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Yikes! Chicago home prices drop 37% since 2007

filed under: Buyers, Chicago home prices, Chicago home sales, Market conditions, Sellers posted on September 23rd, 2011

DOWN IN UPTOWN:

WAY DOWN IN UPTOWN: This 3-bedroom, 2-bath condo, located at 4857 N Winthrop #2S in Uptown, sold for $345,000 as new construction in 2003. Eight years later, it is on the market at $250,000. The condo, which went under contract in July, is now a short sale -- meaning the owner owes the bank more than it's worth. Home prices in Chicago have fallen a stunning 37% citywide since August 2007. Such a massive drop pushes thousands of Chicago homeowners underwater, signaling that more short sales and foreclosures are ahead.

Unfortunately for all Chicago homeowners, the median Chicago home price has plunged over the past four years. According to data just released by the Illinois Assn. of Realtors, the median price was just $192,500 in August, a drop of nearly 4% since last August. Now, a 4% drop doesn’t sound so terrible… but remember, this decrease comes on top of several years worth of steeper declines. Chicago home prices have fallen an astounding 37% since August 2007.

Check out the median price decline:

  • August 2007: $305,000
  • August 2008: $297,500
  • August 2009: $229,900
  • August 2010: $200,000
  • August 2011: $192,500

Like most realtors, I encounter a lot of sellers who know that “the market is bad” but somehow cling to the hope that maybe their home is still worth what they paid for it, or at least what they still owe. They want to price their Chicago condo or house based on whatever number they calculate will protect them from financial harm.

But if you bought your home anytime in the last five years chances are very good that it is worth considerably less than you paid for it. A realtor can look up the recent sales in your neighborhood and give you a decent idea of just how much less. But even in North Side communities like Uptown, Andersonville and Edgewater, prices overall are down at least 20%. Irving Park, Albany Park, Logan Square, the South Loop and Rogers Park are in even worse shape (particularly Rogers Park, an area decimated by foreclosures where sale prices have dropped more than 60% in recent years). Lincoln Square, Bucktown, Wicker Park, and Lakeview have generally held up better, but they have still taken a haircut.

The volume of home sales is up over last summer, but that number is deceptive because last summer — right after the home buyer’s tax credit had expired — few people were buying homes. In the city of Chicago, home sales totaled 1,787 for August 2011, an increase of 20.3% over last August. But when you look at the number of homes sold each August since 2007, you’ll see sales have fallen too — by about 39%.

  • August 2007: 2923 sales
  • August 2008: 2078 sales
  • August 2009: 1927 sales
  • August 2010: 1486 sales
  • August 2011: 1787 sales

All things considered, the Chicago market is in pretty dreadful shape, with both sales and prices down nearly 40% in four years. Sellers need to be ruthless in their home pricing and spotless in their home staging to attract a buyer, and for most people who bought their home in recent years it’s useless to imagine selling for what they paid or what they owe. Those numbers have no bearing on what their home is actually worth in today’s crippled market.

Written by Sue Fox // Please leave a comment.

The return of the Chicago two-flat

filed under: Buyers, Edgewater, Lincoln Square, North Center, Sellers, Two-flats, Uptown posted on July 19th, 2011

A SENSIBLE INVESTMENT:

A SOLID INVESTMENT: This Chicago two-flat, located at 1300 W Norwood St. in Edgewater, sold in April for $370,500 -- a price that makes sense for a buyer hoping to rent out one or both units. It was originally priced at $600,000.

Chicago two-flats are back… as a good investment option, that is. For much of the last decade, their price had climbed so high as to no longer make sense for many owners. As I had warned in previous posts, it is ludicrous to pay $500,000 or $600,000 (or more) for a two-flat when each unit will only rent for $1,200 or $1,300 a month.

And once the recession hit, this obvious math finally caught up with many two-flat owners. Suddenly people were scrambling to unload these properties, and the price of multi-unit buildings plunged. Now that they are priced more realistically — meaning that if an owner were to rent out both units, it would come close to covering the mortgage and other expenses — Chicago two-flats are suddenly in demand once more.

In Edgewater, for instance, a classic red brick two-flat located at 1300 W Norwood Street recently sold for $370,500. The math here makes sense: Assuming the buyer put down 10% and got a 30-year loan at a 4.5% interest rate, the monthly payment (including property taxes and insurance) would be about $2,525. Each unit has 3 bedrooms and a bath, which in Edgewater would rent for around $1,400 per month, giving the owner $2,800 in income. That’s enough to cover the expenses… which indicates that this purchase is a sound investment. (And in my example, the buyer didn’t even put down 20 percent! The numbers would work even better if he/she had.)

What wouldn’t make any sense at all is paying $600,000 for the same property, which is where it was originally priced in January 2010. The seller had to reduce the price seven times over the next year, finally settling at $429,000. Still, this two-flat closed for nearly $60,000 less when it sold in April 2011.

In Chicago, people sometimes buy two-flats with the intention of converting them into a single-family house. But even then, the property must be obtained for a reasonable price to make financial sense. These days, dozens of affordable two-flats can be found in appealing neighborhoods. I just searched the MLS in four North side neighborhoods relatively close to the lake — Edgewater, Uptown, Lincoln Square and North Center — and found 29 two-flats for sale from $149,000 (a foreclosure in Lincoln Square) to $400,000.

Is it time to jump back into the two-flat market? If the numbers make sense, I say yes.

Written by Sue Fox // Please leave a comment.

Chicago ranks #1 nationwide in foreclosures

filed under: Buyers, Foreclosures, Lakeview, Sellers posted on July 9th, 2011

CHICAGO, FORECLOSURE CAPITAL OF THE NATION:

CHICAGO, THE NEW FORECLOSURE CAPITAL: Unfortunately, Chicago now leads the nation in the number of foreclosed homes. This 3-bedroom, 3-bath foreclosed house in Lakeview, which was listed at $586,000 at the end of 2009, finally closed last April for $405,000.

The Chicago area now has the largest inventory of foreclosed homes in the nation, and these abandoned properties take longer to sell here than in most other cities.

With 118,776 homes that are either bank-owned or in the midst of being seized by lenders, Chicago ranks first in foreclosures among the 20 biggest metro areas, according to RealtyTrac, a company that compiles housing data. Even the cities that were hit hardest by the housing bust, such as Los Angeles, Miami, Las Vegas, and Phoenix, had tens of thousands fewer homes in foreclosure when the data was collected in May. Los Angeles, for example, was #2 with 86,745 foreclosed homes.

As a realtor who regularly shows homes throughout Chicago, particularly on the North side, I can testify that many of the foreclosures here are: 1) concentrated in poorer, less desirable neighborhoods with older housing stock 2) in lousy condition, often missing kitchen appliances or pockmarked by signs of neglect, such as water leaks and mold 3) if they are condos, located in buildings that may have other foreclosures, short sales, units not paying their assessments or financial problems that make lenders unlikely to give a buyer a mortgage there 4) owned by banks that are disorganized, unresponsive, and even idiotic in their approach to selling the home.

In a story today in the New York Times, the glut of Chicago foreclosures is also blamed on Illinois law that protects delinquent borrowers by requiring lenders to go to court to foreclose, creating a backlog of cases. Meanwhile, Attorney General Lisa Madigan is investigating banks’ “robo-signing” practices, involving the creation of  false loan documents.

Also slowing down the sale of distressed properties is the reluctance of banks to lose money. Banks will be banks, of course, and they don’t want to sell foreclosed homes for substantially less than what the borrower owed on the mortgage. (I also see this mindset slowing down and often thwarting short sales, which is why I generally discourage buyers from even pursuing them until the banks get their acts together.)

The bottom line is that Chicago and its suburbs, especially the poor neighborhoods, are full of foreclosures. Buying one requires lots of patience and the acceptance of more risk than you’d encounter in a normal sale. But there are still some good deals out there, and I have helped several of my buyers pursue foreclosed homes that they now happily own.

Written by Sue Fox // Please leave a comment.

Experts predict bottom for housing prices

filed under: Buyers, Chicago home prices, Gold Coast, Market conditions, Sellers posted on July 6th, 2011

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.

A MILLION DOLLAR DISCOUNT: This Gold Coast

DRAMATIC DISCOUNTING: This Gold Coast greystone, built in 1883, still boasts many historic details, such as a hand-carved staircase, leaded glass windows and a mosaic tile foyer. All it needs now is a buyer! Have prices finally found a bottom in Chicago? One can assume that this owner, who 0riginally priced the home at $2.15 million, hopes so. Currently for sale at $1.49 million, it has been on the market for nearly 3 years. Jeanne Carava of Prudential Rubloff has the listing.

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.

Written by Sue Fox // Please leave a comment.

Sweet interiors in Wicker Park and Bucktown townhomes

filed under: Bucktown, Buyers, Chicago home prices, Sellers, Townhomes, Wicker Park posted on June 20th, 2011

BUCKTOWN LUCK:

BUCKTOWN LUCK: This snazzy kitchen, burnished by $60,000 in upgrades including custom cabinetry and Brazilian granite countertops, was an eye-catching centerpiece of a Bucktown townhome. Priced at $669,000, it went under contract within just three weeks.

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.

Written by Sue Fox // Please leave a comment.

More troubled sales at Catalpa Gardens

filed under: Buyers, Chicago home prices, Edgewater, Foreclosures, Sellers, Short sales posted on June 14th, 2011

CATALPA GARDENS FALLS SHORT: Not two years after many owners bought here, 13 of them are trying to sell their condos short. Because these deals require lender approval (and the lender will lose money), they often fail.

CATALPA GARDENS FALLS SHORT: Over the past year, 9 of the 12 sales here was a short sale. Another was a foreclosure.

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.

Written by Sue Fox // Please leave a comment.

More IL jobs point to real estate recovery

filed under: Buyers, Illinois unemployment, Market conditions, Sellers posted on April 14th, 2011

People often ask me whether the Chicago housing market, which has deteriorated to the point that home prices now stand about where they were a decade ago, has hit bottom. Much of the answer depends on employment, because without jobs, people can’t buy houses. And if they already own homes, they are more likely to lose them if they lose their jobs.

But in recent months, Chicago’s employment picture has brightened considerably. Today the Illinois Department of Employment Security announced that the Illinois unemployment rate dropped to 8.8% in March — marking the 14th consecutive month of good news about local jobs. 

This is particularly important for Chicago, the economic engine of the state and the third-largest city in the country. The jobless rate fell one-tenth of a percentage point from February and is now the lowest since February 2009, when it stood at 8.6%.

 “Illinois is moving in a positive direction,” said the state employment director, Maureen O’Donnell. She said this is the  longest decline in Illinois unemployment  in more than 16 years. However, more than a half a million state residents (582,100, to be exact) were still looking for jobs in March.

Jobs are the key to any real estate recovery. If unemployment continues to fall — and mortgage interest rates continue to rise — we may find that 2011 indeed marked the bottom for the Chicago housing market.

Written by Sue Fox // Please leave a comment.

Chicago for sale: Priced right & sold in a week

filed under: Buyers, Chicago home prices, Edgewater, Market conditions, Sellers posted on March 30th, 2011

SOLD! In just a week, this nearly new

SOLD! In just a week, this nearly new 3-bedroom condo in a luxury building had a buyer. The property was priced just right at $359,000, a price determined by recent sales -- or lack thereof -- of similar units in Edgewater.

I was going to write about my latest listing, a 2000-sq-ft luxury condo with three bedrooms, two baths, garage parking and a roof deck with a great view of the lake. But it’s already been snapped up by a buyer, after just a week on the market.

So what’s the secret? Yes, it was a lovely unit with plenty of space and high-end finishes, in a snazzy building built just a few years ago. But the reason is sold so quickly, which I see time and again in Chicago, is that it was priced right. My sellers were realistic, asking $359,000 for a unit they purchased new from the developer in 2006 for nearly $90,000 more.

No one likes to take such a loss. But consider the fate of two similar luxury units in the same little lakeside stretch of Edgewater, just south of Loyola: One condo, at 5722 N Winthrop #3S, was on the market for a tragic 1,134 days. The price started at a lofty $489,500 and finally fell to… $359,000. But it didn’t sell. The owner, probably beaten down by three years of relentless price reductions, finally gave up and took it off the market a month ago. Another similar condo, at 6121 N Winthrop #2N, was originally priced at $359,000 in January, and it went under contract in less than two months.

So when it came time to list their unit, my sellers carefully considered the recent comps, listened to my take on market trends and priced their unit accordingly. Within a week, we had a buyer!

And that is really the point. What good is listing your home if you don’t sell it? We’re now seeing thousands of Chicago home sellers each year that — despite months on the market and multiple price cuts — ultimately fail to attract buyers. If you price your home correctly, you needn’t be one of them.

Written by Sue Fox // Please leave a comment.

Chicago home prices flat while sales sink

filed under: Buyers, Chicago home prices, Chicago home sales, Market conditions, Sellers, Uptown posted on March 23rd, 2011

UPTOWN

AN AVERAGE PRICE TAG: What can you get for the median home price in Chicago, currently $177,500? Try this 2-bedroom, 2-bath Uptown condo, located in a nearly new building at 1000 W Leland Ave. A short sale, it recently sold for just under $179,000.

The monthly sales data is out for February, and the median home price in Chicago — now $177,500 — appears to be pretty much what it was a year ago. It’s actually a tad higher (by $1,000). Perhaps prices have finally stopped their relentless downward slide in the Windy City.

Yet sales volume continued to plummet, meaning that fewer properties are actually changing hands.  A year ago in February, there were 1,225 single-family homes and condos sold in Chicago, according to the Illinois Association of Realtors. But in February 2011, only 1,056 homes were sold, nearly a 14% drop. This is not encouraging news for sellers who are hoping to attract buyers during this year’s spring market.

And prices are way down from where they were even in 2008, which was well after the downturn began. Take a look at Chicago’s median home prices in February over the past four years:

  • February 2011: $177,500
  • February 2010: $176,500
  • February 2009: $218,625
  • February 2008: $290,000

This simple chart shows the devastating impact of the thousands of Chicago homes that have fallen into foreclosure or are being marketed as short sales. All these distressed properties have pushed the year-over-year median price down nearly 40% in just a few years.

Written by Sue Fox // Please leave a comment.

Chicago sellers adjust to new reality

filed under: Buyers, Chicago home prices, Lincoln Square, Market conditions, Sellers posted on February 27th, 2011

LINCOLN

LINCOLN SQUARE AFFAIR: This 5-bedroom Bowmanville house sold last week for $450,000, considerably less than its original price tag of nearly $570,000 when it hit the market last May. It had a new second floor, a custom kitchen and updated electric, plumbing and zoned HVAC. The seller had purchased the home just two years ago for $550,000.

This spring, it seems that Chicago homeowners have gotten the message that housing prices have dropped considerably — and they’re not coming back anytime soon. As I meet with prospective sellers this month, I’m sensing a sober new attitude towards selling their homes. People are being realistic, thoughtful, even calm as they digest the latest sales figures in their neighborhood and decide on a reasonable price.

It’s a noticeable change from recent years, when sellers were apt to be more skeptical of the comps, and more insistent that their home must be worth more. Chicago home prices have been falling steadily for about five years now, with each year worse than the last, and at this point many of those folks who wanted to sell in 2007 and 2008 but kept waiting until the market recovered have finally concluded that a rebound could be years off. Do they want to keep waiting?

Some of them, the ones who really need to sell, are deciding to bite the bullet. I have four new listings on or about to hit the market, and all of the sellers know that they are not going to make any money on their sale. Three of them are listing their homes for less than what they paid four or five years ago.

While the circumstances vary, it’s not uncommon these days for people selling an ordinary, run-of-the-mill condo to lose $50,000 on their sale, when you factor in the commissions and closing costs. That’s why inventory in Chicago is so low right now — the month’s supply in January was 30% lower than it was a year ago. People who can’t afford to sell simply aren’t selling (or else they are attempting a short sale.) People who can afford to sell are, it seems, finally pricing their homes to actually sell them.

And deals are getting done. I just sold a house in Evanston last week… for about 10% less than the seller paid for it in 2004.

Written by Sue Fox // Please leave a comment.