The Right Place

Move over Maytag repairman; Let's keep the yawn in Chicago housing prices By Sally Duros

I'm proud to be from Chicago, deep in the belly of the flyover
zone.

Flyover zone is the term that people from the East and West coasts
use to describe the entire middle section of the United States.
This is the middle they seldom visit even though they'll admit that
"some of their best friends" are from here.

Let's build a wall and keep these bicoastals out, lest they come
here and mess up our steady Freddy real estate prices.

In general, real estate news is not good. This week, the National
Association of Home Builders announced that its measure of
confidence among its members fell this month to the lowest since
February 1991 as interest rates climbed and delinquencies surged.
As we have have written about extensively here in the Sun-Times
Real Estate section, Chicago carries its share of delinquencies
related to subprime lending. But still, nationwide, the rate of
delinquencies is being driven by what is taking place in seven
states, Illinois not among them.

Chicago is proof that all real estate is local. Research keeps
finding the same thing over and over again: the pricing of
Chicago's houses, condos and town houses isn't subject to the crazy
roller coaster ups and downs that are a common occurrence on the
coasts.

Chicago anchors the flyover zone for price stability.

That makes being on the real estate beat here in Chicago a bit like
being the Maytag repairman: It's lonely because we're getting so
few repair calls.

Once again another measure of Chicago's market indicates that if
the employment picture remains steady, Chicago will hold its own
during this adjustment.

This week PMI Mortgage Insurance in Walnut Creek, Calif., released
its U.S. PMI Market Risk Index. The index reflects the probability
that house prices will be lower in two years in selected metro
statistical areas (MSAs).

For first quarter 2007, Chicago scored 175, which translates into a
probability of 17.5 percent that our prices will be lower in two
years. Compare that with our friends in Riverside, Calif., with a
65.2 percent probability, and in Phoenix, who face a 64.6 percent
probability that their prices will be lower.

"Price volatility for Chicago is fairly low," said Mark F. Milner,
chief risk officer for PMI. "You've seen some decent price
appreciation but nothing like in other areas."

PMI recently adjusted its index to give more weight to measures of
volatility in local markets. The company, which makes its living
insuring mortgages when a homebuyer has less than 20 percent to put
down on a house, also figures unemployment and affordability into
its index.

In Chicago, Milner said, "steadiness of appreciation means that
homes are very affordable on a relative basis."

Chicago's MSA joined a cohort of metro areas that scored 4 of a
possible 5 in risk rankings: other Midwesterners in our cohort
include Detroit, Milwaukee and St. Louis -- which ranked higher --
and Kansas City, Mo., and Cleveland, which landed lower. We didn't
make the lowest of the lows (rank 5): that was Pittsburgh at 6.4
percent.

"The message for consumers," Milner said, "is that the slow-down in
appreciation rates should make it easier for people to get into a
first home.

"For people who are in homes, you need to keep in mind that home
ownership is a long-term investment," he said. "Take the long
view."

"Lastly," Milner said, "for people who are getting into trouble and
having some financial stress and possibly facing foreclosure, call
your lender."

e-mail: sduros@ suntimes.com