Market Conditions: Crain’s: Is Chicago’s Upper Bracket Condo Market Just Fine?
I was struck by the title of a link to an article on Crain’s today which said: “Upscale condo owners: What downturn?”
But when I clicked on the article, I found it mainly focused on Trump Tower and how more than half of the owners who have resold in that building have actually seen appreciation.
Crain’s analysis of Cook County records shows that residential unit re-sales at Trump have been above the purchase price for 31 of the 49 residential units that have been re-sold, a 63 percent success rate. By comparison, a 60-building survey of downtown and North Side condo buildings by Chicago-based Appraisal Research Counselors shows an overall 19 percent decline in condo values since the end of 2007, around the time prices peaked.
But ultra-luxury success here has its limits. Celebrity developer Donald Trump is unlikely ever to realize a profit on his namesake Chicago skyscraper, raising doubts about the future of such ambitious projects. By the end of 2011 he had only sold 69 percent of the residential units at the River North structure along the Chicago River.
“I’ve had better,” Mr. Trump says of his investment in the 92-story hotel and condominium. “It was very expensive to build. I’m very proud of the building itself, but as an investment, I have done much, much better on other things.”
What the article doesn’t say is how many of the successful resales were buyers who bought at the “friends and family” rate that was originally offered to a select few when the building was first publicized.
And what about other luxury high rise buildings? How are they doing?
At another posh locale, the Waldorf Astoria Chicago in the Gold Coast, five of seven re-sales have been for a gain. Completed in late 2009, the condos formerly known as the Elysian Hotel & Private Residences sold out by September. Nearby, nearly half of re-sales in the Palmolive Building have been for a gain.
There’s no mention of some of the other luxury buildings like 55 E. Erie, 50 E. Chestnut (still not sold out), 10 E. Delaware and others.
Tricia Fox, an @properties broker in Chicago, says success depends on two factors in real estate: location and timing.
People who bought in 2003, when bargain-rate prices were offered to help kick-start the development, have done well. Larger units with the best views have sold out, while smaller condos with lesser views remain in large supply.
“They rent in a New York minute,” Ms. Fox says. “If (owners) have holding power, they can rent their condo and they’ll still do well. They feel that if they hold on to them they’ll garner a higher price in the future, which I believe is correct.”
With Trump still just 69% sold as of the end of 2011, what happens when a couple hundred more luxury units come on the market in the Ritz and in 2520 LP this year?
Trumped up: Trophy towers’ condos rise above housing slump [Crain’s Chicago Business, Ryan Ori and Micah Maidenburg, April 16, 2012]
Thanks for the article – there are some nice points such as the Trump is primarily a high-end second home for Midwesterns.
For myself, I don’t think the article is detailed enough – from what I read and am still not clear:
Crain’s is looking at total re-sales starting from 2007 – 2011 ???
Collective gains at the Trump during that time averaged 9% ???
The buyer pool goes back to 2003 ???
I suspect that the 9% gets eaten up pretty quickly by various one time transactional costs.
I also didn’t look too see what are past and current rental yield vs. on-going costs.
Large units with lux finishings in all of these buildings fair better because they attract not only the wealthy of all ages but the baby boomers who are downsizing. They are not going to downsize to a two bedroom with an 8 x 10 galley kitchen. They are fine with giving up the yard, basement, and extra bedrooms but want a real cooks kitchen with a laundry room. You can’t get this in small units.
“Large units with lux finishings in all of these buildings fair better because they attract not only the wealthy of all ages but the baby boomers who are downsizing.”
Then the 3000 square foot units in 2520 LP should fare equally as well?
“Then the 3000 square foot units in 2520 LP should fare equally as well?”
Has to fare better than any investments in Argentinian energy companies…
“the 3000 square foot units in 2520 LP”
Is a 3000 sf condo for $3mm really “downsizing”?
I guess my idea of lux is less than 3 million, starting at 1 million, and there are lots of suburban babyboomers who own homes of greater value than 1 million. And yes, its downsizing in terms of space. Even if costs remain the same, many boomers want the change in local and less to maintain. I think large units 2200 square feet and above with large chef kitchens, high end baths and laundry rooms will fair better with retirees. I also think that great units in buildings less than Palmolive, Trump will fair well with these crowds if the assessments are slightly less due to fixed incomes.
Sabrina urban mommy said “fair better” not fare better. So I can only assume she is intelligent and astute as to where the market is headed.
And isn’t that funny, ze. The arawaks take what they want when their sense of entitlement takes over. Reminds me a lot of the Obama administration.
“The arawaks take what they want when their sense of entitlement takes over.”
You need to travel more… Mostly of European descent, and studies by the University of Shabat Shalom show they are the worlds 17th fastest walkers. 🙂
“Trump will fair well with these crowds if the assessments are slightly less due to fixed incomes.”
People on “fixed incomes” worrying about a few thousanda a year shouldn’t tie up $1m+ in real estate.
“my idea of lux is less than 3 million, starting at 1 million”
Wha’t $1m get you in 2520? About 1200 sf, right? That’s clearly “downsizing” even is the house in Suburban-ville only fetches $750k. It’s not just about the $$ or just about the size–if the “downsizing” is from 4500 sf to 3000 sf, but the “missing” 1500 sf is the kids’ bedrooms and bathrooms, the retiree’s living space is remaining the same.
“said “fair better” not fare better. So I can only assume she is intelligent and astute as to where the market is headed.”
She didn’t “say” anything Bob, she typo-ed it. Had she “said” it, you wouldn’t have known she was using the wrong word.
Thus, because you used “said” instead of “wrote” or “typed” or “used” or some other synonym, I can only assume you are intelligent and astute as to where the market is headed.
You would be correct in your assumption.
Of those looking to downsize, how many are going to tolerate taking a loss? Granted, I know few super wealthy people, but the middle class boomers I know aren’t planning on downsizing any time soon because they can’t stomach losing their down payments, not to mention the principal portion of their mortgage they have already payed off.
“Mostly of European descent”
Used to be so. It’s % falling rapidly and turning mestizo, and that correlates with Argentina’s disgraceful fall from First World status, that nationalization newsstory you reference, etc. Kirchner’s wife is the best they can do? She embraces Chavez. At least they don’t have to worry about following the Brazil/ObamaUSA model, slaves were never brought there.
“Of those looking to downsize, how many are going to tolerate taking a loss?
The baby boomers I know have lived in the same house for 20,30+ years. I don’t think they are going to take a loss. However, I also know some that have refinanced and pissed away equty, but those aren’t the ones looking to “downsize”.
I think some of the high end sales are due to wealthy not knowing where to park their money in the Fed’s manipulated zero interest rate (negative real rate) environment. Something about the news reporting for the Elysian condos leaves me to speculate that there’s alot of sleazy money in that building. The IRS could have a field day just auditing everyone who bought in there.
but helmet.. that nice mix of african-indian-european.. just works so nicely as the women age… white people skin is clearly inferior as it cracks too easily.
“I know aren’t planning on downsizing any time soon because they can’t stomach losing their down payments, not to mention the principal portion of their mortgage they have already payed off.”
You mean they don’t want to be able to stop pretending that they haven’t lost it already. Because it has already been lost. SImple formula. (current market price – price paid = gain or loss), see how principal paid is not a variable?
I am sure melanin levels make a difference, but I wonder what the effect of stress and poor diet is.
“that nice mix of african-indian-european.. just works so nicely as the women age… white people skin is clearly inferior as it cracks too easily.”
Regardless, there are lots of people who would like to downsize, but don’t want to make the psychological leap of a realized loss. People who can afford to stay put are saying put it seems…at least middle class people.
I would love to see stats on the Trump, listing the number of non-Chicagoans who have bought in the building and live there on a very part time basis.
“Regardless, there are lots of people who would like to downsize, but don’t want to make the psychological leap of a realized loss.”
Yep… winning is easy, it’s knowing how to lose that separates da’ men from da’ boys. Or in Bob’s case, the crowbar.
‘Collective gains at the Trump during that time averaged 9% ???…I suspect that the 9% gets eaten up pretty quickly by various one time transactional costs.’
Outside of a *tiny* percentage that bought in say lower Manhattan or SF in the 70’s and sold in 2006, real estate is a game of loss… it’s just a matter of what degree. When I add up every dollar I spent on my property taxes, mortgage, interest, renovations, repairs, routine maintenance, countless trips to the hardware store, on and on, I’d probably get back every dollar I spent on this house over the last 20+ years of ownership, but not a penny more… and this for a LP single family (with garage and in the LP ele/hs boundary) purchased in the 80’s. True I’ve spent more than most on kitchens/baths/finishes, old homes don’t naturally include 3 bathrooms for example, they have to be added at great expense, but what’s the point in ownership if you can’t live in your house as you like; and there is NO way I could have found a rental that has met my unicorn criteria for all these years.
Break even probably, make money probably not. It takes money to live…. anyone who claims to have made *real* money by selling their house/apartment is probably telling you a lie.
“Is a 3000 sf condo for $3mm really “downsizing”?”
the layouts there are the same as their suburban homes only all on the same floor. IMO for that price it should be raw space to work with the developers to build to suite, like they are doing with the homes (or town homes?) and the ground around the main building.
re:downsizing – I don’t think you guys really know what you are talking about. The VAST majority of people don’t make radical changes in their life just because they are getting older (ie, if you are living in a mansion in Lake Forest, you are not going to leave it for a place in the City of chicago regardless of price, etc.). Most people downsize in their own neighborhoods. These are complete myths (and are the reason that retirement communitieis in Florida and Arizona are not doing as well as expected). Another myth is the enjoyment of retirement (very few retirees enjoy retirement – most are miserable for a variety of reasons – mostly health), I hate to be a debbie downer, but the truth is the truth.
“Another myth is the enjoyment of retirement”
Ze loves being retired. Ze also loves radical shifts… Welcome back to say stupid shit fucktard!
“Most people downsize in their own neighborhoods. These are complete myths (and are the reason that retirement communitieis in Florida and Arizona are not doing as well as expected).”
I have to agree with Clio on this point. He’s right. Most people don’t leave their own neighborhoods. A lot of it has to do with where family and friends are located (as well as places of worship etc.) Their entire social network is in the suburbs. If they leave and come down to the city- who will they know? It sounds like something silly- but it’s a big deal, especially for someone in their 60s or 70s.
““Another myth is the enjoyment of retirement””
I’d enjoy the hell out of being retired. I don’t expect I’ll much enjoy being 70+, retired or otherwise.
yep everything is fine nothing to see here keep moving
http://www.redfin.com/IL/Chicago/Undisclosed-address-60605/home/21797154
bought for 2.26mil kitchen and baths heavily upgraded from original then sells for 1.7mil in 2012. yep upper bracket just fine 😉
i have a few more examples if you wuld like?