Articles for ‘Condos/Townhomes’
Wednesday, January 20th, 2010 by Gary Lucido
We recently updated our Chicago condo (2 and 3 bedroom units) market data through December 2009. Consistent with all the other positive indicators for the Chicago real estate market, we are once again seeing lower inventory numbers and market times.
Months of condo inventory in December was less than half of what it was in 2008, at a 14 month supply.
This is much better than in the summer when inventory levels were actually higher than the previous year. While units on the market are down slightly, the big impact is from sales that are running at about twice last year’s level.
Meanwhile, the days on the market are also dramatically better at just under 250 days. That’s still a lot but it’s also the best level since the reporting was modified in October 2007.
As always, you can find neighborhood specific data at the following locations. A few of these neighborhoods really stick out – e.g. the Near South Side.
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.
|1960 N Lincoln Park West Unit 1009
|| $ 250,500
|| $ 174,000
|2500 N SEMINARY Unit 7W
|| $ 400,000
|| $ 396,000
|1916 N MAUD Unit C
|| $ 635,500
|| $ 545,000
|1049 W ALTGELD Unit 2A
|| $ 275,000
|1848 N Mohawk Unit 1
|| $ 700,000
|| $ 657,000
|823 W LILL Unit 2W
|| $ 398,750
|| $ 425,000
|2000 N LINCOLN PARK WEST Unit 1510
|| $ 193,000
|| $ 414,000
|1982 N MAUD Unit J
|| $ 525,000
|| $ 477,000
|2145 N Sheffield Unit 3
|| $ 505,000
|| $ 500,000
|2700 N HAMPDEN Unit 16C
|| $ 295,000
|| $ 271,000
|2619 N Seminary Unit 3
|| $ 515,000
|| $ 522,000
|2150 N RACINE Unit 2
|| $ 456,000
|| $ 451,500
|1831 N Hudson Unit A
|| $ 257,500
|| $ 385,000
|2620 N CLYBOURN Unit 204
|| $ 295,000
|| $ 325,000
|2650 N MILDRED Unit 3
|| $ 560,000
|| $ 605,000
|2625 N CLARK Unit 908
|| $ 153,000
|| $ 325,000
|2417 N JANSSEN Unit B
|| $ 360,500
|| $ 375,000
|2512 N BOSWORTH Unit 409
|| $ 389,900
|| $ 413,500
|2020 N Lincoln Unit A
|| $ 690,000
|| $ 1,000,000
|442 W Dickens Unit 3
|| $ 330,000
|1717 N Crilly Unit 1
|| $ 532,500
|| $ 534,505
|1660 N LaSalle Unit 1210
|| $ 240,500
|| $ 194,000
|1735 W Diversey Unit 601
|| $ 480,000
|| $ 565,000
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.
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.
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.
Condo 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:
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.
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.