Will Luxury Condo Rentals Be the Deal of 2014? 550 N. St. Clair in Streeterville

There are thousands of new luxury apartments being built in downtown Chicago, some of which will come on the market later this year.

They have all the luxury features of many condos, including stone counter tops, new kitchen cabinets, stainless steel appliances, and hardwood floors in the main living areas.

This 1 bedroom plus den in The St. Clair at 550 N. St. Clair in Streeterville just came on the rental market.

At 1125 square feet, the listing says the den can be used as second bedroom.

This unit has upscale kitchen appliances and cabinetry and marble bathrooms.

It has a terrace that overlooks Michigan Avenue, floor to ceiling windows, and an in-unit Bosch washer/dryer.

This is currently listed at $2400 plus $200 a month for parking.

Given that many of the luxury 1-bedroom apartments, which are only 700 to 750 square feet, rent for this (and more)- isn’t this a deal?

Are luxury condo rentals going to have to lower their prices to compete with the apartment rental inventory that is coming on line in 2014?

Will some luxury condo owners actually have to upgrade their units (new appliances, counter tops, bathrooms) in order to compete in the rental market?

Jeff Leong at @Properties has the listing. See the pictures here.

Unit #1005: 1 bedroom, den, 1125 square feet
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  • Rented for $2600 a month in 2013
  • Currently listed for $2400 plus $200 a month for parking
  • Deposit: $2400
  • Rent includes cable, gas, heat, a/c, pool
  • Central Air
  • Washer/Dryer in the unit
  • Bedroom: 14×12
  • Den: 14×10


Bought a Downtown Condo in 2009? Appreciation Depends on the Building: 130 N. Garland in the Loop

This 4-bedroom unit in the Heritage at 130 N. Garland in the Loop has been on the market since April 2013.

It has direct views of Millennium Park and the Lake from every room in the unit.

The 3100 square feet unit also has a much sought after 3-bedrooms and 2-parking spots included.

The kitchen has granite counter tops, maple cabinets and stainless and black appliances.

It has crown molding and hardwood floors throughout the main living space.

The Heritage is a full service building and has one of the most amazing indoor pools in the city.

Originally listed at $2.5 million, it has been reduced to $2.2 million.

That’s just $90,000 over the 2009 purchase price.

Unlike in the housing boom years, isn’t appreciation really a building specific (and even a unit-specific) thing?

Laura Arnett at Baird & Warner has the listing. See the pictures here.

Unit #5303: 4 bedrooms, 3 baths, 3100 square feet
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  • Sold in November 2005 for $2,079,500
  • Sold in June 2009 for $2,110,000
  • Originally listed in April 2013 for $2,500,000
  • Reduced several times
  • Currently listed at $2,200,000 (includes 2 parking spaces)
  • Assessments of $2146 a month (includes doorman, cable, pool)
  • Taxes of $20,768
  • Central Air
  • Washer/Dryer in the unit
  • Bedroom #1: 16×16
  • Bedroom #2: 12×16
  • Bedroom #3: 16×12
  • Bedroom #4: 14×13


You’ll Pay 37.6% More for this Streeterville 2-Bedroom Than 3-Years Ago: 600 N. Fairbanks

This 2-bedroom in Helmut Jahn’s 600 N. Fairbanks in Streeterville just came on the market.

Long time readers might recognize it because we chattered about it in 2009 and wondered if the buyer in 2009 would make any money 5+ years down the line. (The comments are very interesting with the benefit of hindsight.)

See our prior chatter, with interior pictures, here.

This would be the third sale of this unit since its original sale from the developer in 2007.

The interiors are the same as they were from the 2009 sale.

It has dark hardwood floors throughout with 10 foot floor to ceiling windows.

It has concrete ceilings and a long concrete wall in the kitchen and living room.

All kitchens in the building have Snaidero cabinets, Subzero, Wolf and Miele appliances. It was the standard package at the time of the original sale. This unit has a full limestone backsplash, however, which was an upgrade.

This unit faces north and west.

The prior two sellers both lost money on the unit.

However, the market has changed since the last sale in 2011. It is now, hot, hot, hot.

The current owner is looking for 37.6% appreciation over the last 3 years. This price is also well over the bubble pricing as this building was pre-sold in 2005-2006 with closings in 2007 just before the bust.

Will this seller get it?

Is this the new norm in Streeterville?

Elizabeth Sidorowicz at Re/Max Signature has the listing. See the pictures here.

Unit #1505: 2 bedrooms, 2 baths, 1253 square feet
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  • Sold in November 2007 for $584,000 (included the parking)
  • Sold in July 2009 for $585,000 (included the parking)
  • Sold in April 2011 for $545,000 (included the parking)
  • Currently listed for $749,900 (includes the parking)
  • Assessments now $591 a month (they were $482 a month in January 2009)- including A/C, gas, doorman, pool, and cable
  • Taxes of $7425
  • Central Air
  • Washer/dryer in the unit
  • Bedroom #1: 18×12
  • Bedroom #2: 12×11


Biggest Story of 2014: Will Chicago Home Prices Continue to Rise?

According to Case Shiller, Chicago October home prices rose 10.9% year over year, the fastest increase in 25 years.

However, compared with September, Chicago prices actually declined slightly.

From the Chicago Tribune:

“The S&P/Case-Shiller home price index also showed though, that compared with September, home prices in October fell 0.5 percent, following a month-over-month gain of 0.3 percent from August to September. The monthly decline ended a seven-month run in which local home prices rose compared to the previous month.

Home prices in the Chicago area were on par in October with their February 2003 level before the housing crash and post-crash, in December 2009.

The news was also good for Chicago-area condominium prices, which rose 14.2 percent year-over-year in October but were flat compared with September. Area condo values were akin to their levels in late 2002 as well as in August 2010.”

But mortgage rates are now significantly higher than they were this time a year ago.

Will home prices continue to rise in 2014?

Or will it be a bifurcated market with the upper bracket still seeing increases, due to low inventory, but middle and lower middle class housing prices stalling out as consumers simply can’t absorb the higher rates?

Will more homeowners decide to try and cash in- easing the inventory crunch?

Chicago home prices jump by biggest margin since 1988 [Chicago Tribune, Mary Ellen Podmolik, December 31, 2013]

Second Biggest Story of 2014: You’d Better Have a “New” or “Renovated” Property to Sell in 2014

In 2013, the market was dominated by stories of renovated homes selling almost instantly. Builders also reported brisk sales on new products.

But even with low inventory, sales of fixers lagged. (And I’m not talking about foreclosures.)

This 2-bedroom vintage unit at 621 W. Addison in East Lakeview came on the market in August 2013.

Built in 1916, this top floor unit has many of its original features including crown molding, arches, floors and an arched ceiling in the dining room.

It is a co-op in a building with 27 units.

The listing says it has great bones but needs “some TLC.”

It doesn’t have central air (window units only) but you can have an owner owned washer/dryer in the basement of the building.

There is also a 1.5 car private garage available for $50,000 extra.

Originally listed at $249,900, it has been reduced $50,000 to $199,900.

If you throw in the parking, wouldn’t a spacious 2/2 for around $250,000 be a deal in this neighborhood?

Will properties that aren’t “new” continue to lag in sales in 2014 despite low inventories?

Courtney Welsch at Baird & Warner has the listing. See the pictures here.

Unit #3: 2 bedrooms, 2 baths, no square footage listed
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  • I couldn’t find a prior sales price as it’s a co-op
  • Originally listed at $249,900 in August 2013 (parking $50,000 extra)
  • Reduced twice
  • Currently listed at $199,900 (parking $50,000 extra)
  • Assessments of $788 a month (includes water, gas, taxes)
  • Taxes appear to be $2934 (included in HOA)
  • No central air (window units only)
  • No in-unit washer/dryer (but owned w/d available in the basement)
  • Bedroom #1: 15×13
  • Bedroom #2: 13×12
  • Dining room: 18×12
  • Living room: 20×13
  • Sunroom: 12×8


Third Biggest Story of 2014: Will the Apartment Market Stay Red Hot?

The apartment rental market in the GreenZone in Chicago was red hot in 2013.

Occupancy rates in Class A buildings were above 95% for the first three quarters and only started weakening, but only slightly, in the fourth quarter.

But thousands of new luxury rental apartments are slated to come on the market in 2014, adding to inventories.

Average rental prices rose to record highs in the luxury rental towers but also spiked out in the GreenZone neighborhoods for non-luxury apartments.

This 24-unit building at 2215-2221 N. Clifton in Lincoln Park came on the market in October 2013.

It actually is a 24-unit condo building that has banded together to try and sell to an investor as one big rental building.

Located just north of Webster, it is in the heart of the DePaul neighborhood.

The building consists of:
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  • 20 large 1-bedroom units
  • 4 2-bedroom duplexes
  • 24 outdoor parking spaces behind the building

Built in 1896, the building has some of its original woodwork in the common areas.

There are only a select few pictures of the interior of the units. That will vary based on what each condo owner has done with their unit.

The listing doesn’t say anything about washer/dryers in the units.

The listing estimates the monthly income based on neighborhood rental rates at $50,200.

Originally listed at $8 million, it has been reduced to $7.8 million.

Will we see more of this in the future- with condo owners deciding to go rental and selling out to big-time investors?

And what price will it take to sell this building?

Hillary Levy at Baird & Warner has the listing. See the listing here.

2215-2221 N. Clifton: 24-unit building
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  • Is a collection of condos that is converting to an apartment building
  • Originally listed in October 2013 for $8 million
  • Reduced
  • Currently listed at $7.8 million
  • Taxes of $125,500
  • Monthly estimated income of $50,200
  • Total annual estimated income: $549,512


Chicago Market Conditions: November Home Sales Buck National Market Trends By Rising

November home sales managed to do in Chicago what most other metropolitan areas haven’t seen: they rose.

From the Illinois Association of Realtors:

The city of Chicago saw a 0.1 percent year-over-year home sales increase in November 2013 with 1,800 sales, up from 1,798 in November 2012. The median price also rose to $200,000 versus $180,000 in November 2012, an 11.1 percent annual increase.

The city of Chicago continues to see a steady increase in median home pricing to $220,500, year-to-date, versus $185,000 January through November 2012.

Here is the November sales data for the last 7 years (thanks to G for some of the data):

  • November 2007: 1859 sales and median price of $290,000
  • November 2008: 1093 sales and median price of $222,500 (16% short/REO sales)
  • November 2009: 1905 sales and median price of $215,000 (29% short/REO sales)
  • November 2010: 1144 sales and median price of $182,500 (39% short/REO sales)
  • November 2011: 1429 sales and median price of $157,000 (43% short/REO sales)
  • November 2012: 1750 sales and median price of $180,000
  • November 2013: 1800 sales and median price of $220,500

“This November was reflective of a typical autumn month of sales in Chicago, the real difference being the inventory of homes available, which was down 27.1 percent from this time last year,” said Matt Farrell, president of the Chicago Association of REALTORS® and managing partner of Urban Real Estate.

“Chicago is continuing to see buyers contemplate their future needs; however, the inventory available in 2014 will ultimately dictate the opportunities available for those looking to make a move,” Farrell added.

No, I really don’t understand why the number was 1750 sales a year ago but in today’s press release it is 48 sales higher.

“As with many other markets, the Chicago and Illinois housing sales dipped into the negative range after 29 months of positive growth, but prices continued to inch forward,” noted Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory of the University of Illinois. “One of the greatest concerns in the housing market is the shrinking inventory of lower-priced homes presenting a challenge to lower income households many of whom are paying upwards of 50 percent of their incomes on rent.”

These are good numbers compared to what is happening in other cities.

With prices having rebounded about 15% in the Chicago metro area year over year, will inventory finally get a boost this spring?

Illinois home prices continue trend of strong annual gains in November despite lower housing inventory statewide [Illinois Association of Realtors Press Release, December 19, 2013]

Did the Remodel Pay Off? Gold Coast 1-Bedroom Sells: 21 W. Chestnut

We last chattered about this completely customized 1-bedroom in 21 W. Chestnut in the Gold Coast in October 2013.

See our prior chatter here.

If you recall, it had extensive built-ins in both the living room/kitchen and the bedroom which created a ton of extra storage space.

This unit was also remodeled with luxury finishes.

It had 6-inch hand-scrapped white oak floors.

There was Lagamorph custom white cabinetry.

The kitchen had luxury appliances such as Miele and Viking.

There was also Ann Sacks tile and marble.

The unit had all the features buyers look for including central air, in-unit washer/dryer and parking was available for $35,000 extra.

However, the property still recently sold for $390,000 which was $25,000 under the 2006 purchase price.

Does it pay to remodel condos with luxury finishes in this market?

Deborah Hess at Conlon had the listing. You can see one of the interior pictures here. (Or if you have a Redfin account, sign on there.)

Unit #1704: 1 bedroom, 1.5 baths, 878 square feet
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  • Sold in September 1999 for $216,000
  • Sold in November 2000 for $305,000
  • Sold in August 2001 for $285,000
  • Sold in August 2006 for $415,000 (included the parking)
  • Was listed in October 2013 for $375,000 (parking is $35,000 extra)
  • Sold in December 2013 for $390,000 (included the parking)
  • Assessments of $584 a month (includes heat, a/c, doorman, cable)
  • Taxes of $4691
  • Central Air
  • Washer/Dryer in the unit
  • Bedroom: 17×12
  • Foyer: 6×5


Market Conditions: Sales Up 7.5% YOY in Chicago in October As Median Price Soars

Finally, the Illinois Association of Realtors is out with the October sales data.

From the Illinois Association of Realtors:

The city of Chicago saw a 7.5 percent year-over-year home sales increase in October 2013 with 2,231 sales, up from 2,076 in October 2012.

The city of Chicago continues to see a steady market increase in median home pricing to $218,500 in October 2013 versus $175,000 in October 2012, a 24.9 percent increase, year over year.

Here’s the October data going all the way back to 1997 (thanks to G):

October Chicago sfh/condo/th sales and median
1997 1,731 $129,900
1998 1,855 $138,000
1999 1,978 $159,500
2000 2,106 $174,710
2001 2,177 $200,000
2002 2,503 $215,000
2003 2,996 $236,000
2004 2,651 $241,000
2005 2,846 $268,500
2006 2,630 $278,000
2007 2,007 $285,000
2008 1,564 $261,000
2009 2,068 $215,000
2010 1,225 $183,000
2011 1,324 $162,000 (44% short/REO sales)
2012 2,009 $175,000
2013: 2,231 $218,500

“Lower inventory options continue to raise pricing in the city as motivated, qualified buyers look to make their move as lower interest rates afford more value for their investment,” said Matt Farrell, president of the Chicago Association of REALTORS® and managing partner of Urban Real Estate.

“As the market continues to correct itself, buyers will appreciate increased value on their long-term investment. Absorption of distressed properties being rehabbed and resold will also continue to add value to the communities they are in,” Farrell added.

Chicago mirrored what was happening in other big metro areas in October (and nationally as well) as sales were up year over year but slowed compared to the gains in the spring and summer.

The expert the IAR uses every month blamed the slowdown on the government shutdown.

“While the partial government shutdown has certainly had a profound negative effect on the housing market’s continuing recovery, sales and prices are forecast to return to more robust growth rates over the next three months,” noted Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory of the University of Illinois.

“The declines in consumer sentiment suggest that a longer-term resolution to the government fiscal tensions would provide conditions that would significantly help the housing market.”

While, the National Association of Realtors’ in-house economist blamed affordability.

Lawrence Yun, NAR chief economist, said a flattening trend is expected. “The erosion in buying power is dampening home sales,” he said. “Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”

The FOMC said in its October meeting minutes that the taper on bond buying will likely be happening at the next several meetings. The bond market reacted immediately by pushing up yields on the 10-year.

If mortgage rates start to rise again, what does that mean for sales over the next few months?

Can there be both rising home prices AND rising mortgage rates?

Illinois home sales increase 3.7 percent, median prices rise 13.8 percent in October [Illinois Association of Realtors, Press Release, November 20, 2013]

October Existing-Home Sales Cool but Low Inventory Drives Prices [National Association of Realtors, Press Release, November 20, 2013]

Market Conditions: Are the Downtown Apartment Rent Increases Over?

Almost a bigger story than the recovery in the real estate market has been rising apartment rents in Chicago and the construction of thousands of new luxury rental apartments in the GreenZone.

Crain’s reports that occupancy rates and rental rates in Class A buildings appear to be softening just as 5,000 more apartments are due to hit the market over the next two years.

From Crain’s:

The overall downtown apartment occupancy rate dropped to 92.6 percent in the third quarter, down from 95.3 percent a year earlier and the lowest rate since the end of 2009, according to a report by Appraisal Research Counselors, a Chicago-based consulting firm.

Landlords used to having the upper hand over tenants are seeing that leverage slip away, at least at the high end. Net rents at Class A downtown apartment buildings fell to $2.53 a square foot in the third quarter, down 1.9 percent from a year earlier, according to the report. It was the first year-over-year rent decline in nearly four years.

“The market fundamentals are not supporting the level of supply that’s coming online, and the situation appears to be getting more out of balance as opposed to getting back into balance,” Appraisal Research Vice President Ron DeVries says.

A key demand measure, absorption—the change in the number of occupied apartments—fell to 901 units in the past four quarters in downtown Chicago, down from 1,198 in the prior 12 months and the lowest level since 2005.

Strangely, if you’re not a brand new building, apparently the bloom is off the rose even if the building was considered the top of the luxury chain just a few years ago.

But older buildings are losing tenants to their newer, sexier competitors. Exhibit A is Aqua, the 82-story East Loop high-rise with 474 apartments. It’s hardly frumpy: The building is only four years old and its wavy design has won over architecture critics.

But Aqua’s occupancy dropped to 86.3 percent in the third quarter, from 98.1 percent a year earlier and the lowest level since the building was leased up, according to Appraisal Research. The building is about 90 percent occupied now, says David Carlins, president of Chicago-based Magellan Development Group LLC, which developed the tower and owns a stake in it.

Aqua faces competition from a 515-unit tower called Coast that Magellan recently built just a couple of blocks away, and two high-rises in Streeterville, but Mr. Carlins says he isn’t concerned.

“Everything affects us to some degree, but it hasn’t been a draining of the building,” he says.

If he’s nervous about anything, it’s the potential for some landlords to overreact to the supply surge by offering rent concessions to fill up their buildings, forcing everyone to follow.

“We’re cautiously optimistic that they will keep their heads about them,” he says.

Class B rental buildings, meanwhile, are still seeing rental price holding. They were actually up 3.2% in the third quarter to $2.27 a square foot.

The article seems to indicate that many landlords are waiting for employees of Google’s Motorola Mobility unit, which is moving to Chicago next year, to occupy a bunch of apartments but how many employees will that be (who don’t already have a family and a single family home in the suburbs)?

Are they overbuilding luxury apartment rentals?

And if they do- does that mean good things for the condo market? (i.e.- will landlords simply convert them into condos since that market is still hot?)

Have high rise apartment rents peaked? [Crain’s Chicago Business, Alby Gallun, November 18, 2013]