Sue Fox, @Properties. Direct 773.816.1788
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Archive for the 'South Loop' Category
A well-known Chicago developer just agreed to pay $26 million for a large chunk of land just north of Roosevelt Road, on the east side of the river. A new brewery, Motor Row Brewing, opened its doors in January on the 2300 block of South Michigan. Hundreds of new apartments are being built along South Clark, the British School of Chicago is designing a new South Loop campus, and home prices are steadily recovering — in some cases almost reaching peak levels last seen six years ago.
Is the South Loop back in the game?
Just three years ago, the South Loop was awash in cheap condos whose owners were so deeply underwater that they were going into foreclosure, trying to sell them short, or simply renting them out and waiting until prices recovered. Entire buildings had slipped from bright “grand openings” with shiny sales centers into a troubled half-lives as rental buildings because so few owners had stuck around to live there after the market crashed. When I would go to show condos in the South Loop, some buildings had so many units for rent and sale that they’d designated a special room for dozens of lockboxes filled with keys, so REALTORS® could let themselves in.
At the bottom of the market — which turned out to be the summer of 2012 for the South Loop — median sales prices in two of the area’s main zip codes, 60616 and 60605, had plunged about 40 to 50% over the peak in 2009.
What a mess. But the turnaround has been sharp, and now prices are within 13 to 17% of their previous highs. In other words, the South Loop is well on the road to recovery.
In practical terms, this means that the median home price is now $298,525 in zip code 60616 and $361,000 in 60605. Which means that an investment in the South Loop is now looking like less of a gamble and more of a sure thing. Sellers will finally be able to unload properties bought at the top of the market, and buyers will find a neighborhood whose restaurant, bar and retail scene is growing hotter by the day.
Home sales are down all over Chicago — they fell 27% citywide over the past year — but things have really fallen off a cliff in the once-hot South Loop. The area is now flooded with glassy condo units, many of them in relatively new high-rises or mid-rise complexes, and it looks like this decade-long binge of overbuilding has left the South Loop with quite the condo hangover.
I was just there showing 2 bedroom/2 bath condos to buyers this week, and I was struck by how small many of them are. Even at the $300,000 price point (including parking), the living rooms tend to be so compact that it’s hard to imagine fitting in a dining table. The new kitchens may look flashy, but eating dinner scrunched over the breakfast bar can get old. Many of these condos do not even measure 1,000 square feet.
While they may be sufficient for one or even two people, such small spaces are often quickly outgrown. But there are so many condos in the South Loop that selling one can be tricky. Over the past year, the number of 2 bedroom/2 bath condos sold throughout the Near South Side (the MLS area that encompasses the South Loop) has dropped a stunning 39 percent, from 318 units to 194.
Sales have held pretty steady in the popular $200,000 to $300,000 range. But they have plummeted more than 50% for higher price points. The median condo price, meanwhile, has dropped about 7% year over year.
For buyers, the South Loop offers one of the only Chicago neighborhoods that is both so close to downtown and so affordable. But with sales slowing this dramatically, prices are likely to follow. As I advised my buyers, if you’re going to invest here, be prepared to stay awhile. With the glut of similar homes in the South Loop, it may be tough to sell if you outgrow your sleek 900-square-foot condo in three years.
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.
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).
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.
- Sizzle is back in the South Loop
- How to Buy a Chicago Foreclosure (as Supply Steadily Shrinks)
- Home prices jump 15% in 2014, but cold weather chills sales
- Lincoln Square on a Tear as Average House Price Tops $600,000
- More choices ahead for Chicago buyers as rally cools