Struggling to Sell For Over $500,000 in Lakeview: 508 W. Melrose
There seems to be a certain price point that has really slowed in the Chicago condo market. Included in that price point are two bedroom, two bath condos over $400,000.
An example of the slowdown is evident in the listings at 508 W. Melrose, a 2004 new construction mid-rise building in Lakeview.
There are two units currently on the market. Both have seen price reductions and have been on the market for months. These sellers will be lucky to make any money on these sales (when you subtract agent fees, closing costs etc.)
Unit #2A: 2 bedroom, 2 baths, 1568 square feet
- Sold in June 2004 for $533,000
- Currently listed for $549,900 (plus $35,000 for parking)
- Assessments of $336 a month
- Alan Zuber at Baird and Warner has the listing
Unit #2D: 2 bedrooms, 2 baths, 1688 square feet
- Sold in June 2004 for $512,000
- Currently listed at $499,000 (plus $35,000 for parking)
- Assessments of $261 a month
- Rubloff has the listing
What’s with the assessment discrepancy? Why’s the smaller one almost 30% higher than the bigger one?
Why is this market segment appearing to collapse? Could it be due to the changing qualifications for a jumbo mortgage? It looks like 20% down is once again the minimum for nearly all buyers, along with provable income and job. That alone will remove the majority of buyers from the pool. Add them to the loss of buyers due to the very real fear of values declining further, and that is a huge decrease in demand.
Also, I bet we’re not far off from the “declining” market designation on appraisals, which will require an additional 5% down from all buyers.
We have a long way to go until bottom.
$499 + $35 is pretty close to conforming with 20% down. Do you actually expect a bunch of these sorts of units to move if the sellers would accept $521,250 (including a $104k dp)? Or $463,333, if you’re working with 10% down (only $46k dp)?
No, my point is that there aren’t many buyers with anything approaching 20% down so nothing is selling. These prices only exist in a world where many buyers put very little cash down and the borrowing was free and easy. Those days are gone.
I don’t even think these will move at conforming prices. There are no more liar loans, so real income and jobs must be proven to achieve qualifying standards.
Of course, once the drop in price is recognized we will get the “declining market” designation and automatic requirement of an additional 5% down on every conforming sale. You think people are nervous about buying into a declining market now? Just wait until they see that additional down payment requirement.
Rest assured, anon, I don’t think anything will get properties moving again except for drastic price reductions. They are coming.
I expected as much, but you referred to “the changing qualifications for a jumbo mortgage” so I wanted to clarify.
G: That’s right. I agree with you. Once you get over $400,000 you’ll have to have a big chunk of change to put down as a downpayment. How many buyers even have 5% at that level? Let alone 10% or, heaven forbid, 20%.
$100,000? Never!
Not for a typical first time buyer anyway.
With the easy money taken away- it means that there will be far fewer buyers at this level. It’s going to be interesting to see how it plays out in the city. There is already a glut of condos priced over $400,000.
G: You are 100% correct about prices existing in a world where many buyers but very little cash down and the borrowing was free and easy.
There are SO many condos above $400k that you have to wonder how many potential buyers meet the new criteria for lending: 1) meet the income requirements and 2) saved a substantial down payment of $50k or more. I think all of these condos will linger until there is a deluge of foreclosures and short sales. Many owners simply cannot accept lower than what they paid for it plus realtor costs.
In my humble opinion, I believe $400k and up condo scene in Chicago will get hammered as well as the $600k and above single family home in the Chicago suburbs. I am following a zip code in the Chicago burbs that has a lot of tear-downs and new construction. They range in price from $650k to $949k and almost nothing has moved in the past three months. Surprisingly, there has been very little in terms of price reductions. These small builders are pretty stubborn and are probably waiting it out.
This building is among the ugliest of new buildings, what with “classical” decorative doo-dads glued onto a stodgy, ordinary modern building, and featureless units with things in them like narrow little niches for your computer, and other useless things.
And why does every kitchen have to be “open”, and situated in the living room?
I viewed a couple of the units one hot day in 2004-2005, I forget which, and the developer himself was on hand. He generously offered to give me a deal, $595,000 for a 2 bed 2 bath if I signed that day.
$400K sounds about right for these, if only because they’re large and new and in Lakeview. But markets as extreme as this last boom tend to over-correct, and I would not be surprised to see these bottom out at $350K.
I am following a zip code in the Chicago burbs that has a lot of tear-downs and new construction. They range in price from $650k to $949k and almost nothing has moved in the past three months. Surprisingly, there has been very little in terms of price reductions. These small builders are pretty stubborn and are probably waiting it out.
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Mike, Same with some NW Side Zips. However, the builder is still paying the mortgage for the lot and the const. loan. How long can they last? Depending on the cost of the lot, they might be finished already.
Quick question…
Do declining market clauses exist for current homeowners? If somebody bought at the peak and have negative equity in their home, do banks have any rights to require additional funding?
I don’t own right now, so Im trying to develop a plan on my entry into the market. This site has been awesome!
I am the Listing Agent for #2A and I just wanted to clarify that the square footage is wrong for #2D, so #2A is larger. It has a large foyer when you walk in that is missing in the other unit. I’m not sure where the other listing came up with their number. It really is a nice unit, and although Laura feels strongly that the building is not her favorite, there are a lot of people who are drawn to this type of architecture. Especially people moving here from the Suburbs and other areas with a lot of new constuction. It’s a great place a 1/2 block from the lakefront, help me sell it!!!
Thanks for the clarification on the square footage Alan.
Alan:
Not interested in finding you a sucker. Sorry.
Alan,
How about $180K if they pay my closing costs? 😉
Laura – I have to say I really disagree. These units were quite beautiful inside and out. I was shocked by your post. I’ve seen 40 properties around this price and this was at the top – but it also conforms to my personal taste apparently more than yours.
Saw all 3 listings. They do not “feel” their respective sq. footage. Perhaps the listed sq. ft. includes balcony. The sole source of light in main room comes from the street-facing sliding door and oddly placed window. Second BR has windows but the room is quite small. Baths are fabulously appointed. Lovely intimate elevator building in a great loca. Too much sq. footage spent in hallways/entrance rather than the actual living spaces. More misses than hits and so not worth the asking price.