Market Conditions: Best Year for July Sales Since 2007 in Chicago
It’s that time again. As expected, July sales soared year over year. Median prices also jumped by double digits.
From the Illinois Association of Realtors:
The city of Chicago saw a 31.1 percent year-over-year home sales increase in July 2013 with 2,838 sales, up from 2,164 in July 2012.
The median price of a home in the city of Chicago in July 2013 was $250,000 up 25 percent compared to July 2012 when it was $200,000. Chicago condo prices also saw double-digit gains for the month, posting a 13.8 percent jump to $280,000. Average time on market in the city was 48 days, down 30.4 percent compared to 69 days last July.
Here’s the July data since 1997 (thanks, once again, to G for the info):
- 1997: 1,694
- 1998: 2,139
- 1999: 2,186
- 2000: 2,013
- 2001: 2,410
- 2002: 2,661
- 2003: 3,105
- 2004: 3,429
- 2005: 3,487
- 2006: 3,088
- 2007: 2,819
- 2008: 2,200
- 2009: 2,040
- 2010: 1,631
- 2011: 1,666
- 2012: 2,088
- 2013: 2,838
Inventories continue to be the problem.
“The market is starting to come together, especially in the condo arena that was hard-hit across most areas of the city. That condos are moving at a strong pace now and prices are also increasing means that both buyers and sellers are feeling confident,” said REALTOR® Zeke Morris, president of the Chicago Association of REALTORS® and Operating Principal and Managing Broker, Keller Williams Realty, CCG. “As the availability of inventory continues to decrease, we hope to see buyers look into some of the areas that aren’t performing as well, as an alternative.”
Additionally, foreclosures have all but dried up and those that do come on the market are bought by investors.
“While both prices and sales continue to point to a sustained housing market recovery,” noted Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory of the University of Illinois, “the inventory of homes for sale remains at low levels. The number of foreclosed properties may have deterred many potential sellers from listing their homes. Recent analysis suggests that the level of foreclosed properties may return to pre-recession levels by the end of the year and thus providing some incentive for additional listings.”
What does the CAR mean when it says they “hope to see buyers look in some of the areas that aren’t performing as well”?
That buyers who are looking in Lakeview will now start looking in Uptown or Rogers Park or Albany Park?
New mortgage applications have been falling this summer. That data would indicate that sales, nationally, will also fall in the coming months.
Will July be the best it will get for 2013 or will Chicago be immune to a slowdown?
Illinois home sales and prices see double-digit gains in July; Statewide sales up 28.5 percent, median price jumps 14.2 percent [Illinois Association of Realtors, Press Release, August 21, 2013]
I think sales will slow, as is typical when school starts but I don’t think this is a downturn as much as a slowing. The market heated up fast, now I think people are coming back to reality and hopefully some sort of “normal ness” will return to the Chicago market.
Job growth has accelerated the last fed months in Chicago metro. That is a good indicator of what the market will do. We’ll have to see if it’s sustainable though.
With no new construction high rise condos in sight, I have to believe that prices will climb 10% in the next year with interest rates still low. The alternative is to rent a 2/2 1200 square footer at a new rental tower like Hubbard Place for a minimum of $3350 a month (low floor / minimal view), plus $150 for the utility package, plus $75 for electric / cable / internet, plus $225 for parking and build no equity in the process. And have fun hearing your neighbor watch TV or play with their dog because rentals buildings have paper thin walls.
Rents are crazy. A buddy of mine rented a two bedroom in bridgeport for $650, and it’s a dump. I know there’s not a lot of places that $625 will get a decent two bed, but wow, this was a tenement house for $650 bucks. My other buddy who rents says that he briefly looked at teh south loop but it was well over $2k for a 2 bedroom so he found a place on the NW side for a little more than half the price. Rents are insane. My house in the ‘burbs is less than $2,000 a month (after DP, etc) but deals like mine are long gone in this market. And after a $17,000 overhead sewer install, a $20,000 basemetn/bath renovation, $2k driveway repair, $8k patio…..maybe I would be better off renting for $2k a month in the south loop!
i bought in 2011 in E Lakeview. i live in an 8 unit walk up and a neighbor of mine just rented their unit for ~$1000 over my PITI. I’ve had a realtor in my building asking if I had any interest in listing my unit >20% more than I paid, claiming he had interested buyers who would buy it within a week of listing. the hot rental market is most definitely flowing through to prices. talking my book but i hope it continues.
Rents increase in certain areas by quite a bit, but the older units arent getting the rental increases that the ones built in the last 12-15 years are. Our previous landlord raised the rent $500 a month on a 2 bedroom in Lakeview when we moved out this year. Not SF rent increases but still quite high, and high enough that its causing people to move to other neighborhoods and trade down if anything to not spend absurd amounts. The for sale market is being overheated again by the banks. We have friends who were able to borrow 25% more this year than they qualified for in fall of 2012. Income stayed fairly consistent too.
“The alternative is to rent a 2/2 1200 square footer at a new rental tower like Hubbard Place for a minimum of $3350 a month (low floor / minimal view), plus $150 for the utility package, plus $75 for electric / cable / internet, plus $225 for parking and build no equity in the process.”
How many buyers/renters have the $120,000 (or more) to put down on the 2/2 condo that is equivalent to Hubbard Place? (so I’m not talking about the cheaper buildings like Admiral’s Pointe on Kingsbury.) And how many will stay there long enough to have it pay off?
Sure- if you’re going to be in a property 10 years- then it makes sense to buy it. But who will be in a River North 2/2 for 10 years?
“Rents are crazy.”
This is true. It’s amazing the CPI isn’t soaring given what’s going on in the major metropolitan areas across the country.
An apartment I looked at in Lakeview 3 years ago which is a basic 2/1 with an older kitchen (i.e. no granite, stainless steel etc.) was available for $1550 back then and just came back on Craigslist for $2000 a month. We’ll see how long it takes to rent it this time.
I know a few people looking for October 1st rentals. There isn’t a lot of demand. They’re looking in Lakeview and the north part of Lincoln Park. They make appointments to see the apartments for a week out and there’s no rush to see them. No one else is looking at it. They’re all still available a week later. They’re looking at 2-bedrooms in the $1600 range. They don’t feel pressured or rushed or anything.
“Not SF rent increases but still quite high, and high enough that its causing people to move to other neighborhoods and trade down if anything to not spend absurd amounts.”
You can’t get blood from a stone. Rate increases aren’t infinite without salary increases. And those aren’t happening.
By the way- isn’t Hubbard Place only 13% rented even though move-ins are starting on Oct 1st?
I wonder how long it will take to rent out that building. It’s among the most expensive in all of the city. Over $3 a square foot. And there are thousands of more apartments due to come on line in the next 12 months.
How many employees are moving downtown and to the west loop from Google and other large companies? That can’t be as much as the amount of new rental units coming online which have astronomical rents. It may be seen as unsustainable and will be without job growth in jobs that are more than just the $50K entry level ones. Hiring at many firms out of school is still not back to the peak 2008 levels.
The amount of new rental units has to be driving up vacancy rates in class A- or Class B buildings and increasing competition for renters. It doesn’t make sense that rents are going up at 8-10% like Appraisal Research Counselors is always saying without significant increases in downtown or metro area employment ….
“What does the CAR mean when it says they “hope to see buyers look in some of the areas that aren’t performing as well”?”
Translation: I hope I can unload that condo I bought in Albany Park when I was sure AP would become the next Lincoln Square.
Rents are insane – prices are still reasonable relative to those insane rents. Either prices need to go up or rents need to come down. Having owned a 2/2 at one point I strongly believe those should be primarily investor owned and they only make sense for a small subset of people (empty nesters, people who don’t plan to have children, etc) unless they are absurdly cheap (as they were in 2010/2011). There are now 2/2s selling above 2006 prices in RN! I am shocked at how quickly we have rebounded in the GZ.
Most renters are on a summer renewal cycle. It is not uncommon for the rental market to slow down in the fall. And the apartments that are left tend to be the overpriced ones that weren’t rented in the summer. So I don’t think your friends’ experiences are unusual.
And one other thought – we won’t see the top of the sales market until we see multiple new condo buildings going up or multiple rental to condo conversions. I think we are the top in rents with all the new rental buildings going up – but not near the top in home prices (except for those 2/2s that are really just rental proxies – they are near the top).
500 LSD is 50% leased.
http://chicago.curbed.com/archives/2013/08/21/rent-check-500-n-lsd.php#reader_comments
http://chicago.curbed.com/archives/2013/08/21/vesta-lofts-rental-conversion-weeks-from-movein.php
This leased quickly too.
I bet that come 3-2 weeks out people will be lining up to look at rental places. We had to rent a 1 BR out quickly in the East Village; our tenant was leaving soon and 2 weeks later was the 1st of the month. We told her to put it on Craig’s List and see who bites. 14 people came out that Saturday, 4 filled out applications and left $ for a credit screen, 2 left checks with the full security deposit. While I do understand the Fall move vs the Summer move, Oct 1 is a big turnover day and I would expect things to heat up later.
This is making me wish we’d kept the 2/2 condo in ELP we sold many years ago and rented it out. We’d probably get $3,000 a month for it.
I was looking at some 2nd quarter 2013 leasing reports, vacancy rates are down and rental rates up from last year in the City.
“Rents are crazy”
A couple of years ago the whole rent/ buy equation flipped in favor of buying. That’s why I stopped renting and finally bought after 12 years of waiting. This is why sales have picked up.
“Rate increases aren’t infinite without salary increases.”
No, not infinite. But there is plenty of room for increases. People can spend more of their income on rent. The demand is clearly there. Employment has improved quite a bit in the past few years. Look at the absolute numbers, not the unemployment rate.
“That buyers who are looking in Lakeview will now start looking in Uptown or Rogers Park or Albany Park?”
Of course it won’t be that extreme but it has to happen at the margin. The green zone is pushing west. Look at where the new construction is happening outside the traditional green zone: http://www.chicagonow.com/getting-real/2013/08/new-construction-in-chicago-a-far-cry-from-its-peak-levels/
Oh…and there is apparently a gross mis-reporting of the housing supply. The Tribune said that listings are down 35%. NOT TRUE. Listings are actually way up over last year. And inventory is still down. How is that possible? Because things are selling so fast.
“This is making me wish we’d kept the 2/2 condo in ELP we sold many years ago and rented it out. We’d probably get $3,000 a month for it.”
I’m glad I kept mine…. Are any sellers still bringing money to the table at closing? Friends were doing that several years ago but I have’n’t heard too much about that lately. One buddy sold, brought money to the closing and rented in the burbs. I dont think he really follows N Side properties and I’m wondering if I should bust his balls about how he should have just rented his old 2/2 out becuase he prob could sell it for what he paid for it now.
So much for that shadow inventory, huh?
“So much for that shadow inventory, huh?”
There have been 865,000 loan modifications under TARP as of 2013
There have been a total of 6.15 Million loan modifications under HARP as of December 2012.
There have been an unknown number of loan modifications through private programs, although in January of this year, 63,539 received loan modifications through private programs.
Where is the shadow inventory? It’s in the shadows – with 40 year mortgages, deferred principal (aka balloon payments) at the end of those 40 years, and in many cases, introductory interest rates that rise from 2.0% to 5% over the next 5-10 years.
Sabrina said-“I wonder how long it will take to rent out that building. It’s among the most expensive in all of the city. Over $3 a square foot. ”
Well Sabrina if K2 is any indication (same sort of building same sort of pricing in much worse location) it won’t take long at all. Nor will the addition of 5000 rental units be a factor either
http://www.multihousingnews.com/news/k2-reports-leasing-surge/1004084427.html
“Though metro Chicago isn’t enjoying the strongest of economic recoveries, demand for apartments is expected to increase this year. According to investment specialist Marcus & Millichap, job growth in the area—about 66,900 this year, it forecasts—will spur household formation, pushing vacancies down 40 basis points to 4.3 percent by year’s end. Apartment completions this year (including K2) will add 5,450 units to the market, or only about 1.6 percent.”
“Where is the shadow inventory? It’s in the shadows – with 40 year mortgages, deferred principal (aka balloon payments) at the end of those 40 years, and in many cases, introductory interest rates that rise from 2.0% to 5% over the next 5-10 years.”
In other words, it is meaningless, like I said 2 years ago.
So HD, assuming you’ve lived in your home for about 2 years now, you are practically paying like 2k a month in assessments 🙂
“In other words, it is meaningless, like I said 2 years ago.”
Meaningless? It’s the primary reason why inventory levels have been dropping since 2007 and it’s one of the primary reasons prices have been increasing. When millions upon millions of homes that would otherwise be for sale are tied up in exotic financing via government directive – or have been sold in BULK to hedge fund investors with government connections – there’s a lot of artificial propping up of the market. The lack of foreclosures is actually scarier than the deluge of foreclosures – at least from an affordability perspective.
“So HD, assuming you’ve lived in your home for about 2 years now, you are practically paying like 2k a month in assessments :)”
Basically yes. It’s like you get a ‘deal’ at the bottom of the market … until two rounds of 5″ of rain floods the basement this spring … the previous owner never felt the need in 50 years to install flood control because it only flooded once in 50 years… and then it flood twice one year. Don’t get me started on the difference in cost between the overhead and the check valve…and the renovations … and patio … and yard work … and jesus, wanna trade home for a few weeks SOnies?
LOL HD- I think you might like my boring little low cost cement box after the money you’ve had to throw at your new place. I feel bad, I really do. That sucks the worst, as I have a good friend going through the same thing with his house.
“Meaningless? It’s the primary reason why inventory levels have been dropping since 2007 and it’s one of the primary reasons prices have been increasing.”
So the shadow inventory is now why inventory levels have been DROPPING? I was told it was the reason why inventory would be INCREASING. So it seems that not only was everyone else wrong about it causing an increase in inventory, the exact opposite happened.
It don’t see how it can be shadow inventory if the owners have modified loans that allow them to stay in their properties.
“I don’t see how it can be shadow inventory if the owners have modified loans that allow them to stay in their properties.”
They’re eventually going to default anyway; that’s just common sense.
Thanks for correcting my spelling anon!
“Look at where the new construction is happening outside the traditional green zone”
Interesting map, Gary. Nice little thicket on the Logan/Humboldt border on the Bloomingdale Trail (although it gets sparse west of Kedzie).
“or have been sold in BULK to hedge fund investors with government connections”
This has the potential to create a monster. If home ownership becomes a more liquid asset driven by the market of both the paper owed AND the home itself (both being manipulated by traders) we are in a brand new world of hurt.
HD – I’m with you on the flood costs. That spring flooding ruined the carpeting we’d just installed in our basement (we’d put it in after going 10 years without significant water in the basement since installing a sump pump). That 5-inch rain unfortunately backed up the city’s sewers, causing the water to come up through a drain in the floor of our basement, and we were ankle deep. Nothing the sump pump could do.
Luckily, insurance paid, but it sucked to have a stinky basement and rip out the ruined carpet piece by piece and bring it up to the garage.
I didn’t even bother with the sump pump / check valve or lift station. I just over the overhead sewers. There’s a sump in the back and a sump for a outside drain and then two ejector pumps. I shouldn’t have sewer back up again now that my lowest drain not on the ejectors is the kitchen sink. Maybe a little seepage in the future I can deal with. 12″ of water twice. … No way. The further irony is tha July and August are drought like conditions.
Don’t forget the backup sump pump and power supply. The first thing I did when I moved in was put those in. Power failure or pump failure during a storm would sure hurt. It cost me about $2000 but I sleep better. And I guess you need to periodically check that the main pump is still working.
“I don’t see how it can be shadow inventory if the owners have modified loans that allow them to stay in their properties.”
Those who have gotten modifications are already defaulting at much higher rates than everyone else- sometimes within a year.
“Well Sabrina if K2 is any indication (same sort of building same sort of pricing in much worse location) it won’t take long at all. Nor will the addition of 5000 rental units be a factor either.”
Thanks Sonies. I don’t think K2 is as expensive as Hubbard Place which is THE most expensive rental in that area (if not the city).
If you extrapolate out from what the article says they’ve leased already- I’m assuming a year to get the whole building leased. 500 LSD is more impressive. It’s already at 50%. Maybe that will take just 6 months to lease out but presumably a lot of the larger, more expensive units remain available.
The key is to look for rental incentives. They haven’t had to use any due to demand so if they start popping up then we’ll know that demand is weakening.
That loft building someone linked to in the South Loop is a unique property. It rented fast because there are few other loft rentals (and none that I can think of that are “new”) and it’s mainly 1-bedrooms at somewhat affordable prices of $1400-$1700. We’re not talking $2100+ 1-bedrooms like these other buildings.
“While I do understand the Fall move vs the Summer move, Oct 1 is a big turnover day and I would expect things to heat up later.”
Anyone who needs to move Oct 1 is already looking. It’s only 5 weeks out. People have already told their landlords they’re not renewing. That’s why a bunch of rental signs have popped up all over the place in the last week.
Maybe the 1-bedroom in the East Village was cheap so that’s why there was a lot of interest in it. Maybe it was in a fantastic location near the El. Maybe it had parking included and nothing else on the market does. Maybe it has C/A and W/D in the unit. Or maybe the East Village is just hotter than Lakeview. Because those listings are sitting there. No urgency whatsoever.
“How many employees are moving downtown and to the west loop from Google and other large companies?”
There is this “Google-myth” that thousands of people will be moving downtown because of them.
Here’s what’s going on:
1. Google is moving its current office in River North (500 sales people) to the Fulton Market in the West Loop in 2016. Those employees, presumably, already live where they’re going to live. NO net gain to the city from this move.
2. Google is also moving Motorola Mobility to the Merchandise Mart in early 2014. This was supposed to be 3000 people but is now 2000 due to layoffs. The vast majority of these employees presumably live in or near Libertyville. Some of this should be a net gain for the city but how many? How many of the employees don’t own homes in the suburbs (and/or have kids in the schools out there?)
And there is no guarantee that these employees will move to River North/Streeterville high rises. They could just as easily buy a townhouse or condo in Lincoln Square. While that is still a net gain for the city, of course, it does nothing to fill up the 5,000 apartments that are being built.
Hi Bri,
K2 studio 596 sf $1890 per month $3.17 per sf (low floor)
Hubbard Place 546 sf $1705 per month $3.12 per sf (low floor)
Pretty much the same on a sf basis.
yes I was looking at 2 bedrooms 2 baths in K2 on their website and they are listed for a whopping 3800 bucks for 1250sqft for the 01 units and $3300 for the 02 units that are 1251 sqft (must have the north facing crap view or something)
http://k2chicago.riverstoneres.com/?module=check_availability&is_snippet=1&property%5Bid%5D=52512&property_floorplan%5Bid%5D=135850&floorplan_availability_filter%5Bnumber_of_bedrooms%5D=2
absolutely INSANE if you ask me
“Sabrina (August 22, 2013, 9:50 pm)…
There is this “Google-myth” that thousands of people will be moving downtown because of them….”
People aren’t saying GOOG is going to move tens of thousands of people downtown. They are saying that GOOG consolidating to RN/WL from their current burbs/RN location will draw other tech companies downtown. This is just another illustration of the trend of companies moving to city centers. Have any of you been to 600 W Chicago (where Groupon is located) during work hours on a weekday? There are typically 2-4 food trucks parked outside with 50+ young people (20s and 30s) milling around. I used to live in the area and it was dead during the day.
“Or maybe the East Village is just hotter than Lakeview. Because those listings are sitting there.”
I can’t speak for other people’s properties, but it has never, ever been easier to find tenants in Lakeview for me. At higher prices, too.
“absolutely INSANE if you ask me”
I agree that it’s insane. Just think- Hubbard Place is even MORE expensive.
Who is paying that? And I really don’t want to hear that some first year lawyer with massive student loans is spending $3000 to $4000 a month on a rental. Maybe they are living two each to the apartment then? Because you had better make over $100,000 a year to afford that.
Hubbard place should be a bit more expensive, its in a far better location, I mean have you seen the surrounding area of K2? Its a shitty intersection of ashland, I-94, abandoned former industrial lots, a half abandoned truck sorting facility, railroad tracks, and literally the only redeeming quality of living there is being close to a new (albeit awesome) jewel.
I totally agree that paying nearly 3 grand for a 1 bedroom 700 sqft rental is absurd, and I am not sure how the hell that will be justified by anything other than “parents money”
K station is all kids in that building, no way some of these young twentysomethings can afford the rents there without help from the pa’rents’
” … the surrounding area of K2? Its a shitty intersection of ashland …”
Huh?
I have two rentals in RN (not getting these kind of rents btw). Both tenants contacted me 3-4 months before their leases expired to renew. Additionally they both wanted to extended for more than a 1 year term. It is truly crazy out there.
“Sabrina (August 23, 2013, 8:57 am)
“absolutely INSANE if you ask me”
I agree that it’s insane. Just think- Hubbard Place is even MORE expensive.
Who is paying that? And I really don’t want to hear that some first year lawyer with massive student loans is spending $3000 to $4000 a month on a rental. Maybe they are living two each to the apartment then? Because you had better make over $100,000 a year to afford that.”
When I graduated I didn’t know anyone that lived by themselves in a 2/2. It was at least 1 person per BR and sometimes more (dividing a large BR or LR). So 2 young professionals sharing a 2BR that is $3500 isn’t unreasonable. And with people waiting to get married there are more dual income households and 30+ year old single people who are near their peak earning years.
“Its a shitty intersection of ashland, I-94, abandoned former industrial lots”
Halsted.
yes, halsted, sorry
That is true, most 2/2’s will be split up or be older more established professionals, the pricing for 1/1’s (2k-2800) is also kind of nuts, but… if its you and your girlfriend/fiance/wife who works a good job its probably a lot more doable.
anyone know if utilities/parking are included in these prices? If not, ouch!
“anyone know if utilities/parking are included in these prices? If not, ouch!”
Someone this week in one of the threads quoted prices for parking and utilities in one of these places, so I imagine most of the quoted rates for the new buildings are base rates.