Market Conditions: The Chicago Luxury Market is Hot, But Are Prices?
I don’t know if anyone else saw Crain’s luxury residential real estate report yesterday but I was struck by the three listings.
House #1: A 6-bedroom 6400 square foot vintage greystone on Cedar in the Gold Coast.
- Sold in 2000 for $4.5 million
- Sold in 2013 for $3.1 million
House #2: A 6-bedroom 7100 square foot home in Barrington Hills.
- Sold in 1996 for $1.2 million
- Currently listed for $1.78 million
House #3: A 6-bedroom 6500 square foot home on Sheridan Road in Lake Forest.
- Sold in 2004 for $2.38 million
- Sold in 2013 for $1.88 million
We’ve been chattering a lot recently about what is happening in the housing market. The general consensus is that it is hot and prices are rising again.
But what does that mean?
2 out of these 3 homes which were in A+ locations sold for significantly less than their prior purchase prices. It’s unclear the outcome for the third home.
Is taking a loss on the house still the norm, even on the luxury end of the housing market?
Is inventory simply still too high for this price bracket to see much price appreciation (even though luxury sales have picked up)?
These are just 3 examples. Clearly, others in the luxury bracket who bought in the last 10 years have made some money.
If you’re not making money in A+ locations, what does that say for all the others?
Well known lawyer sells Gold Coast greystone [Crain’s Chicago Business, David Lee Matthews, May 16, 2013]
Cough, cough….
Barrington Hills and Lake Forest are not A+ locations. Zero transit. In the middle of nowhere.
The market is hot and prices are rising, but prices still have a ways to go before approaching their peaks from the bubble. It’s not a difficult concept.
Three houses from three different markets, hard to extrapolate anything here.
BTW where is G????????? Would be great to see some of his numbers!
“The market is hot and prices are rising, but prices still have a ways to go before approaching their peaks from the bubble. It’s not a difficult concept.”
How many years until people can even break even? Heitman says if you bought in 2005 in LP you are fine and making money. But I just don’t see it in the closings I see across all levels of the real estate market.
We would have to have prices go up 5% a year for a handful of years to even get back to what they were in 2007. But the Fed isn’t going to keep money that cheap for that long. In fact, the Fed may be forced to taper back by the end of this year. The 10-year is already rising again.
“Barrington Hills and Lake Forest are not A+ locations. Zero transit. In the middle of nowhere.”
Pulease. Yeah- that’s why every other house is a million dollars plus. Because no one wants to live there (although Barrington Hills is an acquired taste with its huge lots. Lovely area though. Great estates there.)
Lake Forest is nice, but Barrington HIlls? No thanks.
“Barrington Hills and Lake Forest are not A+ locations. Zero transit. In the middle of nowhere.”
Same market, comparable demographics, great beautiful locations. These places are great despite the chatteratti’s disdain for homes located west of western avenue, or god forbid, has zip code that begins with something other than 606.
My dad who’s a pretty smart guy with money told me a long time ago.
“your house is a place to live, you’ll lose money about 50% of the time and you’ll make money 50% of the time on it.”
He has moved about once every 5-7 years in his life. In the late 80’s he made a killing selling one house, enough money to pay for me and my sister to go to college. And he sold his most expensive home he ever owned in 2007, and downsized (through analysis regarding how insane housing prices were getting). So he does somewhat know what he’s doing.
Saying you always make money on your home is dumb. You’re pretty lucky if you do actually, even in the most A+ locations, there are so many factors involved with high end homes you just never know whats going to happen.
“Sabrina (May 17, 2013, 9:01 am)
How many years until people can even break even? Heitman says if you bought in 2005 in LP you are fine and making money. But I just don’t see it in the closings I see across all levels of the real estate market.”
Any examples in LP? Here you have one in the Gold Coast and 2 in the burbs. The GC one is somewhat surprising to me but I think two things affected that. 1. GC isn’t as desirable as LP / RN / OT now. 2. For the same price you can get similar size new construction in LP. There are several examples in GC but not many in LP / OT. There is a listing on Astor that sold in 2007 for $3.7 and is now offered at $2.5 if I recall correctly.
Regarding the burbs – I don’t know enough about them but I personally think the city is becoming more desirable while the burbs are becoming less so. Similar to how GC used to be ultra-prime while now OT / LP are ultra-prime.
“How many years until people can even break even?”
That’s an irrelevant question. 1) For today’s first time buyers it certainly doesn’t matter, right? 2) It’s like someone who bought Apple stock at 700 and is waiting for it to come back before selling it. You NEVER EVER think like that on an investment. What you paid for something is totally irrelevant (unless you need equity to move on). All that matters is what is the best opportunity for your money NOW. Is it in the stock you lost a ton on or should you realize your loss and put the money elsewhere?
But if you insist on asking the question then for people who bought well before or well after the peak the answer is “soon” or even “now”.
“Heitman says if you bought in 2005 in LP you are fine and making money.”
You’re forgetting all of Steve-o’s ‘rules’ for what and where to buy and to *not* buy. About 75% of LP is knocked out of the Steve-o zone for one reason or another.
At some point I’ll do a blog post with the data on this but you can clearly see evidence of rising prices in buildings like the Pinnacle.
Here’s my take. Young wealthy buyers don’t want to live in any of those locations and those are the folks who are looking to buy. B Hills, L Forest and the estates in Gold C all have long time residences. Try, Winnetka to the north and Hinsdale to the west. Housing is strong becuase young families want to live there, same with LP/OT. River North not so much for families but I think it’s hot becuase its for older 30+ singles that are still living the dream….and have passed up GC.
steve-o’s rule for a ‘good buy’ was also circular argument. A ‘good buy’ was a purchase that made money. A bad buy was a purchase that lost money. But you could never know if it was a good buy or a bad buy until you sold. Because every buy is a good buy to a realtor at the closing table.
Barrington Hills – you need to love open spaces to live here and be willling to afford the monthly nut. It’s bascially like living in a high rise with a large assessment becuase you’ll be paying a lot in utilities and service folks to maintain your property on a monthly basis.
“Regarding the burbs – I don’t know enough about them but I personally think the city is becoming more desirable while the burbs are becoming less so. Similar to how GC used to be ultra-prime while now OT / LP are ultra-prime.”
I think this is true, although I have no data to back it up. My feeling is that people’s ideas of what makes a property really desirable are changing, and one of those changes has been a shift to smaller, better designed residences closer to urban areas.
“steve-o’s rule for a ‘good buy’ was also circular argument.”
Yep. Anytime there was a data point that showed a loss, some aspect of that property got added to the “don’t buy a property that is X” list: Not on a ‘major’ street, not sharing an alley with a ‘major’ street, not too close to the el, not too far from the el/express bus, not in too small an association, not in too big a building, etc. etc.
“My feeling is that people’s ideas of what makes a property really desirable are changing, and one of those changes has been a shift to smaller, better designed residences closer to urban areas.”
At some point it becomes impractical to live so far out unless you’re very wealthy. This is the concept of ‘the villa’ or ‘the estate’ that has existed since man first urbanized.
The idea of moving to Algonquin to live in some cramped 4 bedroom townhouse a 20 minute drive from the nearest wal-mart only became appealing because it was half the price of a comparable SFH in any other reputable suburb.
The fact of the matter is that plenty of people – albeit mostly older – still pay lots of money to live in the far out suburbs in an estate like atmosphere. There’s country clubs out there, park like settings, low crime…
Heck, lake forest is literally like living in a forest. Huge homes on great forested lots and a dense forest canopy overhead. There are elevation changes, the lake, bluffs, ravines, all in the context of a forest. Quaint little downtown area, metra stop. Great place for certain types of people Not for me though, at least not in this stage of lif.e
In fact, I highly suggest that anyone who enjoys road biking do the 50 mile (or even 100 mile) north shore bike ride in september. Great ride starting at the beach in evanston, and works all the up to a great bluff overlooking lake michigan (in lake bluff), back through lake forest, and along the rest of the northshore. The first 10 miles of the ride are kind of awful on Skokie Road but after that it’s riding through some of the most expensive residential real estate within 500 miles. Beautifully designed older estate homes on large lots, great living. That’s the place to be, it’s absolutely gorgeous living for the upper middle class; except as I’ve lamented before, the type of person it attracts is far different from most other areas in Chicago. Too snobby for me but that’s just me. I’d rather live west or northwest than north because I seem to fit in better out there, but Im’ biased.
“That’s the place to be, it’s absolutely gorgeous living for the upper middle class; except as I’ve lamented before, the type of person it attracts is far different from most other areas in Chicago. Too snobby for me but that’s just me. I’d rather live west or northwest than north because I seem to fit in better out there, but Im’ biased.”
Living off of sheridan to me puts you in upper class, not upper middle.
I also love how most people generalize anyone with money and different tastes then them as being snobby.
Lake Forest really is beautiful. It just seems far out distance-wise, and today with traffic, it’s less functional than it once was when the Edens was not clogged daily. So, LF isn’t the best choice for downtown workers anymore (although the buyer was a WM. Blair dude). My theory is there less marginal demand for LF because of traffic and commute times.
The other thing is the I-94 suburban office corridor is hurting, with alot of vacancy. I always thought that I-94 would become like a mini-Stamford, CT with financial firms and hedge fund types setting up shop near their big homes. I guess that isn’t happening, 1) CT offers tax reasons to be there vs. NY and Lake Forest doesn’t offer any tax reasons to locate there (same state), and 2) Chicago just isn’t kicking ass in finance anymore or maintained any global big-time money. It’s more like those old-time rich areas of St. Louis and Kansas City (the Plaza), that are still “nice” but not true world-class wealth like around NYC, Hamptons etc. That’s why a 6,600 sf house w/ 6 bds. on Sheridan Rd. no less… costs only $1.88 million. who agrees with Rachel Shteir?
PS Go take a sunday drive up to and through the road to Shore Acres country club, it’s a public road. When you drive past the clubhouse, you can hardly even believe that you are in the Chicago area, and that anyone participating in that lifestyle/culture would even be connected to Chicago, or why someone who like Shore Acres culture would even want to participate in shitbox-crime-corrupt-immigrant hell Chicago. It’s like being in another state or metro area.
LF home:
http://www.redfin.com/IL/Lake-Forest/725-N-Sheridan-Rd-60045/home/17665019
BH house:
http://www.redfin.com/IL/Barrington/428-Caesar-Dr-60010/home/13904710
Just yesterday I was in an office building along 90/94 and yeah, they’re hurting pretty bad. Another one of my clients is involved in some litigation with a landlord of another office building along 90/94 and the word on the street is that the building is over 50% vacant.
” That’s why a 6,600 sf house w/ 6 bds. on Sheridan Rd. no less… costs only $1.88 million. ”
You got a point. That house any where with big money this house would cost millions mores.
This is my favorite link from the internet today:
$5,900,000
http://www.zillow.com/homedetails/308-S-Bristol-Ave-Los-Angeles-CA-90049/20537890_zpid/
“Brentwood Park – Fabulous Opportunity, Bring Your Builder Flat 20,000 Sq Foot Lot, Priced To Sell Immediately. The Seller Will Not Make Any Repairs Or Give Any Credits. The Buyer Is Responsible For Retrofit And Termite. No Showings of The Inside of The Property, Exterior Only”
There’s a guy who used to post here often under his real name who lives on Sheridan road….
“I also love how most people generalize anyone with money and different tastes then them as being snobby.”
Snobby is arrogance and aloofness, not different tastes. HUGE difference, not even the same ballpark.
“I also love how most people generalize anyone with money and different tastes then them as being snobby.”
“Snobby is arrogance and aloofness, not different tastes. HUGE difference, not even the same ballpark”
I have some Lake Forest friends and they don’t appear snobby. HD I think you have watched one too many John Hughes movies.
” HD I think you have watched one too many John Hughes movies.”
Arguably my view of north shore residents is jaded by the likes of JZ’s posts, interaction with new trier high schoolers and graduates, and former employers. All of my interactions left a bad taste in my mouth. To each’s own, YMMV.
My former landlord lives in the NS and his two spoiled children attended NT. My former landlord is a great guy, I’d call him a friend; but his two kids are brats and he knows it, he blames it all on his wife. And his wife and children, from my interactions with them, don’t care to speak to tenants of ‘daddy’s building’.
“JZ’s posts”
ugh, now I know where your coming from.
“At some point it becomes impractical to live so far out unless you’re very wealthy. This is the concept of ‘the villa’ or ‘the estate’ that has existed since man first urbanized.”
I think people interested in this buy second homes further away, like the ski condos everyone was talking about the other day or a place in southwest Michigan. Owning an “estate” just seems more and more pointlessly expensive and completely impractical except for the uber-wealthy. If you have $1M – $2M to spend on a house, I think people are looking more towards the Blaine school district than Lake Forest. But again, this is based on nothing more than the people I happen to know.
” If you have $1M – $2M to spend on a house, I think people are looking more towards the Blaine school district than Lake Forest. ”
That’s just the people you know, because the homes on the north shore are selling too…
As far as the ‘estate’ lifestyle, an attorney I know often describes her childhood lifestyle growing up on an ‘estate’ in the barrington area with her large family. Pool parties, large family gatherings, lazy afternoons during the summer exploring the grounds and such, fishing in the various ponds, etc; golfing at the country club; sunday evening family dinner in the dining room; snow glistening on the grounds at xmas.
Interesting enough, the parents sold the estate after 25+ years (during the boom too) and we figured out that the house appreciated on average only 1 to 2% a year for 25 years.
City-data shows that LF elementary school populations are stable or increasing, with one elementary school showing a slight decrease.
http://www.chicagorealestatedaily.com/article/20130207/CRED0701/130209830/2-3-off-sale-developer-sells-home-for-3-4-million
2/3 off sale: Developer sells home for $3.4 million
February 07, 2013
An entity managed by veteran homebuilder Ron Benach recently sold a five-bedroom Lake Forest home for nearly $3.39 million, less than half the $8.95 million he originally asked in 2007, according to county records. Mr. Benach’s son, Jeff, said his parents now primarily live in Florida and a Chicago condominium. The 9,876-square-foot Palladian-style home on Green Bay Road was built in 1990 and includes an outdoor pool with cabana, radiant-heated travertine tile and a never-used kitchen, said listing agent Steve McEwen of @properties. The elder Benach, who has founded four Chicago-area homebuilding companies, including Lexington Homes, spent more than $7 million building the home, Mr. McEwen said. The buyer, self-storage investor Matthew Nagel of Lake Forest-based Metro Storage LLC, could not be reached for comment.
Haha a 5.6 million dollar tear down…
http://www.redfin.com/IL/Lake-Forest/660-N-Green-Bay-Rd-60045/home/17665542
No shit the house sold for 2/3rds off. IT’S ON THE WEST SIDE OF GREEN BAY ROAD. Everyone knows the ‘real’ north shore is east of green bay road. Typical home builder, put $7,000,000 into a house WEST OF GREEN BAY ROAD and then sell it for only $3,390,000. It’s far west of downtown and it’s so far west it may as well be on highway 41. Dumb dumb dumb. Location location location. I’ll cry a river for that builder…couldn’t have happened to a nicer guy.
“They’re surfing in Wilmette!”
https://maps.google.com/maps?q=sun+rise+park+lake+bluff+google+maps&ll=42.278535,-87.830261&spn=0.000866,0.002064&oe=utf-8&client=firefox-a&fb=1&gl=us&hq=sun+rise+park&hnear=0x880feb4c2b9fe997:0xc1d6586c32d2433f,Lake+Bluff,+IL&cid=0,0,6684404723172941401&t=h&z=20&layer=c&cbll=42.278575,-87.830274&panoid=BvCP-7e61bd8p4OfJXCSTw&cbp=12,36.8,,0,10.29
(Actually Lake Bluff but regardless!)
Some of these far flung suburbs are nice, in that you could easily own a horse. I adopted my dog from a rescue in a far flung suburb and the people had horses on their property. It almost made me want to move somewhere far out.
I will say that house is pretty frickin kick-ass for 3.4 mil
“homedelete (May 17, 2013, 12:20 pm)
As far as the ‘estate’ lifestyle, an attorney I know often describes her childhood lifestyle growing up on an ‘estate’ in the barrington area with her large family. Pool parties, large family gatherings, lazy afternoons during the summer exploring the grounds and such, fishing in the various ponds, etc; golfing at the country club; sunday evening family dinner in the dining room; snow glistening on the grounds at xmas. ”
This is going to be a gross generalization – but with families getting smaller (due to people waiting longer to have children) / more families where both parents work (less time to do or coordinate home / lawn work) / longer commute times / more spread out families (what young person doesn’t want to live in NYC or SF?) these large estates that are far out are going to be a tougher sell.
“Snobby is arrogance and aloofness, not different tastes. HUGE difference, not even the same ballpark.”
Free Dictionary
Snob – noun
1. One who tends to patronize, rebuff, or ignore people regarded as social inferiors and imitate, admire, or seek association with people regarded as social superiors.
2. One who affects an offensive air of self-satisfied superiority in matters of taste or intellect.
1.) I don’t live on the NS and I never attended New Trier.
2.) Snobbery works both ways, you don’t have to be rich to be a snob.
3.) New Trier is a huge school with a ton of alumni. Forming opinions on a few interactions is igonorant. But you are absolutely correct, YMMV.
My wife is from a far Chicago suburb and not what folks on this site would call a desirable area, but I actually find that the working class harbors more snobbery towards those who are not working class thatn the other way around.
“This is going to be a gross generalization – but with families getting smaller (due to people waiting longer to have children) / more families where both parents work (less time to do or coordinate home / lawn work) / longer commute times / more spread out families (what young person doesn’t want to live in NYC or SF?) these large estates that are far out are going to be a tougher sell.”
Or it could be the disparity in income and wealth. The attoneys, finance folkd and other “educated professionsls” are slaving away competing against each other so they are valuing homes closer to work while those in the middle class are failing to reach the upper class and unable to purchase and maintain large estates becuase they are not part of corporate drudgery.
“No shit the house sold for 2/3rds off. IT’S ON THE WEST SIDE OF GREEN BAY ROAD. Everyone knows the ‘real’ north shore is east of green bay road. ”
Actually there are some of LF’s finest houses on Westminster west of GB. Also, Onwentsia Club is west of GB Road. Problem with the homebuilder’s house was it was a JAP palace, and not everyone who moves to Lake Forest likes that jappy Highland Park style, which is where he should have built it.
“Problem with the homebuilder’s house was it was a JAP palace, and not everyone who moves to Lake Forest likes that jappy Highland Park style, which is where he should have built it.”
Isn’t that the problem with Jordan’s place in HP? Nevermind all the basketball stuff, but the modern architecture just screams dated. From what I’ve see the New England/Nantuckett style is really popular. Perhaps anything with a front porch….
“THE WEST SIDE OF GREEN BAY ROAD”
It’s “surrounded on 3 sides by conservation land”!
What, 15′ of coservation land on each side? There is a house next door on each side. You can probably hear the western neighbors playing tennis when you sit by the pool. Biggest problem it has is the small lot for such a big house.
looking to buy: I grew up a short drive east on lake cook road/dundee/palatine roads from the NS and I’ve had plenty of interaction with residents of the NS as clients and employers, peers, co-workers, etc. I’m sure there are great people on the north shore i.e. my former landlord etc, but in general, that’s my opinion and I’m sticking to it. I’ve had over 20 years to form this opinion and it’s not unfounded. There’s plenty of wealthy areas in the chicagoland area, but there’s only one north shore.
surprised jmm hasn’t been able to convince you ns peeps are humble
Odd memory: Was at a burial in the cemetery across from waters edge ln 10 yrs ago and a father and his young daughter rode by on segways.
Used to swim in that lake on now waters edge lane way back in high school. Damn shame that they sold and developed that space. Some cool houses there but it might be a bit isolated.
The fact that the Eden’s spur goes down to one lane southbound just shows how utterly dysfunctional Illinois government is. Leading to thousands of commuters in bumper to bumper stuck looking at that asshole’s house on the north part of Waters Edge Lane–with his ridiculous noise wall. The funny part is I think he even got a sign put up on the Edens warning against revving engines. HAH! Yeah everyone is revving their engines constantly while going 4-5 mph, it really takes a tax on the engines, getting the tach up to 1k.
Looks like one of his neighbors got a free better noisewall paid for by us taxpayers.
think about the Mosquitos. think about the Mosquitos!