Sue Fox, @Properties. Direct 773.816.1788
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If super-low home prices and interest rates aren’t enough to persuade you to make the jump from renting to owning, maybe this will: Rents are climbing throughout the Chicago area.
The average rent for a Chicago one-bedroom apartment has increased nearly 9% in 2011 while two-bedroom rents have jumped more than 5%, according to ApartmentRatings.com, a website where renters exchange information about apartments. Meanwhile, an article in today’s Chicago Tribune reported that “a stew of factors, including the foreclosure rate, uncertainty about jobs and sheer demographics, have driven rental demand (and rents) to levels not seen in years.”
The average asking price of a Chicago one-bedroom apartment is now $1,236; a two-bedroom is $1,736; and a three-bedroom is $2,204. According to the Tribune, some of the most expensive neighborhoods were those closest to downtown: the West Loop, with an average rental price of $1,991; Streeterville ($1,981); River West ($1,954); the Loop ($1,935); and the South Loop ($1,875).
“You see it all across the board,” said David Vivero, chief executive of RentJuice, a company that provides services for landlords in Chicago, New York, Miami and Boston. “You have prices circling up. We’re seeing fewer incentives being given. Fewer brokerages are working (to market) some of the high-rises because they’re filling up more. The supply hasn’t moved as much as demand has increased,” he told the Tribune.
I sometimes see prospective buyers wavering about whether to buy a home or continue to rent. Buyers certainly need to be sure that their jobs are stable, that they have some savings and that they plan to stay in Chicago for a good while (I recommend five years, at a minimum.) But with home prices now at a 10-year low, I can certainly find you a condo to buy that will cost the same — or less — than it would to rent a similar apartment.
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.
These days, selling a Chicago condo is almost all about pricing. I was doing a search recently for some Bucktown buyers when I came across some interesting data for the neighborhood, suggesting that there is a sweet spot for Bucktown (and Wicker Park) condo pricing: between $300,000 and $350,000.
Over the past year, more condos in West Town (the MLS area that includes Bucktown, Wicker Park, and River West) — 137 of them, to be exact — sold in this price range than at any other price point. Another 109 condos sold at prices between $350,000 and $400,000.
Since a total of 691 condos were sold here over the last 12 months, that means more than a third of them went for somewhere between $300,000 and $400,000.Why does this matter? Every property is different, of course, but the price distribution gives you a pretty good idea of the competition. In a relatively cool market, it helps to know that the hottest action is happening in the low $300s. If you want to sell in Bucktown or Wicker Park, it may make sense to price your condo at $349,000 and aim for a quick sale rather than starting at $400,000 and waiting for buyers to materialize.
Buyers are scarce these days, especially for big-ticket items. For example, only 80 condos sold for more than $500,000 in the past year in all of West Town. It makes sense; these days you can find a single-family house for that price in many desirable Chicago neighborhoods.
The Chicago real estate market continues to struggle. In June, according to the latest data from the Illinois Assn. of Realtors, both the median price and the number of home sales fell considerably compared with the previous year.
This is more good news for Chicago buyers, and equally bad news for sellers. The median price for single-family homes and condominiums in June was $207,000, down 11.6% compared to $234,250 in June 2010.
And far fewer homes traded hands this June, primarily because last year we were still seeing the helpful effects of the federal tax credits for buyers, which inflated home sales. Home sales totaled 1,841 in June 2011, a dramatic 27.1% drop from the 2,526 homes sold during the same month last year.
Home prices and sales were also down statewide. Illinois home prices sank 11.7%, on par with Chicago’s numbers. But home sales across the state declined less than they did in the urban areas, dropping 16.3% over the past year.
The high number of foreclosures in Chicago — our city is now ranked #1 nationwide in foreclosed properties — continues to muddle the hopes of a local real estate recovery. “In the coming months, we will be observing the economic pressures which will likely lead to an increase in distressed assets to the market,” predicted Mabel Guzman, president of the Chicago Association of Realtors.
If you are considering buying a home, the forecast appears sunny for the foreseeable future. Rates on 30-year fixed mortgages are now hovering at 4.5% in the Chicago area, prices are back at levels last seen a decade ago, and there are plenty of foreclosures keeping a lid on price increases. Buying a home is now just as affordable as renting in Chicago, plus it gives you a significant tax break and the chance to build equity rather than just forking over thousands of dollars to your landlord every year.
Recently I helped one of my clients find a 2-bedroom condo in downtown Chicago. But this wasn’t just any 2-bedroom unit she was after; it had to be above the 15th floor with a fabulous, unobstructed view of Lake Michigan. Two baths, a balcony, and parking were also on the list.
We searched on and off for months, exploring high-rise buildings along the lake like 1212 Lake Shore Drive and 1300 Lake Shore Drive. Then we moved further south, where we saw plenty of units in newer luxury buildings such as 225 N Columbus Drive (“Aqua”); 420 E Waterside Drive; 340 E Randolph Street; 130 N Garland Court; and 60 E Monroe Street, among others. One of the nice upsides to our prolonged real estate downturn is that the Chicago Loop is now swimming in condos, many of them still owned by developers — and this oversupply means buyers can now get a piece of prime downtown property for a reasonable price.
Take 130 N Garland, a high-rise built in 2005 that directly overlooks Millenium Park, with the lake shimmering behind the grassy expanse and the Pritzker Pavilion. In 2007, several 2-bedroom/2-bath units sold in the building at prices between $800,000 and $850,000. But this summer, my buyer was able to find an east-facing condo on the 23rd floor for substantially less. It had been on the market for two long years, originally priced at $795,000 (with parking sold separately for another $40,000.)
My buyer closed last week… for $690,000, including parking. Just in time to watch the Fourth of July fireworks from her new balcony overlooking the lake!
These are the kind of deals people are now finding in downtown Chicago. Almost new units in almost new buildings, in the heart of the city with a true lake view. Many of these 2-bedroom units can now be had for less than $700,000. Call me at 773-816-1788 if you’d like to see some.
Will 2011 prove to be the bottom for Chicago home prices? The jury is still out, but on a national level, many housing experts believe that the worst will soon be behind us.
In June, MacroMarkets LLC polled more than 100 economists, real estate experts and investment strategists with a wide range of viewpoints, including the National Association of Realtors Chief Economist Lawrence Yun, Moody’s Analytics economists Mark Zandi and Cecilia Chen, FusionIQ CEO Barry Ritholtz, and Freddie Mac Chief Economist Frank Nothaft. More than half of the panel said they expect U.S. home prices to hit bottom sometime this year and then remain stable through 2015.
“A significant majority of our panelists believe that the bottom for home prices arrived in the first quarter or will arrive sometime before year end,” said Robert Shiller, co-founder of the Standard & Poor’s/ Case-Shiller National Home Price Index and Macro Markets’ chief economist and co-founder. “Despite persistent macroeconomic uncertainly and unprecedented housing market dysfunction, almost two-thirds of the panelists see the U.S. residential real estate market as at an historic turning point.”
To be sure, I still see plenty of homes that aren’t selling. But those that do sell tend to be either distressed properties at bargain prices or handsome homes with plenty of amenities in solid neighborhoods. Put it all together, and it seems home prices in Chicago are finally starting to touch bottom.
Buyers often ask me for advice about a key question: Is it better to buy a smaller place in a nicer neighborhood, or a bigger home in a slightly less-desirable area? Real estate always involves a series of trade-offs (regarding price, location, size of the home, age of the home, amenities, school district, etc. etc. etc.) but this Location Vs. Size debate is one of the central decisions that buyers must make. In other words, is it a better investment to buy a 2-bedroom condo in, say, a stable, affluent area like Lincoln Park… or maybe a 3-bedroom condo a little further north, perhaps in Uptown or Edgewater?
These days, my vote would have to go with Location. That’s because we are now in Year 5 of a brutal and unrelenting real estate downturn, and I’ve watched homes in many fine North Side neighborhoods lose their value as buyers increasingly turned away from up-and-coming, less central areas in favor of those that were already quite popular. A bird in the hand is probably worth at least five in the bush in these uncertain times, and if you buy in an established, thriving community like Lincoln Park, you will likely come out ahead no matter what.
Consider the prices of condos and townhomes in Lincoln Park over the past two years. While other Chicago communities (and the city as a whole) saw home prices drop, the median sale price for Lincoln Park condos and townhomes increased 14.2% since June 2009, according to MLS data. And the climb has been relatively steady. Two years ago, the median sale price was $530,000. A year later, it was $557,500. And this June, it had jumped to $605,000.
Chicago home buyers are voting with their feet. Every day, they are choosing where to invest, live, and raise families — and they aren’t in a mood to gamble on a neighborhood that seems to be struggling or battered by foreclosures or lacking a strong commercial center or too far from the action. Lately I’m seeing more buyers opting for places like Lincoln Park, Lakeview, Bucktown, and the Gold Coast over areas like Logan Square, Irving Park, Albany Park, Uptown, Edgewater and Rogers Park — even if it means less space.
I have some clients looking for a townhome in the $700,000 range in Wicker Park, Bucktown, or Lincoln Park, and lately we have run across several impressive homes with a least three bedrooms, garage parking and a roof deck. Because Wicker Park and Bucktown tend to boast newer construction than other areas of the city closer to the lake, their selection of mid-range townhomes has been more attractive than that of, say, Lincoln Park, where many townhomes were built in the 1980s.
Take, for example, the 4-bedroom, 2-and-a-half bath townhouse at 1757 N Paulina, Unit O in the heart of Bucktown. Tucked away in a narrow courtyard off a nondescript street, these brick townhomes aren’t much to look at from the outside. (This is often the case with Chicago townhome developments; you’ll find an expanse of brick broken up by an occasional bay window jutting out, usually framed in metallic cladding or limestone as an accent. Nothing too exciting, generally, but once you step inside some homes rapidly distinguish themselves from the masses.)
Here on Paulina, the home immediately opens up into a soaring living room bathed in light, anchored by a dramatic floor-to-ceiling stone fireplace. The kitchen –which has seen some $60,000 in upgrades — was truly beautiful, with custom Brookhaven cabinetry and white Brazilian granite. There was a huge island and room for a large table (or a built-in banquette, in this case.)
This elegant home was priced at $669,000 — and it’s not alone. We have seen several at this price point that are worth consideration, a welcome change from the lofty prices such upgraded homes used to command. There was a similar unit in this development that sold for $800,000 in 2008.
Even in this market, a lovely home in a good location that is well-priced is likely to sell. People still value beauty (and location). And while this Bucktown townhome wasn’t quite right for my buyers, it sold quickly — just three weeks after hitting the market.
For a building that is only four years old, Catalpa Gardens has seen more than its fair share of trouble. This colorful complex had the misfortune to be built and unveiled to the public just as the Chicago condo market was beginning a steep decline. This plunge not only caught off guard the developers — who were forced to slash their asking prices by as much as $150,000 on some 2-bedroom units — but it pretty much trapped dozens of buyers who purchased their units here before the massive price cuts in 2009.
I’ve written about the problems here before; in fact, in late 2009 I warned potential buyers to beware of this 126-unit building, a virtual ticking time bomb since so many owners were deeply underwater. Now we are seeing the fallout.
Over the past year, there have been 12 sales in the building, including 9 short sales. One was a foreclosure, and the last two were the developer’s “liquidation” of the final units. One of those, a sixth-floor unit with 2 bedrooms, 2 baths and garage parking, sold for $230,000 — the highest price in the building all year. It had previously been priced as high as $417,301 (with parking an additional $31,900.)
But the real losers in the Catalpa Gardens debacle are the regular folks who paid top dollar for a new building whose value was sinking by the day. Like the owner of #703, who paid a whopping $439,661 for a 1200-square-foot 2-bedroom, 2-bath condo in the summer of 2008. The housing market was already crippled then, and a year later this owner was trying to get out. But Catalpa Gardens was in serious trouble, and unit #703 (priced at $399,900) did not sell. The owner was forced to cut the price seven times, to $189,000, before it finally sold as a short sale last spring.
That’s right. This poor homeowner owned the place for less than two years, sold it for an appalling 57% less than he paid for it, and destroyed his credit in a short sale. And consider the fate of a similar sixth-floor unit, #603, whose owner paid $435,061 in 2008. That one has been for sale now for almost two years, currently priced at $175,900. It’s also a short sale.
Today there are six units for sale at Catalpa Gardens, and five of them are short sales or foreclosures. The cheapest is a 1-bedroom, one-bath condo priced at $103,500. More distressed sales are certainly ahead for this star-crossed building, but prices are now so low that these units are beginning to seem like a deal.
Condo prices have tumbled 10.4% nationwide in the last year, according to data just released by the National Assn. of Realtors. But the plunge was much worse in the Chicago area, where prices dove 24.1% in the first quarter compared to a year ago.
The region (Chicago-Naperville-Joliet, in terms of the realtor’s association) fared worse than almost every other metro area in the country. Only the Tampa and Sarasota regions in Florida and Barnstable Town, Mass., saw condo prices fall further.
No wonder it’s getting so difficult to sell a condo in Chicago. What was once an active market has become seized and sclerotic, with thousands of condos for sale that just sit and sit and sit. I’m now seeing this troublesome trend in desirable neighborhoods like Andersonville and Lincoln Square, as well as much of Edgewater, Uptown, and even parts of Lakeview. Chicago’s North side seems to be awash in condos, may of them recent rehabs or nicely restored vintage units, that languish on the market for months despite their appeal. For many condos, showings are scarce and open houses attract only a few people, even at the height of the spring market.
What is going on here? Are young people, who traditionally drove the market for first-time condo buyers, deciding that it’s simply better to rent? Or are so many of them unemployed or under-employed that they can’t qualify for a mortgage? There are definitely fewer first-time buyers in the market these days; according to the realtor’s association, first-time buyers purchased 32% of homes in the first quarter, down from 42% last year when a $8,000 tax credit was stimulating sales.
If first-time buyers sit on the sidelines, our market will become paralyzed. First-time buyers drive sales by buying at the lower end, which then frees up those sellers to go buy another home. But if people can’t sell their condos, most of them won’t be able to buy again. They will be stuck. And unfortunately, this year many Chicago sellers are discovering that is exactly where they are.
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