Flipper Alert: Foreclosures Pick-Up in 1620 S. Michigan
I’ve chattered about the sellers in distress in 1620 S. Michigan in the South Loop several times before.
So far, in 2008, only three units have sold.
Current stats on the building (out of 249 units):
- 14 for sale
- 6 for rent
- 8 motorcycle spaces for sale (for $4900 each)
In February 2008, one seller was trying a short-sale but the unit was scheduled for a foreclosure auction. That unit is no longer listed for sale.
Unit #904: 2 bedrooms, 2 baths, 1174 square feet
- Sold in October 2006 for $410,000
- Was listed as a short-sale for $369,900 plus $15k for parking
- Scheduled for foreclosure auction in mid-February 2008 for $344,866
- Assessment of $366 a month
Unit #522 also recently went to foreclosure auction. It was listed for sale, but it has now also been withdrawn from the market.
Unit #522: 2 bedrooms, 1 bath
- Sold in December 2006 for $286,000
- Was listed in early May 2008 for $274,999 (parking was $35k)
- Foreclosure auction price of $305,734
- Assessments of $342 a month
Unit #314, a two bedroom/two bath with a 690 square foot terrace, was one of the three units to sell this year.
Unit #314: 2 bedrooms, 2 baths
- Sold in August 2006 for $351,500
- Sold in April 2008 for $321,500
(Not sure if parking was included in the 2008 re-sale.)
Several other units that I chattered about in February have changed their prices:
Unit #803: 2 bedroom, 2 bath, 1100 square feet
- Sold for $333,000 in September 2006
- Was listed in February 2008 for $335,000 with parking included
- Now listed for $319,900 (parking is now $25k extra)
- Listing says “never lived in”
Two years after closing, this unit is also still for sale and apparently no one has lived in it.
Unit #305: 2 bedrooms, 2 baths, 851 square foot terrace, 1278 square feet
- Sold in April 2006 for $450,000
- Listed in February 2008 for $479,000
- Currently listed for $460,000 (parking for $35,900)
- Assessments of $445 a month
- “Unit has never been occupied”
- Koenig & Strey has the listing
The area is simply over built. The newer 1720 S Michigan (same developer-CMK) is right next door. Why not buy “new” instead and negotiate with the developer for some freebies?
If you like modern/concrete ceilings etc, great time to go for some deals in these buildings.
What deals? The prices are going nowhere but down. Way down.
The prices are already coming down for some who aren’t as disconnected with reality as the owner of unit 305.
Unit 403 is listed for 334k with parking on craigslist, a close to 20k reduction from where it originally closed at on 8/06 for 353.5k.
The owner of 803 is comical as well: he raises the price by 10k when it doesn’t sell. Gotta love that flipper economics..
Everyone talks about these types of buildings being cookie cutter, but there are some nice units on the 3rd floor with some oversized terraces like the one shown above. Some even originally sold for mid-200s. So I’ll definitely be watching the REO market for these..
I have to agree with G about there being “deals.”
It’s taken about two years for the foreclosures and price reductions to appear in 1620. It will take awhile for the same to happen in 1720. And 1720 is a bigger building and still has many units that are not sold.
It’s likely these prices are going to come way, way down. We’ll have to see what the banks list the 1620 units for.
I’ve said it before and I will say it again, these concrete ceilings look like something I would expect to find in Eastern Europe — left overs from the Soviet Union. I know these are “trendy” but all it is to me is some clever developer cutting costs and then passing it on to buyers (suckers) as a “hip” and “modern” amenity. I’d much prefer the beautiful homes on East Lakeshore Drive, in West Ridge or Rogers Park that were featured in previous post, despite their shortcomings, to this glorified parking garage.
I bought in the south loop, a CMK building in 2001. Just loved the huge terraces. BUT, even then, buyers weren’t willing to pay extra for the outdoor space. Plus, yes, the contruction is not so hot.
Good marketing on the part of CMK, but a neighborhood that hasn’t grown to match all the buildings and careless construction. Buyer beware, in my opinion.
Deidre, what is the careless construction? I had thought CMK was a good developer, and the units I’ve seen in 1720 looked really solid (not luxury, but well done for the price point). Of course, I haven’t actually *lived* in one of these units, which can make all the difference.
Rob,
I’m not a fan of the concrete ceilings either, mostly for color reasons. But these can be painted white easily enough.
Decoupled from the economics of owning here I actually like 1620 as a building–tons of natural light from those windows and modernity. Also others may not see the value in an oversized terrace but I do: its leagues away from a tiny balcony that can barely fit a grill or three smokers. These terraces are great for entertaining or just lounging outside in the brief time here weather permits, of course.
When we throw financial considerations into the mix I think someone would have to be crazy to do anything but rent in this and similar buildings right now. Listings for this building are splattered all across the MLS with pricing just above developer closing. Its flippers trying to bail out without suffering a loss..
I would really stay away from condo buildings with high % of flippers/foreclosures. This is going to be a miami like situation where the remaining owners will get saddled with assessments. I think a couple of more rounds of “knife catchers” have to be purged before we arrive at real valuations on these units.
I can see the attraction of the concrete, but I have to agree also with Rob’s “Soviet Union” comparison. I remember when coppertone and avacado appliance colors were the trend and you could not find a white refrigerator.
Off topic post:
I’ve been reading this blog for a few months and it’s been really useful. My husband and I had planned on buying a condo in Chicago this summer, but now we’re having second thoughts because it seems like the market could continue to drop.
What do you all think of the Lincoln Park/Depaul condo market? How much more do you think that prices could/should drop there? For example, please look at MLS 06819234 and MLS 06778187. Do you think we would be knife catchers if we bought units like these right now (i.e. the value of these units could drop more than 10 percent over the next year)? Or will a condo in this area likely hold its value (i.e. not drop more than another five percent or so)? What would you pay for these two units?
More info: If we rented for another year it would cost 20k. We’re in a high tax bracket and I’ve heard that owning a condo could really lower our tax bill. We would hold the condo about 7 years.
Do you think we would be better off renting for a year, or do you think these units are fairly priced and will hold their value and we would be better off buying one of them?
Thanks in advance for your advice.
I certainly agree with you, sartre. We aren’t even out of the first inning yet in the condo downturn. The foreclosures are only just beginning and will make up a large percentage of all sales activity in the near future. Every single buyer today is a knife-catcher. No big deal if you can afford to lose 10’s (or 100’s) of thousands of dollars on your housing, but I am willing to bet that most cannot.
Can we expand on satre’s point? The best deals won’t be the biggest markdowns, but will be the best prices in those buildings that have stable ownership % after the shakeout. Like stocks, at the end of the bear market, buy the marked down blue-chips, not the near-bankrupt, fire-sale, speculative stocks.
So, part of this is a neighborhood situation. South loop sounds like the most vulnerable. (note – I’m so new to Chicago I haven’t moved here yet [/Y Berra].) It seems like it’s waay to early to identify which condos will come out of this the least scathed.
Chris,
You can tell the neighborhoods in trouble fairly quickly: its the ones that still have a lot of cranes decorating the sky from ongoing building. In terms of speculative building the cake has to be in the Near South side.
The Near South side (“South Loop”) is in trouble indeed, but I think the near westside and near northside are going to take their licks as well.
Sartre’s point was likely that it is very difficult for homeowner’s associations to get the former owners who go into foreclosure, and the banks that foreclose on them, to pay and be current on homeowners association fees. This leaves the non-delinquent owners to foot the bill for those who couldn’t afford to live there or speculated incorrectly. So by buying into a building like this before the foreclosure boom has come and passed could be more expensive than envisioned and more than the declining principal on the property.
I’m currently looking for a place in the South Loop. I like that it’s relatively quiet and less congested than the north side. What do you think would be a reasonable price to pay for a small one bedroom with parking? I’m waiting to see if anything falls below $200,000. Do you think this will happen?
Jenny,
The developer is advertising 1brs in 1720 for ~197 currently. I’d bet you could swing a free parking space with that. It can’t hurt to ask as it is definitely a buyer’s market. Other developers are already offering this incentive, CMK will either match or will be matching soon.
Jenny,
Turnover in the type of unit you desire is phenomenal. Even without the looming wave of foreclosures there will be others who have to sell. Rent for now in the South Loop. You will save money each and every month over buying and prices will be lower next year.
Kenworthey –
Loud. Very little soundproofing. Electrical that needed enhanced. Narrow hallways and cheap common area paint/carpet that looked awful quickly. Assessments “deal” with cable company that was not accurate. Ongoing construction that caused numerous safety issues, plus workers that (daily) threw their lunch trash onto patios of occupied units.
Numerous board meetings where CMK refused to address any issues.
Also, management company hired by CMK, before building was turned over? Turns out they were stealing funds.
Honestly, beware of these buldings that have large #’s of flippers or brand new condo owners as they will likey form a condo ass. board that can’t handle all the upcoming issues.
Outdoor space and tons of natural light are great! I just think there are other (better) options. Just my experience.
Anne:
It’s hard to know what’s going to happen in a particular neighborhood. Lincoln Park is holding up better than some others because, frankly, there wasn’t as much new construction and not as many investors/flippers. It’s an established neighborhood.
It also still has the “prestige” factor and people will pay a premium to live there.
Certain properties are selling at a slower rate – those where people are having a hard time getting loans (over $400,000 for instance.) That doesn’t mean nothing is selling in that price point however.
But there are some beautiful units that seem to be just sitting on the market.
But will we see 10% or 20% decline in LP? I don’t know. No one does.
If you’re going to live there for seven years- at a minimum- then maybe you can ride out any downturn. It will certainly not be as severe in that neighborhood compared to others (in my opinion.)
Only you can weigh the options of rent v own. For some, it may not be worth it.
As other posters have said- you do have to LIVE. If you find a property you love and you can afford it, then LIVE in it. But be prepared to be in the property for a long time to ride out any storm.
If the storm doesn’t turn out to be very severe in LP- then it will work out great for you either way.
deidre: Who as the CMK management company that you were talking about? Forth Group?
No neighborhood in Chicago will be immune. Suicidal lending standards created a demand that will not likely be repeated in our lifetimes.
The more desirable, established areas like LP ran up in value due to the easy money just like everywhere else. Inventory is way up and sales have fallen off a cliff. The disconnect between wages, rents and prices has never been greater. There is absolutely no chance this won’t lead to significant price reductions. The alt-A resets are coming soon and will create the next wave of foreclosures, many of which will be in the “desirable” areas. There is no way that the “best” neighborhoods avoid the fate of elsewhere, it will just come a little later because the hands are stronger.
jack dan –
can’t recall name, as it was a few years ago. but, their office was on north wells, and it was a mess.
Anne,
The unit on Lill is under contract (06778187). Did you guys go for it?
Anne,
Use the NYT rent or buy calculator posted at the right. It will let you add predictions to account for different scenarios (taxes, change in property values, etc.) The variables are complicated; it makes sense to use a calculator and try several different scenarios.
The places you are looking at wouldn’t have to drop in value by much to make it more sensible to wait. You are paying only $20K in rent per year; that is less than 5% of the asking price of the first place (I didn’t look at the second). On the other hand, the place you’d be moving to is undoubtedly far nicer than the place you are currently renting, and the calculator can only give good information about the financial picture, not any “intangibles.”
It seems high for the South Loop for that square footage, low floor, unfinished concrete, standard stuff. At least all of that unfinished concrete looked good on the renderings. Ouch!
Thanks for the information. I’m taking this property search very slow. I’m staying with family to save money. I’m not in a huge rush to move, but if I saw a very good deal, I would go for it.
We didn’t bid on the Lill place–it’s a nice condo but we didn’t think it was a great deal at 500k+, though I don’t really know the LP market so maybe I’m wrong about that. I’m watching several properties in both LP and Wicker Park and it seems like the stuff in LP is moving a lot faster than the stuff in Wicker Park.
Do you think the legislation that got passed (I think) by the Senate a few days ago to help homeowners avoid foreclosure will drastically slow the foreclosure rate, assuming Bush signs it? Part of the reason that I’m worried about buying now is because I think there will be many more foreclosures in Chicago and they’ll drive down the comps. But maybe this legislation will really cut down on foreclosure rates and we’ll hit bottom sooner than expected?
I also wonder about all the new condos set to come online in the downtown area… will this over-supply only depress prices downtown, or will it also depress prices in hoods like Lincoln Park? I know that no one knows what will happen, but this is another factor that’s scaring me away from buying right now, so if you want to speculate please feel free.
Anne,
On the legislation, it won’t have much of an impact. It only slightly helps some of the owner-occupied units who meet stringent criteria. Its really only a small fraction of all of those that are in trouble and flippers won’t qualify. Overall experts don’t expect it to have much of an impact on foreclosure rates.
Will the downtown condo boom affect other neighborhoods? Well other neighborhoods don’t exist in a vacuum so I’d expect to see some impact. How pronounced it is remains to be seen. It stands to reason that the neighborhoods with the biggest supply-demand disconnects will drop the most but who knows how widespread and deep the fallout will be to other neighborhoods.
It makes sense that Lincoln Park is moving units quicker than Wicker Park. In the latter part of the boom we saw $/sf in the transition neighborhoods like Wicker Park move to the same levels as established neighborhhods like Lincoln Park and Lakeview. If you’re paying the same price of course most buyers would pick Lincoln Park over Wicker Park.
There is no legislation that will slow the foreclosure rate because those in trouble cannot afford their homes. Anything that attempts to “save” them will compound the crash by making it likely that lending will completely freeze up. What other result is probable when long established contract law is tossed aside? Imagine where home prices will be if there are few to no mortgages to be had.
The only places where “it is different” are those that did not participate in the credit bubble. I know of no such place.
Long time reader here…
Anne, reading anything in the news and especially here will scare anyone from buying anything! While I agree on a whole that the market will still correct itself, it will be of varying degrees in different parts of the city. Despite all the negative comments about doom and gloom, not one of these individuals really know what’s going to happen.
I chuckle at all the posts that say “I won’t buy here unless it’s back to 2001-2002-2003 prices…” or “the seller is crazy and they should drop the price by 20%”. or “if you buy now, you are a knife-catcher…”
If these people are really buying and feel that one should be paying 2002-2003-2004 prices, then why not just make an offer on it instead of the wait and see tactic?? Besides “Jason” who is making offers and congrats to him on possibly scoring a deal on a foreclosure, I don’t see any other people here doing that… I get a feeling that most of the regular posters here who are renting and supposedly “looking” to buy at the magical “bottom” or slightly on the way up will still be renting 2-3 years later because they will keep talking themselves out of it.
Really though, like Sabrina has said… no one really knows what’s going to happen.
If you are going to stay in the home for the long term, I would suggest that you take your time and look for a location and a condo that you really love and just submit an offer that you think is fair and see what happens. Worse thing is the seller says no but maybe they will eventually come closer to your price after some time and negotiations. No matter what, the location and the unit itself should still be the most important thing if you think you can get a fair price on the unit. Move in, move on, and be happy.
Here is the way I see it. If you are going to be staying there as your primary home for at least 3-5 yrs. Make an offer on a foreclosure at price you are willing to pay…they will come to your offer. The 1620 building does have a lot of renters, but for the most part, the South Loop is an easy place to rent your Condo. So if you can’t sell your place in the future for what you want, you have the option of renting. No one looks at in that respect. Flippers are everywhere and no building is devoid of foreclosures. Even in buildings that are owner occupied, owners are underwater..i.e 1645 Ogden(old crappy building). Everything in terms of real estate, is a risk right now. The 1620 building has healthy reserves. And say you buy, and there is a wave of foreclosures, these foreclosed properties are selling pretty fast in the S. Loop. Still a hot place to live(close to the lake, Downtown, Soldier Field, Field Museum) What was once a flippers building will become an owner occupied building? Natural Course. Ride the cycle, not for those with a weak stomach. This is a newer building, so the appeal is till there. It is not an ugly River City, anyone making that comparison doesn’t know much about the market. Does anyone have anything positive to say on Crib Chatter? No one commends the guy buying in a up market, but the risk taker who benefits from a down market gets commended. These prices won’t hold for too long. Those that look into areas like S. Loop, W Loop, LP, Gold Coast are professional and educated and these areas will always be desirable places to live.