Chicago Journal: Chicago’s Upper Bracket Still Holding Its Own
The Feb 28 issue of the Chicago Journal had statistics about the Chicago luxury housing market in Don Debat’s column called “Market is still alive.” From the Chicago Journal:
“Although the news media would have you believe the sky is falling, an examination of two segments of the upper end of the housing market-properties listed for more than $1 million-dispel that notion,” said Gold Coast sales agent Louise Study, a 14-year veteran at Rubloff Residential Properties.
Study, who compiles an annual MLS resale home study of about a dozen Chicago neighborhoods, noted the following price stability in the luxury home and condominium marketplace:
388 upper-bracket single-family homes sold in 2007 for an average price of $1,716,713 with an average market time of 179 days. That compares with 434 luxury homes sold in 2006 for an average price of $1,673,223 with an average market time of 149 days.
393 luxury condominiums sold in 2007 for an average price of $1,636,726 with an average market time of 208 days. That compares with 393 upper-bracket condos sold in 2006 for an average price of $1,757,204 with an average market time of 210 days.
The statistics are complied from re-sales of more than $1 million in the following areas:
“These statistics covering luxury resales in such neighborhoods as the Gold Coast, Lincoln Park, Lakeview, Bucktown, Roscoe Village, Wicker Park, Hyde Park, Ravenswood, Andersonville, the South Loop and West Loop demonstrate that Chicago’s high-end market did not suffer a bubble that occurred in other markets across the country,” Study noted.
You would expect market times to be rising, given the sheer number of units coming onto the market in that price range. If you do even a basic search of the MLS, there are dozens of empty homes in Lakeview, Bucktown and Lincoln Park. There doesn’t seem to be any demand for those.
Just a quick search of the MLS for the Loop shows that there are 125 condos over $1 million. Some are not ready for occupancy (the units in The Legacy or WaterView Tower, for instance), but they’re all being built and will have to be occupied at some time.
I wish this article would have talked about inventories.
The key to the health of the market will be market times.
“These statistics…demonstrate that Chicago’s high-end market did not suffer a bubble that occurred in other markets across the country,” Study noted.
WTF? How did she come to that conclusion? It just shows that the bubble didn’t yet burst in 2007 for this submarket. Besides, how many of those “sales” were contracted for in prior years?
Has she been following these markets for all of her 14 years in the business? Where is the data for the prior years? Could it be that it would clearly illustrate the size of the bubble? As Sabrina noted, where is the discussion of inventory?
Ms. Study belies her name.
If you think about it, taking an average of sales > $1 million is kinda useless for showing trends, because it censors those transactions less than $1 million. E.g., if you took an average of sales at exactly $1 million a year, that average would be unchanged by definition.
Leaving aside other data issues including whether the data are recording transactions that were contracted for in prior years, note that this “average” can easily lead to the wrong conclusion. Suppose, e.g., there was three homes that sold for $1MM, $2MM, and $3MM. Average is $2MM for the three sales. Now suppose that everything drops by 10 percent. The three are now sold for $0.9, $1.8, and $2.7 million. Of course, the first sale drops out of the average as defined, leaving an average sales price of $2.25 million. So this average has increased by 12.5 percent while the true prices have decreased by 10 percent.
This example is only illustrative, but I would strongly suspect that in terms the number of homes in the $1MM+ category is skewed to the low end. That is, there are a lot more sales between $1.0-1.5MM than e.g. $2.0-$2.5MM. As prices decline, homes at the low end get dropped from the average, increasing the influence higher end homes on the average. Thus, even when prices are falling, this average can be flat or increasing, because you are taking the average over a different (more expensive) population of homes.
BTW, enjoy the web site.
I think one needs to look at the trend month by month. The bottom dropped significantly in the later part of the year. When you average it in it doesn’t look as bad, but look at the last quarter and there will be a big difference.
This supports what I’ve suspected regarding median sale price in this area. As long as the high end continues to sell at it’s current pricing level it will skew the median giving the false impression that prices are staying stable even though the middle and lower end are getting hit hard.
yawn. average people still cannot afford an average house without a crazy loan.
Looks to me like the average sellig price for the condos dropped almost 10% from 2006 to 2007. Yeah, looks great to me! 😀
The negativity on this site is amazing. But, I am not sure there is realism here.
I have built, gutted and flipped. Bottom line, when building a house there are cost for labor and materials. While labor has been squeezed a little, the cost of materials has not. In fact, the cost of stainless, steel, wood and many other materials are rising fast due to global demands.
I know it will cost me about 500K for a 25×125 lot. 550K for 37.5×125 in the lakeview/north central area. The cost for me to build a 25×125 home will be about 500K assuming I manage the project on a daily basis. Higher if I have a builder do it.
My wife and I are expecting. My mother will need to live with us for health reasons. We need to find a nice 5-6 bedroom in the area. I have now looked at 75 homes from builders all priced in the 1.1 – 1.7M range. Yes, they will negotiate. But, only to the level that they are at cost. Some have moved their families into the units. Some have rented the units. Every builder knows some savvy buyer who has multiple properties can build a house on their own, but I will spend 1 year of never ending work to save what 50-100K. That, to me, is not smart in terms of my time.
Therefore, the high end market choice is simple
Buy a built home for 1.1 – 1.7 or do it yourself. Builders are dropping 100-250K in this range. But, that is it… So, I am buying and bidding 15-20% below asking. This will allow the market to slip another 10% and I have a discount.
DZ had the best comment. The 1-1.5M is stable. The biggest discounts are in the 1.5-3M range.
Hey, monster, so your current cost per sq ft is about $105-110? Does that include carrying costs on the land or is it the true cost of construction? And using a builder tacks on about 10%, no?
Also, am I correct that that pricing is for typical nice (for the bracket) but not extreme hi-end fixtures and finishes?