Museum Park At Central Station Tribune Ad: How Persuasive?
I hope some of you saw the full-page ad in the Sunday Chicago Tribune for Museum Park at Central Station. It had a headline which stated:
“An Unmatched Record of Value and Appreciation in Chicago’s Most Successful Lakefront Neighborhood”
The ad then listed 7 buildings and various units from the buildings to show buyers how much money people are making on real estate in the South Loop.
The other headline said: “Re-Sale Information For the Period January 1, 2007 through December 31, 2007”
A tiny disclaimer at the bottom of the ad also said:
“The above information shows the increase/decrease in price of all condominium units re-sold at Museum Park from the period January 1, 2007 through December 31, 2007 based on a comparison of the re-sale prices (as disclosed in the Chicagoland Multiple Listing Service) to the original sale price when the unit was purchased from the developer. The developer makes no guaranty as to whether your unit will increase or decrease in value.”
When I first looked at the ad I was assuming that it meant that these units all sold for these prices sometime in 2007.
But, upon closer examination, that’s not correct.
Take, for instance, Loft 1- 125 E. 13th.
This building started closings in 2004. When did the original sales center open? I don’t know, but I’m assuming maybe 2000.
Unit #702: 2 bedrooms, 2 baths, 1289 square feet
- Sold in June 2004 for $324,690
- Sold in December 2006 for $375,000
- Was just listed again. Currently priced at $399,900 (parking extra)
Is the current seller going to “make” money? You be the judge.
Would anyone be surprised that the original seller made some money during the biggest housing boom Chicago has ever known? That seller could have entered his contract as early as 2000.
I’ve looked up a few of the listings in the other buildings. Yes- the sellers all sold for more.
But many of these buildings were completed in 2006. If you bought 3 or 4 years before and resold in the last 2 years, you made money.
Is this a persuasive argument to current buyers?
It’s the “if you owned you would have made XYZ so if you buy now you will make XYZ” without them actually saying you’ll make a profit (because they can’t, of course, say that, as per the disclaimer at the bottom of the ad.)
Just wondering.
It was a full-page ad. Was it money well-spent?
Museum Park [website]
I would say yes, the ad was worth the money. Dumb and qualified buyers are certainly getting harder to come by. The only way some of these developers will survive is if they can locate the few who are left.
John
I find it amazing that real estate companies can get away with this type of advertising. I’ve worked in the mutual fund/investment world for many years, and the regulators in the investment world would come down HARD on any company that promoted itself in such a promissory way. Considering that the line between real estate and investing has blurred in recent years, I would think that the industry would hold itself to a higher standard — or that some regulatory body would step in and stop this sort of thing.
same thing with mutual funds. They show you charts and figure that it increased in value x% / yr for so many years. Then at the bottom, it says ‘past performace does not guarantee future results.’
Real estate is merely another asset class for potential investment. Unfortunately, the ease of which buyers were able to get financing artificially increased the demand and hence value or properties. This environment has somehow lulled people into believing that a positive return on real estate was an entitlement.
While I don’t have the most up to date data regarding sales in Museum Park, in the recent past, South Loop – including Museum Park as well as Bucktown had some of the lowest overall absorption rates in the city of Chicago. That being said – and if the number hasn’t changed substantially, it may be fair to assume that sellers could expect to have shorter market times and sell closer to their actual sales price. The best predictor of what a property should sell for is based not only on past sales, BUT equally importantly, the sales velocity of like-property. Sales velocity is calculated by absorption rate – the rate at which properties sell and close over a specific period of time.
Tom: So you’re saying that Museum Park sells slowly? I’m not sure I’m following you correctly.
Hi Sabrina – I have not calculated the absorption rate for units in Museum Park – I simply don’t have a good enough handle on Museum Park in terms of sales velocity. My take on the units in Museum Park – some units are finally seeing their views go away with the additional construction of the 2 towers along Roosevelt. I sold a resale in Tower IV in October, 2006 for essentially what the seller purchased it for from the developer.
Just read an article on the Illinois Assoc of Realtors website – I posted it on my blog – just wanted to comment that while sales volume is down 28% from 4th qtr 2006 to 4th qtr 2007, the median sales price for a condo in Cook Cty was up 10% – this is per MLSNI sales data.
Heard another interesting statistic that surprised me – Cook County has the second highest population of individuals with a net worth greater than $1M in the US. While I continue to remain cautious about the condo market in Chicago, the reality is that there is a population of buyers who can afford to purchase and absorb the inventory – albeit not at the previous pace.
Just some food for thought.
So, Tom, are you stating that condo prices rose 10% YOY in the 4th quarter? In light of the precipitous sales decline, could that median be due to the closings of old contracts for new construction coupled with the low end of the market in collapse?
You might want to dig a little deeper into that “the rich will save the market” bs. That Cook County stat you posted begs for context, such as a list of the most populated counties:
1. Los Angeles County, CA – 9,935,475
2. Cook County, IL – 5,303,683
3. Harris County, TX – 3,693,050
4. Maricopa County, AZ – 3,635,528
5. Orange County, CA – 2,988,072
6. San Diego County, CA – 2,933,462
7. Kings County, NY – 2,486,235
8. Miami-Dade County, FL – 2,376,014
9. Dallas County, TX – 2,305,454
10. Queens County, NY – 2,241,600
Geez, those first two have an awful lot more people than the rest. I wonder where they appear on the list Tom referenced? Here it is, the list of counties with the most households over $1M in net worth:
1. Los Angeles County, CA – 268,138 (2.70% of population)
2. Cook County, IL – 171,118 (3.23%)
3. Orange County, CA – 116,157 (3.89%)
4. Maricopa County, AZ – 113,414 (3.12%)
5. San Diego County, CA – 102,138 (3.48%)
6. Harris County, TX – 99,504 (2.69%)
7. Nassau County, NY – 79,704 (5.98%)
8. Santa Clara County, CA – 74,824 (4.40%)
9. Palm Beach County, Florida – 71,221 (5.61%)
10.King County, Washington – 68,390 (3.81%)
Of course, the percentage comparison does not take into account the relative household sizes, but I doubt that changes much by county.
By the way, the counties with the highest concentrations of wealthy are already in the crapper. Kind of makes that “food for thought” rather toxic, doesn’t it? Are there really some people who believe ‘it will be different here?’
No, the millionaires won’t save us anymore than the foreigners. Salvation will only come with price reductions.
“while sales volume is down 28% from 4th qtr 2006 to 4th qtr 2007, the median sales price for a condo in Cook Cty was up 10%”
So, the market is completely dead for inexpensive condos. Shocker! Financing has been virtually unavailable for the typical buyers of such units.
If sales of, say, the cheapest 5% of units drop to zero, what happens to the median price? It goes up! Numbers are wonderful things.
I guess I should have checked the used-home salesman’s claim more carefully. The comment that “sales volume is down 28% from 4th qtr 2006 to 4th qtr 2007, the median sales price for a condo in Cook Cty was up 10% – this is per MLSNI sales data” is not true. The median sales price was up approx 6%, not 10% as claimed. It was only up 4.2% on the year, so highlighting the 4th quarter YOY result is misleading unless the intent is to convey an appreciating market.
Your “trusted advisor” indeed.
Did you access my blog to review the source? I am merely conveying the data provided.
4th quarter is significant because it is typically the weakest quarter in terms of closed sales
Sorry, Trusted Advisor, but I thought you were refering to what you highlighted on your blog: “The fourth quarter condo median price in the Chicago PMSA was $230,000, up 6.0 percent from $217,000 in the fourth quarter of 2006.” I see now that a breakdown by county was available in a link attached to the topic heading, and that it was 9.6% for Cook County. Thanks for not pointing that out.
Are you sure that the 4th quarter is “typically the weakest quarter in terms of closed sales?” I don’t track every area in Chicago, but take the condo rich area 8008 (boundaries: river to north and west, lake to east, North Ave to north) for example. The percentage of closings in the fourth quarter are as follows:
1997 24.8%
1998 20.8%
1999 32.5%
2000 24.1%
2001 19.4%
2002 25.6%
2003 32.0%
2004 25.9%
2005 23.4%
2006 19.9%
2007 22.9%
The combined fourth quarter sales for the 11 years presented represent 24.8% of the combined closings. Of course, I am willing to discuss the data to support your claim, do you have it?
After reading all of that i am just going to rent a $500.00 per month studio somewhere…..
G – thanks for the breakdown. Your info suggests a fairly even distribution. While I do not have the data, 8008 is a good sample, however, I believe in past readings per Chicago Assoc of Realtors, Chicago area sales have typically been lowest in 4th qtr. Again, don’t shoot me, but I don’t have the data. I need my body armor. Forgive my oversight on the link – I sense a bit of hostility 😉
From where I sit as an agent who works this business full time, I don’t see nor do I experience the overwhelming sense of doom that many consumers feel regarding the Chicago market. There is a great deal of pent up demand right now – granted buyers are cautious as they should be, however, the data does not suggest a substantial collapse in values.
I am rooting for dome so I can get a good deal. Its impossible to find a decent place to live in this City with a parking spot for under $200K. Unless I want to live on 103rd and Avenue O or something, under some powerlines.
Doom, I meant.
From where I sit as a consultant that works this business full time, I don’t see nor do I experience the kool-aid drinking optimism that many used home salespeople feel regarding the Chicago market. There is no amount of pent up demand right now at asking prices – because buyers are cautious as they should be, however, the data does not suggest anything but a substantial collapse in values.
Now go on with the “median price” realtor(tm) shill speak. Why anyone would listen at this point is beyond my field of expertise. I’ll leave that to the sociologists and psychologists.
Gotta go with G on this one.
Jason,
Consider Hyde Park. It’s a lovely neighborhood. It is a fifteen minute drive to downtown, or a direct shot on the Metra, or take an express bus. The housing stock is interesting, and it’s very cheap. For instance, right now in my very building, there is a gorgeous 2nd floor one-BR facing onto the courtyard, with parking, and the asking price is $150K. Assessments in this building are low (and remember they include taxes)–I think for that unit they are around $350 a month. There is also a nice 2Br with parking in the building, and I’m sure they are asking less than $200K. There is also tons of free parking on the street outside our building. And I’m you can get substantially less than asking at any rate.
Anyway, I don’t know why more people don’t consider this neighborhood. The crime is no worse–probably better–than Rogers Park, Pilsen, even some parts of West Loop.
I like Hyde Park. Just most of my friends live up North. Not much of a night life there for a single guy and his dog. What’s the zip code there?
60637. With a car, Northside is no problem. Most (all) of my friends live north, too. Without a car, Hyde Park wouldn’t work at all.
Kenworthey- what’s the status of them adding more restaurants down in Hyde Park?
I never understood this. You have a bunch of students and a lot of people with a lot of money and then NO new restaurants (I lived in the neighborhood in the early 1990s because it was cheap- but I was bored so I moved to the north side.)
It would seem a great location for a few really good cafes or asian noodle restaurants.
If they build them, they will come.
This has been a source of frustration in Hyde Park, but things HAVE gotten better. There are several very good restaurants here now–and not just the (overrated) fancy pants La Petit Folie. We have, in my opinion, the best middle eastern resto. in the city–Cedar’s on 53rd. There’s a really terrific new noodle restaurant also on 53rd with an actual liquor license (!) Two wonderful coffee houses opened in the last few years–Istria Cafe and Third World Cafe. Then there’s the standby Dixie Kitchen, Calypso, several pizza restaurants…
The co-op finally gasped its last breath, and we’re getting a new Treasure Island in its place. Hyde Park Produce has vastly increased its size in a move a couple of storefronts down.
It’s no Northside. Never will be. But the NIMBYs have been put in their place more often than not recently, and the neighborhood is the better for it.
Or maybe I’m just telling myself all of this because I’ve decided to stay put for a couple of years. 🙂
G – while I find Koolaid to be delightfully refreshing, it has yet to provide any kind of euphoric, overly optimistic view of the current real estate market. It also has not given me any overwhelming sense that the sky is falling either. The data simply does not suggest that we are in a freefall. In my statistics class in college, I read a booked called How to Lie with Statistics. Being a consultant, you analyze data – bottomline, we all can look at the same data and come out with different viewpoints.
I guess I’ll just go back to selling used houses …
OK, stop picking on the real estate agent, he might know something about real estate! Can’t we all just get along! Great Crains Article.
I think that what happens this spring will give us better insight into the strength or weekness of the housing market. The big question what will lenders do if valuations decline at an accelerating rate. What if lenders require 20% down payments. How many first time buyers will have the resources for this type of down payment. How many move up buyers will there be if they have no equity in their current residence? Any thoughts?
Jason –
If you don’t mind window air conditioners, there are places around $200k in the upper Gold Coast/Old Town area. Very convenient for those of us with dog & closer to nightlife than Hyde Park.
Thanks for the update Kenworthey. Hyde Park always has had so much potential.
just to beat a long dead horse, regarding the “closings” in the 4th quarter representing almost one quarter of the number of sales in the year:
aren’t many of the sales that close in the 4th quarter placed under contract in the 3rd quarter? if that’s the case, 4th quarter closings may represent a blend of 3rd and 4th quarter activity.
G, were the data you cited based on 4th quarter contracts signed or 4th quarter closings.
I guess i’m just curious if real estate has any seasonality to it at all.
The numbers represent closed sales for the 4th quarter. The contracts could have been signed anytime.
I believe there are differences in seasonal activity in “normal” (stable) markets. The differences would show up most clearly in the contract numbers. However, a lot of new construction/conversions in an area typically results in distorted data in the mls due to obvious inconsistencies in recording developer list/contract dates.