Sue Fox, @Properties. Direct 773.816.1788
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In another hopeful sign for Chicago’s real estate market, the sales of downtown condos recently hit a two-year high. It seems as though buyers are finally starting to absorb the excess inventory that has shadowed the downtown market ever since the downturn, holding down prices and forcing some newer buildings to turn to renters.
In April, there were 360 condo sales pending in the downtown area, up 55% from a year earlier. While this is good news, prices have yet to recover in downtown Chicago, making this summer an especially good time to buy a condo in the heart of the city.
Over the past two years, according to MLS data, median prices for condos in the Loop have fallen almost 8%, from $352,500 to $325,000. Developers of many downtown condos have had to slash prices to attract interest. Interest rates, too, have dropped and are now at record lows — around 3.75% for a 30-year loan for people with the best credit and sizable down payments.
The combination of low prices and rock-bottom interest rates make this year the best time to buy a Chicago home in at least the last 12 years. Will prices downtown continue to slump, or are we at the bottom? We have seen a recent uptick in prices (and sales) citywide, suggesting that a recovery, however faint, may finally be taking hold.
Little by little, Chicago developers are once again breaking ground on new houses on lots sprinkled across the North side, bringing dozens of high-end homes to neighborhoods like North Center (which includes Roscoe Village and Ravenswood), Lincoln Park, and Bucktown. In North Center, for example, 18 new homes were sold this year, another 16 are still on the market, while 4 more are under contract.
It looks like Chicago is now witnessing the Return of the Spec Builder — local developers who plan, design and build single-family houses without having a buyer lined up ahead of time. “While spec building never entirely dried up, it slowed significantly after the bust, leaving only a few developers with deep pockets still standing” said a recent story in Crain’s Chicago Business. “Now, smaller builders that waited for signs of life — and the availability of financing — are once again breaking ground on million-dollar-plus homes, confident that buyers will bite.”
In North Center, the new homes for sale range from a 3-bedroom frame house at 2440 W Fletcher St. for $649,900 (with delivery planned for 2012) to a 7-bedroom mini-mansion on an oversized lot at 1936 W Grace St. for $1,749,900 (that the builder promises to customize.) But the majority of the homes are 5-bedroom houses, many of them in the Coonley elementary school district, for $1 million to $1.3 million.
A typical offering is 4108 N Claremont Street, which has a large family room on the main floor, a second-floor laundry room, and a finished basement with a rec room and a wet bar. It has been on the market for only a week, priced at $1,199,000. Once finished, it will be just over 4,000-square feet, with amenities like radiant heat, steam showers and an outdoor fireplace.
While Chicago is just starting to see a glimmer of new construction, housing starts — a measure of how many homes builders are working on — are up sharply throughout the country. Today the Commerce Department reported that housing starts jumped 9.3% in November, the highest in the past 19 months. It seems that low interest rates for mortgages, as well as lower home prices, are propelling buyers back into the market for new houses.
In Chicago, developer Mike Barrett of Barrett Homes is building three spec homes, in Roscoe Village, west Lakeview and Bucktown. “I wouldn’t say the market is flush with prospective buyers,” he told Crain’s, “but the people who are looking seem to be well-qualified and have a pretty good idea of what they want in a home.”
Condo sales in downtown Chicago continued to sink this fall, dropping 9% over this time last year. Developers closed just 229 sales downtown in the third quarter, according to a new report from Appraisal Research Counselors, a Chicago consulting firm.
In a weak market, some buyers were inspired to make the move only after steep price reductions. A recent story by Crain’s Chicago Business said that Parkside of Old Town, a redevelopment built at the site of the old Cabrini Green towers on Division Street, had the highest number of closings in the third quarter — 26 units — after chopping prices 30% to 40% over the summer. One-bedroom condos priced at $259,000 were reduced to $155,040 with a free parking space, while two-bedroom units went from $379,900 to $229,500, including parking. Parkside also offered buyer incentives like a $10,000 grant from the city.
With financing for development so tight, it’s gotten quite hard to find new condos under construction throughout Chicago’s North side. What you can find, however, are hundreds of condos built in the last five years — where the value has fallen so far from what the original owner paid that many of them are nearing or already in foreclosure.
That means there are plenty of almost new condos in almost new buildings, many of them being sold at bargain prices. In Lincoln Square and North Center, two popular areas that include Ravenswood and Roscoe Village, there are more than 50 condos with at least 2-bedrooms that fit this description — all for sale at prices under $400,000.
At the lower end of the scale you have distressed (meaning financially troubled, not necessarily physically damaged) properties like 2472 W Foster Ave. #206, a 2-bedroom, 2-bath unit with garage parking for only $194,000. This empty unit is a short sale, which requires bank approval (and patience on the part of a buyer). The 1300-square-foot condo boasts limestone baths and a balcony, and it is located in a 5-year-old building where similar units sold for $280,000 to $335,000 in late 2006 and early 2007.
Meanwhile, there are several properties for sale in the $300,000 range with considerably more space. Consider 4809 N California Ave. #2W, also in Lincoln Square, a 3-bedroom, 2-bath with Brazilian cherry floors, a master bath with a steam shower and jacuzzi tub, and a large deck. Parking is $20,000 extra. Or 4313 N Western Ave. #2 in North Center, a 3-bedroom, 2-bath unit with parking. It features cherry cabinets and granite counters, stone baths and hardwood floors, located in an intimate 3-unit building built in 2008.
At the upper end of the range, there’s a 3-bedroom, 2-bath Roscoe Village condo with two parking spaces, a large deck and a balcony. Located at 2332 W Belmont Ave. #2, this is a 1700-square-feet unit featuring a separate dining room, gourmet kitchen, limestone baths and custom closets. It is priced at $398,500.
So if you’re looking for new construction in this age of scant construction, don’t despair. There are some wonderful, slightly used condos out there, available for much less than the first owner paid.
Chicago’s real estate market continues to gasp and wheeze this autumn, with the Illinois Association of Realtors reporting that homes sales fell 27% in September compared to the previous year. The city’s median price dropped like a stone as well, falling 20% — from $225,000 a year ago to $180,000 this September.
However, if you look at the entire year, things are a bit brighter. Thanks largely to the now-expired federal tax credit for home buyers, Chicago’s year-to-date sales jumped 11% during January through September 2010, compared to the same period in 2009. The year-to-date median home price fell 8%.
Looking ahead to the always-slow winter season, I would say that qualified buyers have a great opportunity to buy a home at both a stellar price and interest rate … but everyone else (sellers and existing homeowners) is in for a long, chilly slog towards spring.
The number of foreclosed homes, meanwhile, is soaring in Chicago. In fact, the Chicago metro region recently ranked third in the nation for foreclosures, with more than 12,000 foreclosed homes in the third quarter of 2010, behind only Phoenix and Miami. The Chicago area’s foreclosure activity jumped 35% in the third quarter, according to RealtyTrac, a company that tracks distressed properties.
Some of Chicago’s more affluent neighborhoods — like the Loop, West Loop, South Loop and Lincoln Park — have also seen large increases in foreclosures. In the Loop, for instance, there have been 205 foreclosure filings during the first nine months of the year, a 77% increase over the same period in 2009, according to data compiled by the Woodstock Institute, a non-profit research group based in Chicago.
The troubled buildings in the Loop include River City at 800 S. Wells, where there were 16 new foreclosure filings in the last three months; Century Tower at 182 W. Lake St. (nine foreclosure filings); Park Millennium at 222 N. Columbus Drive (six), according to the Woodstock Institute. In the South Loop, where many of the newer condo buildings have ended up filled with renters, a handful of buildings had two-thirds of the recent foreclosure filings: 1620 South Michigan Ave. (twelve); Vision on State at 1255 S. State St. (eleven); and 1720 South Michigan Ave. (eight).
It looks like the wind has once again been knocked out of the sails for Chicago’s downtown condo market. Sales of new construction condos plunged 52% in the second quarter of 2010 compared to the same period last year, according to a new report from Appraisal Research, a real estate research firm based in Chicago.
Even compared to the first quarter of 2010 — when the federal government’s tax credits for home buyers were still in force — the numbers look pretty weak. There were 256 downtown Chicago condo sales in Q1, but only 150 sales — a 41% drop — in Q2 this year.
“With the tax credit expired, continued concerns about the economy and job market, worries about the stability of housing prices, and the difficulty in selling an existing residence and securing financing, many buyers continue to remain on the sidelines for the near term,” said the report.
It’s been a rather rude awakening for downtown developers, who once feasted on thousands of sales of glittering high-rise condos each year. In 2005, for example, developers sold more than 8,000 units in downtown Chicago. Last year they only sold 572. But the collapse means it’s a very attractive time to buy a new condo downtown, many of them with sweeping lake or city views, sleek gyms and swimming pools.
For the past few weeks, I’ve been taking out a pair of buyers to see many of the new 2-bedroom, 2-bath condos with lake views in Streeterville, and we’ve been pleasantly surprised by the prices. At 505 N McClurg, a snazzy building built in 2008 with floor-to-ceiling windows and beautiful finishes, a 2-bedroom, 2-bath unit that was priced at $554,500 last summer recently sold for $473,500. And with sales slumping, I expect to see even greater discounts ahead this fall.
And now for some good news… After several years of sluggish sales, condos in downtown Chicago are finally selling at a healthy clip, according to a recent report.
Downtown builders sold 256 condos and townhomes in the first quarter of 2010, up from 148 in the previous quarter and just 55 in the same period a year ago, according to Appraisal Research Counselors, a real estate consulting firm. Just to be clear, that’s nearly five times as many condos sold as compared to a year ago!
Of course, this glut of unsold units didn’t just miraculously begin to mesmerize buyers. Chicago developers chopped tens of thousands of dollars — sometimes hundreds of thousands — off their prices to attract buyers.
“If you discount, they will come,” Gail Lissner, vice president at Appraisal Research, told Crain’s Chicago Business.
For example, at 565 W. Quincy St. in the West Loop, developer Belgravia Group Ltd. slashed prices on some units by as much as 30%, sparking dozens of sales. The 241-unit project sold 59 condos in the first quarter (a period that coincided with the $8,000 first-time home buyer’s tax credit.)
Other Chicago projects also relied heavily on price discounts to attract buyers, including those at 200 N. Dearborn St., 222 E. Pearson St., the R+D359 development in the West Loop and the 38-story Silver Tower in River North.
Still, Chicago developers are climbing out of a very deep hole (Chicago Spire, anyone?) Crain’s reports that developers sold only 572 condos and townhomes in 2009 and 592 in 2008, a tiny sliver of the 8,162 they sold at the peak in 2005.
The pain is spreading. We’ve already seen developers resort to condo auctions downtown to finally rid themselves of unsold units, but now the fallout from Chicago’s condo implosion is spreading north to the Gold Coast.
The developer who converted a 391-unit apartment building at 1400 N. Lake Shore Drive into condos in 2006 just announced an April 25 auction to sell off 30 of the 80 remaining units. “People are going to get a great deal,” Robert Mosky, president of RDM Development & Investment LLC, told Crain’s Chicago Business. “It’s going to help out the building.”
Help out the building? Mosky said that bidding for studios — that once sold for $140,000 to $160,000 — will now begin at $50,000. One-bedroom condos will start at $90,000, a devastating reduction from the original prices of $250,000 to $270,000. This may be an attractive deal for new buyers who value the location, but these fire sale prices will hardly help out the rest of the building’s owners, many of whom are likely now underwater on their mortgages.
With Chicago condo sales sluggish (particularly downtown), some developers are turning to auctions as a last resort to jumpstart sales. It’s so hard to get a condo loan these days in buildings with many unsold units that auctions — where the financing is already lined up for potential buyers — can help get people in the door. Then, the hope is that other buyers will be able to qualify for conventional loans to buy the remaining units.
But at 1400 N Lake Shore, trouble has been brewing for months for many existing owners (see my Dec.16 post). There are now at least four condos being offered as short sales in the building, and many more for sale with price tags well above the planned auction prices.
“INCREDIBLE financing incentive!! Spectacular views!! Great values!! Location, location, location!!” So went the email I recently received from the team marketing the SoNo development in Lincoln Park, where the developer and MB Financial have just teamed up to offer an extremely low interest rate for buyers who are able to put at least 10% down.
I’ve written about the price cuts at SoNo in the past (see my June 16, 2009 post), but this new mortgage deal should really light a fire under the remaining units. The developer and MB Financial are now offering a 3.99% interest rate on a 30-year, fixed rate mortgage with no PMI (private mortgage insurance), which is, I must admit, a fabulous deal. But do you want to buy at SoNo?
Almost 70% of the building’s 232 units have now been sold, and prices are quite competitive, with 1-bedrooms starting at $250,900 and 2-bedrooms at $421,900. According to one agent marketing the project, “The developer and building isn’t in any kind of trouble. In fact it’s quite the opposite…It’s a last push to get the project closed out in conjunction with the home buyer tax credit.”
Let it be said that although my @properties colleagues are marketing the project, I have absolutely nothing to do with this development. If you’re interested in living in a new high-rise in Lincoln Park (in this case, a pair of towers near North and Halsted) this could be a good opportunity. The low mortgage rate would save you hundreds of dollars per month, depending on the price of the unit.
If you’re interested in checking out SoNo, give me a call at 773-816-1788.
If you are thinking about buying a condo in Chicago, one of the main decisions ahead will be whether you prefer new (and small) or old (and big).
In many neighborhoods like Lakeview, Lincoln Square, Uptown, Andersonville, Edgewater and Rogers Park, it’s as simple as that: The same amount of money can fetch you a new (or, more often, gut-rehabbed) condo or an older, vintage condo with more space. Many buyers want a new kitchen with granite countertops and stainless-steel appliances, so the sleek new developments that feature such amenities (along with new marble-tiled baths with jacuzzi tubs) hold a lot of appeal.
Who can blame them? By the time they’re ready to buy, lots of Chicago dwellers have spent years living in vintage apartments. They have had enough of drafty wooden windows and creaky floors, clanking radiators and outdated kitchens. They don’t want to buy a condo that looks just like their rental apartment. They want something new.
I would say that the majority of condo buyers feel this way, and that’s why Chicago developers have spent the last decade merrily snapping up 90-year-old apartment buildings and converting them into newly-rehabbed condos. But developers are out to make a profit, and the more units they can fit in a building, the more money they make. This is why you rarely see much basement storage space in newer developments; the developer carved up most of the basement into “garden” units (otherwise known as condos in the basement). And even the condos above ground, while they may have lovely fixtures and finishes, are often rather small. The kitchen and living area are often combined, there is no separate dining room, and the second bedrooms are tiny.
How long do you plan to live there? How many people will live there, and are you planning to have children? How big is your furniture, and if it won’t fit are you willing to get rid of it? These are some important considerations when buying a newer condo. I can’t tell you how many times realtors sell a new 2-bedroom condo to a single person who calls them back in three years because now their girlfriend and two dogs have moved in, and they’ve already outgrown it.
So if space is important, consider a vintage condo. There aren’t as many of them out there anymore, but those that remain often feature separate dining rooms, sun rooms, and larger bedrooms. If you want a renovated kitchen, you can always upgrade the interior of your condo.
Still, in most older condo buildings it may be hard to add central air or a washer/dryer to your unit. So before you start condo shopping, think about what is more important to you: amenities or space. Because in the world of Chicago condos, that is often what your decision will boil down to.
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