Market Conditions: Can Foreign Buyers Save Chicago’s Luxury Market?
Tricia Fox of Keller Williams Gold Coast, and one of the city’s top agents, is going to Dubai for the 5th Annual International Property Show in February to try and lure wealthy foreign buyers to Chicago’s luxury condo market.
According to the Chicago Tribune, Tricia has been working with Australian clients and members of her sales team have been assisting Russian buyers, so the city is already attracting some foreign buyers.
The election of Barack Obama and the possibility of the Olympic Games are putting Chicago on the world’s stage.
But can foreign buyers really fill the gap in the luxury downtown market?
“People overseas are saying to me, ‘I didn’t realize you have the Third Coast, with nearly an ocean.’
“For the first time, they’re giving us a serious look,” Fox said.
Previously, she said, international buyers have shopped for properties primarily in San Francisco and New York.
“They wanted waterfront, and they wanted city. We have both, and our prices are better than those two markets.”
Although economic conditions certainly have affected the very high end of the market that she specializes in, she said that bracket tends to operate in its own little world, and some properties are doing well.
Nonetheless, she sees a change in what buyers are seeking at that level—$1 million and up in downtown Chicago and the Gold Coast.
“The majority of our buyers have two or three homes,” Fox said.
“They’re price-conscious, for sure. It used to be location, location, location, and now it’s price, price, price.”
No longer, she said, is it likely that those buyers will pick out a condo and plan on an extensive renovation.
“They don’t seem to be in the mood for a gut job, or something they have to redo,” Fox said.
And, perhaps, they’re looking at real estate anew.
“A client I met said, ‘I’ve lost $3 million [in the stock market]. I wish I had put it in real estate.’ ”
The economy also inspired the client to decide maybe it’s time to live a little, Fox said.
“She also went out and bought herself a Bentley.”
Willing to go the extra mile for a sale [Mary Umberger, Chicago Tribune, January 25, 2009]
NO
Overpriced real estate, overpriced companies, and bad mortgages are our most profitable exports. It’s a great way to get our currency reserves back. But I agree with Ze.
would’ve been nice if the RE agent suggested donating $100K to a homeless shelter or soup kitchen, but I digress..
Dubai and RE salvation? LMAO.
I doubt it. For one, Chicago just doesn’t have the prestige that Manhattan and Dubai’s real estate markets have (well had). I’m sure a few foreigners are getting on the plane with their cashiers checks and Amex black cards but they will never arrive here in masses like they do(did) in Manhattan, Paris and Dubai. Those places are the buyers’ first choice because they offer the bragging right. Realtors like to create hype to bring out discouraged buyers, sorry Tricia that trick doesn’t work anymore. If foreigners were really snapping up luxury condos, Trump tower, the Shangri-la and the Mandarin Oriental would have been built and sold out by now. Plus everyone knows that the worst is yet to come in real estate so why not wait a few months until banks and sellers are more desperate?
Maybe… I think Chicago is starting to look a lot more attractive now that our President is a well-known Chicagoan. I guess we’ll see.
Honestly, though, I’m kind of hoping that we get to keep Chicago to ourselves. One of the things that makes housing so freaking expensive in NYC is that it’s the playground for the wealthy. I’d hate for Chicago to become unaffordable for your average middle-class person.
“I’d hate for Chicago to become unaffordable for your average middle-class person.”
Do you really think the jet-setters–if they come–would have a significant effect on “middle-class” housing? These would be the folks buying at Trump and buying $600k 1-BRs. They aren’t going to be looking at bungalows.
Yeah count the towel heads walking down Mich Ave today. Zero!
“Yeah count the towel heads walking down Mich Ave today. Zero!”
They’re the smart ones, Ze. Too cold.
If the real question is in the title of this post, the answer is easy, NO!
The idea that foreign investment will save us this time around (again) is preposterous. i really believe these writers and developers are starting to grasp for straws.
Foreign (Japan) investors stepped in to stabilize a shaky RE market in the mid-late 1980’s and got burned (false wealth here, drove record inflation there, crashing their entire economy), again FI (Arab world) stepped in in the late 90’s and early this decade to buttress the Financial Sector, and got burned really bad (Prince Alwahleed lost $8 billion on CIti alone, that’s just 1 person). Iceland, a country with one of the best quality of life quotients in the world was bankrupted by investing in the American housing market. The country carried no debt for 80 years (til 2007), then all of a sudden. currently live off the, literal, charity of the EU.
The only large pools of FI capital are in China, which I cannot foresee doing anything but shopping at junk rates (see their bid for Chrysler $4.50 a share), and the Oil countries.
Dubai was mentioned so I want to say something of the mythic Dubai.
It is a glittering mirage in the psyche of the world. The country has already announced an expected 30% drop in their own real estate prices.
http://www.arabianbusiness.com/544789-dubai-property-prices-may-fall-20—emaar-chief
The global financial meltdown has cut tourism to the country by close to 40% since September.
The relatively moderate ruler of the country has gained more than a few enemies within the region with his lax requirements for Islamic adherence to his people, so they may not step in to assist if the downslide continues.
The ridiculously rapid expansion of this small country has been largely financed by investment from America and Europe, does anyone think that will continue.
Dubai also holds a large number of horrible foreign investments as it is (Loehman’s, anyone?), so many VC pools are already staring at liquidation.
I don’t mean to be negative, it just seems every time we have a problem here in America (Port Security, Capital Infusion to the Financials or the housing meltdown) the name “Dubai” rears it’s head.
I don’t know if they want to help us, what I do know is they can’t.
Iceland was not taken down by the US mortgage market. Iceland’s central bank set high interest rates and took in foreign money, mainly from the UK, and in turn used that money to finance grocery stores, sports teams and condos in Spain.
Dubai and RE salvation? I am still LMAO.
I have a question regarding paying cash during times like these: how much discount will a buyer get for paying cash for a normal or bank owned property? I don’t see anyone, foreign or american, giving up that much liquidity unless they are really getting a deal.
Lauren had this convo here once. I still don’t get the cash thing. As a seller I wouldn’t discount anything to someone for cash. As for banks who knows.
“I still don’t get the cash thing”
can’t imagine it makes *any* difference for any property under $500k–the bank holding the REO can even finance the damn thing and sell the mortgage along to Fannie and not assume any risk. If you’re tlkaing $2mm REO properties, maybe it could make some difference.
Banks will typically make a deal for cash and put your offer ahead of higher, loan contingent offers. The fewer contract clauses the better on REOs.
Ze C. , I wouldn’t mind shoving a towel down your throat.
ChiREvassel.. would you care to expand on that. ROFLMAO.
Most big banks don’t approve foreign nationals for hefty mortgages anymore because it’s so easy for them to pack up and leave. Even foreigners that work for large international companies such as Credit Suisse and Bayer aren’t approved. So for the only way for them to buy all these luxury condos they are supposedly buying is to pay cash. I am just curious to know if sellers and banks offer any extra discount to cash buyers and how much it is. I think it depends on how desperate the seller is: wait for a qualified home buyer, which could take months in this strict mortage market or accept the cash buyer’s offer and have the property off the market within 10 days…
just in reference to your derogatory remarks
which one in particular so that I know to repeat it more often 🙂
And did you spell vassal wrong? The RE in front of it suggests that you very likely might have.
Thanks G. Although it will be a freezing day in hell before I can/will fork over 6 figures in cash for a condo, it doesn’t hurt to know how it works 🙂
“And did you spell vassal wrong?”
He’s from Puy-de-Dôme.
“Although it will be a freezing day in hell before I can/will fork over 6 figures in cash for a condo, it doesn’t hurt to know how it works”
You can always finance it after you close. You are assuming the financing and interest rate risks, but if teh deal is good enough, you can get your cash back out.
Relatedly, G, are the REO banks really not self-financing conforming mortgages? Seems silly to me.
I haven’t heard of banks self-financing conforming mortgages for their REOs but I imagine it’s just a matter of time before it happens.
rather spell something wrong than be a jack@*s
“I haven’t heard of banks self-financing conforming mortgages for their REOs”
Why the hell not? Fannie and Freddie are still buying–they don’t have to assume any risk. Seems like a no-brainer.
“rather spell something wrong than be a jack@*s”
So you’re not from Puy-de-Dôme?
I think it’s a great idea too. I’m not the fannie/freddie expert but i imagine there’s some prohibition on self-funding mortgages for REO properties and then dropping them off on the GSE’s doorstep. Maybe they think it encourages paying “hot potato” or something like that, as if they haven’t been doing that for years with securitization.
that is cool though, didn’t know france has/had a volcano.
my comments have been to the racist an nobody else
“there’s some prohibition on self-funding mortgages for REO properties”
So, they all agree to finance each other–Wells funds BofA’s who funda Chase’s who funds Wells’ REO. Obviously, the buyers need to pass UW, but it’s still not soo burdensome.
And I’m just messing, ChiRE. I like typos as quasi-puns.
I guess back to the topic on hand like I brought up in another thread, Chicago has some of the best valuations compared to other major metro areas worldwide (with their MSA’s 5 mil or higher). If you know any others I would mind making it my next investment, especially somewhere warm.
I guess back to the topic on hand like I brought up in another thread, Chicago has some of the best valuations compared to other major metro areas worldwide (with their MSA’s 5 mil or higher). If you know any others I would mind making it my next investment, especially somewhere warm. People will come here esp. if we get the Olympics, Obama has already helped. The media will be taking some property too.
ChiREvassel , you should invest in $30,000 and $40,000 properties in humboldt park and in pullman. You can rent them out cash flow positive from day one. $750 to $1,000 rent for 2 bedrooms and houses respectively. The only catch is that you have to personally collect the rent from your tenants….
Ze, I can’t believe that you don’t actually know this, but on the off chance you really are ignorant, the term “towel head” is used as a racial epithet, and is perceived as hateful and hurtful. Whether you meant it to be so is not the point; language is social and the racist meaning is the dominant one.
Aww boohoo the PC police are trying to come out in droves and will their delicate sensibilities onto others.
KW I take offense at the mere fact that you take offense to such epithets! Haha LOL you can’t control these here intertubes so get off your high horse and if you don’t like what is written howabout this, take a track from the way people used to react to such things before PC crying became so commonplace: IGNORE IT.
Now get off this thread before I throw out un-PC words to offend you even more. Afterall remember you offended me by your very offense to non-PC words you don’t approve of. As I am so offended I will not hesitate to muck up this thread further in an attempt to hurt your feelings even moreso.
Ken.. I thought they liked that term.. Whew…good thing I backed off from using sand ni#^*
🙂
it not that mine or anybody’s feeling will get hurt, I would rather have a decent conversation/read (about real estate), but it does feel good to know that when little brother (PC police) is watching people feel a need to put on a show.
ChiREvassel,
Don’t mind Bob. He’s afraid of Negroes.
“Chicago has some of the best valuations compared to other major metro areas worldwide (with their MSA’s 5 mil or higher)”
Some idiot threw the same logic at me when I was picking up my place in Rio (pop 12 mil). Kept telling me the price per sq meter for London, New York, and Paris.
I loved Chicago but it is not NYC, Paris, London and it ain’t never gunna be.
Uh Ken.. you can’t use that word either… oh and adding to the RE convo. RE sucks.. and will be funny to watch the spring fire sale. Now back to checking out my tiles being cut.
Bob:
Don’t be a troll. Nothing worse on the ‘tubez than a troll.
KW,
You bought at the peak didn’t you? You did everything you thought you were supposed to in life including aspiring to the status symbols of ‘adulthood’ which included ‘ownership’? I bet your parents must be so proud.
You oh so remind me of my favorite Wizard of Oz character the scarecrow. Thats you KW, enjoy:
http://www.youtube.com/watch?v=2hAg_k69a4M&feature=PlayList&p=866352B842E31B42&playnext=1&index=2
Good luck attaining your class 3 scuba license, you’re going to need it seeing as how underwater you are! LMFAO. Financial ruin and home loanership takes its toll on another lemming. Remember KW success in life isn’t all about hard work its about being smart too, perhaps beyond your sensibilities to discern. You go gal! Let me know how the food is in debtors prison.
Wow, Bob… have you considered cutting back on the caffeine?
I think someone or something crapped in Bob’s coffee today.
These boards have now gone the way of youtube.
“These boards have now gone the way of youtube.”
Congratulations, Sabrina! I had no idea Google was throwing money at you.
anon, I believe the bank’s insistence on “as is” offers might muck up the underwriting. Not to mention their knowledge of the value of pre-approval letters these days.
Oh yeah, keeping with the youtube theme, let’s not forget this lesson: http://www.youtube.com/watch?v=JNeLAS3axKI
Funny you say that. I was just thinking that this site has decent traffic but is so poorly monetized.
I haven’t been to Rio but I am sure some part are good, I do believe that Chi (2nd city) will/can be moved up to be on par with Paris, London, Tokyo, Mumbai, Dubai etc. Even if it isn’t it will be ours and I like getting close to world class attention/services/fun/transportation etc for lower prices/cost of living.
Homedelete said: “ChiREvassel , you should invest in $30,000 and $40,000 properties in humboldt park and in pullman. You can rent them out cash flow positive from day one. $750 to $1,000 rent for 2 bedrooms and houses respectively. The only catch is that you have to personally collect the rent from your tenants….”
Actually- I’m surprised no one has noticed the prices on some of the properties in parts of LP and Old Town from the 1980s and early 1990s. $175,000 in the early 1990s in Old Town? Seems like a no brainer, right?
Except that that neighborhood wasn’t exactly stellar 15 to 20 years ago. Who had the guts to buy then?
Maybe some people buying up $30,000 houses in Humboldt Park right now will look like a genius in 15 to 20 years.
Maybe she can charge home builders for development specific threads and then present them with rose-colored glasses. She can censor any negative comments and then attack and/or ban anyone she doesn’t like with impunity. Then she can post links anywhere and everywhere on these tubes to her website … Oh wait …I think someone has already done that.
“MADFLY on January 26th, 2009 at 4:05 pm
Funny you say that. I was just thinking that this site has decent traffic but is so poorly monetized.”
I don’t think it’s genius as much as it is dumb luck.
My novel idea of late is to buy up entire blocks on the cheap, especially in hoods with plenty of vacant lots, and either combine the lots with homes to make the equiv of suburban yards or make them parks paid for with assessments charged to residents of the new subdivision. It would be pretty nice to buy medium sized house on two or three lots, near the green line or blue line, for a couple of hundred grand. I’m sure someone could get the numbers to work. Vacant lots in englewood and the like are only $30k or in some cases far less. Too bad the hoods with the most vacant lots are far removed from any amenities and are in the middle of high crime areas. Developers during the boom were all about high density housing, packing as many townhomes or sfh’s onto the smallest lots possible. It’s just an idea I”m sure I’ll get flamed for here but it is definitely a creative use of underutilized land.
Check out the number of vacant lots for the cheap at 58th and Racine.
http://maps.live.com/default.aspx?v=2&FORM=LMLTCP&cp=41.788137~-87.654408&style=h&lvl=17&tilt=-90&dir=0&alt=-1000&scene=11400646&phx=0&phy=0&phscl=1&encType=1
“Maybe some people buying up $30,000 houses in Humboldt Park right now will look like a genius in 15 to 20 years.”
Anecdotally, most of the people I have met abroad after spending two years in southeast Asia and another year in different parts of Europe, know Chicago for two things: It’s world-class segregation and The Haymarket martyrs.
“Maybe she can charge home builders for development specific threads and then present them with rose-colored glasses. She can censor any negative comments and then attack and/or ban anyone she doesn’t like with impunity. Then she can post links anywhere and everywhere on these tubes to her website … Oh wait …I think someone has already done that.”
One site is run like a business; the other like a hobby. I find this site way more interesting but interesting don’t pay the rent.
So right you are Madfly. ha!
homedelete,
Good luck finding a bank or other lender to finance your grandiose plans. You might find the funds a little lacking, as of lately.
Still as bad as the market is, and I predict this housing bear market will not bottom for another five years (actually parroting another poster on here who seemed wealthy to me), I think this year will be the end of the major financial crises.
Not sure when in the year it will happen but I think big institutions will stabilize at some point, they almost have to. For the smaller banks we could still see waves of failures all the way to and during the bottom. But household names, I just don’t see the government allowing too many of the remaining ones left to go. Its really gotten to the point where we have a handful of mega banks, only a few larger banks below that, then thousands of small banks not even in comparison to the size of the first two categories.
With such a discrete disruption in scale this could be troublesome for the economy should the bigger ones or even 2nd tier fail.
Second half recovery will be a myth, however any improvement in the employment picture, or even a stabilization in the unemployment rate would be welcome news.
And Arizona will win the big game. HAH, okay that WAS a joke just letting you guys know I’m not crazy..
Well, I don’t know about Dubai – but I am selling my place to this guy in Nigeria who just emailed me. He’s sending a check first – for more than my list price. It’s crazy, yall!
I dunno I just don’t find Humboldt Park any warmer than where I live, lol. it is unfortunate but this fiasco will set places like Humboldt and bronzeville back a few many years; esp if the pessimistic people are right, it might be a decade or 2 ur talking about. I wouldn’t want to tie up my money for that long, (it might be ‘cash flow positive’ but as you eluded to it might be hard to get everything you would expect). As some say cash is king, it definitely helps pay the bills.
Long Live May Day
Sabrina, you ought to put a “tip jar” on the top of your page.
I’m not a developer so I’m not about to start gentrifying the ghetto into an urban residential oasis. Still, there are lots of areas in the city both west and south that are more or less Detriot-esque. Furthermore, the foreclosure crisis is causing other more stable neighborhoods to go under too. There are blocks where every third or fourth house is boarded up due to foreclosure, whereas a few years ago people actually lived there. I don’t know what the outcome of this all will be, maybe much of the southside will be Detroit but the northside will become a model of post-peak oil urban living. Who knows, all I know is that land that is no more than a 20 minute drive within the city limits is so cheap that the banks can barely give it away, and in some cases, they are giving it away if you pay the liens and taxes. The developers built everything so high density over the last few years it would be nice to see some lower density building/rehab within the city limits.
Thirty two blocks east is UIC where lots sold for probably 10x as much.
http://maps.live.com/default.aspx?v=2&FORM=LMLTCC&cp=41.871023~-87.73186&style=h&lvl=17&tilt=-90&dir=0&alt=-1000&scene=11384165&phx=0&phy=0&phscl=1&encType=1
Pulaski is only 16 west of Western – 2 miles. We talk about chicago and damen/western quite often on here.
http://maps.live.com/default.aspx?v=2&FORM=LMLTCC&cp=41.892782~-87.72156&style=h&lvl=17&tilt=-90&dir=0&alt=-1000&scene=11383234&phx=0&phy=0&phscl=1&encType=1
alright back to work for me
Sorry one last one but my favorite –
58th and prarie: There is one building on the block. Yes, one building. I’d love to own a house and have an entire block as my yard. I’d fricken make it my own english garden. Of course I would probably be shot/robbed/burglarized/murdered within minutes upon entry into the neighborhood, but, like sabria pointed out..buying in Old Town 20 years ago would have netted a nice profit.
http://maps.live.com/default.aspx?v=2&FORM=LMLTCC&cp=qyy7g07pymgj&style=b&lvl=1&tilt=-90&dir=0&alt=-1000&scene=11400833&phx=0&phy=0&phscl=1&encType=1
“58th and prarie: There is one building on the block. ”
That’s only half a block, HD. I feel cheated. And no one is going to let that land go cheaply (unless you’re connected) until after the Olympics are given to someplace else. If the Olympics are coming, that will be (probably unjustified) high premium land–right by a green line stop, two+ blocks from the stadium.
Two buildings HD. And too bad its not east by a mile or else you’d have the UC police patrols which are all over the place.
yeah, it’s more like half a block, cause technically a city block includes both sides of the alley. There are three buildings on the otherside of the alley for a total of four buildings on the city block. But nevertheless, there is a lot of land available in the city, and cheap too, that could be gentrified a much lower density than all the crappy townhomes developers have built over the years. This land is in the city and near public trans and the lake shore. But if detriot is an example of blight then people will continue to move farther and farther away from the city. i.e. the urban prairie
Maybe if peak oil becomes a poignant reality and gas reaches a sustained $5 or $6 a gallon developers might rethink repopulating the south and west sides. But I hopefully we’ll have developed alternative energy sources by then (i’m crossing my fingers for cold fusion!) so who knows. Still I’ve love to have 3 or 4 city lots and a house in the middle and then take a short bus ride to the train downtown. and bike to the lake in the summer.
…and not have to pay $5,000,000
“Still I’ve love to have 3 or 4 city lots and a house in the middle and then take a short bus ride to the train downtown. and bike to the lake in the summer.”
“Of course I would probably be shot/robbed/burglarized/murdered within minutes upon entry into the neighborhood,”
yes, yes you would. 58th and prairie suuuuuuuuuuuucks. Almost as scary as the 71st and king area. But both are nowhere near as crappy as Austin or West Douglass Park. My god. How the hell does anyone live there?
“short bus ride to the train downtown. and bike to the lake in the summer.”
Steve rides the short bus
“Still I’ve love to have 3 or 4 city lots and a house in the middle …and not have to pay $5,000,000”
All you have to do is become the Cardinal.
“yes, yes you would. 58th and prairie suuuuuuuuuuuucks. Almost as scary as the 71st and king area. But both are nowhere near as crappy as Austin or West Douglass Park. My god. How the hell does anyone live there?”
Because there are poor people in this world
And poor people have to live somewhere. Jack#$@.
I’ve been to Austin. Sketchy, not the best place in the world to be, but contrary to some idiots beliefs, it’s not Gaza or Western Pakistan. Lots of cities are more dangerous than Austin. Or Englewood, or anywhere else.
And, if you want to buy for future investment value, just look where real estate prices are cheap, property is underdeveloped, and there’s close access to an El stop. That’s where the future value is.
Jerry 101: “That’s where the future value is.”
The problem is that the future value is below today prices. The marginal neighborhoods will go down further in the incoming hard economic times, so the RE values will go further down. Look at Detroit and Cleveland for examples.
I have to agree with jerry101, access to public transportation will be the key, but if you don’t get good value you will be holding the bag for a while (vacant property is easier to maintain but no roi in the short term), given peoples comments about the south/west side, it seems to me it will be a while before it gets better in those areas.