Sue Fox, @Properties. Direct 773.816.1788
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There are 28 houses, many of them new construction, currently for sale at prices above $1 million in Bucktown, Wicker Park and Ukrainian Village. But despite many months — sometimes more than a year — on the market, the majority of these sellers seem reluctant to lower their prices. Some are surely developers who built spec houses and now don’t want to face the fact that the depressed market has sliced deeply into their hoped-for profits.
Only 13 of the 28 have cut their prices, a ratio far less than the local average. Two-thirds of home sellers in Illinois reduce their asking prices, according to data collected by the Illinois Assn. of Realtors. Home sellers in Chicago, a region hit hard by foreclosures, typically post the largest price reductions in the state.
But at the top of the market in popular Bucktown and its neighboring areas, you’ll find houses like 2556 W Huron Street, a 4-bedroom renovated greystone for $1.3 million that’s been on the market for two and a half years without a price reduction. Or 2032 W Ohio Street, a 7000-square-foot mansion with 5 bedrooms, 20-foot ceilings and a huge roof deck, all spread over two city lots. It’s been stubbornly priced at $1,685,000 for a whole year.
Others are more recent listings, with no price reductions all summer and into the fall. Or there are homes like 1232 N Hoyne Avenue, a modern 6-bedroom with an elevator, two playrooms and a screening room, which has been priced at $1,699,000 for more than nine months (it did have one price cut before that, from $1,749,000.)
While I agree that Bucktown and Wicker Park are wonderful, hip places to live, it’s simply not realistic to leave these overpriced luxury homes languishing on the market. If they are not selling after months online, by definition they are priced too high. And over the past four months, only three of these million-plus houses have closed. Three out of 28… That’s a pretty low ratio.
So if you are shopping for a high-end house in Bucktown and its environs, I wouldn’t put too much stock in these lofty price tags. All three of the homes that actually sold, after all, went for $175,000 to $650,000 less than their original prices.
The latest Chicago housing data is out, covering the month of July, and it looks like both sales volume and prices have climbed slightly compared to last July. (But before you imagine a real estate rebound, remember that last summer Chicago home sales were in the gutter, once the federal tax credit for buyers expired. So things can only go up from there!)
Anyway, there were 1,655 home sales in the city of Chicago (single-family houses and condos) in July, an increase of 4.2% over the previous year. And the median home price in July 2011 was $210,000 — up 6.9% compared to the previous year.
“This is the first month, year-over-year, where we are without a federal tax credit and are encouraged by July’s sales, hopefully a positive outlook for the remainder of 2011,” said Mabel Guzman, president of the Chicago Association of Realtors. “There is an ongoing absorption of units throughout the city, specifically in the performance of the condo market over 2010, as well as compared to 2009.”
Some neighborhoods are obviously selling better than others. In Lakeview, for example, a popular area that is home to Wrigley Field and close to both the lake and downtown, there are now 260 condos for sale with 2 bedrooms and 2 baths. Another 64 of these condos are under contract (pending sale), and 122 have closed in the past three months. That’s a pretty good ratio in this market, with closed sales at roughly half the number of active listings. Condos in Lakeview, in other words, are selling.
Now consider Edgewater, another lakeside neighborhood just a couple miles north. There are 137 condos for sale right now that feature 2 bedrooms and 2 baths. Another 28 are under contract. But just 45 have closed in the past three months — a much worse ratio than in Lakeview. The closed sales don’t even amount to a third of the number of active listings in Edgewater.
Unfortunately, I’ve been witnessing sluggish condo sales in other northern neighborhoods, like Lincoln Square, Andersonville and Uptown. With condo buyers scarce in 2011, many of them seem to be opting to live in areas that are closer to the Loop. For first-time home buyers (or anyone else with cash or good credit), this is an excellent time to snag a great deal in the most coveted, central parts of Chicago.
Despite all the volatility in the stock and bond markets, mortgage rates are now at their lowest point in more than 50 years. The average 30-year fixed rate mortgage fell to 4.15% last week, according to Freddie Mac’s Primary Mortgage Market Survey. Rates have been below 5% for awhile now; previously, the record low (set last November) was 4.17%.
The extra-low interest rates make home buying more affordable than ever, particularly in Chicago, where home prices have dropped more than 30% in recent years. If you’re wondering where to find these rates locally, Guaranteed Rate is one Chicago lender now offering a 4.15% rate on a 30-year fixed loan, while a 15-year fixed mortgage can be had even cheaper: 3.525%. The rate for 5-year adjustable rate mortgage is just 3.125%.
Money to buy a home — if you can qualify for the loan! — is now incredibly cheap. It’s hard to find even a car loan or a student loan with such rock-bottom rates, let alone a mortgage. Mortgage rates closely track yields on U.S. Treasury bonds, which have also dipped. The 10-year note hit a record low on Thursday, falling below 2 percent to 1.99 percent.
If you’ve been considering buying a home (whether to live in yourself, as a second home, a home for your child or as an investment property to fix up and sell — all of which I’ve had buyers recently searching for) now may be the time to act. It is rare to find both interest rates and prices simultaneously so low.
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.
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.
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.
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.
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