Sue Fox, @Properties. Direct 773.816.1788
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The bursting of the real estate bubble sounds more like a balloon slowly deflating in the South Loop. Condo developers badly overbuilt this area, and in the last three years we’ve seen many projects — once hyped with glossy promises of sophisticated urban living — fade into half-occupied shells as prices fell so sharply that many units were converted into rentals.
After failing to find buyers through the usual channels, some developers are now hauling their leftover condos to the auction block. This week, two auctions involving condo developments in the South Loop and Near South Side produced dramatic discounts for buyers, according to Crain’s Chicago Business.
In a 269-unit condo tower at 1400 S. Michigan Ave., known as Michigan Avenue II, 43 units were auctioned off at prices 27% off the previous list price. And at Motor Row, a 51-unit loft conversion project at 2301 S. Michigan Ave., 19 units were sold at a 45% price reduction.
The fire sale comes after a similar auction in March at the Vetro condo project, 31-story tower at 611 S. Wells St. that was built two years ago.
And now, with Chicago’s Olympic bid crushed and Illinois foreclosures and unemployment on the rise, I think it could be many years before the South Loop becomes the trendy destination its backers are hoping for. Lenders on other stalled downtown condo projects may also force developers to hold auctions, clearing out the overbuilt inventory by taking an axe to condo prices.
Lincoln Square, one of the more desirable neighborhoods on the North Side, is now growing more affordable as well. Prices of single-family houses here have tumbled considerably in the last year, making the area a great buy for bargain-hunters.
In June 2008, for example, six houses sold in Lincoln Square, with a median price of $664,500. This June, eight houses found buyers, but the median price had fallen to $532,500 — a 20% drop in just a year.
I think part of the problem was the rash of small-time investors who started buying up old A-frame houses here in 2007 and 2008. Some were contractors, some were real estate agents, some were just starry-eyed dreamers, but they all shared a hope of fixing and flipping these houses for a tidy profit, particularly in the Bowmanville area north of Foster and west of Damen.
Now, unfortunately, Lincoln Square is speckled with lovely, newly-rehabbed houses that can’t find buyers. There’s 2130 W Summerdale, which has been on the market since March, for $645,900. There’s 2110 W Berwyn, also for sale since March, now listed at $650,000. Or 5324 N Leavitt, which has been on and off the market since 2007 and is now a short sale for $650,000. Or 5148 N Oakley, which has been on the market all year and is now priced at $539,900.
All of these homes have endured multiple price reductions of tens of thousands of dollars, sometimes even $100,000. And yet here it is, heading into our sluggish winter season, and they remain unsold.
I love bungalows. As the former owner of a 1913 Craftsman bungalow, I know well the joys of living in a cozy house with old oak floors and built-in bookshelves flanking the fireplace. Entire neighborhoods of bungalows were built in Chicago in the 1920s and ’30s, and today — thanks to the efforts of the Historic Chicago Bungalow Association — most are still standing and many have been updated in keeping with their historic charm.
But many have not! About six months ago, I helped my buyers Anne and Mark Diffenderffer find a rundown brick bungalow on Warwick Ave. in Portage Park. The house had great bones — and it was on a double lot — but it had been neglected. The hardwood floors were badly scuffed and stained, the kitchen was very outdated, and even the walls seemed dirty.
“We were like, uggghhh. It was overwhelming,” Anne said. “We knew we had a lot of work to do.” So they called in a painter and some hardwood floor restoration companies to get estimates before they even closed. Then they had the floors sanded and refinished, all the rooms and some exterior trim repainted, some ceilings patched and doors refinished, and they added beadboard wainscoting to the kitchen.
So far, the new owners have spent about $6,000 on the house. But I would say that they have added at least $20,000 in value, because now their bungalow sparkles rather than sags. When you walk in the door, you see gorgeous hardwood floors and fresh paint coloring the walls. It looks beautiful!
“It definitely feels like a nice, new house,” Anne said this week. She advises other buyers to try to look past the grimy walls, floors, and furniture that so often dulls the shine of older homes. “If everything just needs a fresh touch, that is not a huge investment to make in a house. You don’t have to be a genius at home improvement,” she said.
Even better, now that the house looks lovely, the change has boosted the owners’ spirits so that future upgrades and repairs now feel more manageable. “Once the aesthetics are taken care of, the rest of it seems totally doable,” Anne said. “There’s some psychological impact it has that makes you have more stamina.”
Last week, policy makers at the Federal Reserve suggested that the recession appears to be ending. Consumer spending — which accounts for almost 70% of economic activity — seems to be stabilizing. Other hopeful signs in recent weeks include data showing the country’s three-year housing slump is slowing, and news that unemployment leveled off in July after climbing precipitously in the months before.
In Chicago, we are seeing more evidence that the housing market, while not exactly bouncing back to previous heights, at least does not seem to be sinking further. According to a new report, sales of new homes downtown jumped sharply in the second quarter, from 55 to 313 homes. The quarterly tally is still down 35% compared to a year ago, according to the Downtown Chicago Residential Benchmark Report issued by Appraisal Research Counselors, a real estate consulting group. But at least things are heading in the right direction.
Developers across the city continue to announce dramatic price cuts, sometimes up to 20 or 25%, in order to move their inventory, particularly in large buildings where dozens of units remain unsold. The discounting appears to be working: “The developments exhibiting the strongest sales were the developers which were offering the largest price discounts,” the benchmark report said.
As summer draws to an end, we are seeing more large developers cut prices in an effort to spur sales. The latest example is an FHA-approved building at 2930 N Sheridan, a rehabbed tower that looks a bit drab from the outside. Sales here have been sluggish for two years, and this week the sales center is announcing substantial price cuts.
One-bedroom units now start at $209,900, rather than $249,900. Two-bedroom condos are $229,900 (a $40,000 drop) and three bedrooms can be had for $299,900 (a $50,000 cut).
A new three-bedroom condo in Lakeview for under $300,000? This really is a buyer’s market. Inside the building, the units are bright and modern. But they don’t have balconies, and the brownish mid-century facade outside doesn’t offer much curb appeal. Still, FHA approval means that buyers only have to put 3.5% down, and if they close before Nov. 30 first-time buyers can take advantage of the government’s $8000 tax credit.
Ok, so home prices on the whole are down around 18% over last year in Chicago. But all real estate is local, and in a market as volatile as this one it’s important to zoom in on a given neighborhood before you generalize about the market there. Many areas, particularly gentrified neighborhoods near the lake that have a solid business core, have managed to hold their own in this downturn.
Take Andersonville, the quaint southern swath of Edgewater that runs roughly from Foster to Bryn Mawr and Broadway to Ravenswood. Once a Swedish enclave, Andersonville is a peaceful, tree-lined neighborhood anchored by a strip of small businesses along Clark Street. It offers plenty of restaurants, bars, clothing boutiques, and increasingly, antique shops.
As far as real estate statistics go, Andersonville is generally lumped in with Edgewater, making it hard to discern precisely what is happening in this tiny hamlet. So let’s look at Edgewater, where prices have slipped a bit over the last few years — but only a bit. In 2006, for example, a 2-bedroom, 1-bath condo sold for an average price of $246,525 in Edgewater. In 2008, the average price slipped to $239,188, a decline of about 3%. For single-family houses under $500,000, the average price during that two-year period fell about 5.5%, from $416,972 to $397,958. And for the more expensive homes above $500,000, prices dropped less than 2%, from $698,450 to $686,130.
So if prices are down about 2 to 6% in Edgewater as a whole, chances are Andersonville is doing just fine. Andersonville, which includes the tony Lakewood-Balmoral historic district, is generally more expensive than the rest of Edgewater. Single-family houses in Andersonville often fetch upwards of $800,000 and new condo developments (and there are only a few) tend to sell out quickly. With demand high, prices here have barely taken a haircut even though the city, overall, has been hard hit by the market downturn.
What does all this mean for prospective buyers and sellers? Well, if you’re a buyer in Andersonville, know that you’re unlikely to find massive discounts or a raft of foreclosures here. But rest assured that as a homeowner you, too, will be relatively insulated from price swings as compared to the rest of the city. Andersonville sellers, too, are better off than many in this declining market. Even if you bought your home just a couple years ago, chances are it is still worth around what you paid for it, or maybe a little less. And if you’ve owned it for five years or more, you’re probably ahead of the game.
Every third Saturday, the Edgewater Community Council throws a mini-street fair to highlight a different corner of Broadway. With free music, sidewalk sales, special deals from local businesses, and a free trolley cruising up the street, the June 20 event will spotlight the stretch of Broadway between Granville and Thorndale.
That has been a busy strip lately, what with The Clarovista mixed-use development (formerly known as The Granville) stirring up debate as it hunts for commercial tenants in a soft market. Now Aldi is planning a new store there, to the chagrin of some neighbors who were hoping for a Trader Joe’s instead.
But unity will be on tap Saturday, with a raft of local businesses from spas to liquor stores promoting their wares with discounts and giveaways. Among the deals:
Ole St. Andrew’s Inn will be handing out free rib tips on Saturday, and the Ethiopian Diamond restaurant will have free coupons for the taking. The Edgewater Wellness Clinic will be offering free 15-minute massages, and the local farmer’s market is kicking off its summer season. The Edgewater Green Market runs from 7am to 1pm Saturday at the corner of Broadway and Norwood, just outside True Nature Foods.
For more information about “Third Saturdays,” check out the Edgewater Chamber of Commerce at www.edgewater.org
Developers around town are slashing prices this summer in an effort to move their inventory before the sluggish winter months return. Even brand-new highrise buildings with modern finishes can now be found in the bargain bin, at prices significantly lower than they stood just a month ago.
At SoNo, a stylish pair of new towers near North and Halsted developed by Smithfield Properties, prices plunged this week. One-bedroom units originally priced at $316,750 are now being sold at $275,900. Spacious two-bedroom units, with 1650 square feet, have dropped more than $100,000 — from $579,900 to $475,900. Even parking spaces are now on sale, for $9,000 rather than the $30,000 they once cost. The new prices are certain to irritate exisiting owners who spent more, but it’s a good deal for newcomers. Sales have reportedly been brisk, with at least ten units going under contract over the weekend. (Disclosure: The property is being marketed by @properties, but I have nothing to do with it.)
While SoNo is a particulary visible example, the story is much the same all over Chicago. Developers who planned projects two or three years ago are hurting, facing tough lending climates and far fewer qualified buyers than they expected. With profit margins shrinking — and many of them pressed to pay back their construction loans — some builders are now swallowing the medicine and cutting prices to levels that will actually attract buyers.
Among the deals my buyers have snagged in the last 3 months:
* A Bucktown 3-bedroom, 3-bath duplex for $399,000, in a building where the developer expected to sell each unit in the mid-$500s.
*A Rogers Park 2-bedroom, 2-bath condo for $200,000, in a building where similar units sold for about $245,000 two years ago.
* A Logan Square 3-bedroom, 2 and a half-bath condo for $380,000, on a block where smaller units sold for $50,000 more in 2006.
Such deals are no longer the exception in Chicago. For buyers with good credit, verifiable income, and some money saved for a down payment, the whole city is basically on sale.
After an impossibly chilly, rainy and otherwise dreary June, the sun finally came out this weekend for Midsommarfest, Andersonville’s annual street fair. Thousands of people turned out to roam Clark Street, buying trinkets ranging from $100 handmade silver necklaces to 25-cent temporary tattoos. There was eating, there was drinking, and there was much dancing, as about 50 bands played over the course of the weekend. Retro ’80s anthems — think Bon Jovi — seemed especially popular this year, and one ’80s cover band, Sixteen Candles, even closed their set Saturday night with a rousing rendition of Corey Hart’s “Sunglasses at Night.” Picture 300 semi-drunk people, all apparently over the age of 30, wearing their sunglasses as they chanted along.
By Sunday, the weather was even better, and the crowd swelled with families and children and dogs and couples and clusters of friends sharing six-packs of Miller Lite that they smuggled in, a lovely mix of gay and straight people so unique to Andersonville (and parts of Lakeview.) A good time was had by all, and the $5 donations collected at the door go to support the Andersonville Chamber of Commerce.
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