Is a Junior 1 Bedroom a Good Investment? 450 W. Briar
Junior one bedrooms are an affordable way to get into condo ownership for many people.
450 W. Briar in Lakeview was converted into condominiums in 2005 and 2006. The building has 13 floors and was built in 1972.
This seller is trying to move on after two and a half years. Is there profit to be had in buying these small units and selling within only a few years?
Unit #9E: 1 bedroom, 1 bath, no square footage given
- Sold in December 2005 for $197,000
- Currently listed for $234,000 (no parking but rental available)
- W/D in the unit
- Small balcony
- No central air- window unit
- Bedroom: 10 x 7
- Livingroom: 14 x 10
- Assessment of $176 a month
- @Properties has the listing
I am looking in this area at entry level properties and this unit is not priced accordingly. You can get jr-1bdrms in Lakeview for 190k and these include a fireplace and central air and were newly rehabbed like this one.
Look at 1122 Wellington, the 500 block of Barry or the listing on Melrose a few months back (which closed quickly) for good neighborhood comps.
For 240k you can get a lot more than a unit like this: you can get a unit with a garage and central air.
I think it’s a mistake to look at home-ownership solely as whether there is “profit to be had,” particularly as applied to a rent v. buy argument.
– There is something psychologically important about homeownership, just like car ownership. People are willing to pay absurd premiums to own a car; luxury car ownership in this city usually works out to $20 per trip taken; these people could just take cabs, but choose car ownership for psychological reasons. Homeownership is the same way, there is economic value knowing you aren’t subject to the whims of the rental market: it’s yours for as long as you want to stay there.
– Homeownership is a form of forced-savings as the principal is paid down, though of course this is risky if values decline faster than you pay off the principal
– Assuming you are willing to stay put, the combined equity of appreciation plus paying down the principal make for easy (tax-free) stepping stone of eventually moving up to a more desireable home.
Of course you can manipulate these numbers to show whatever you want, e.g. making an 8% return through investments in lieu of a down payment. Of course those are also subject to capital gains taxes, which will double when Obama becomes president….so it becomes a complex equation, even moreso once the psychological element is factored in.
Just wanted to get that train of thought off my chest, it’s been a nagging aspect of this blog’s commentary to reduce these things to straight-up cash flow analysis, which I feel is a fauly premise.
Or alternatively, I’m just trying to make myself feel better about my condo who’s value has stagnated 🙂
When I talk to people about why they own rather than rent (which I very occasionally do), I NEVER get the ‘psychological value’ argument, I get the “rent is just throwing money down the drain” argument. Ditto car ownership versus driving cabs (though convenience also pays a place in people’s arguments). Truthfully, I think most people don’t sit down and crunch the numbers, and if they did, they’d be shocked by what they found–as I did when I crunched the numbers on my own car ownership.
My car is far from luxury. I bought it used five years ago for $10K, and plan to drive it another 5 years. My gas is half what everyone else pays because it is a hybrid. My parking is heavily subsidized by my employer. And for all that, I STILL pay over $500 a month once all costs and depreciation are considered. As soon as I move to a place where I don’t have to take two buses to get to work, I’m going to ditch my car. I could take two ten-dollar cab rides each and every working day of the month and still come out ahead over owning.
Do you really think most, or even many, people have done the math on home ownership? If they do it and say, “Hey, it’s worth it,” that would be one thing–and I’d fully respect the decision. But if my conversations have been any indication, that’s not the case.
As my realtor told the seller of a unit I recently put a b (low) bid on, “If everyone could sell for what they paid in 2005, we wouldn’t be having the problems we’re having now.”
Sad, but true. If you buy at the top of a bubble, and that bubble deflates, you better be prepared to bring some money to closing. In the best of times, you should be prepared to stay somewhere 5 years or so. 2005 to now was not the best of times.
Well, the unit is decorated beautifully! Good job to whoever did that.
I could buy a pretty sweet sailboat if I wanted to live in something that cramped.
David: Thanks for the comments. Cash flow is just one part of the equation. There is, as you said, the psychological aspect of it.
But I also think many people who have bought in the last five years have no idea that real estate can decline and/or stay flat for many, many years. If they actually experienced it, they may think twice about buying that condo that they know they’re only going to live in for 2 years (max).
Not enough people have experienced what happens when you have to stay in a property for a long, long time.
I have nothing against buying the dream condo or the dream single family house that you know you’re going to live in for the next decade.
But when you look at real estate listings every day, as I do for this blog, it becomes quite apparent that many, many people treat their condo as nothing more than an apartment- that they can buy and sell in a year or two AND make money off the transaction (in some cases quite a bit of money.)
When the “making money” part goes away- how many people will buy simply for the psychological component of it?
We’ll see.
I think we are seeing an evolution in the logic for home ownership. A home is consumption and we need to decide on what level we would like to consume. Based on discussions and literature, people (age 40+) have bought homes because they found satisfaction in maintaining the property, watching equity build (lived in the home for 20+ years), and home prices were not rising at such a steep rate relative to income so people could afford a large home.
Just as fuel has made the large SUV less desirable, it appears that rising home energy costs, high home prices, and rising commodity prices will push people back towards smaller homes. People also lack the time/desire to maintain the outside of the home because we are working more.
I expect home purchases going forward to be smaller and lacking outdoor maintenance requirements. Do I seem off base on the previous comment? Going forward, do you think we will start to see small home prices rise faster than large home prices?
Again, what appeal is there with such narrow rooms? To each his/her own, but one can do a lot more with one big room than with two impossibly narrow ones. Such close in walls give it a very cramped feeling.
my brother used to own a one bedroom in this building and, when the arm got to him, he sold it. he now rents a junior one bedroom here. i don’t know why, as the place is pretty shitty. he had issues with the unit he bought, and there are issues with the unit he rents. the floors are laminate over concrete, but in realtor/marketing speak they are “floating floors” (oooooh…). and, over all, it just seems like living in a cheap motel. also, good luck finding parking around this place.
I know this building well, had many friends there over the years, and totally agree with Kenworthy’s line of reasoning.
There has to be some joy in ownership. So far, the joy of it eludes me. How can there be joy in moving out of my beautiful, roomy rental into a squeezy little box that isn’t one-third the apt. I currently occupied. At the prices these (and other) places are offered, “ownership” would mean a steep stepdown from rental in terms of space, beauty, amenity, and overall comfort.
You would only buy a place like this because the prices are rapidly increasing and you want to get a toehold on ownership. This could never be HOME. Apartments like these would never be considered eligible for condo conversion in times in which house prices are based on economic fundamentals such as local incomes and rents, and what that means to a potential buyer is that little convenience apartments like these, meant to be temporary housing, will revert back to being rentals, and will sell at prices that make sense for an investor- in other words, the prices at which you can rent the place profitably.
Unit 4L was recently listed for 188k which looks comparable to this. Not sure of square footage but its also a jr 1-bdrm, probably couldn’t be smaller than this unit and has the same high end finishes.
Let’s call the place what it really is: a cramped studio apartment. Barely big enough for one person, impossible for two. When you look at it like that, the idea of it being a good investment doesn’t even seem possible. By the way, what’s with the kitchen walls? Are they the original 1970s wallpaper/tile?
For the better part of this decade, the developers’ mantra was “if you build it they will come” and 99% of the time the buyers did. Condos on Elston across from a fire station; jr one bedrooms in former apartment buildings; lofts in decrepit 100 year old factories; townhomes in subdivisions where the ‘streets’ are as narrow as alleys; condotels; mcmansions in the exurbs; new brick construction sfh’s for $1.0 mil in low income neighborhoods; new homes next to power lines and substations; townhome subdivisions in the middle of Algonquin; the list of ill-conceived housing is longer than I care to list. They built homes in places and manners that no one had thought to build in the 200 years since europeans permanently settled the area. Developers found a way to throw common sense out the window and build some of the most ridiculous of housing we’ll see in our lifetimes. Five years from now we’ll look back and say, “what the heck were they thinking”. Twenty years from now much of it will probably be torn down or will be low income housing.
I love these: Wibiti.com/3LQN
Ariel view: http://maps.live.com/default.aspx?v=2&FORM=LMLTCP&cp=qzqj8d7pr5z5&style=b&lvl=1&tilt=-90&dir=0&alt=-1000&scene=11369942&phx=0&phy=0&phscl=1&encType=1
Riverview Station. 3434 N. Elston. There’s no river. No view of a river. Directly on Elston Ave. Across the street from a very active fire station. Near not one – but two – radio/cellular transmission towers. In a low income area. Only 1 block west of a major ComEd storage facility. No public trans within walking distance. And they cost only $349,000. At least they’re close to Target.
FYI – The market has turned for the btter over the past 30 days. I am of course talking about desirable areas of the city. Buy smart and you will make money…
Steve,
Your a glutten for punishment. Posting statements without any data to support your position…. G will be all over you on this one.
Steve — what evidence do you have that things are improving? How are you separating any sales increase from a typical seasonal pattern? How are you controlling for changes in the composition of sales if you are measuring median or average prices? Are you accounting for the dramatic increase in mortgage rates since late May? How about the effects of mortgage insurers who are seeing their credit ratings drop (MBIA)? Or the effect of “white knight” banks whose ratings drop when taking over failing mortgage companies (BofA for Countrywide)?
As much as I’d like to believe that the worst has passed (as I am closing this month on a 3BR condo in the Gold Coast), I expect and am planning for no paper profit for several years. It can’t be a good sign that our appraiser needed to look back to June 2007 to find the only 3BR comp he used (and he needed to go to March 2008 to find three 2BR comps).
G thinks the sky is falling. I see the everyday activity and the supply vs demand. I will send you the data at the end of June for the 2nd qrt. You will then understand that in the desirable areas supplies are down and EVERYTHING is under contract. Months suuply was running at around 6 months in LP in Q1. I bet it is down to 4 months for condos. We will let the data speak for itself.
Again, if you purchased above the median in a less than desirable area you will lose money. These neighborhoods are the ones hit by the financing crisis and most of the people who purchaed here should have not been able to get a loan. These areas will return in pricing to where they should have been in the 1st place. This is not the case in the higher income areas (LP, LV, GC, Loop). People in these areas are qualified for the loans they took and will be fine.
Steve, When you get this information please post it. I would love to see some positive data. I argree that alot of overpriced/ badly designed units were built in less desireble areas of the city.
I’d argue that months of supply is not a particularly useful metric for a market like this. To a large extent, the only people who would sell now (having heard horror stories about the market for months) are those who absolutely have to — moving to new city, estate sales, and REOs. I have to wonder about the “shadow” supply of people who would like to sell, but don’t want to disrupt their lives for months of showings (or have already given up and become landlords for a while). I’d also note that the banks seem to list far more homes on their REO websites than appear in the MLS — another source of undercounting.
How does the supply of homes on the market compare to past years? If you like, look at something comfortably pre-bubble like 2001/2.
This is the same sort of logic that is used to attack the unemployment rate statistic in a long downturn. Unemployment (about 5% these days) is #(actively looking for work) / #(working or actively looking). It misses people who have given up looking and especially those who have started doing something else (more school, staying home with kids) but would really like to be working.
Also selling now: people with unaffordable adjusting mortgages. But that didn’t happen in desirable areas, according to Steve. And since there are no REOs in these nice areas (per Steve), the only people selling now should be those who have fantastic out-of-state jobs or are dead.
Supply these days must be incredibly small.
“This is not the case in the higher income areas (LP, LV, GC, Loop). People in these areas are qualified for the loans they took and will be fine.”
So in the difficult-to-afford areas, nobody assumed mortgages that were difficult for them to afford? I, like the others here, eagerly await the data on that one.
I agree with Steve that there ARE units selling. The condo we chattered about at 1647 N. Sedgwick with the rooftop deck went under contract within a week.
Why?
It was priced correctly for what that product was AND was in a very highly desirable neighborhood (and it had parking.)
But the price point matters as does the amenities.
Many of the lovely properties in LP and Lakeview that I have featured over $600k have been on the market for months and have reduced. Several will likely sell for less then they paid in 2004 and 2005.
These are just a microcosm, obviously- because for every seller that is losing money, there is another that is making it.
But if the market was so “great” in Lincoln Park, wouldn’t these sellers be selling within 30 to 60 days- instead it’s 120 to 160 days with price reductions?
There ARE parts of the city doing better than others.
But, again, to say that there aren’t people in the upscale areas getting foreclosed on is just not the truth. They are just as vulnerable to living above their means as anyone else.
Certainly things are selling (a couple hundred per month in river north, another hundred in Lincoln Park). But those have been going down (on a year-over-year) basis for a while, with the last Tribune data showing 10-25% drops in volume.
I expect that May and June may see increases in sales volume on a monthly basis, but the non-Chicago data I’ve seen suggests that the spring bump is much smaller this year than previous years. That would suggest that year-over-year sales will fall even more. I would like to see some Chicago data to see how we compare, but it seems to be slower to be published.
Regardless, if both sales volume and months of supply are dropping, it means that the number of homes on the market must be shrinking substantially — people who might like to sell are no longer doing so.
I expect that the shorter parts of Lincoln Park and Gold Coast will do adequately. Those areas probably didn’t see as much subprime lending as other parts of the city (anyone have data?), and the midwest in general didn’t see too much Option ARM activity — this should keep the number of foreclosures in these areas down at about usual recession levels.
Newer condo buildings, especially midrises and taller, I expect will suffer badly in these areas because of overbuilding — there are still several buildings going up at State and Walton and many more in the area; Trump, Spire, and the third giant (on Wacker) should impact the view market; and the South Loop can’t sell at that much of a discount to River North.
The largest percentage of foreclosures are occuring in the low-income areas of the city. Subprime loans were heavily marketed in these areas as a way to achieve the American Dream. Now because of the number of foreclosures in these communities banks are requiring 20 to 25% downpayments. At lower income levels it is almost impossible to make this type of downpayment so that property is not selling. When income level and individual networth are plotted on a chart it is an hyperbolic curve, where most of the assets are held by the fewiest individuals. This is why you are seeing less foreclosures in LP/LV and the Gold Coast. I think the Steve will tell you on the upper end most buyers are putting down a significant amount of money or its a cash deal.
Well I think this unit is certainly in a nice area but obviously is ridiculously overpriced. It is small, there is no central a/c and there is no parking. And the owner believes they are going to get 235k for it.
Unfortunately for the owner one of their neighbors is a little more realistic and has a list of 188k.
So is this jr-1-bdrm an investment at or close to list? Given that is probably the fastest way to lose 50 grand, even quicker than a bad drug habit, I think the article’s question is answered. 😀
I hope for the owners sake they don’t need to sell or else they better bring some money to the table. Its not any potential buyer’s fault this seller was dumb enough to pay 197k back in late 2005.
Steve wrote: “You will then understand that in the desirable areas supplies are down and EVERYTHING is under contract.”
Wow, I wasn’t aware that EVERYTHING is under contract in those areas. So I guess that has to set some record, right? 0 supply!
Sarcasm aside, the upper brackets of many major metropolitan areas have held up. Whether they will continue to do so I’m betting against and expect a substantial drop this winter.
So how are your 5 (is it?) recent acquisitions doing Steve? (If you can’t tell, I’m calling you out on your bs.)
for the 10th time. There are spenty of properties in LP, LV, ect that will sell for less than they were purchased for. The condo conversion listed above is junk. 1st time owners were sucked into the granite and ss applicances. Look at the price they purchased per sq ft and then tell me if the area is declining in value, or did the buyers of these units PAID TOO MUCH? I think this is obvious. The same goes for the unit on Clark. Paying $400 – $500 per sq ft for a conversion is ridiculas and will caue you to lose money.
Buy smart and you will make money. Buy this junk and you will lose your shirt. The sky is not falling in the real estate market, people’s bad judgements are simply being exposed. If I pay $1,200 for an ounce of gold, and then sell it back at its current FMV of $900, does this mean the market is declining? No, it simply means I over paid for something and now will take a loss…
That sounds like the definition of a declining market.
Speculating, which seems to be what is implied by “buying smart”, is a losing proposition in 2008, in any price range, in any neighborhood. One would hope that this month’s buyers are in it for the long haul.
Dave,
Steves point is that many properties converted in 2002-05 were overpriced, bascially the developer put lipstick on a pig, and the pig sold. Let say this unit is around 500sf/$197,000.00=$394.00 per sq.ft.(2005 price). Who ever payed that price did no market research. Addtionally if the mortgage company had done an accurate appraisal on the property they probably would have never made the loan. Units like the one outlined above do not indicate a declining market but the stupity of a single buyer.
Thanks Valasko… you are right on with your comments.
But Steve- I have covered plenty of beautiful vintage non-conversion units that were bought in LP in 2004-2005 where the owners are going to take a loss.
Are you saying owners of these units overpaid as well?
Then- you can argue- EVERYONE who bought at the peak (which was about 2005) overpaid. (Not just those in conversions.)
Isn’t that the nature of a bubble? Everything goes up well beyond the fundamentals. And in the bust, everything comes down. Some of the more speculative come down more than the non-speculative, but the non-speculative isn’t spared.
Hence, in the dot-com bubble, those who bought shares of Cisco (a billion dollar company) and those who bought pets.com (which made no profit) both suffered losses in the bust. Cisco went from $70 to $11 a share. Pets.com from $60 to zero. Obviously, those who bought pets.com suffered larger losses. But even those who bought quality, Cisco, still lost.
1104 w montana makes my point. We’ve chattered about that vintage unit.
It wasn’t a conversion. It’s a one bedroom that sold in 2006. The seller put $10k in upgrades into the unit. Seller paid $250k in 2006 and it’s been reduced and is now $245k. And it still hasn’t sold.
But there is no “decline” in LP. Look the other way, and move along.
Yes Sabrina, 1104 Montana is a dump and the seller will take a loss. You really are reaching when we have 100’s of properties closing and you point to a small percentage that are selling at a loss. Here are a couple that closed recently. I literally just went down the list of what closed in the past 5 months in east LP. I did not come accross 1 loss. I am sure they are some but the gains out number them at least 7 to 1.
641 Willow
1901 Cleveland
2030 Sedgwick A
419 Grant B
205 Eugenie H
500 Armitage # 3
1838 Halsted unit 7
I just don’t see how you can claim the market is going down here. Please list 7 losses for me. I would love to see them. Please no 2005 condo conversions. Again, the dumb do dumb things…
1846 Halsted # 3
1908 Mohawk unit 5
2004 Howe unit 1
ect, ect, ect
I can’t disagree with Steven as I don’t wish to research the data (he is more familiar with) and in other areas there are pocket hotspots still in existence. Today the WSJ ran an article that despite overall UK home prices dropping 500 pounds/week on average the Kensington and Chelsea areas in London continue to appreciate (to ~3MM/USD equivalent per home on average)
“How long house prices in Kensington and Chelsea can remain insulated from the national trend remains to be seen. Mr. Shipside said asking prices for homes in less desirable areas tend to fall first, but more upscale neighborhoods may feel the pinch if the housing market continues to slip.”
So is it unheard of that we could have similar neighborhoods in Chicago? Probably not. I still think the lower end of LP and LV are poised for a shakeout as they aren’t near rental yield equivalence. But renting a house is still pretty expensive in LP so the higher end may hold up better.
The prime area of LP is North to Fullerton and west to around Kenmore. I would bet the gain to loss ratio is higher than 7 to 1.
Any takers?
Bob – I only deal with the mid to upper end of LP condos. They are fine and the demand is still crazy. I do agree that the 1 bed end of the LP is the worst. The credit crisis has hit those that don’t make a lot of money. The rest of the LP market is not really affected. They put down 10 – 20% and only utilze 20% – 30% of the their gross monthly on housing. They can afford what they are buying plus a lot more.
Okay- so now we are talking about:
A 20 block radius in a city of 1.5 million people.
Only the mid-to-upper end.
Only people putting down 20% – 30% or paying all cash.
And no one bedrooms because they’re “dumps.”
LOL!
The percent of the market that fits these criteria is laughable.
I’ve never said that things aren’t selling and some aren’t making money. Sure- the upper end is holding on pretty well in some areas (and not in others.) That is natural and happens in EVERY housing bust since time began.
It doesn’t mean the upper end will escape the downdraft.
I have simply been stating that LP is doing fine. You have said it is not. It is not jut LP but Bucktown, Lakeview, Gold Coast, and Old Town.
“It doesn’t mean the upper end will escape the downdraft.” It also does not mean that people who buy quality properties in the best areas will not continue to see healthy appreciation rates of 3 – 5%. Your speculation is no better than those who purchased new construction in the South Loop.
Let’s look at Steven’s examples:
641 Willow #134 — sold for $675,000 on 03/26/2008 (sold by a trust)
Deed transfered from L.B. to the trust on 08/25/2004 ($0)
Deed transferred from E.B. to L.B on 09/24/1993 ($0, same name)
Sold to E.B. for $340,000 on 08/31/1993
** Value doubled in 15 years (about 4.7%/yr)
1901 Cleveland:
5 units at this address per Assessor.
None have sold since 2005 per CCRD.
2030 Sedgwick #A — sold for $985,000 on 05/20/2008 (sold by a trust)
(5/20/2008 is recorded date, not sale date)
Deed transferred from L.G. to the trust on 10/05/1999 ($0)
Sold to L.G. for $820,000 on 10/05/1999
** Value increased 20% in 9 years (about 2.0%/yr)
419 Grant #B — sold for $457,500 on 05/08/2008
Sold for $415,000 on 04/25/2006
** Value increased 10% in 2 years (about 5.0%/yr)
205 Eugenie #H:
No sale recorded at CCRD since 1997
500 Armitage #3 — sold for $447,000 on 05/02/2008
Sold for $405,000 on 08/07/2002
** Value increased 10% in 6 years (about 1.7%/yr)
1838 Halsted #7:
Unit doesn’t exist in Assessor list (only #5 at PIN 1005).
PIN 1007 exists in CCRD, but no sales since 2002.
So, of Steven’s 7 sales, three haven’t been recorded yet, but the other four have been.
The sales that I can calculate profit on are:
641 Willow #134: average 4.7% return over 15 years
2030 Sedgwick #A: average 2.0% return over 9 years
419 Grant #B: average 5.0% return over 2 years
500 Armitage #3: average 1.7% return over 6 years
The average gain for Chicago metro area per Case-Schiller (from each purchase date to Feb 2008) is 4.8%, 5.4%, -4.1%, and 4.0% respectively.
Of these four Lincoln Park homeowners hand-picked by Steven, only one managed to make more money over their ownership period than the average for *all* of Chicago. One other managed to match the Chicago average, by holding their property for 15 years.
Thank you Kevin. This is very interesting information to have (for all buyers, actually.) It lays out pretty clearly what kind of “appreciation” to look for while we’re in housing bust (instead of a boom.)
This information also shows that LP didn’t appreciate like other parts of the city during the boom (I would expect Lakeview’s appreciation numbers to be much higher, for example.)
For those who want to recreate my work:
* Look up address in Tribune list of sales to find PIN.
* If not listed, look up at Cook Co Assessor by address to find PIN.
* Use PIN to pull up public records at CCRD.
* Look at the “abstract” for each recorded deed to trace ownership and prices.
Finally, I calculated annual returns assuming continuous-time compounding:
return = exp[ln[(New-Old)/Old]/years] – 1
The Case-Schiller returns were calculated similarly, using the monthly price index published through Feb 2008 (the data I had on my desktop):
return = exp[ln[(New-Old)/Old]/(months/12)] – 1
Kevin – So your point is that yes all of these sellers made a nice profit from owning real estate? I have been claiming all along that this area is very stable and continues to appreciate. Is there anything from your above post that contradicts this? LP Never appreciated like the Logan Squares and will not decline like the Logan Squares. I never said LP was the best place to invest. I said it was the best place to live if you want stability and continued appreciation. Investing in a property and finding a great area to live are 2 completely seperate things.
I will go back to the same argument I have always supported. LP did not appreciate like others hot areas of the city and will not feel the declines. Others here continue to say that LP is not immune and will come down in value. I simply disagree and my good friend Kevin helped me prove why. It’s a very desirable and stable area for young professionals, families, and the elderly. It will always be in high demand whether the market is booming or busting.
Thanks for your time…
Trulia offers snapshots vs. values in 2003. Granted this wasn’t pre-bubble but perhaps in the early or middle of it (depending on whether you call the beginning in 98 or 01). Lincoln Park did not depreciate significantly on a $/sf basis (I think down around 5% from 2003 levels). Lakeview did appreciate significantly.
LP was around $437/sf in 2003. Today its around $406/sf. Interestingly enough transaction volume has dropped off in LP since 2007 significantly, however it is down to a level comparable to 2003 sales volume levels.
On this note while we talk about sales volume being down x% from 2005/2006/2007 levels, LP, DePaul and LV all had transaction volume essentally equal to 2003 levels. Near North side even had transaction volume significantly above 2003 levels.
Bob – You are saying that LP is currently at 2003 levels? Show me 1 person who purchased in 2003 and sold in 2008 at the same level. It is just not true. Trulia has no way to calculate this as NOONE in northern chicago uses sq footage on their listings. Do they guess the size of the units for their calculations? Trulia also says my neighbors house is worth $400K more than my house. This is frustrating considering my house is larger and 100% updated and my neighbor’s home was last updated in 1976.
Bob – Trulia also says LP is up 10% since last year. That’s great because I bought last year. I should take my profits and run…
“Show me 1 person who purchased in 2003 and sold in 2008 at the same level”
80 E Elm #4 :
Sold for $485,000 on 08/29/2003.
Sold for $507,000 on 03/18/2008.
$22K gain in five years (less than 1% per year), without accounting for closing costs or anything else.
Okay Kevin, you got me! This person almost lost some money. I gues we are all screwed.
True, the four sales that I could track from Steven’s hand-picked list all made money (relative to just putting it in their mattress).
However, I don’t recall anyone arguing that long-term holding of real estate has been unprofitable. Most properties in Chicago (and especially in these “better” areas) seem to still be above their 2004 prices. I was surprised that the 2006 buyer was able to make money — if I had better info I would look for evidence of remodeling (as it is, closing costs probably ate his 10% gain).
For my part, I am more interested in future gains. The rent-buy calculation for my decision was fairly robust, still supporting buying out to about 10 years of no (real) price appreciation. That said, it could be bothersome if prices drop another 20% and I have to move early. So, I’d like to get a feel for how prices are moving in Gold Coast/Lincoln Park now.
One anecdote: a not-new Gold Coast condo that sold last summer has been on the market most of this spring at about the same price, but is getting essentially no foot traffic. It seems to me that buyers think it is overpriced, suggesting that prices may be falling year-over-year even here. Similarly, there are some pairs I know of were one unit sold early this year and a twin unit is on the market now at a slightly lower price.
My sense is that Gold Coast prices are stable or decreasing slowly now, but are 10-20% off of peak. Too many sellers are asking high prices (and not reducing fast enough to attract attention), but also too many buyers believe that prices have collapsed. Well-priced properties are selling quickly, but half of the MLS might be overpriced deadwood.
“Show me 1 person who purchased in 2003 and sold in 2008 at the same level”
“Okay Kevin, you got me! This person almost lost some money. I gues we are all screwed.”
You asked for one example; I gave you one example. From that same appraisal, I have two 2001 purchases that made about 10% when they sold this spring (also in Gold Coast).
We are not all screwed — but the people who purchased in 2005-6 probably can’t sell for their purchase price. If they bought with 20% down, they will be able to sell in this market (but they won’t walk away with much). If they bought with little down, they are likely going to need to bring cash to closing to satisfy their mortgage.
Back of the envelope calculation on how screwed some people are:
Purchase for $400K in 2005, with 10% down.
— $360K mortgage at 6% (30yr fixed).
— Principal payments total $14,097 over three years.
— $346K owed on mortgage.
If they can sell for $380K, they will be able to pay the Realtors (6%), Chicago (3% transfer tax), and the mortgage. Their entire downpayment (and principal payments) will be lost. Note that as little as a 5% drop from the 2005 price will force the seller to bring funds to closing.
If the sellers started with 20% down, they will be able to withstand a 15% drop over 3 years before their downpayment disappears.
Messed up the transfer tax calculation — it is $1.50/$500, or 0.3%. That puts the breakeven around 7.5% decrease (10% down) and 18% decrease (20% down).
Still, if you bought in 2005 with little down, you probably won’t be able to close at current prices without additional funds.
This Junior 1 bedroom was indeed NOT a good investment, as evidenced by unit 12B which came on the market 492 days ago and is now listed as a short sale with an ask price of 165k. Parking an extra 25k.
The down market isn’t affecting the owner of unit 6H, which is a 1/1 listed 38 days ago with an ask price of 225k. I guess the downturn doesn’t apply to all units in this building, or so the owner believes.
Unit 7K is listed as a 1,000sqft short sale 1/1.
450 W Briar unit #11E is a short sale 1/1 listed with an ask price of 150k.
So to answer the blog authors question from four years ago ex-post, a junior one bedroom here for 235k was decidedly NOT a good investment.
450 W Briar unit #11E is now a foreclosure with an ask price of 75k. One can only imagine what impact this will have on their neighbor two floors below, in unit 9E. I sure as hell hope these people aren’t getting government bailouts for their reckless purchasing decisions during the boom.
Hi Bob,
I was actually the previous owner of 450 briar unit 11E. I purchased it during April 2006 at $210,000 for a 450 square-foot condo in Lakeview. Incredibly overpriced. In 2008, with my husband and 4 month old baby, I was laid off of work. I am a college grad with my NCIDQ for design, not a slacker or anyone who takes your so called “ballots.” Keep in mind In 2006 most people had interest only loans, as I did. These are awful. When I tried to refinance and keep my condo well unemployed with a four-month-old baby I was offered a 40 year loan with 10.75% financing. I think it was the best business decision I ever made in my life to get rid of place. I currently own a beautiful home and was actually just featured on HGTV. I made the best decision. Eat your words!
Hi – this is an old thread, but is anyone else mad about the deconversion falling thru for the building? can we chat?
“Hi – this is an old thread, but is anyone else mad about the deconversion falling thru for the building? can we chat?”
The sale of this building to turn it back into apartments fell through???
What happened? Did they vote it down?
How much is needed to pass it? Like 70%, right?
These deconversions have been a good deal for the owners. They usually get higher prices than selling it individually. I was surprised when River City in the South Loop voted it down.
75% of the owners need to vote yes; however, I have a feeling that since so much of the building is rent, not all the owners were notified about the deconversion. I’m very upset because I think this would have been a great deal for us. Do you own or know anyone in the building?