Market Conditions: Is Chicago’s Condo Market in a “Frenzy”?
Anyone who has been trying to buy a condo in the GreenZone this year under $600,000 has stories of how hot the market is.
Crain’s is reporting that condo market times fell to just 52 days in May, the lowest market time since January 2007.
Chicago condos have been selling so fast this year that agent Sherri Hoke said she assured a client that his West Loop two-bedroom would go “pretty fast, probably a week.” She underestimated.
Hoke listed the condo on a Thursday and set up a two-hour window that Saturday for potential buyers to walk through it.
“There were 30 people waiting” when she arrived, said Hoke, a Jameson Sotheby’s International Realty agent.
That night two of them made offers, and one bought the condo in late May for $515,000, about 3 percent more than the asking price of $499,000.
“It’s a frenzy,” said Scott Curto, a Baird & Warner agent. He represented a buyer who, after losing the race on several condos he wanted, made a fast grab at a West Town unit. He was out of town when the three-bedroom place hit the market at $499,000, but the online photos told him all he needed to know, according to Curto.
“He submitted his offer blind,” Curto said, and bought the unit for $515,000. Elapsed time between listing and deal: five days.
Several hot downtown and lakefront neighborhoods are seeing hyper-speed condo sales. In Crain’s review of May’s transactions, multiple fast deals surfaced in Lincoln Park, Lakeview, West Town and the South Loop.
Any new construction is either in luxury apartment rentals or luxury condos, with price points over $1 million.
For the entry level buyer looking in the GreenZone neighborhoods, there is no new construction but plenty of buyers looking at the lower price point.
The result is bidding wars on many properties and rising home prices.
Is the era of first time buyers being able to buy in a GreenZone neighborhood now over?
Wanna buy that Chicago condo? Hurry [Crain’s Chicago Business, Dennis Rodkin, June 15, 2017]
The very fact that condos have 30 people lined up to look at them and then sell for over list price is clear evidence that they were underpriced. If that condo had been listed at $525K it might have sold for more than $515K, certainly no less.
Jan Terri is now licensed REALTOR®
LOLZ!!!! Go Cubbies!!!!!
“Is the era of first time buyers being able to buy in a GreenZone neighborhood now over?”
Yes. For those who don’t make decent wages and/or don’t have the bank of mom and dad to compete with other buyers (and their parents) there is no realistic or sustainable way for them afford these prices, even if their lender says otherwise (HD probably has some thoughts on this!). My feeling is that the expectations for a lot of millennials I know need to be considerably lowered (think 1bd or studio condo if they want to live in GZ) and in many cases even those can be a financial stretch.
This is the new economy… at least for now. With property taxes going up another 10% on average and the system for assessing properties a total mess (as exposed recently by the Tribune), people are going to be in a for a big surprise. The variable (only increasing cost) of property taxes and the financial mess Chicago is in practically invalidates the argument that renting is more expensive and uncertain. I feel safer renting right now than buying.
A smart millennial should rent cheap, save up, and wait for the right moment to strike. I think it will happen again.
There are still plenty of condos available in the Green Zone for first time homebuyers. You may have to settle for 15 year old finishes though. Prices aren’t up THAT much.
I’d love to be selling now, sadly I’m not moving for 3-4 more years… hopefully this stuff continues
Chicago isn’t a frenzy. Yeah, some stuff sells fast, but frenzy is a bit of a strong word for our market.
A frenzy imho is like the Bay Area or some parts of the east coast where people routinely bid 10% over list. It isn’t uncommon for buyers to need to make 10-15 offers to get one accepted. Sellers are demanding no mortgage or appraisal contingencies. Closings within 25 days. Buyers having to write letters to sellers begging to be selected touting their unique qualifications like they are applying for college or something.
All so you can say you own a 2 bed/1 bath that needs a little TLC for $850,000.
“All so you can say you own a 2 bed/1 bath that needs a little TLC for $850,000.”
Someday it’ll be worth a million to a greater fool.
“Chicago isn’t a frenzy. Yeah, some stuff sells fast, but frenzy is a bit of a strong word for our market.”
Russ- maybe in your bracket it isn’t a frenzy. But when a property listed for $250,000 in the GreenZone gets 10 offers in Chicago within 24 hours, I’d say that’s pretty hot. Some might call it a frenzy.
If the property is under $500,000 and in the GZ, you basically MUST see it within the first 24 hours. Most realtors are holding a “one time” open house for everyone to see it and then expects bids.
It’s no different than what is going on in the Bay Area except that in Chicago the “frenzy” isn’t happening at the upper price points.
“There are still plenty of condos available in the Green Zone for first time homebuyers.”
This is true. You won’t get new appliances, kitchens or baths. You may not get a/c. You may not get parking. You may only get a 1-bedroom.
If you’re willing to buy a fixer upper, you have more options.
But at some point, those condos that were built from 2000-2005 will need new cabinets, appliances etc. You’ll have to spend money renovating. I’m kind of surprised people are actually paying premium prices for some of these units that haven’t been updated.
How long can you wait to update?
If the condo is nearly 20 years old, should you expect to get a lower price when you sell?
“But when a property listed for $250,000 in the GreenZone gets 10 offers in Chicago within 24 hours, I’d say that’s pretty hot. Some might call it a frenzy.”
I would call that an underpriced property.
“If the property is under $500,000 and in the GZ, you basically MUST see it within the first 24 hours. Most realtors are holding a “one time” open house for everyone to see it and then expects bids.”
I can provide countless examples of properties under 500K that don’t sell right away. I think when they do sell this fast it’s a pricing error or the realtor is looking for an easy sale.
“I would call that an underpriced property.”
So they’re all underpriced Gary?
Wow. Amazing.
All those dozens and dozens of listings I’m seeing (and people writing me to tell me about the bidding wars they’re having to get into) are NOT the norm.
Um…okay.
The depiction of “frenzy” in the article is pretty accurate from what I’ve seen.
The properties that AREN’T going under contract within days are either 1) overpriced as there is a ton of greed going on out there now or 2) not updated and buyers don’t want to do the updating, especially on a condo.
The rentals are so new and nice, why would you want to buy something that is 20 years old? You wouldn’t. Unless the price is “right”. But so few are.
Additionally, I’m also seeing quite a few properties go under contract in a bidding war only to have it fall out of contract. I’m assuming that some appraisals aren’t coming through at these bidding war prices. So at least that mechanism is still working to keep prices in check (unlike in 2005-2008 when there was a lot of appraisal fraud.)
On a separate note, the Tribune had an article today about how you can put 0% down again. Hooray!
I think a lot of them are underpriced – whether it’s intentional or accidental. By my book if they go over list they were underpriced by definition.
And I think the reason they fall out of contract is somewhat due to buyer’s remorse after a bidding war as opposed to appraisal. I bet Russ can provide better insight on that. But I actually track contract attrition and it’s been pretty steady at around 15% lately, though a year ago it was more like 20%.
Condos are selling lightening fast no doubt. Half of all condos that closed in May went under contract in 16 days or less. But I’m not sure how many bidding wars are involved because the sale/ list ratio isn’t up that much from last year – and it always jumps up during this time of year.
Keep in mind that the contract times are only for condos that sold and I suspect that it’s based only on the last listing for a property because it would be really hard to tie two listings of the same property together.
The number of GZ (my personal GZ) condos under 500K on the market for 30+ days without a contract is a little under 400. The number of condos under contract and on the market for 30 days or less is around 240. Sounds like plenty of units out there for others who chose not to engage in bidding wars.
Sabrina, imho multiple offers on individual properties does not necessarily mean the market is in a frenzy.
My point was that in other markets that I have originated mortgages, the buyers are much more irrational than anything we remotely see here in Chicago. It goes way beyond just multiple offers. Hardly any buyers in Chicago are willing to forgo an inspection, appraisal, or mortgage contingency completely risking all their earnest money on a property all the while bidding 10% over list. Not too mention providing resumes to the seller. Basically, buyers in these markets are willing to pay more than a third party disinterested appraisal says the home is worth. If the lender’s appraisal comes up short, the buyer is on the hook for the difference.
Chicago is a very rational and normal market compared to some others right now.