Market Conditions: Tough Times for Sellers of Luxury Homes
Readers of Crib Chatter already know how tough the market is for sellers of mansions and other luxury properties, including condos.
Crain’s reports on the stubborness of sellers in the $1 million to $2 million range in Northern Illinois:
“When there is a motivated seller in the luxury market, the average reduction is 20% to 30%,” says Doris Hamilton, an agent at Hamilton & Associates in Arlington Heights.
Single-family home prices in the Chicago area fell 14.3% last year, not as steep as in other big cities but enough to cause gnashing of teeth for sellers. Since the peak in September 2006, prices here have fallen 18.6%, leaving them comparable to what they were in December 2003.
Market time leapt nearly 28% from 2007 to 2008, rising to 156 days from 122.
“There are many properties that need to be adjusted downward in order to sell,” says Jim Merrion, regional director of Re/Max for northern Illinois.
He found only 27 price changes this year on more than 500 listings of $1 million to $2 million in northern Illinois.
“That’s very low,” he says. Unrealistic pricing “damages a property the most. Once the property sits and sits, buyers fear there is something wrong with it that they have missed.”
Crain’s highlighted three homeowners of luxury properties who are having difficulty selling, even after slashing their prices.
Even Lincoln Park properties are a tough sell, as we’ve chattered about frequently.
The cost of long-distance living helped push Jack and Martha Gruber to pare the price of their one-of-a-kind Lincoln Park home by 20%, to $1.9 million from $2.5 million, in December.
Mr. Gruber, 62, an executive with Tacoma, Wash.-based Russell Investments, was transferred there, and they were eager to sell.
“We thought if we drop the price dramatically, maybe it will spur something,” says Ms. Gruber, 57.
The Grubers bought the home for $1.3 million two years ago, sinking $500,000 into redecorating and remodeling. Built as a bakery in 1923 and later converted for residential use, it’s sandwiched into a mostly retail block of Webster Avenue. The four-bedroom, 5,200-square-foot space features an atrium topped by skylights, four fireplaces, elevator, wine tasting room and rooftop deck.
“I didn’t want to walk away from half a million dollars,” he says, “but I’m resigned to it.”
Meanwhile, south of Lincoln Park in River North, the glut of luxury condos in newer highrises like Trump Tower is making it difficult for owners of “older” condo units to compete.
Owen Deutsch had already knocked down the price of his Gold Coast penthouse twice in a year, dropping it from $4.2 million to $3.75 million. But when he hired a new broker last month, she refused to take the listing without slicing off a quarter-million more.
“I told him, ‘If we price it where we can sell it, I’m interested,’ ” says Katherine Chez, a broker at Coldwell Banker’s Gold Coast office.
Mr. Deutsch, whose 47th-floor property is in the Fordham, 25 E. Superior St., is chairman and CEO of Chicago-based Loft Development Corp., which buys, develops and leases office space.
He wrestled with the price drop for 10 days before conceding to his new agent’s suggestion, $3.495 (note the effort to come in just below $3.5 million).
Mr. Deutsch, 68, bought the 3,700-square-foot raw space five years ago and “spared no expense” finishing it, hiring an interior designer to create a bright, loft-like apartment. He enclosed one of the two terraces, creating a greenhouse-like dining room with sweeping views of the city and lake.
Watching the price drop has been frustrating for Mr. Deutsch, who thought his penthouse was so unique it would fetch close to the original asking price.
“I had an awakening,” he says. “I’m not going to get all my money out of it.”
Ms. Chez predicts traffic will increase this spring as her well-heeled clients drift back from winter retreats. The unit’s private, enclosed garage spaces, an unusual amenity, may tempt “a car nut,” she says.
Until then, Mr. Deutsch waits.
There have been many nights I did not have a good night’s sleep,” he says. “Hopefully, this drop will be the last.”
Sellers grudgingly accept sizable cuts [Crain’s Chicago Business, Laura Bianchi, Mar 23, 2009]
An awakening on price [Crain’s Chicago Business, Laura Bianchi, Mar 23, 2009]
One big slice to heat up interest [Crain’s Chicago Business, Laura Bianchi, Mar 23, 2009]
They can’t just give it away!
Million dollar homes only became so because of the ability to borrow that much money. I know a mattress salesperson who said she took home $200,000 a month and borrowed $1,000,000.
After capitulation the luxury market will sell for relative bargains compared to the tier below it. I’ve heard of stories in California and Florida of nice, large luxury homes on golf courses and in condo towers selling for only slightly more than standard homes and condos. Fortunately the luxury homes are in much better shape when they turn into REOs.
and before you jump on my back with exceptions, i of course mean that the guilded estates of lake forest will still be very expensive and won’t be slightly more expensive than a tract home.
I’m sorry, is that sand in your vagina? Maybe you can wipe it out with a few hundred dollar bills.
What a brilliant advertising move by the Grubers – lay it all out there about your home and get the plug about the wine tasting room. That article could only drive more people to check it out.
Well hopefully this is the death of the McMansion in the city craze… those things are so freakin ugly in some neighborhoods!
Mr. Deutsch is pricing his penthouse, even reduced, at $1,000 psf.
The Fordham originally sold for $400 psf, did it not? So, what’s the premium for the penthouse and his finishes?
Also, doesn’t the price per sf drop on a sliding scale as the sq. footage gets larger? Meaning that a 1-2 bd. should sell for more per sf than a 4 bd.?
Doesn’t a 1,500 sf unit (all things being equal) sell for more per sf than a 3,200 sf unit in the same building?
McMansions aren’t going anywhere unless the zoning code is rewritten, people don’t value yards/green space and will build the maximum SF on the lot allowable.
I think the realtors are already and will increasingly start pushing for lower listing prices. While the idea that real estate can go down in price is anathema to them, they are not going to get any commissions at inflated prices. Better to get the 6 or whatever percent they get of $80 then zero percent of $100.
Too bad they’re going to get disintermediated soon…
Seriously, Chicago is a complicated enough place with very heterogenous housing stock where a realtor might add some value. In a suburb with cookie cutter houses, what the hell do I need a realtor for?
“Chicago is a complicated enough place with very heterogenous housing stock where a realtor might add some value”
Not likely, you can probably find out more than your realtor will EVER do for you by just using google.
The realtor has the key to the lockbox.
I feel so sorry for the Grubers. How will they ever survive? They might have to sell a couple of the Rolls Royces also!
“The realtor has the key to the lockbox.”
Why don’t you call the listing agent and show up yourself? Or do you need your realtor to chauffeur you around and flip light switches for you once you’re in the house?
I was being sarcastic about the lockbox!
If you think this is a good deal just wait!
OH BOO FREAKING HOO! POOR GRUBERS!
When you buy with the big dogs, you’d better be ready to pay like the big dogs.
“I didn’t want to walk away from half a million dollars”
That’s why I’ll list my Uptown studio for $1.1mm. I don’t want to walk away from a million dollars.
And anyone interested in a 74 Pinto** for $10k? I was asking $260k, but I’m now resigned to walking away from a quarter million dollars.
[/sarcasm]
If no one wants to buy it for price X, reducing to X-500k isn’t “walking away from” anything. Does Russell Investments employ the same logic?
**Low, low miles. Good runner. Pumpkin orange. Original gas tank.
I find it funny both of the rich people mentioned in the article are from industries that are effectively toast (finance & RE). I really hope for their sake they have substantial savings or else they’re in for some big lifestyle adjustments.
Might have to cut back the maid’s hours and the chauffer’s Christmas bonus.
From the article:
Even Lincoln Park properties are a tough sell, as we’ve chattered about frequently.
Lincoln Park is grossly overpriced and over rated. The southside lake front areas are being gentrified and this neighborhood will have some stiff competition. Developers and commercial businesses know they most go to to undeserved and underdeveloped areas in order to survive. The south side is an undiscovered gold mine. I’m buying as much property as I can. I’m really hoping for the Olympics.