Stratton of KlopasStratton Team, a top 20 team in the nation with over 1.2 billion sold , sits down with weekly guests to talk about becoming successful, the real estate market, and crazy stories/people we run into. Visit www.klopasstratton.com to see more!
The Jason Theory
Navigating 2025 Real Estate: Market Trends, Design Shifts, and the Impact of NAR Settlement on Chicago Housing
Reflecting on the housing market of 2024 reveals significant changes affecting buyers and sellers alike, with a focus on the NAR settlement and ongoing inventory challenges. As 2025 approaches, the necessity for transparency, increased demand, and shifting design trends will shape the real estate landscape, urging prospective buyers to strategize effectively.
• Discussion of NAR settlement impacts and transparency in broker compensation
• Exploration of current real estate inventory issues and their implications
• Analysis of interest rates, pricing trends, and market dynamics
• Predictions for housing design trends, valuing outdoor spaces and A-frame roofs
• Overview of the Northwest Ordinance and its effects on housing affordability
If you're buying a house in 2025, forego the rooftop deck, which is going to leak and you're not going to get insurance. So let me just one second so you can get insurance. Anything that happens from the roof is so. If your roof leaks and destroys your house, it nullifies, like you get no money.
Speaker 2:Oh, like when you have a foundation crack.
Speaker 1:Yeah, you get no money from the roof. So if you have insurance on your kitchen, your floors, but the leak comes from the roof, originates from the roof, you have no claim. You will have to rebuild your house on your own. So in 2025, I would highly suggest looking for a frame roof. What's the five Ps? Do you remember?
Speaker 2:it. Preparation prevents poor performance.
Speaker 1:There you go. It doesn't matter how much money we get, if we don't close it's no money right? So no, close is no money. I'm everything that I am because of my dad's death, and I wouldn't be as successful without his death. Welcome to the Jason Theory. This is season four, episode one.
Speaker 2:Happy New Year.
Speaker 1:Yes, very excited First half of January and we are going to take a moment to reflect on 2024, what happened, what surprised us, what didn't surprise us, and kind of what we see for 2025. We'll talk about inventories, pricing, let's talk about trends, let's talk about in brief, let's talk about the Northwest Ordinance, since it affects a lot of our clientele and us, since we live in that area, and then we'll head up for what we think for 25.
Speaker 2:I think we should maybe start with what most people know about who are involved in real estate, whether they're brokers or buyers and sellers was this very large NAR settlement that was supposed to be earth shattering. It was earth shattering financially, although I don't really feel it took the change or changed the market or the not the market, but the way we do business. As greatly as it was anticipated it was in the brokerage community, amongst brokers was, oh my God, the world is coming to an end. How are we going to get people to continue to use us? And basically, the NAR settlement changed business, I think, really in three ways, one being something we were sort of doing, but now it became more solidified, that buyers needed to know exactly how brokers were getting paid and you now need to have, as of August 17th 2024, a buyer's brokerage agreement signed.
Speaker 2:That, I think, was the biggest part of all of this and, quite honestly, most buyers haven't had a problem with it. If someone does have a problem with it. It sort of made me feel like, okay, this person isn't committed to me, but you haven't had a problem with it. Someone does have a problem with it. It sort of made me feel like, okay, this person isn't committed to me.
Speaker 1:But you haven't had a problem. No, everybody's committed to you.
Speaker 2:Everybody is committed to me. I did have one person who didn't want to sign it and I was like, well, let's talk about why not. And ultimately they did.
Speaker 1:So what did you say to them?
Speaker 2:I said well, and they've bought and sold real estate before. And they said, well, you had no problem signing the listing agreement with me to sell your home, but somehow doing it's the exact same thing, but it's just with a buyer, I said, somehow you have an issue with the buying side of it. I said it's the same thing and when I sent it that way, it clicked for them.
Speaker 2:I said you had no problem with the listing agreement because that has been sort of standard issue over the last. I don't know. I've been selling real estate for 20 years. I mean you can't list anything without a listing agreement. I said it's the exact same thing and that really helped them with that. So that was the biggest, I think, visible upfront change. There are other changes. I mean there's a lot that goes on behind the scenes with broker to broker when we're negotiating. I mean a lot of brokers will call and say is your client cooperating with compensation? And so that has been a behind the scenes sort of um conversation, even though you have the buyer's agreement. So I think that has been, you know, the secondary part of it. Um, and what do you think?
Speaker 1:I think I think everything that you said, I mean, I think it's been, I've had, I just have, I've had no one even blink, literally. Now, what I've done is I produce the buyer's broker agreement at the same time that I produce the compensation rider that goes to the contract, and I said, hey, this is buyer's broker agreement, this is what I'm going to get paid. So you are well aware that this is my compensation, this is the, this is the transparency and when we do offer, this is the writer the form that.
Speaker 1:I will put. This addendum will be part of the contract that solidifies me being paid for my services from the seller, not the seller's broker anymore, but from the seller and man I just get. I just get no pushback and someone's like, well, whatever, so if they don't want to pay, I'm like, well, listen, if they don't want to pay, we're going to make that adjustment in the price in your mind, right, and you're going to be paying me, but it all it all, it all it all, it all washes out.
Speaker 1:Nothing just changed at all.
Speaker 2:Jim Miller, who's our managing broker at Jameson Sotheby's, said to me, sophia, because I was dealing as a listing broker and a buyer's broker brought us a buyer's broker agreement with a number larger than my client had signed the listing agreement to pay out. And Jim said to me, sophia, it's a net-net basis, so have your client respond to their counter keeping this number in mind, and that they're going to be paying more than they thought they were, so the buyer is going to have to pay more.
Speaker 1:Yeah.
Speaker 2:He said that's how you have to present it to your client, and it made a lot of sense. And my client were business people and they were like, okay, fine, so we wanted X made a lot of sense. And my client were business people and they were like, okay, fine, so we wanted X. Now we want this because we have to compensate higher than we had originally thought of Okay.
Speaker 1:So then I'm going to continue with. That same broker brought me an offer and they did the same thing.
Speaker 2:Right.
Speaker 1:But my client was like no, we're going to pay you two and a half, that's what we're offering. And that person was like okay, so like she did the same thing.
Speaker 2:I know so but your property was on the market for a week.
Speaker 1:Mine was on the market for five months, oh yeah, yeah, not even a week. There's a difference.
Speaker 2:That's also a big differentiating factor in this whole thing.
Speaker 1:Yeah, but like.
Speaker 2:That's also a big differentiating factor in this whole thing.
Speaker 1:Yeah, and a vastly different price point? Yeah, extremely, but that's definitely nothing has changed in that sense at all and I don't think it will change. I mean, we're not going to deep dive into the NAR stuff, because I did that a while ago, but I definitely think you're not seeing what the DOJ expected, and that was compression of commissions. That's not happening. It's actually the exact opposite, and that's a discussion in itself. People that were usually paying out below the standard or what's usually paid out are now getting paid out more, and that's going to be reflected in the buyer's price. So if I had I mean I just want to call it as it is If I had the biggest winners and losers, I would say the biggest losers in the NARS settlement are the people that this settlement was supposed to. In the NAR settlement are the people that this settlement was supposed to be for, and that's the buyers. But since it was government done, it's no surprise to me that the biggest losers are the people that the government was trying to help.
Speaker 2:That's my little jab at the whole thing. So the NAR settlement, that I would think is the biggest thing of 2024 because it had been going on for a very long time.
Speaker 1:Yeah.
Speaker 2:So that's that, but I also think there's been a lot of things that didn't change. So I would say the biggest thing in the real estate market that did not change in 2024 is inventory.
Speaker 1:It got worse.
Speaker 2:It is still so low and I think that we're going to continue to see that into 2025. That's my prediction. I hope I'm wrong, but I don't think we're going to see a huge influx of inventory in 2025. We did make it a prediction for 2024 that we thought that the rates would drop.
Speaker 1:Yes.
Speaker 2:They dropped, then they went back up, and then they dropped and they went back up. And I think they're probably I mean, you follow the market way more closely than I do but I think that they're very close to where they were all year long, from the beginning- yeah, I mean we got down to the low sixes.
Speaker 1:I even saw some high fives and then the crazy thing is is they ended up cutting interest rates and they cut interest rates three times and rates went up three times. So I think the biggest if I had to go back and say if I'm wrong about this, why am I wrong? I think the one thing that I didn't think about is the level of debt that the country is in and just so everyone is aware, the more debt you have, the bonds go up because the country becomes less attractive. And when a country becomes less attractive, the bonds have to go up. So people will buy them because there's more of a risk in the country. If we're going to see lower rates, I don't give a rat's patoot. First off, there's some inflationary markers that have come out the last couple of weeks. That's a whole other discussion of us going back up to an inflationary environment. But if the rates are to drop, it will only drop if we can get we don't have to get it under control. If we can show that we can curb our spending, you are going to see a massive drop in rates. We just to do a couple numbers and I'll get off numbers.
Speaker 1:We collect a little bit under $5 trillion in tax revenue. Our debt right now is the number one expenditure by the US government and that's a trillion dollars. It outpaces our defense spending. The budget that was proposed which will not go into effect because there's going to be a regime change, was $7.2 trillion. So you're talking about $7.2 trillion and basically we only bring in about taking the debt out the payments of debt. We only make about $3.9 trillion. This would send rates even higher. So it doesn't matter what they do to the front end of the curve, like the short-term rates, as they drop them. If investors don't like what our debt structure is as a whole country, the rates aren't going to drop. So if we could just get someone to say we're going to spend less money, even 20% less, you're going to see sixes in a jiffy. We just got to get that done under control and that's the one thing I did not predict is that we would continue this massive amount of spending and that's what's kept rates up. All right, I'm off that.
Speaker 2:All right, jason and his numbers, so I'll just throw a couple numbers at you, some interesting numbers. The average sales price in 24, how much do you think it went up? This is across the board on detached single families. That's just a freestanding home. How much do you think it went up?
Speaker 1:13%.
Speaker 2:A little less 11.2. You were close. I think that is really amazing for this market, with rates having not dropped. Yes, right, I did not think it would be.
Speaker 1:So where does that go at rates at 6%, I know, I mean if they go down yeah, it'll go up even higher, so I thought that was interesting.
Speaker 2:Market time was down 6%.
Speaker 1:Okay.
Speaker 2:So market time went down, which is great. Unfortunately, affordability went down 4.7%. That makes sense, that makes sense right, let's see that's detached, so attached single family which is a very large part of the Chicago downtown market.
Speaker 1:Condos, townhomes, guys.
Speaker 2:Condos, townhomes. So the average sales price. Do you want to guess that number? How much it went up?
Speaker 1:I'm going to say it's going to be a little less, but I'm still going to. I'm going to say just shy of nine, maybe 8%.
Speaker 2:It's so close 6.9%. So 7% is the average sales price went up 7%. Market time down in a bigger way 15% 9%, 9%, 9%, that's a lot.
Speaker 1:It's a lot considering that you're probably talking about. You're still in the 60s or 50s, yeah.
Speaker 2:Yeah, you are at 59 days 59 days. And keep in mind that when you have a condo, it's a little bit longer to close because you have, even if it's cash, there is still that process of getting the condo, docs, the meeting minutes. So that's why I mean unrelated, but an important thing is that a condo always takes a little bit longer to close just because there's a lot of things you need to know about the association. So if you look at 59 days, that's really that's fast.
Speaker 1:There's about 30 to 40 days of just yeah, and of getting like.
Speaker 2:unless you're like in a really fast uh association, it could take somewhere.
Speaker 1:So basically, to get it yeah, so yeah that, so that was really interesting Um it'd be interesting if we pulled out new construction that sits on the market for like a hundred days Cause people, that always skews it a little bit.
Speaker 2:Let's see what else was interesting. September was a shockingly low closed sales. It was the highest amount of closed. Least amount of closed sales were in September of 2024.
Speaker 1:Going into the November election.
Speaker 2:Going right. October it bumped up to 10%. That's shocking.
Speaker 1:We haven't gotten it yet, but I'm always interested on the December, over December close, which we'll get in January, which we'll go over, you know, coming off of an election. I know, and you know because you had buyers. It was crazy.
Speaker 2:I did put four, five properties under contract in December, which usually I can phone it in and just finish out the year. So December, absolutely this year and I think we always say that I mean, you know when we're talking to clients that election year is it's just going to be slow in the fall and we'll have a post Thanksgiving bump, which is exactly what happened, and Thanksgiving was so late this year.
Speaker 2:I mean, the Monday was a December. So you know, those are just some interesting stats for the year so 25. I think February is going to be, unless it's freezing. Freezing which, according to the farmer's almanac which our mother loves to talk about.
Speaker 1:Is that ever right?
Speaker 2:Generally it's pretty accurate. It's going to be mild. It's going to be mild, so that means we're probably going to have a really robust listing and under contract in February, which will give us a really strong April.
Speaker 1:Yeah, Like when I'm I'm meeting with a ton of buyers right now and the first thing I tell them is you know they're like well, we wanted this. I said, listen, as long, these are the things I want to go over. You're going to have to be as is. You can do, you can do an inspection. It's as is, it's multiple offers, it's escalation clauses and it's no mortgage contingency but the rub is there's nothing for people to buy.
Speaker 2:Right now I have three buyers for single family.
Speaker 1:I agree with you, but I'm just telling them yeah you know, like we, I saw I have a client christened multiple client multiple times and we saw stuff on friday and she's she said she was this checks all the boxes but it's not in the West loop and I said we can wait and she goes. I just don't know if I have it in me to battle every single person.
Speaker 2:That's a smart buyer.
Speaker 1:Yeah, she goes, and you know, and I'm like, she's like, I'm like, well, it's a great place, it's in a place she likes, in River North, and it's not West Loop, but she likes it and she goes. What do you think? I said listen, the River North has gotten beaten down.
Speaker 2:In price.
Speaker 1:In price. Sorry, that's what I meant. It's down in price. I'm like, whatever you buy now, you're going to have a slingshot to the upside. I said All the places if someone was like. They gave me 15 places and River North was on there. In terms of where the pricing is in River North and what the amenities are in the area, it's the best buy.
Speaker 2:I think it's the best buy. Gold Coast is a very close second. Gold Coast has been hit hard. Gold Coast Streeterville.
Speaker 1:Yes.
Speaker 2:Streeterville, streeterville yeah, I agree with you, streeterville too.
Speaker 1:Streeterville. For sure, like for sure.
Speaker 2:So we were at Thanksgiving with some buyers of mine who have a very nice budget for a single family and they were just like, well, we're just going to wait until February. And I said, okay, but just know that in February you are going to pay at least a 20% premium and at that you might not even get it. You're going to have to give up my kidney, so I said are you sure you don't want to revisit looking at these other places now, Because the deal is now.
Speaker 1:Yeah.
Speaker 2:And you know. I think, there's mistakes being made.
Speaker 1:The people that I'm dealing with right now. They're all like I'm going out on Friday, I'm going out on Wednesday, I'm going out on Saturday. They're all like if we find something that kind like if we find something that's nine out of 10, right, eight out of 10. And we don't have, and we get a deal, and we don't have to deal with the madness they're like we're good to go.
Speaker 2:That's great. Yeah, I have like.
Speaker 1:I have like great nonicky people that want deals.
Speaker 2:Yep, so sellers, which brings us to sellers. It's going to be a seller's market.
Speaker 1:Yes.
Speaker 2:I am telling all of my clients that, buyers and sellers. I'm telling my sellers listen, we have to be ready to go in February. Don't talk to me about waiting until June, because the market's over in June, it's you know, there's a big lull in the summer. So I think that it's going to absolutely be a seller's market up until June. I mean, we'll see what happens. I think there's a lot that can change by June. We do have a new president coming in in January and there's always like we'll see what happens from that. But I do think it's going to continue to very much be a seller's market in most market places Obviously the places we just talked about, the couple sub-neighborhoods. I was at a wedding this weekend and everybody asked me because they want to ask me how's the market.
Speaker 2:How's the market? And I said, well, it just depends on what market you're talking about. They're like we hear it's hot, hot, hot, hot. And I said, well, again, yeah, if you want to. You know, if you're looking, if you've got a $1 million house in Wilmette, you're the king, but if you have a $1 million condo in River North, you're not. So it just you know. It was a very interesting conversation. How's?
Speaker 1:the market. How's the market? So you know, this is what I'm telling everybody.
Speaker 1:Yeah, it's super hyper-local. This is what I'm thinking is happening. Do you think we'll get into? Would you ever? I mean, I know people do it, I've never done it. But would you ever get into a situation where you're like, hey, the house is going on the market, you have five, we're going to take offers for five days. On the sixth day we're going to pick an offer? No, I don't like that either, but I ran into a lot of that last year. So they collect through a certain day.
Speaker 2:No, I feel. My personal opinion is, if someone comes in, they give you a good offer, they write don't kick a gift horse in the mouth. That's, that's like what. That's how I always feel. It's like if you get the offer that you're looking for or something fantastic, and it's a good buyer and they're committed with a broker. Yeah, oh, yeah good buyer and they're committed with a broker. Yeah, oh yeah, the broker on the other side of the deal is a huge, huge part. Listen, up.
Speaker 1:Can we? Can we say that I don't know what the rules are? Can we like the? Can we say that the buyer's broker really matters of?
Speaker 2:course we can okay but because our seller is asking us oh yeah what people? It's a big broker work?
Speaker 1:does this broker a? Do you know the broker?
Speaker 2:have you done deals? Have you done deals? Broker A. Do you know the broker?
Speaker 1:Have you done deals? Have you done deals with the broker Number?
Speaker 2:one thing you know, is this someone who, if they write me an as-is offer, they're going to stand by the as-is, or is this the type of broker that retrades the deal?
Speaker 1:I don't know if we could say, when people shop on their own, it's a deterrent.
Speaker 2:We're not talking. Talking, I mean, this is just a reality. I mean this is what our clients, this is what our clients ask us, even if they're going to save money on a commission potentially they want to close. The end game is to close. So if there and if there's multiple offers and everybody has a broker, the broker matters to the seller and their reputation and if they can close and no more is the day of love letters of the buyer telling you their life story, which is illegal.
Speaker 2:It is illegal people. No one can take it.
Speaker 1:Selling brokers don't take those notes, yeah listing agents throw them in the garbage.
Speaker 2:But I think that that's a big part of the transaction is who's on the other side?
Speaker 1:I do, and I think that one thing I enjoy is that with this NARS settlement we are getting a little bit more. I think we'll gravitate to more of the cream of the crop.
Speaker 2:Well, when you're representing a buyer, it's a pitch just like a listing.
Speaker 1:now, this is what I can provide.
Speaker 2:Yes, this is what I provide. Here is my backbone, here is what I've done up to date. I'm not just going to throw you in the back of my car and run you around and not have a commitment, but also me showing you my commitment, them showing the commitment back. So I've heard people say, oh, I was beaten out as a buyer's broker. That was not a thing before. I mean because sometimes buyers are working with two or three different brokers.
Speaker 1:I think I'd be more depressed getting beaten by a buyer's broker than being beaten in the cell. A listing side.
Speaker 2:Yeah, yeah, I mean you hate me, it's happening, I mean you know.
Speaker 1:Yeah, no, I like it. So I do think, that Not everybody's for everybody.
Speaker 2:Yeah, no, I mean, you know, for all practical purposes, I mean you are heavily involved in this person's life, so if there's a personality issue between two people, it can be trying, but anyway. So I think that we're going to see in 25, you know, the cream of the crop will rise, right? They always say the cream rises. I don't know what do you think is going to be the trend Like, do you think this farm, like, let's get into some design talk, because that's kind of what I love to talk about.
Speaker 2:I'm hoping the farmhouse is out the farmhouse I think should be going away, unless you're like living out in the suburbs or in the farm right, I mean I.
Speaker 1:I have a farmhouse. It's surrounded by corn. It's surrounded by corn, it's appropriate, yes, surrounded by corn.
Speaker 2:I do think I do not want to see hardy board go away, though. I just would like to see it in a different application.
Speaker 1:I like hardy board when it's mixed with materials, right Like when there's bricks and there's stuff like that. I think one thing we're seeing, a lot of which I love, are brick facades and then Like different materials that are popping, giving texture and giving depth On the facade. Yeah, okay, like bay windows that are like really like awesome.
Speaker 2:Metal cladded yeah.
Speaker 1:Like I really like, and I guess that's old school right, like that was. Yeah, I like that.
Speaker 2:Not a flat facade.
Speaker 1:Yeah, I like like when you go to the Gold Coast and you see all those beautiful pop outs, or Alta Vista yes. The Alta.
Speaker 2:Vista Historic District.
Speaker 1:Yeah.
Speaker 2:There's all of those houses which we did a walk through and you can find that on our page somewhere, but I don't know where it lives. You do, but it's there somewhere, I think, hardy Board. So I personally have a house that I've lived in since 1999. And the house is concrete block. I've just hired somebody because I do not like the concrete block and I am having Hardy put. I'm having my block wrapped in Hardy.
Speaker 2:That's going to be so nice and doing that so, but I'm not doing a farm style because the facade of my house in Bucktown does not warrant. Are you doing just big pieces? No, I'm doing it, but I'm doing it horizontal and I'm picking a more modern color than a white. So I think that hardy board, I hope it stays, I think it's going to stay, but I think that now they're doing flat panels, they're not doing just the wood.
Speaker 1:Yeah, hardy comes in everything yeah.
Speaker 2:So for those of you that don't know, Hardy is a cement board. It's a composite cement board that is very sturdy. It's less expensive than brick.
Speaker 1:Yes, it is Right.
Speaker 2:Less expensive than brick, so I think that's another reason why you see some of it, and it's extremely sturdy. I personally think it looks really nice. If the budget does not allow for an all-brick home whether it's new construction or resale or a buyer, the labor is a lot less. Yeah, but it still looks nice and it's very sturdy and it's not porous. I just would say make sure you use somebody who knows what they're doing, and if you have an inspector who tells you the hardy board is not sealed and it's defective, hire a new inspector.
Speaker 1:Yeah, you don't seal it.
Speaker 2:Yeah.
Speaker 1:Well cause, I've heard that at inspections. And you don't caulk, you, don't caulk you don't caulk where they meet, that's what I meant. You don't seal the craft. I had an inspector say that to me and I'm like, yeah, you don't do that and I've got on Google. I'm page.
Speaker 2:So I do think we'll continue to see Hardy. I do think and I know this is a big one for you- I think we're going to see a lot more homes without flat roofs.
Speaker 1:Well, I mean, I had the insurance. I just posted it two weeks ago. I had the insurance lady here. They will not. Half the insurance companies have stopped insuring flat roofs. The other half will follow suit next year. You will still be able to get insurance. You know State Farm, all these other insurance places, even high-end Chubb, will not take Chubb. Cincinnati AIG will not take new clients that have flat roofs.
Speaker 2:New clients. So if you're an existing, you're in good shape. Yes, because you have a flat roof, I have a flat roof New clients. So if you're an existing.
Speaker 1:You're in good shape. Thank the Lord, I'm existing.
Speaker 2:Yes, because you have a flat roof.
Speaker 1:I have a flat roof.
Speaker 2:I have an A-frame roof. I've had the house since 1999. I have replaced my shingles once and actually my inspector told me the reason that my block never had any issues was because I had an A-frame roof and the water shifts off had any issues was because I had an A-frame roof and the water shifts off. So that is something. If you are buying a concrete block house, get one with an A-frame. You can't because the water doesn't sit and seep into the brick. So that's another thing.
Speaker 1:So we have a client that this has got to be seven years ago that bought a house and it was a concrete block house and they actually put an A-frame roof on top of their flat roof.
Speaker 2:Oh well there you go, there's a solution, yeah.
Speaker 1:But you will not get insurance on a flat roof in Chicago coming up. So there is a caveat, there is a workaround you rip off the roof and put a brand new roof on and then they will insure you.
Speaker 2:And then she said when she goes, she believes Do they need to see and inspect the roof? Oh yeah, oh yeah, it has to be brand new.
Speaker 1:And that's what Cincinnati told me. If you rip off the roof and do it, I'm like, oh so I spend 50 grand, you'll give me insurance. So, but she feels, as soon as you get to that 10-year mark, they'll just pull your insurance. But like I mean, I heard this two years ago and I did like a little TikTok on it and some people were saying what? But now it's come to fruition that they're not going to be insuring those and I mean we live in that's a 25. That's a big one for 25.
Speaker 2:Yeah, that's a big one for 25.
Speaker 1:70% 70% of the inventory in Chicago is flat roof.
Speaker 2:Yeah.
Speaker 1:According to AI.
Speaker 2:I just wonder, why though I mean.
Speaker 1:I know it's the amount of leaks.
Speaker 2:No, but no why they did them, why there's so many that are flat and why builders have built them.
Speaker 1:It had to be cheaper, it had to be from the 1880s.
Speaker 2:Or is it that people wanted, oh okay, the older homes, but I'm I mean a lot of the older homes in the Gold Coast. They're the A-frame roofs.
Speaker 1:Yeah, but all these two flats are all flat.
Speaker 2:Yeah, I don't know.
Speaker 1:And the two flats are like almost all of the two and three flats are almost like a massive amount of the.
Speaker 2:This is a great segue into. You want to talk about the ordinance? Oh yeah, We'll get into that too. You want to talk about the ordinance?
Speaker 1:Oh yeah, we'll get into that too, yeah, yeah. So I would tell you, if you're, if you're, buying a house in 2025, forego the rooftop deck, which is going to leak, and you're not going to get insurance. So, oh well, let me just one second so you can get insurance. Anything that happens from the roof is so if your roof leaks and destroys your house, it nullifies. Like you get no money.
Speaker 2:Oh, like when you have a foundation crack.
Speaker 1:Yeah, you have no money from the roof. So if, if, if you have insurance on your kitchen, your floors, but the leak comes from the roof, originates from the roof, you will. You have no claim. You will have to rebuild your house on your own.
Speaker 2:Wonderful.
Speaker 1:So in 2025, I would highly suggest looking for A-frame roofs. Anyways, the A-frame roof gives you such a cool inside like you could do different ceilings and the different bedrooms. And listen, you're never going to go to your rooftop deck. Get a nice garage rooftop deck.
Speaker 2:Yes, because who's schlepping through the house with meat? Yeah, you got to pee the stuff, forget it. All right, yeah, so that goes to the Northwest Ordinance, which was passed at 1159. At some point, I think this is something that deserves its whole own podcast because it is so complex. Why don't you just do like a yeah, a little?
Speaker 1:bit, Just a little. What is it yeah?
Speaker 2:a little bit, just a little. What is it?
Speaker 1:Okay, so the Northwest Ordinance is basically another misshot at trying to create affordable housing.
Speaker 1:And more housing and more housing. So, basically, about five, six, seven years ago, they did the 606 because everyone was buying all the homes by the 606, tearing them down and what the city said is you're displacing these people. Well, first and foremost, no one is grabbing someone out of their house that doesn't want to sell and throwing them on the street. People bought these homes in the 50s, 60s and 70s for $20,000, $15,000, $30,000. A bunch of them do not have 401ks or investments. Their investment is their house. These lots started selling for $400,000, $450,000, $500,000 and going up. So the city, some constituents, were like. You know, these people are coming in and gentrifying the neighborhood. However, it takes two people to tangle. The sellers want that money, but most of them just go and retire. They, they, they. They own it free and clear. Here's 500 grand. They're going to go on their merry way. They probably want to get out of our high tax environment or forget the Chicago retire or retire.
Speaker 1:I'm going to get out, I'm going to go somewhere warm, arizona, whatever, then they that started with a $20,000 demo fee. So when you go get your demo permit it costs 20 grand. Then this year in the middle of the night, literally like 1150 City Hall, without telling anyone, snuck in this Northwest ordinance and it took it from 20 grand to 60,000. So now it's $60,000 to tear down a place that's in that vicinity and it's basically Logan Square, avondale and Pilsen. Why it doesn't cost money to tear down stuff in Bucktown, lincoln Park, roscoe Village, that's a whole other thing. It's just funny that they're taking money out of these people's pockets and not out of the people that put politicians in their seats. But now it's $60,000.
Speaker 1:So now if you want to tear down a house and develop and do multi-units, a new single family, whatever it is a dilapidated house that just cannot stand on its own anymore, it costs $60,000.
Speaker 1:So if you own that piece of property which I will tell you, a client of mine owns a piece of property and they want to sell it and they want to retire this is what this person's nest egg is. They raise their family there. They want to sell it and move on. This piece of property would have gotten $500,000 to $520,000 three months ago. Now, obviously, every single person that wants to buy this property is tagging on $60,000 to it because that is the fee to now tear down that house, which I think is really terrible to those people that want to take that money, because that money is coming out of two people's pockets it's coming out of the seller's pocket or, once again, it's making housing more, less affordable, because it's just adding a cost that we passed on to the consumer. The other thing that was passed, which I had no clue until a permit was denied, is that now anything within a half a mile of an L station, if it's R4-.
Speaker 2:That's the residential zoning.
Speaker 1:Zoning R4. So there's a bunch, but let me go to the two main ones. R3 is a single family home. There's a bunch, but let me go to the two main ones. R3 is a single family home. R4 is a single family home. A two flat or three units, anything that's R4 within a half a mile of an L. Mind you, there are Ls that run through the whole goddamn city, every place Now any L within a half a mile. If it's R4, you cannot build a single family, even if a single family is currently what is on the property. That's a big distinction. Now you can rehab, because that's how we're getting around our issue. You can rehab.
Speaker 2:But you can't. If it's a single family, you can't tear it down and build a new single family.
Speaker 1:So my clients bought a single family home to tear it down and build a single family home and their permit was denied because no longer will they allow them to do that, which is fine. However, there are different lot sizes in the city of Chicago and when you have a small lot, you cannot build multi-units because the build out does not the price of that, does not exceed. Doesn't make sense, doesn't make sense. So, instead of them just opening zoning this is the whole thing that's crazy to me. Instead of the city opening up zoning and allowing more units to be built, they're actually just continue to constrict zoning and constrict the ability to build. Zoning and constrict the ability to build.
Speaker 1:Like, if you want affordable housing, just get rid of, take all the R3s and make them R4. All of a sudden, you can have more density on these pieces of property and that would lower costs, affordability, everything. It's just they continue to make strides that actually limit the amount that people are willing to build, because they don't take into consideration that people need to make money to build. These are people's lives. No one is building homes for free or for a loss. So that's the Northwest ordinance. There's much more to it.
Speaker 2:They're trying to create. It has not passed yet Northwest ordinance.
Speaker 1:There's much more to it they're trying to create. It has not passed yet. No, no, it passed. What they're stopping is another part of it which is insane.
Speaker 2:Well, I think it's, but I think it's not being enforced until, I think, march.
Speaker 1:No, because they went to go get a permit.
Speaker 2:I understand, but I think that's a different component of it. But there is a portion. There is a portion of the fees to tear. The fees upon transfer have been put on hold because they're trying to figure that out. I was on a meeting.
Speaker 1:I was on a.
Speaker 2:Zoom call for that. So that has not passed. Actually, as a result of the CAR Chicago Association of Realtors invited in Alderman Wegespeck from the Bucktown neighborhood and no, not, no, it was La Spada had La Spada on and he said I'm going to go back, these are all things we did not think about, and so it actually got put on a hold over a Zoom call with Carr.
Speaker 1:The demo permit too, because we tried, we talked to the city.
Speaker 2:The enforcement of the fee is not instituted yet.
Speaker 1:Yeah, that's bananas.
Speaker 2:It is bananas.
Speaker 1:I know they definitely paused the ability for the renters to have first dib and not so the renters have first dib at any multi-unit in that zone and they do not have to show that they can afford the place, which is just insanity.
Speaker 2:That was also part of it, but the actual levy of the fee and who might possibly be exempt from the fees were being discussed.
Speaker 1:Okay, so there may be exemptions.
Speaker 2:There may be exemptions and how they're going to carry it out. So there's still more to come on that, yeah.
Speaker 1:So they pass a law and they don't know anything about how to enforce the law Correct or how to do it.
Speaker 2:So it's all kind of been put. The financial component was put on hold for now, so anyhow, that's that.
Speaker 1:That's the just ordinance fee. So that's another big thing that happened in 24 that will affect us this year in 25. Yeah, so I think. So any thoughts in terms of 2025, where you see pricing? Obviously we still we both think it's going to just continue to climb.
Speaker 2:It's going to continue to climb. I have several buyers who bought in 24 because they've realized this market crash that was coming.
Speaker 1:Oh, it's coming, it's coming, it's not coming.
Speaker 2:That's my favorite thing at open houses they finally realized in fact it's not coming and in fact prices are rising so that it's time to get off. Their took us and buy which they did, and I think that that's just going to continue into 25. I don't think we're going to have an enormous crash. I don't think I see anything like what happened in you know, 2008 coming anytime soon.
Speaker 1:Yeah, no inventory.
Speaker 2:No, not enough inventory for that. That was a big part of the problem in 08.
Speaker 1:Yeah.
Speaker 2:And one last thing color trends. Gray is out, so what's? So are we getting splashes of color? Now we're getting some color with a lot of base, of some really beautiful whites like different shades of white, different shades of white, even in the how about?
Speaker 1:how about kitchens? I don't see anybody doing white. I see a lot of wood. What is?
Speaker 2:coming. I'm talking about paint color paint colors paint, which is your highest roi, so paint. Yes, wood is making a very strong, very strong comeback, which might be nice for all of those people who bought in the early 2000s.
Speaker 1:You don't have to paint them now, you can just paint.
Speaker 2:Like you know, it's a combination of wood along with paint. Another really nice treatment I think that's coming in is high lacquer. Okay, it's a combination with a matte wood. I'm seeing a lot of that in magazines and things coming out of Italy.
Speaker 1:Interesting. I also think a trend that started, probably because of COVID, which is starting, is less square footage in the homes. People are less concerned with square footage, shorter homes with larger yards. So you know when before everyone would max out a house, it was always 41, like 50. Your big homes now I mean obviously this is relative, but most of your homes now are anywhere between 33 and 3,600. So about five to 600 square feet smaller and that which is about a 10 foot extra in a yard.
Speaker 1:Yes, and it's all going to the yard and that's what people are really look. I think people have gotten better with floor plans and that's turned like and most of that space, guys, is coming from the formal space in front and being creative upstairs with the bathroom layouts and the closets, but definitely seeing a ton of that happening too. And continuing on, outdoor space is the driving factor in price in condominiums, townhomes and homes and I think that is going to continue to drive the market in those spaces.
Speaker 2:Oh I do want to say if we can get a handle on inventory in Chicago, I think that we won't quite see the mass exodus from the city like we've seen in the last two to three years.
Speaker 1:Yeah, and not only that. If we don't get that inventory and everyone is ending work from home, it's stopping. You're going to see people reversing and coming back into the city, which is going to drive pricing again. And I think, in closing, the last thing I think of, too, is I've never seen people more. I mean, I know this sounds crazy, but it seems like it should be that way, but in the city I've never seen people more. I mean, I know this sounds crazy, but I've never seen. It seems like it's should be that way, but in the city I've never seen people more interested. Um, one of the top things is is um is school districts like more than ever.
Speaker 2:Well, I mean just cause cost of living has gone so high.
Speaker 1:Yeah that if you.
Speaker 2:I mean like private schools are more expensive than a lot of colleges for grade school and high school. So if you can get into a great school district, at least save up until eighth grade.
Speaker 1:Yeah, I mean, it's a pretty decent driving force. I never really used to bring it up, but I have people that have, you know, that have extreme, like babies are going to go there, and I would never really talk about districts, but now we we talk about it at that time because it's like, hey, this is really important, it's super expensive and it's and it's getting extremely, extremely competitive in terms of, uh, schooling in the high school zone. So that's it. I think that's pretty much everything that we saw in 24 and what we're looking for in 25.
Speaker 2:And can't wait. 25 is going to be great.
Speaker 1:Thanks so much. So this season four, episode one, and we'll see you and I hope we have an unbelievable 25.