Karma Yacht Sales Grows Boating

Lou Sandoval and Jack Buoscio, co-owners of Karma Yacht Sales at 3635 South Halsted, returned from the Strictly Sail winter boat show bustling with leads. Winter is the season when people buy yachts, and boat sales reflect consumer confidence. Apparently consumer confidence has been rousing itself.

Boat sales began to step up in 2011, according to Spader, a franchise and consultancy. During the consumer-confidence bust, used boats flooded the market. But last year, dealer inventories of used boats dropped, and sales of new boats rose 3 times as fast as sales of used boats did.

Jack says the first to start buying again were people who had the money to buy all along, they never lost it -- they were the 45 to 50 foot yacht crowd. Now, people in the 35 to 40 foot crowd are following them back into the water.

If it surprises you to find a yacht dealer on Halsted Street in Bridgeport, Jack and Lou are quick to point out that sailing isn’t just a rich man’s sport. Though they say it is a sport for the forward looking. “Sailing a boat isn’t like driving a car,” Jack says “you have to plan several steps ahead.” They named their business for the principle that “waves of good fortune follow admirable actions.” And when they are not selling yachts, they are actively trying to bring the sport to a broader demographic. Lou, who lives in Bridgeport, is interested in doing something similar for Halsted Street.

Jack and Lou grew up on Chicago’s south side, in close proximity to the lake. Jack’s father was a school teacher, Lou’s was a steel worker. Lou first experienced sailing in the scouts, Jack discovered he had what they call the ‘water gene’ later in life.

Lou Sandoval and Jack Buoscio Outside the Office

As adults, they bought their first boat together with some friends while they were still employed in their corporate careers. It was a 26-foot 1978 craft “with a yellow hull and a Brady Bunch interior,” Lou recalls. They sailed it until they calculated they were ploughing enough into repairs and maintenance that they might as well buy a new boat. They did their homework and decided to buy a Beneteau.

Benjamin Beneteau started building fishing boats in 1884. His grandchildren pioneered in pleasure boats. Today, Beneteau is the largest builder of sailing yachts in the world. Even Benjamin’s fishing boats had names like “Poursuivante” (Pursuer) and “Vanquer des Jaloux” (Vanquisher of the Jealous). The brand is still known for speed and performance, and a reasonable price. For a new, 50-foot Beneteau, a reasonable price may be half a million dollars. Karma Yacht Sales also brokers used boats -- a smaller, older boat can be bought for the price of a car.

Jack and Lou bought their first Beneteau in 1999. By 2002 they were ready to trade their corporate careers for entrepreneurship. They’d struck up a friendship with Joe and Elaine Darby, owners of Darfin Yachts, who represented Beneteau on Lake Michigan. Jack eventually quit his corporate job to sell boats through Darfin full-time. Lou had once had a side venture managing yachts for clients he met through his corporate job – when he was doing sales for Abbott pharmaceuticals – they tended to be heads of surgery with a lot more money than time.

The Darby’s ran Darfin from their home near Midway airport.When they expressed interest in selling their dealership, Jack and Lou decided to buy it. They set up shop in Pilsen first, they acquired their building in Bridgeport in 2007.

There is still a portion of their customer base that rarely travels south of Madison Street. But Bridgeport is equidistant between Crowley’s 95th Street Yacht Yard, where they keep their inventory, and Burnham Harbor downtown. And Karma will be even better poised when the new 31st Street Harbor comes online this May.

Jack estimates there are 6 to 7 sailboat dealers in the Lake Michigan market, but only 2 or 3 of them have actually invested in inventory. The others will sell you boats out of catalogues. Karma also employs 2-3 service technicians so they can guarantee reliable service on boats they sell.

They typically start the season with 4 boats on hand in representative sizes – some customers will order variations based on their models, but by late summer, they hope to be selling the last of their inventory.

A wavering customer can visit Beneteau’s US manufacturing plant in Marion, South Carolina, where 300 families build boats in a 21-step assembly process. It’s a convincing experience. Buyers sometimes visit their own boat as it is being built.

Nationally, new boat sales have waxed and waned with the economy over decades, but sales of new sailboats began to drop steadily after 2000. That may reflect the aging of the traditional yacht demographic. It does not measure trade in used boats, and Lou says sales of new yachts have been steadier in Chicago than they have been nationally.

Karma opened during the dotcom bust, and has weathered the banking crisis. At the height of it, sales shifted toward cash transactions, (from about 20% toward 40% of sales) but that’s not because marine lenders weren’t willing to make loans. Jack says financing for sailboats is still readily available.

In fact that’s a point of some pride for sailors: in the past 5 years, foreclosures hit the world of boat finance too. But 98% of those were foreclosures on motorboats. Only 2% were on sailboats, according to GE Capital, which lends to both dealers and consumers.

Jack and Lou say it’s not that sailboat owners are richer, they believe it reflects the careful instincts of the sailor, who must calculate the wind to change his course. Sailboats don’t appeal to the sportsman impatient to press a button, drop the throttle or hit the gas.

And sailboats tend to hold their value, even in crisis – they may depreciate 2-3% a year. Jack describes a customer who inherited some money 4 years ago. He considered investing in stocks, or in a vacation home, but ultimately decided to buy a boat. Two years later, he was very happy with that decision. “He came back to tell us ‘The stocks I was going to buy are down 40%, the cottage is down to half its value in 2 years,” Jack recalls, “but the boat held 94% of its value.’”

Boat loans are often amortized over 20 years – which means you can buy a yacht the price of a house for payments similar to those for a nice car. That is why Jack and Lou’s typical customer doesn’t have to be rich. Karma’s customers include police officers and school teachers, who enjoy their summers off.

The storied ‘water gene’ – which differentiates the person who goes out on a boat and isn’t all that impressed from the one who absolutely loves it – may be widely dispersed. But old social dynamics still impinge on its expression. “Grow Boating” is an industry initiative to promote the boating lifestyle.

Lou attended a Grow Boating assembly last year. It brought 160 luminaries from across boating types and industry sectors. Lou says only 15 of them were women, and he was one of 5 minorities. He believes the boat-owning grassroots is more diverse, even if that diversity is still filtering up through industry leadership. As of 2009 there were roughly 375,000 registered boats in Illinois, about 1 for every 13 households in the state, suggesting he is probably right.

Karma Yacht Sales has an activist streak – its owners are current on issues that impact their industry and advocate for measures that help it along. Locally, they have approached the public schools and city colleges about developing educational programs that might use sailing to demonstrate classroom concepts in physics and math, or offer vocational training in fiberglass and diesel mechanics – skills that could grow a local sailing industry, and are transferable to other industries as well.

Lou moved his family to Bridgeport in 2006, so he tends to see opportunities for action here too. He lived in Wicker Park for 9 years, and was active in the Chamber of Commerce that raised Wicker Park’s retail profile – he’d like to see similar efforts in Bridgeport. Wicker Park used a Special Service Area to generate revenues that merchants could invest as a group. Just as important, they coordinated their marketing efforts and used electronic media – something Bridgeport’s retail old-guard has been slow to embrace.

This summer, when the new marina opens at 31st Street, non-boaters may also feel the boost. Chicago harbors generate more than $30 million in annual revenue for the Park District, and help support 100s of jobs hospitality sector jobs.
Last year, about 5,000 boats docked at the city’s 9 marinas. The Park District has cited growing demand to justify substantial hikes in harbor fees over the last 10 years.

The new harbor at 31st Street will add 1,000 slips to the city’s inventory, according to Westrec Marinas, which operates the harbors for the Park District. Jack and Lou anticipate a salutary effect on harbor fees, not to mention new points of entry for Chicagoans just discovering their affinity for the water.

The German-Chinese Restaurant Equipment Connection

C&R Equipment builds wok-stoves and does custom builds of all the stainless surfaces used in restaurants. They are at the hub of a Chinese-owned restaurant supply cluster in Bridgeport. The cluster is small, but appears to be growing. It’s grafted on German roots.

Zweifel’s Hardware first opened in 1886 where the Dan Ryan Expressway is now. It’s currently operated by David Zweifel at 29th and Stewart – just to the east of the viaduct.

David’s father, Herman had wanted to be a chemist in his youth, but his family wouldn’t have it. Eventually his brother David would take up the reigns of the hardware store. Young Herman rebelled by branching into sheet metal.

He started out mounting gutters, but developed a specialty in restaurants. This was after he came back from World War II. The decades after the war were boom years for new restaurants, and stainless was an ideal modern material. It’s sleek and workable, it’s also superbly tough and hygienic for kitchen surfaces. Herman teamed up with a popular designer and fitted out restaurants from Downtown to Dempster Avenue.

Chinatown was his own backyard. He did build outs for Cantonese Chef and Three Happiness more than once. He built a custom contraption for washing bean sprouts for Great American Foods, over on 26th and State Street. The sprouts were grown in big galvanized tubs filled with water that had to be changed every day – a cumbersome task.

The Zweifel bean sprout washer had motorized paddles to circulate water around mesh baskets of sprouts. It worked so well, he sold half a dozen of them to bean sprout outfits from Chicago to Kansas City.

By the early 1980s, Herman was slowing down. When he lost a key employee to a (non-work related) injury, he had trouble replacing him. His son David says Herman didn’t get along so well with the young guys just coming out of the union trade schools; by 1984 he had stopped doing big restaurant jobs altogether. When Herman died, David sold off the sheet metal tools.

In fact, he sold a couple of them to a gray haired Chinese gentleman who may have been the founder of C&R Equipment. The gentleman bought an 8 foot handbrake, used for bending metal, and a Cincinnati shear, for slicing it. His shop was located on Canal, which is where C&R Restaurant Equipment first opened up. Allen Ng, the founder’s nephew, says his uncle wouldn’t necessarily want his name in print – he prefers to be discreet.

Allen, like his uncle, is a New York City transplant. His uncle owned his own restaurant in New York for awhile, and worked for a few years at a fabrication shop that made restaurant equipment. There are scores of such shops in New York City, building specialty equipment for the crowded Chinese restaurant market.

When Allen’s uncle moved to Chicago, there weren’t any here. Chinese restaurants in Chicago had their wok stoves shipped in from New York. He and some business partners opened up C&R Equipment – originally called Chicago Restaurant Supply – at Canal and Archer in 1992. C&R’s retail business, which sells a full range of small-ware in addition to larger equipment, is still located in that small industrial pocket along Lumber Street just north of the river.

Chinatown’s population has grown steadily, expanding into Bridgeport, and its retail population has grown denser, filling out Chinatown Square, the 2 story mall on the north side of Cermak that was completed in 1993.
By the early 2000s, C&R needed more space. They bought the former All-Type Electrical Supply building at the southeast corner of 36th and Halsted and set up their fabrication shop there.

Today, C&R Equipment employs 15 metal-workers at the 36th Street shop. That’s down from 20, at the height of the boom, but C&R took advantage of cheap prices in the bust to open a new storefront office adjacent to the metal shop in August. From the office, you can see the activity at every station in the shop on 2 big flat screen tvs.

C&R will custom fabricate, alter or repair almost any stainless surface or appliance imaginable for a restaurant, for a highly competitive price. Some are purely functional, like kitchen counters; some are decorative, like textured wall coverings and railings for outdoor seating areas.

They still build wok stoves: which have removable woks in place of burners, and built-in water faucets. The faucets help keep up the pace at a Chinese restaurant, where dishes are cooked quickly at high heat, then rinsed to cook the next dish in rapid succession. Specialized exhaust hoods draw away steam, and fumes from hot, aromatic cooking oils.

C&R Equipment was still the only supplier of Chinese wok stoves in Chicago until 2007, when Allen says a long time employee organized some investors and opened Midwest Restaurant Supply – also in Bridgeport – a few blocks away at 35th and Morgan.

The third member of the Bridgeport’s restaurant equipment sector predates the other two. Spencer Yang bought the All-Type Electrical building across 36th Street from where C&R Equipment is now in 1990, and began distributing Chinese manufactured food equipment under the brand name American Eagle Food Machinery.

All three businesses supply networks beyond the confines of Chinatown. American Eagle’s customer network is national. They supply a variety of grinders, slicers shredders and mixers, with a specialty in equipment for pizza dough.

Midwest Restaurant Supply provided equipment for Bridgeport’s own Bridgeport Pasty Company and built stainless counters for Pleasant House Bakery at the top of Morgan Street.

Allen says C&R Equipment has found customers among Indian and Packistani businesses along Devon Avenue – among other things they build locks and gates for securing convenience stores. He says they haven’t done much on Argyle Street’s north Chinatown, where the restaurants there older. Much of their new restaurant business is in build-outs for new Thai and Sushi restaurants in the suburbs.

Though they still have a core of business in Chinatown -- and the business is recession resistant. Allen observes that when restaurants go broke, new ones replace them, and they often want new stainless for their renovations. He’s also noticed a spurt of new customers who’ve been laid off from their old jobs -- they pool their savings with friends to open a restaurant. Which bodes well for the future of Bridgeport's restaurant equipment business.

Bridgeport Tattoo Company: a Traditional Neighborhood Shop

The Bridgeport Tattoo Company is a self-described traditional shop. Tattoo is a vigorous folk art -- it's proliferated in popularity, and in variety of styles. In recent years, it’s taken on Hollywood drama, thanks to tattooed celebrities and reality tv.

When David ‘Blackjack’ Fitzgerald opened Bridgeport Tattoo Company in 2007, he papered the walls with the history of the American sailor-era style of tattoo. “That’s what we’re known for,” he says. People from other cities, who know they’ll be visiting Chicago, book ahead to add a tattoo in the traditional American style to their personal canvas.

But Blackjack wanted to make his shop traditional in a broader sense.

He generally keeps his own tattoos under wraps. But the 2 that are always visible are the tiny ‘312’ and shamrock under his right eye that mark him as Chicago Irish. He grew up on the northwest side. “Everything south of North Avenue was no man’s land,” he says. But when he saw the storefront at 3527 S. Halsted advertised on Craig’s list, he kept an open mind.

He and his longtime girlfriend, Jeanette, had a beer in a couple Bridgeport taverns, ate dinner at the Ramova Grill. He read up on the neighborhood’s history. He read about the canal diggers who linked the great inland waterways, and tied Chicago to global commerce. And about Bridgeport mayors, and the gangs of precinct captains and patronage workers who all ‘looked out for their own.’

A neighborhood that ‘looks out for its own,’ has some negative connotations. Especially, Blackjack acknowledges, if you’re looking in from the outside. “But if you’re part of it, if you live here, if you have a business here, supporting your own is a good thing.”

He wanted to open a shop that would be part of it.

“If people come [to Bridgeport Tattoo] from Lincoln Park, that’s awesome,” he says. “But I didn’t come to Bridgeport to serve them. I knew Bridgeport was a blue collar, old school community, and that’s the people I wanted to serve.” And he is enthusiastic about how Bridgeport’s heritage is poised to evolve.





Tattoo has a long outsider tradition. It has associations with circus sideshows and prison gangs. In the U.S., it has a strong association with military service. Blackjack describes traditional American style as a badge a young soldier or sailor would get to remind him of what he valued most (his mother, a pretty girl, a patriot’s eagle) before he marched off to war.

In Japan, the other traditional source for tattoo, it was an underground art, associated with organized crime, and sometimes suppressed under law.

Blackjack, who traces his artistic lineage back to Sailor "Bill" Killingsworth, has lined the walls of Bridgeport Tattoo Company with the work of old masters like Don Ed Hardy and Sailor Jerry in Honolulu.

Sailor Jerry helped link the American and Japanese traditions. He learned tattoo while riding the rails as a teenager in the 1920s. He practiced up on hobos. He joined the navy in the 30s and sailed the Pacific, where he was exposed to the Japanese tradition first hand. Then he settled in Honolulu and tattooed generations of American sailors.

Sailor Jerry tapped his Japanese acquaintances to help his protégé, Don Ed Hardy, gain access to study the art in Japan. Hardy was the first Westerner to really do so. Blackjack can show you the early results, how Hardy combined Japanese themes in an American style, in the history that ornaments his walls.

For his part, Sailor Jerry was known for an abiding mistrust of squares, who live their lives conforming to social conventions. Tattooing has thrived on the margins, where conventions were weakest. In Chicago, that used to be on south State Street, where the tattoo arcades prospered alongside bars with boozy music and go-go girls. Teen-age sailors, fresh from the Great Lakes Naval Academy, would go there to get their courage up before they hit the high seas.







Blackjack was a military man himself, before he was a tattoo artist; he did combat in Operation Restore Hope in Mogadishu, Somalia. In the service, he and his buddies sought out the seedy corners of foreign towns, where they’d stay up late getting tattooed into the early hours of the morning.

Back in the States, he took up the trade. He’s been tattooing since 1992, and came back to Chicago in 1994. For the most part, he picked up his skills on the job. Now he wants to mentor younger talent in his shop. He employs 3 younger tattooists, and an apprentice, who he’s been drilling in her drawing skills. She draws pages of hearts that already look perfect to an untrained eye.

“It’s the simplest things that are most difficult.” In the case of hearts, the trick is drawing 2 curves in perfect symmetry, in reverse. In the case of lettering, it’s learning to draw your letters, consistently, as opposed to scribbling them, the way people do when they write.
“Things I learned in 10 years of practice, she’ll learn in 2,” Blackjack says.



In all those years he’s been practicing, the industry has changed. The portion of the population who are tattooed has grown. When the American Academy of Dermatology did a survey in 2004, they found that 36% of 18-29 year olds had tattoos, compared to 24% of people in their 30s, and 15% of people in their 40s.

The practice has become more mainstream, but not necessarily more professional. There’s been a proliferation of trade shows, where artists converge, making more styles more widely available.

The first one was held in Houston in 1976. Blackjack points out those were the days before e-mail, when a long distance telephone call was expensive. The show was an opportunity for the best of the best to meet, swap stories and techniques. “That’s really cool, how did you do that?”

By the time Blackjack joined the business, conventions were open to the public. The convergence of talent meant you could get a tattoo from artists from distant cities. But Blackjack says they’ve gradually devolved into vehicles for their promoters, many of whom have no other interest in tattoos.

The biggest change in the industry he’s noticed has been the explosion of shops since the genre was made a legitimate business in Chicago.

Tattoo shops weren’t illegal before, but they weren’t explicitly allowed in the Chicago zoning code, until the rewrite in 2004. Before that, if you wanted to open a tattoo shop, you had to get the alderman’s permission to open as a special use.

“What alderman is going to say ‘Open in my ward, because that’s what we need?’ Of course not, no political person is going to say ‘Yes, we love tattoo parlors in our community.’”

Since it’s become a permitted use in commercial zones, the population of tattoo parlors has exploded. Most of them are fly-by-night. Long time practitioners have no idea who they are.

Blackjack says pretty much all you need to open a tattoo parlor is $250 for a license and lids on your garbage cans. There’s certainly no accreditation to prove you’ve got skill. In that respect, the industry is still self regulating.

He says amid the hundreds of shops crowding Chicago today, there are about 6 shops “that matter” – he counts them off in his head. “We all know each other. We all know what each other is doing. Not just as business owners, but as tattoo-ers.”




Meanwhile, the zoning change allowed him to open up his own shop in Bridgeport. He’d already been thinking about what he wanted his own legacy to be. He chose the neighborhood for its tradition. So he was careful not to offend its sensibilities.

He did the build-out behind paper in the windows. When he first opened, he didn’t even post a sign for the first 6 weeks. “I wanted the business and the community to just have time to gradually get to know each other.”





Now it's the most respectable looking storefront south of 35th Street, with its green awning, and tasteful lettering. Even the art on the walls that is visible from the windows was hand-picked to make sure all the girls were clothed. “I didn’t want some longtime Bridgeport resident to walk by and be offended by the boobs of a pin-up girl.”

He figured customers who wanted to find the shop, would find it. And when they came in, he wanted them to feel welcome. Tattoo parlors can be intimidating. Some of them cultivate a ‘Who are you?’ ‘What do you want?’ kind of vibe. Blackjack wanted to create a customer friendly establishment.

“I turned into the person we used to make fun of,” he jokes. “We were the seedy crowd, the rough and tumble party guys. It’s a different time for me, as an adult.”

Now he’s a family man. In fact, his family is installed in the apartment upstairs. There are some drawbacks to that – he rarely leaves the building, for instance. But he’s home for supper every night, and to tuck the kids in to bed.



He says one of his first requirements for employees is that they be good family men themselves, whether they are married or not. “If you’ve made a commitment to me to be a good man outside work, I know your mind is clear, and you’re going to be a good employee.”

Second, is that they be fastidious about the shop. Hygiene is one area where tattooing is regulated. Blackjack doubles the requirements -- from what parts of the machine get disposed after each use, to how they bag the bottles used to swab the skin. And of course the shop itself is military clean, because “this place gets cleaned like Mother Theresa is coming every day.”

One of Blackjack’s ideas for making the shop more community friendly was a little controversial among his peers. He wanted to try making the price of a good tattoo more affordable. “It’s expensive, you might only do 1 or 2 a day, and you’re trying to make a paycheck from those 1 or 2 walk-ins.” Lowering the price might increase the customer flow, though some of his closest associates were skeptical of the strategy.

As it is, prices for tattoos vary widely. At Bridgeport Tattoo Company, they tell clients a tattoo the size of a deck of cards will typically cost $150 – that’s based on an hourly rate of $100. They say a shop that doesn’t matter might charge as little as $30 for the same card sized tattoo; a shop that does might charge $300. And that $100 an hour doesn’t include the time spent drafting the design, which can sometimes take longer than executing the tattoo.

At any rate, their business model appears to be working. The first day Bridgeport Tattoo Company opened for business, 6 weeks before there was a sign in the window, Blackjack says he did 20 tattoos – he was up into the early morning hours doing them -- and they were all for customers from Bridgeport.

On February 5, 2012, Blackjack will celebrate the 20th anniversary of his work as a tattooist. Over the years, he has accumulated a client list from further afield. Some of them are 2nd generation -- guys who were kids when he started tattooing their fathers. Some have had standing monthly appointments for years. But he says the majority of his clientele come from Bridgeport, which is how he wanted it to be.

Most tattoo shops “are just shops in a location.” That’s not what he wants for Bridgeport Tattoo Company. He’s sponsored every charity who’s asked him. He even sounds a little disappointed when he sees a sign in a neighbors’ window who is sponsoring an organization that never approached his shop to do it, like they might have been intimidated by tattooing’s outsider image.

But Bridgeport’s retail streetscape is something Blackjack is proud to be a part of. When he’s bragging about his neighborhood to friends, he tells them about the longevity of places like Schallers, and about all the new places that have opened just since he’s been here: Zaytune's Mediterranean Grill, Nana’s Michelen rated restaurant, Blue City Cycles and Maria’s Community Bar.

“Imagine Halsted full of new and innovative stores. When you think of Halsted at Maxwell Street – it looks awesome, but it’s all Subways and Quiznos.

“In Bridgeport, it’s places you’ve never heard about. They’re small batch, locally grown. What they do matters -- they do it intentionally,” Blackjack enthuses. “Their business is an extension of who they are.” It’s a business community where Bridgeport Tattoo Company fits right in.

Variations on the Boom and Bust

Last March, I speculated that Bridgeport had been insulated against the housing bust. That the market here had been less inflated by speculation in the first place, and that when the bubble burst, there was less fallout. Foreclosures haven’t been as frequent, lending didn’t drop off as much. People are still buying houses and banks are still giving them loans to do it.

Then I went around talking to property owners, and some of them are less optimistic.

One acquaintance bought his home in 2002, a new construction single family house on Aberdeen, near where he grew up. By 2006, it had doubled in value; by 2011, it had lost what it gained. And a little bit more than it had gained, he said. Now he finds himself obsessively checking Zillow for comparable sales. He’s not looking to sell, he just wants to know.

I had informal conversations with some small landlords. Some of them fit my ideal description of the good steward, defending the stability of Bridgeport’s housing stock into the future, but not all of them did.

One of them rents to the high end of the rental market. He’s lost a few tenants as they’ve lost jobs, or their circumstances changed, and they’ve left for cheaper apartments. He had a few vacancies when I spoke to him last spring, but he planned to keep his units open until he found tenants who would pay his rents. He acquired his buildings gradually, renovated them down to the bricks, managed the work himself. He didn’t have to rent right away.

One on them targets the lower end of the market. He says it’s more complicated renting to yuppies, they are more demanding, and the building inspectors follow them in. “The money is in slum housing,” he says. It’s easier renting to “murderers and rapists,” if they’ve got a leak, he says “here’s a bucket.”

Or so he claimed anyway, I think he was exaggerating a little to impress. His porches were bright with fresh paint and beds of flowers, and he was sitting outside supervising workers making improvements. He bought his first building 40 years ago, he says he enjoyed doing the work himself. But he’s older now, he wishes he’d sold during the boom when he was getting crazy offers.

He’s still getting offers, he says they never stopped. But they’re crazy low offers. “They’re looking for someone who doesn’t know” (what their building is really worth). Or someone like his neighbor. The building inspectors recently came in and told her she has to make $40,000 in improvements.

“She has the money,” he says, but it rankles with her, because the repairs will cost more than she paid for the building, decades ago.

I met at least one investor on the lookout for owners who don’t know what their building is really worth, or who are getting restless to sell. He lives in the neighborhood, and works in the construction trades, he’s always kept his eye out for opportunities.

He’d just heard that an owner who rejected his offer for a storefront on Halsted a few years ago recently sold it to someone else for a third the price. He’d just made a successful bid for a 6-flat in Bridgeport, and he’d been venturing east into Bronzeville, looking at properties for a few tens of thousands of dollars.

Now he squabbles with the bank though. They want him to spend more of his own money on the purchase. They say “You have the money,” and he says “I know I have the money, but I don’t want to spend it, I want to borrow it.”

Reading Into the Loan Data:
At the end of September, new residential loan data came out for 2010. Theoretically, numbers are an objective check for the stories you hear people tell. There is an actual number for residential loans made in Bridgeport in 2010 for instance. You can compare it to the number of loans made in 2005, or to the number made in other neighborhoods.

But what do you make of that count, once you know what it is? The comparisons invite interpretation.

The portion of residential loans that were made for home purchases, as opposed to loans made to refinance existing loans, proves that property is actually changing hands, which must happen more in hot markets. But loans made to non-occupants in particular seem to measure more speculative investment.

Then again, so might a loan refinance. During the boom it wasn’t unusual for a home buyer to close on his home loan, then refinance it multiple times within a few years. Hopefully, he was trading in for better terms. But some of his friends were sucking equity out from their houses to fuel other kinds of spending – they were speculating on their own property in a sense.

The same loans took on different connotations when the context changed. In the bust, loan refinances suggest the correction of past excess. Or at least the persistence of opportunity to make corrections.

In 2005, at the height of the boom, residential loans in the Chicago metropolitan area were evenly split between single family home purchase loans, and loan refinances, with each representing 47% of residential loans. (The remainder was made up of multi-family and home improvement loans.)

In 2006, residential lending stumbled, and was still falling through 2010. The balance among loans also changed. Home purchase loans, and loans to non-occupants, fell furthest. Refinances dropped the least. By 2010, refinances accounted for 3 in 4 loans made across the MSA. Though in some neighborhoods, loan refinances evaporated too.

Then in 2009, the number of refinances lurched upwards. The lurch was strong enough to make up for the year’s drop in home purchase loans, and to lift the count of residential loans across the metro area by 22%.



Not incidentally, 2009 was the year the federal government’s Making Home Affordable programs went into effect. They were designed to help borrowers who were current on their mortgages refinance loans that were underwater at more favorable terms. Or to help those who’d fallen behind negotiate modifications of their existing loans to avoid foreclosure. The state of Illinois and Cook County both took measures to give borrowers more time and leverage to use those programs.

Many have been frustrated by what the government interventions actually accomplished. By year end 2009, foreclosure filings in the Chicago metro area actually rose to 70,000 from less than 60,000 the year before. The Woodstock Institute, a fair lending advocate, concluded that the government interventions only delayed foreclosures. They clearly hadn’t reduced them.

But the surge in refinances suggests foreclosure filings would have been worse if those programs were not in effect. In some neighborhoods, refinances did not seem to slow foreclosures from increasing, but in others, they may have done just that.

By 2010, loans were dropping again, in the Chicago metro area as a whole. But there was a modest surge in loans to non-occupants – investors were apparently venturing out to pick up bargains. No neighborhood needs more absentee investors. But non-occupants aren’t necessarily absentee owners. And if nothing else, they take up some of the slack in the housing market. Their perking interest might give the homeowner watching Zillow a reason to hope his situation is beginning to improve.

Variations in Lending:
Looking at loans, Bridgeport didn’t escape speculation during the boom and it hasn’t escaped the bust either. But it still looks pretty good in contrast with the metro area.

It also stands out among its neighbors. Communities whose housing stock is similar in age (pre-war) and composition (single family and small apartments), whose populations are similar in occupation (growing numbers of white collar professionals, but persistently high numbers of blue collar trades) and in origin (large numbers of the foreign born, small but growing numbers of blacks).



For all the things they have in common, the neighborhoods in the larger Bridgeport area looked very different from one another in the boom and bust. In general, you might expect the ones that saw high rates of speculative fervor would be the ones that saw a sharp decline in loans, and particularly high rates of foreclosure, in later years. Though the connections aren’t always consistent.

The South Loop seemed a case study in excess a few years ago, but it exhibits at least one measure of resilience now.

Almost half the neighborhood’s housing stock was constructed in the 2000s. In 2005, the neighborhood was boiling with loans. In the Near South Side, which includes the South Loop from Roosevelt to Cermak, there were 19 loans made for every 100 housing units that year alone.

Neighborhoods like Lincoln Park and Logan Square saw 10 and 11 loans per 100 housing units in 2005.



Furthermore, 2 in 3 of the loans in the Near South Side represented property changing hands, which makes sense in a neighborhood so newly constructed, but which stands out in the metro area where home purchase loans were balanced with loan refinances. And a lot more of the Near South loans were made to non-occupants investors.

Considering the speculative fervor, it’s a little surprising to see that loan activity actually held up better in the South Loop than it did everywhere else. The weight of it shifted from home purchase, to refinance, as it did across the metro area. But across the metro area, loan refinances slowed down, they just didn’t slow as much as other kinds of loans. In the Near South Side, loan refinances increased 92%. Even home purchase loans dropped more slowly than they did other places. The South Loop's location advantage hasn't been overwhelmed.



Still, liquidity alone has not been enough to correct for prices the bubble brought, and foreclosure filings have been exceptionally high in the Near South Side. In 2009 there were filings per mortgageable property were almost 1 in 10. And by 2010, as filings have been dropping in some of the hardest hit neighborhoods, filings in the Near South Side were up another 50%.



By contrast, in the Bridgeport area, the neighborhoods where lenders and borrowers were busiest in 2005 saw the sharpest drop in loans in the 5 years to 2010.

New City and Brighton Park are two of those neighborhoods. In 2005, they were the 2 most active residential loan markets in the Bridgeport area, with 13 loans per 100 housing units. Bridgeport, by comparison had 7 loans for every 100 housing units.



They are geographically adjacent, but historically different – they began to resemble each other more over the course of the 2000s.

New City includes Canaryville and the Back of the Yards neighborhoods. It’s traditionally been working class, and dominated by renters. In 2000, Brighton Park had higher incomes, and more homeowners. It started out as an extension of Bridgeport and McKinley Park – families would move down the Archer corridor as they moved up in the world.

In 2005, loans associated with home sales in New City slightly outpaced loan refinances, and almost a quarter of all residential loans were made to non-occupant investors. Brighton Park saw fewer home sales and less speculation of the non-occupant variety, and more homeowners grappling for terms, or for cash.

Both neighborhoods saw some of the steepest drops in loan activity in subsequent years. And the highest rates of foreclosure. Foreclosure filings in New City peaked in 2008, and have been falling since. But there were still 461 of them in 2009, or 57 per 1,000 mortgageable property. And they have contributed to a growing stock of vacant buildings. In 2009, only 3 Chicago neighborhoods -- Austin, Roseland and Englewood -- had more.

Foreclosure filings in Brighton Park have lagged behind New City’s, but there were still more of them, proportionate to mortgageable properties, than in other neighborhoods in the area. And the cycle has corresponded with changing incomes, and home values, that have brought the neighborhood more in line with New City than its old Archer Avenue peers.



The Lower West Side also stands out for its steep drop in loan activity after 2005. But foreclosure filings have remained relatively modest there, maybe because loan activity before 2005 was less intense. Despite rumors of gentrification progressing through Pilsen, loans south of 18th Street remained modest in volume, and also in the portion that involved actual property sales. It is true the Lower West Side is dominated by rental apartments, but no more so than New City, where property sales, and foreclosures, spiked.

The other neighborhood that looked comparably quiet in 2005 was Armour Square. In 2005, both Armour Square and the Lower West Side saw just 5 loans for every 100 housing units. But in Armour Square, that loan activity didn’t disappear. Loans of all kinds were fewer in number by 2010, but they hadn’t dropped off at the same rates they did for the metro area, or for other neighborhoods in greater Bridgeport for that matter.



As in the South Loop, loan refinances in particular were resilient. They were down slightly in 2008 from 2005 (down 13%) but by 2009 there were more than there had been in 2005 (112 vs 107), and in 2010, they were still increasing (to 124). And unlike the South Loop, foreclosure filings have been all but non-existent in Armour Square. There were 4 filings per 1,000 mortgageable properties in 2009.



If there is a single neighborhood in the area that shows where moderation in the housing market helped guard against disaster later on, Armour Square is the one.

But Bridgeport looks a lot like it. Bridgeport wasn’t immune to speculation, at least it attracted a fairly large share of non-occupant investors in 2005. But it saw less lending overall than several of its neighbors, and more of those loans were to existing owners, adjusting their position, rather than property changing hands.

Lending dropped off more in Bridgeport than it did in Armour Square, but it didn’t drop off as much it did in the MSA, or as in most of its neighbors. Foreclosures have been on the rise, but they remain modest as a portion of mortgageable properties.

In a map that shows change in overall lending between 2005 and 2010, Bridgeport stands out, together with Armour Square and the South Loop. But a map of loans made in 2010 shows that actual optimism may be more diffuse.



The South Loop remains particularly rich in loans – of course it also particularly rich in foreclosure filings. Meanwhile, lending activity continues down the Archer Corridor, and into Canaryville, and parts of Back of the Yards. New loans suffuse neighborhoods where other measures have not looked so good. There are lots of loans made in Bridgeport west of Halsted Street, and there’s a cluster of lending between 35th Street and Pershing Road that extends from Normal Avenue to Western.



That cluster shows up again in a map showing where non-occupant loans stepped up between 2009 and 2010. The spurt of non-occupant investment penetrates pockets of New City and Brighton Park.



In fact, Brighton Park, the neighborhood that may have lost the most in the decade of the boom and bust, saw the best news by another measure: in 2010, it is the only community in the area that saw a spurt of new home purchase loans. Some of them may have been loans to non-occupant investors. But since the former outnumber the latter, most of them were not.