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Our main blog has been moved to chicagonow.com/getting-real
but we occasionally post articles here as well.

Articles for ‘Condos/Townhomes’

Lincoln Park Home Prices Not Immune To Downturn

Monday, January 11th, 2010 by Gary Lucido

There was a heated debate on Cribchatter the other day about home price declines in Lincoln Park. Everyone’s favorite Lincoln Park bull, going by the fake name of Steve Heitman, claimed that not only has Lincoln Park real estate held it’s value but that people were still making lots of money on their homes there. He proceeded to provide 4 examples of people who were selling their homes at a profit in the last 30 days. Of course, this unleashed a torrent of discussion. One of his examples proved to be wrong – the seller actually lost money – and “Steve” was also accused of cherry picking his examples.

Well, I did an analysis on Lincoln Park home values about a year ago and have been meaning to update it for some time now so this discussion finally motivated me to do it. Since “Steve” showed condo examples and since there are more condo sales in Lincoln Park than anything else I focused on condo sales – every closing in the last 30 days where prior sales data was available. This is what I found, sorted by prior sale date.

Address Sale
Price
Prior
Sale
Prior
Price
Gain/Loss
1960 N Lincoln Park West Unit 1009 $ 250,500 2/27/1998 $ 174,000 44%
2500 N SEMINARY Unit 7W $ 400,000 4/30/2002 $ 396,000 1%
1916 N MAUD Unit C $ 635,500 5/2/2002 $ 545,000 17%
1049 W ALTGELD Unit 2A $ 275,000 7/22/2003 $280,000 -2%
1848 N Mohawk Unit 1 $ 700,000 8/4/2003 $ 657,000 7%
823 W LILL Unit 2W $ 398,750 5/17/2004 $ 425,000 -6%
2000 N LINCOLN PARK WEST Unit 1510 $ 193,000 1/12/2005 $ 414,000 -53%
1982 N MAUD Unit J $ 525,000 2/7/2005 $ 477,000 10%
2145 N Sheffield Unit 3 $ 505,000 3/8/2005 $ 500,000 1%
2700 N HAMPDEN Unit 16C $ 295,000 3/21/2005 $ 271,000 9%
2619 N Seminary Unit 3 $ 515,000 4/21/2005 $ 522,000 -1%
2150 N RACINE Unit 2 $ 456,000 7/22/2005 $ 451,500 1%
1831 N Hudson Unit A $ 257,500 9/1/2005 $ 385,000 -33%
2620 N CLYBOURN Unit 204 $ 295,000 9/8/2005 $ 325,000 -9%
2650 N MILDRED Unit 3 $ 560,000 9/26/2005 $ 605,000 -7%
2625 N CLARK Unit 908 $ 153,000 11/9/2005 $ 325,000 -53%
2417 N JANSSEN Unit B $ 360,500 12/2/2005 $ 375,000 -4%
2512 N BOSWORTH Unit 409 $ 389,900 2/7/2006 $ 413,500 -6%
2020 N Lincoln Unit A $ 690,000 2/10/2006 $ 1,000,000 -31%
442 W Dickens Unit 3 $ 330,000 10/5/2006 $ 349,500 -6%
1717 N Crilly Unit 1 $ 532,500 3/28/2007 $ 534,505 0%
1660 N LaSalle Unit 1210 $ 240,500 5/31/2007 $ 194,000 24%
1735 W Diversey Unit 601 $ 480,000 12/26/2007 $ 565,000 -15%

As you can see, pretty much everyone who bought a condo in Lincoln Park since April 2005 lost money in the last 30 days. (I should point out that the 1660 N LaSalle condo, shown selling at a “gain”, might very well have had substantial work done on it since being originally purchased – it’s hard to believe it gained that much value on its own.) On the other hand, eyeballing the data, the situation looks better today than it did a year ago. Homes don’t seem to have lost as much value in Lincoln Park as they were losing a year ago.

As the debate on Cribchatter did include a discussion of transaction costs and renting vs. buying, I will point out that when you take transaction costs into account the situation is even worse and renting would have been a better option during this period. However, 4 years is a pretty short time period and I would argue that, for people planning on staying in their homes for a while, they haven’t done too poorly in Lincoln Park. On the other hand, during this same time period average home prices in Chicago have fallen 15% according to the Case Shiller home price index and it doesn’t look to me like Lincoln Park has held its home values any better than the city as a whole.

Oh, one other caveat. Anecdotally, it does appear that people who bought condos in large buildings on busy streets may have gotten hit harder than those that bought in smaller buildings on quiet, tree-lined streets.

Chicago Home Inventory And Market Times Showing Dramatic Improvement

Sunday, November 22nd, 2009 by Gary Lucido

When we updated our Chicago real estate market statistics recently we noticed that the last 24 months of history for 2 – 3 bedroom condos (the sweet spot of the housing market in Chicago) had changed dramatically from the last time we updated these statistics.

Chicago Condos Days On Market

The red marker on the graph marks the spot where the new market time data begins. After calling the data provider and launching a 2 day investigation we discovered that they had just fixed an error in the way that they determine the days on the market. The result is that the market times are now shown to be much worse than we had thought but they have also been exhibiting dramatic improvements throughout the course of 2009.

You can see a similar improvement in the Chicago housing inventory, though these statistics were not impacted by the change.

Chicago Housing Months Of SupplyCondo market times are down and inventory levels are down since the beginning of the year. The number of condos on the market is down at the same time that the number of condos sold is up.

There are probably several factors at play here. Certainly the tax credit is helping sales volume and I believe that sellers who are not prepared to price their properties properly have given up on selling – for the time being at least. Many of them just can’t afford to sell at current market levels. Some argue that this represents a shadow inventory of housing that will come back to haunt us another day. However, while I think that may prevent real estate values from rising, I don’t think it’s going to further depress Chicago housing prices because these home owners have already demonstrated an unwillingness to sell at current prices.

As always you can find our housing market statistics for several Chicago neighborhoods at the links below:

1400 S. Michigan Lowers Prices To Auction Levels

Friday, November 20th, 2009 by Gary Lucido

Earlier today I received an email from 1400 S. Michigan – Tower II promoting recent price reductions with the subject line “Auction Pricing without the Auction!” Basically they are claiming that they’ve lowered their asking prices to the auction levels. Well, if you can buy a unit at the same price as at auction then that’s a pretty good deal because you can do so at a more leisurely pace and without all the auction mania going on. Let’s see if this claim holds water.

Unit 1312, 1 bedroom/ 1 bath and 692 sq ft has been cut from $253,990 to $182,990. That compares with unit 1812, which sold for $182,000 at auction. Well, that’s a higher floor but let’s assume there is some room for negotiation on unit 1312 – though developers don’t usually like to negotiate.

Unit 1508, 1 bedroom +/ 1 bath and 751 sq ft has been cut from $268,990 to $199,990. That compares with unit 2008, which sold for $204,000 at auction, which seems reasonably fair – lower price for a lower floor.

Unit 2707, 2 bedroom/ 2 bath and 1259 sq ft has been cut from $490,990 to $378,990. That compares with unit 2607, which sold for $336,000 at auction. So I would not say that unit 2707 is available at auction prices. This one is much higher.

Oh…and they might want to update their MLS listings. The bulk of their listings that are showing as active were sold at auction. I think that violates some kind of MLS rule.

Comparing Assessments – Part II

Wednesday, November 18th, 2009 by Gary Lucido

Let’s assume that after adjusting for all the factors in my earlier post on comparing Chicago condos with different assessments you are still left with a choice between two condominiums that have different assessments. How do you then factor in that difference – especially if the condo with the lower assessments has a higher price?

Let’s start with a simple approach for making that comparison, based upon an example where the difference in assessments is $100/month and your mortgage interest rate is 5%. In that case the extra $1200/year in assessments is approximately equal to the interest you would pay on an additional $24,000 purchase price ($1200/.05). In other words, for the same monthly outlay you could afford a $24,000 more expensive home or buying the home with a $100/month assessment is equivalent to spending an additional $24,000 on a home. In fact, most buyers intuitively take this into account by looking at their total monthly outlay in terms of mortgage, taxes, and assessments.

That’s the basic concept. It gets more complicated (doesn’t it always?)

First, there’s the tax benefit of a mortgage. If your marginal tax rate is 25% then the after tax cost of mortgage interest is really 3.75%. So that $100/month is really equivalent to paying an extra $32,000.

But I’m not done. It gets even more complicated. Really complicated on this round. In fact, it gets downright scary. Let’s say you believe that your assessments are going to go up because of inflation – maybe 3% per year on average. Wellllllll….now that’s equivalent to paying an extra $160,000 (1200/(.0375 – .03)!

OK. You’re not going to believe that and, while it’s accurate, it’s not totally correct so I better explain. The formula I used above is for what’s called a perpetuity. In other words, it assumes you are going to live there forever. Of course, that’s not true. In fact, you will either die (sorry, but it’s true unless you are a teenager in which case you believe you are immortal) or move before perpetuity comes. So what you really need to do is factor in the increases that will occur while you are living there using a technique called discounted cash flow, which is too complicated for me to get into right now but, in a simplified form, it’s actually the basis for all the formulas I’ve been kicking around here. Basically, it averages out the increases you are likely to experience while living in this place and it comes up with a number far closer to $32,000 than $160,000.

But here’s the point: an extra $100/month really adds up over time and the longer you live there the more of a burden it’s going to become. So think twice about buying a place with a higher assessment unless it’s a lot cheaper.

1400 S Michigan Avenue Tower II Auction Results

Sunday, November 15th, 2009 by Gary Lucido

Today I attended the condo auction for 1400 S Michigan Avenue – Tower II held at the W Hotel on Adams St. in Chicago – along with about 300 -500 other people. 43 condos were auctioned off in about 1 1/2 hours at an discount off of the last list price of about 26%. Here are the results sorted by exposure and unit number (you may want to check out the floorplans at the link above):

Unit # Unit
Type
Sq.
Ft.
Exposure Last
Asking Price
Auction
Price
Discount Auction Price /SF Assessments
500 Studio / 1BA 580 East $135,900 $160,000 -18% $276 $239
1107 1BD + /1BA 751 North $264,900 $198,000 25% $264 $293
1507 1BD + /1BA 751 North $266,000 $202,000 24% $269 $306
2107 1BD + /1BA 751 North ??? $218,000 ??? $290 ???
2205 1BD + /1BA 825 North $305,000 $243,000 20% $295 $359
2505 1BD + /1BA 825 North $316,000 $251,000 21% $304 $375
2507 1BD + /1BA 751 North $306,900 $222,000 28% $296 $371
2605 2BD /2BA 1,144 North $520,000 $296,000 43% $259 $488
2705 2BD /2BA 1,144 North $525,000 $317,000 40% $277 $491
703 2BD /2BA 1,260 Northeast $429,900 $302,000 30% $240 $444
1203 3BD /3BA 2,120 Northeast $682,000 $601,000 12% $283 $764
2603 3BD /2BA 1,540 Northeast ??? $506,000 ??? $329 ???
809 2BD /2BA 1,027 Northwest $345,900 $274,000 21% $267 $381
1409 2BD /2BA 1,027 Northwest $363,900 $279,000 23% $272 $400
1509 2BD /2BA 1,027 Northwest $366,900 $281,000 23% $274 $403
2009 2BD /2BA 1,027 Northwest $381,900 $286,000 25% $278 $419
2309 2BD /2BA 1,027 Northwest $390,900 $285,000 27% $278 $446
2509 2BD /2BA 1,027 Northwest $395,900 $297,000 25% $289 $460
2607 2BD /2BA 1,259 Northwest $559,000 $336,000 40% $267 $524
1906 1BD /1BA 783 South $302,900 $218,000 28% $278 $318
2006 1BD /1BA 783 South $305,900 $221,000 28% $282 $321
2008 1BD + /1BA 751 South $276,000 $204,000 26% $272 $314
2106 1BD /1BA 783 South $308,900 $219,000 29% $280 $351
2108 1BD + /1BA 751 South $279,900 $211,000 25% $281 $350
2208 1BD + /1BA 751 South $282,900 $208,000 26% $277 $353
2306 1BD /1BA 783 South $314,900 $220,000 30% $281 $357
2308 1BD + /1BA 751 South $285,900 $212,000 26% $282 $356
2506 1BD /1BA 783 South $320,900 $220,000 31% $281 $371
2802 2BD /2BA 1,115 South $439,900 $317,000 28% $284 $510
1104 2BD /2BA 1,260 Southeast $435,900 $326,000 25% $259 $405
2602 3BD /3BA 1,540 Southeast $650,990 $457,000 30% $297 ???
2510 2BD /2BA 1,027 Southwest $391,900 $305,000 22% $297 $449
2606 2BD /2BA 1,259 Southwest $559,000 $338,000 40% $268 $521
2706 2BD /2BA 1,259 Southwest $446,900 $327,000 27% $260 $532
1211 1BD /1BA 692 West $239,000 $180,000 25% $260 $277
1812 1BD /1BA 692 West $238,900 $182,000 24% $263 $294
1911 1BD /1BA 692 West $238,900 $182,000 24% $263 $300
1912 1BD /1BA 692 West $240,900 $186,000 23% $269 $298
2011 1BD /1BA 692 West $241,900 $185,000 24% $267 $303
2212 1BD /1BA 692 West $243,900 $188,000 23% $272 $310
2311 1BD /1BA 692 West $246,900 $183,000 26% $264 $317
2312 1BD /1BA 692 West $246,900 $188,000 24% $272 $314
2512 1BD /1BA 692 West $252,900 $182,000 28% $263 $317

There are several interesting observations from this auction:

  • You will notice that unit 500, which is a studio, actually went for more than the last list price. Regardless of what you think it was worth, we can only conclude that when this unit was on the market people were not aware of its availability. Otherwise the bidders could have bought it then for a lot less.
  • I don’t show the auction sequence here but they auctioned off the higher floors first. In several instances the lower floors then went at a higher price – e.g. units 2512 and 2312. I’m thinking that either people incorrectly assumed that the higher bidders would be taken out in the earlier round or they developed remorse that they didn’t get the higher floor.
  • It looks like the developer was trying to get about a $3K premium per floor. However, the auction only assigned a premium like that about half the time.
  • Unit 2602 seemed overpriced relative to 1203 and in fact the auction gave it a bigger discount.
  • I was surprised that the south and west views went for as high prices as they did vs. the north and east views.
  • When they say get there an hour ahead of time you should if you want to get free food and good seats.


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