Market Conditions: Downtown Chicago is a Renters Market
As we’ve been chattering about for several months now, the sheer number of new apartment high rises combined with investors trying to rent out unsold condo units has created a glut of rental units downtown.
From the Chicago Tribune:
Rates in the “best of the best” apartments in the downtown area on average dipped from $1,850 a month for a one-bedroom unit in 2007 to $1,750 a month in 2008, says Ron DeVries, vice president of Appraisal Research Counselors, a real estate appraisal and consulting firm.
The reason, says DeVries, is that 1,974 new rental units opened in the area bounded by North Avenue, McCormick Place, Lake Michigan and Ashland Avenue in 2008. Another 954 are expected to be delivered in 2009.
“It is the biggest new supply [of rental units] we’ve seen since the early 1990s,” he says.
Those figures do not include the “ghost” market of rented condominiums. An estimated 20 to 25 percent of downtown condominiums are rented privately, so as thousands of new condos come on stream in 2009, the number of available rentals is expected to rise significantly.
“We’ve got more condos being delivered downtown which are becoming rentals and there’s more traditional apartments being delivered downtown … so we’ve got an increase of supply of traditional rentals, we’ve got condo rentals and a weaker job market. It’s really converged for a downturn in net rents,” DeVries told a fall gathering of the CAA, which represents more than 600 properties and more than 136,000 apartments in the six-county Chicago region.
Some landlords are offering juicy concessions including 3-months of free rent and no security deposits.
The outlook doesn’t look as positive in the other glamour neighborhoods like Lincoln Park, Lakeview and Bucktown where rents are expected to move higher in 2009 due to fewer new apartment buildings being built.
“In our world—which is urban, vintage and along the lake all through Chicago, I think they will be some modest increases,” Stuart Handler, chief executive of TLC Management, Chicago, told the CAA at its “Preview 2009.”
While there may be deals on some of the rentals of condo units downtown- there is also the looming problem of foreclosures.
DeVries says it might be wise to consider your personal “risk-and-reward” quotient before signing on the dotted line.
“I think they can get a deal,” DeVries says.
Renters, however, need to be honest with themselves about personal tolerance and willingness to forgo the 24-hour service that a well-managed apartment building offers in exchange for dealing with the chance that an individual landlord, especially one who is new and inexperienced, may not be as responsive when a problem arises.
Those looking for a long-term residence should remember when renting from a private owner there is always a chance that the owner will decide to live in the unit, so you may not have a renewal option.
Finally, given the shaky economy, consider the “risk that you come home one day to see a foreclosed notice posted on the door,” DeVries notes.
Renters likely to have their pick of downtown units in ’09 [Chicago Tribune, Dec 28, 2008]
Whats even worse is the misrepresentation of units. A lot of buildings will lie in their ads, say there are “cherry cabinets” and “stainless steel appliances” and when you walk in its the default, crappy pine cabinets and standard black fridge probably bought in bulk. Some list “community library” with “free daily papers” in my building. We dont even have a library, wtf?
Urban, vintage and along the lake? Good luck with rent increases in tentament houses. People will gladly move a few blocks west to save a few bucks.
“In our world—which is urban, vintage and along the lake all through Chicago, I think they will be some modest increases,” Stuart Handler, chief executive of TLC Management, Chicago, told the CAA at its “Preview 2009.”
hmmm.. how many times will this be thought…so last year I rented to wait for the market to get better and now I will have to rent at a bigger cash flow loss and the place is worth less than a year ago…
Keep moving West HD, you will find your price point eventually…
At this point if I were changing apartments I’d do a background check on the landlord and property, to minimize the chance of a foreclosure right around the corner. Anyone renting from a stuck flipper MUST do this!
Touche Steven, Uptown urban, vintage and along the lake.
Just buy a house you can afford and don’t worry all these renting issues. I promise you will be just fine when you go to sell in 5 years. I hate to see all of you make scuh terrible mistakes with your money.
You all own houses via the government right now anyway, might as well be able to actually move in 🙂
Why buy now when you can get it far cheaper once the pain sets in for the banks? Eventually they’re going to have to get rid of the foreclosures for real. Competitive prices are the only way to do it. What will that do to comps?
Pete,
While getting foreclosed on can happen as a renter, I’m still weighing the pros of renting from an underwater flipper in a luxury building.
For two reasons, first you can rent these for below breakeven costs to the stuck flipper. Second the process to evict a renter was recently made tougher in Chicago I read somewhere and might even be prohibited in winter months. It takes many months and you can fight it in court just by showing up or saying some paperwork was done incorrectly. You could wind up even living there rent free possibly for a period of time (before eviction is finalized and takes effect after many months of court)not pay last months rent.
Yes getting foreclosed on as a renter is a distinct possibility but so long as your flexible to possibly move early, the rents are priced for the risk in some cases.
When Sabrina posted the link for that 2/2 in One Museum Park for $2500 that made me sit back and relook this rental market seriously.
I am all about having others subsidize my lifestyle 😀
Pete,
HD is one of the CC lawyers and see what he said about living in a unit that gets foreclosed on in this thread:
http://cribchatter.com/?p=5718
Doesn’t sound like a bad thing for the renters if you ask me!
I agree, Pete.
Knowing a few people who got burned, the LAST thing I would want to do is rent a condo on the private market. One was the victim of a scam where the guy who placed the ad and showed them the place was actually the renter of the unit (who then took their money and disappeared). Another friend rented a unit that later went into foreclosure and they had to move 4 months after they moved in.
There’s also a lion’s share of “landlords” who really don’t understand landlord/tenant rights in their state OR what they are legally responsible for, and as a result it creates a lot of problems.
I can’t see the logic of buying a condo right now, especially with so many associations under fiscal pressure. There is not an investment vehicle anymore and special assessments are always an issue especially with older building (or poorly constructed newer buildings).
I’d buy a condo today for the right price. It would have to be so cheap that PITI+HOA would be less than rent. It would have to be a 2/2 on a mid to high floor. The selling price would have to be somewhere in the low $100’s. Of course some sellers say I’m crazy to think that price will ever get this low. Maybe prices will, maybe prices won’t, who’s to say. But right now the joke is on sellers. Virtually nothing is selling at their current wishing prices. Few people need to buy but oh so many need to sell.
“I am all about having others subsidize my lifestyle”
Bob- this is how I feel about my renters! I guess it all depends on the property’s fundamentals. If it cash flows, I’m happy; if not, the renter is happy?
I have two leases due up in Feb. Let’s hope they don’t go shopping around… 😛
In other news the Case-Shiller Real Estate Index was released this morning. Chicagoland fell 1.6% month over month to a value of 145.5. It hasn’t been this low since August 2004. Nominal real estate prices are still 45.5% above what they were in January 2000.
Cities that fared better than Chicago on a month-month basis were: Cleveland, New York, Boston, Dallas & Seattle.
I’ve rented from two different flippers in the past five years. I don’t have any complaints. The units were new when I moved in and though one of the buildings later had big problems nothing affected me while I lived there. Rents, as far as I can tell, were pretty reasonable, and the owner-landlords were flexible about dogs.
On my most recent re-upping of the lease I shopped around a bit and found that what I am paying is very much on the low side in my area. I have no idea whether my rent covers their mortgage, but that’s beside the point. By keeping me out of the condo market these guys have saved me from a financial nightmare several times running. I could pay twice my rent and still save money versus the loss from the alternatives I was then seriously contemplating.
Of course it still drives me nuts to live in a place where I’m unwilling to make improvements to the fixtures, appliances, etc. Oh well.
s/flippers/specuvestors
“Just buy a house you can afford and don’t worry all these renting issues. I promise you will be just fine when you go to sell in 5 years.”
You have to be kidding me.
Renting is fine…esp. in a well run condo building where they vet renters. The condo assoc. knows and is in contact with the real owner, etc. The real risk is foreclosure so go online and check out what mortgages and liens exist. I rent in a brand new building…the unit was never lived in, professionally furnished and decorated to 100% turn key with bath robes and all – like a W hotel. Direct ocean view right on the beach for 1/2 price of owning. I researched the owner and found no mortgages so no chance of foreclosure. Owner happy to have a good, caring renter etc. The deals are out there in Chicago too, just use your head and a little due diligence…you have to vet the owner like they vet the renter…
John, where can I find data on mortgages and liens online?
www ccrd info for the recorder’s office
get the PIN from www cookcountyassessor com
HD, thank you very much!
hd:
On ccrd, when I do a PIN search for a condo, what do I put under
Declaration of Condo No. (required)
The unit #? The street address?
use the pin only; don’t worry about subdivision or any of that
http://www.ccrd.info/CCRD/controller;jsessionid=E0D5C0176BE4A5EDFF263BA511BA0F98.CCRDAPPSRV2
thanks hd! This is going to be really entertaining at work.
Be care a, ccrd is full of errors and you need to do a lot of cross referencing of mortgages that have been paid, etc. Its not that you won’t be able to figure it out but you will probably have some questions.
homedelete: Yeah, I’m looking at this and some things dont seem right. Specifically I want to check how much someone paid for their property. How would I accurately guage this?
“Specifically I want to check how much someone paid for their property. How would I accurately guage this?”
The deed amounts are *usually* accurate. The most common error is the dropping of a zero (i.e. $150,000, when it should be $1.5m) and if it’s a trustee’s deed (i.e. from a land trust) then there is no amount recorded.
On mortgages, the most common misleading (rather than incorrect) thing is a mortgage encumbering more than one property.
Simple, look the PIN up on ccrd and click on the latest warranty deed. A trustee deed may not include the sale price or may not represent a sale. A quitclaim deed probably does not represent a sale.
The other misleading thing is the failure to record a release for a paid off mortgage.
What about lis pendens? I’m looking up a recent cribchatter property (10 E. Ontario) and all the units are coming up with a lis penden filed against it.
Depends on who filed it. If it was a lender, it probably indicates the start of a foreclosure.
10 E Ontario will have a lot of foreclosures. There might also be lawsuits pending against the bldg (which would show up on every PIN.)