Crib Chatter

Crain’s recently focused on the dilemma many people have voiced here at Crib Chatter.  Should they rent or should they buy? Renting seems like the much better financial deal right now.

The general statistics also seem to confirm that renting is smarter right now.  From Crain’s:

Apartment rents are surging in the Chicago area, but that check to the landlord is still a lot smaller than a monthly mortgage payment.

Rent in the Chicago area represented just 60.0% of the after-tax monthly mortgage payment for the median home in the third quarter, according to a recent report by Deutsche Bank Securities Inc. That is up from 59.6% in the second quarter and a low of 58.2% in second-quarter 2006.

The article has a chart that is very interesting.

Either rents have to really spike, housing prices have to come down, or mortgage rates have to come way, way down again. Or a combination of all three.

Deutsche Bank estimates that the Chicago-area market will get close to an equilibrium level if the median home price falls 10% from its third-quarter level and if mortgage rates fall a full percentage point. The Chicago-area median home price rose 2.5% in the year ended Sept. 30.

One way or another, the housing equilibrium will be reached. Question is: How will it get there?

Perhaps you’ve walked up Dearborn in River North and the Gold Coast and seen this black building as I have.

It is 1025 N. Dearborn a development of 10 modern townhomes that were supposed to compliment the highrise tower next to it at 30 West Oak.  Smithfield developed 30 West Oak.  The townhomes aren’t listed on Smithfield’s website but they show up in a rendering of the building on the website.  I’m assuming it is still a Smithfield product.

The townhomes have been on the market for months but from what I can tell, none have sold.  At least one has had a major price reduction of $500,000.

What has gone wrong with this development?

Here’s the listing:

ARCHITECTURALLY SIGNIFICANT NEW FEE SIMPLE LUXURY TOWNHOMES IN PRIME GOLD COAST LOCATION! THESE CONTEMPORARY HOMES FEAT FOUR LEVELS OF SPACIOUS MODERN LIVING W/GENEROUS ROOM SIZES POGGENPOHL KITCHENS WITH ULTRA-LUX APPLIANCE PACKAGE, CUSTOM WOOD FLOORING, ALL STONE BATHS, LARGE OUTDOOR TERRACES, 2 CAR ATTACHED GARAGE AND MUCH MORE. DELIVERY FALL 2007.

Prices range from $1.799 million for the 4,856 square foot townhouse to $3.25 million for the largest 6,228 square foot townhouse.

@Properties has the listing.

Crain’s is reporting the fourth quarter Chicago sales statistics:

Builders sold 2,196 units in the quarter, a 51% decline from the year-earlier period and the biggest quarterly drop since the residential slump began more than two years ago, according to Tracy Cross & Associates, a Schaumburg-based real estate consulting firm. Homes sold in the quarter at the slowest pace in 15 years, the firm says.

Still, the experts aren’t grim about all of 2008:

As they head into the spring selling season, typically the market’s strongest period, builders “will be lucky to repeat last spring,” says Tracy Cross, president of the eponymous consulting firm. Still, he expects a recovery in the second half of the year, with annual sales rising 12% for all of 2008.

Yet, the slowdown in sales is clearly troubling. Inventory is rising. And we all know that dozens of new high rises are being built downtown.

Builders last year suffered most in the suburbs, where sales fell 39% to 11,565 units. City developers sold 4,121 units, a 32% decline, and could be in for more tough times as a slew of new downtown condominium towers opens up. About 3,500 unsold downtown condos are under construction and will be completed between now and 2010.

“Some of those buildings are going to have some trouble,” Mr. Cross says.

The spring selling season is about to begin. It should get interesting.

The number of flippers keeps growing larger at Avenue East at 160 E. Illinois in Streeterville.

The building has not completed closings yet.

There are only 133 units.  So far:

• 43 units are for sale
• At least 18 units are for rent
• 53 units are either for sale or for rent

That means 40% of the building is owned by investors or the developer (so far.)  And the number is actually higher, because a half a dozen units have actually already rented.

The rent versus owning ratios are pretty striking in the building already.

Unit #1302: 2 bedrooms, 2 baths,  1508 square feet

• Currently listed for $850,000 (with parking available for at least $50k)
• Assessments of $604 a month
• Koenig & Strey has the listing

Or you can rent it for: $4200 a month

Unit #24A: 2 bedroom, 2.5 bath, 1482 square feet penthouse unit

•  Currently listed for $798,000 (parking is available for $50k)
• Assessment of $685 a month
• Baird and Warner has the listing

Or you can rent it for $3950 a month.

The most radical rental is Unit #23C.  I wish I had some pictures of it.

Unit #23C: 1 bedroom, 1 bath, 907 square feet

• Currently listed for $590,000 (parking is available for $50k)
• Assessment of $399 a month
• Baird and Warner has the listing

Or you can rent it for $2100 a month.

From what I can tell, nothing has flipped yet in the building even though closings began over 6 months ago.  Several have rented.

I guess this means no Europeans are strolling into the building off the Mag Mile, shopping bags in hand, to buy condos.

The Brewster, at 2800 N. Pine Grove in Lakeview, is famous for several reasons.  Not only did Charlie Chaplin live in the penthouse in 1915 and 1916 but several movies have also been filmed in the building,  including Childs Play and The Untouchables.  The interior of the building is amazing, with intricate ironwork and skylights.

Built in 1893, it was originally known as the Lincoln Park Palace.  It was designated a Chicago Landmark in 1982.

Chaplin’s penthouse is again on the market.  But it looks like it hasn’t held up so well (if you can even tell anything from these pictures).

The listing says the unit has 18 foot ceilings, but there aren’t any pictures of them in the listing.  Nor are there pictures of the “FAB kitchen” nor the baths.

The biggest selling point of the unit, though, is the wonderful wrap-around terrace.

Unit #PHA: 3 bedrooms, 2 baths, 2200 square feet

• Sold in June 1997 for $163,500
• Sold in September 2000 for $320,000
• Sold in June 2005 for $545,000
• Currently listed for $597,000
• Assessments of $998 a month

The Brewster has no parking available.

Castle Keepers Realty has the listing.

Let the flipping begin in 550 N. St. Clair in Streeterville.

I don’t believe any units have officially closed yet but already there are 15 units on the market out of 112 units.  It appears that nearly all of floor 13 is back up for sale,  with several units available from the developer’s agent- which is Weichart Realtors.

Unit #1303: studio, 600 square feet

• Currently listed for $288,500 (parking is $45,000 extra)
• Emarket Realty has the listing

Unit #1304: 2 bedrooms, 2 baths

• Currently listed for $598,500 (plus $45,000 for parking)
• Weichart Realtors, First Chicago has the listing

Unit #1305: 2 bedrooms, 1.5 baths

• Currently listed for $498,500 (parking is $45,000 extra)
• Weichart Reatlers, First Chicago has the listing

Unit #1306: 1 bedroom, 1 bath, 800 square feet

• Currently listed for $399,000 (parking is extra)
• Emarket Realty has the listing

Unit #1307: studio, 600 square feet

• Currently listed for $319,500 (parking is extra)
• Emarket Realty has the listing

A larger flip has also come on the market.

Unit #1508: 3 bedrooms, 2 baths, 1625 square feet

• Currently listed for $749,900 (plus $50,000 for parking)
• Caren Real Estate has the listing

Unit #1708 is going to have to compete against the developer.  Weichart is trying to sell Unit #908, same size unit, for nearly the same price: $748,500.

The investor on Craigslist a few weeks back is still out there looking for help:

I am an investor and I need to sell a few units I bought at 550 n. st clair. This is a beautiful building in Streeterville, close to Michigan Ave where there is an array of shopping and wonderful restaurants. My intention was to live in one and manage the others as high end rentals; however, I have decided not to move forward. I can either lose my earnest money, or sell my units at the price I contracted them at 3 years ago, which in some cases are up to 10% less than what the Developer is asking for now.

There are also a few rentals available already on Craigslist.

Stay tuned. There will certainly be more action in this building in the next few weeks.

550 St. Clair [website]

Did you see all the incentives developers were throwing around in this weekend’s real estate ads?

The ad for The Emerald, which is being built in the West Loop near Greektown, said:  “Limited Time- Leap Year Promo”

Now thru March 2, leap into Emerald for special offers! Plus get $1000 off closing costs and put only 5% down. See sales rep for details.

They don’t say what the “special offers” are but if you go to their website it says they are offering free parking through March 2.

At the Terrazio at 1935 S. Wabash in the South Loop, you can get a “New Year’s Special” of $25,000 off purchase. It is limited to the first 15 contracts only. The ad says to “hurry”.

The Marquee at 1454 S. Michigan is also offering a “New Year’s Special” of a $25,000 furniture credit. Now that’s unique. Imagine how much furniture that could buy you in a one bedroom condo? That is only available for the next nine contracts. The ad says to “hurry” too.

At the Residences at the Grand Plaza at 545 N. Dearborn in River North, you can get up to $100,000 in personal upgrades for your penthouse. Those start over $1 million. The ad says the “allowance” differs by unit and purchase price.

2930 Sheridan Tower at 2930 North Sheridan in Lakeview, an apartment to condo conversion, is offering $5,000 cash at closing. A few months ago when I visited the sales center, they were also offering a $5,000 “credit” towards upgrades like getting rid of the popcorn ceilings.

Eco 18, the “green” building at 1830 S. Wabash in the South Loop, is offering free parking “for a limited time.”

The Emerald [website]
Terrazio [website]
The Marquee [website]
The Residences at Grand Plaza [website]
2930 Sheridan Tower [website]
Eco 18 [website]

This is the time of the year in Chicago when you think, “darn, I should have bought that house with the fireplace.”

Or, in this case, you can buy one with two.

7406 N. Claremont is a vintage building  in the West Ridge neighborhood (aka West Rogers Park) originally built in 1928 and renovated and converted in 2000.

7406 N. Claremont #1S:  3 bedrooms, 3 baths, duplex, 3100 square feet

• Sold in March 2002 for $302,000 
• Currently listed for $434,900 (includes the parking)
• Assessments of $232 a month

Look at these cozy fireplaces.  There’s even one in your bedroom!

James Snelson and Sam Powell at Keller Williams Lincoln Park have the listing.

It’s not just condo flippers who are having a hard time selling in this market.  Owners of million dollar homes in Chicago seem to be under some stress as well.

Just take a walk down West Wolfram Street in West Lakeview.

I’ve already posted about 1445 W. Wolfram.  Remember that house?  It was the “Once in a Lifetime Opportunity” on a new construction McMansion listing.  The listing said:

“Developer must get out now! Make an offer!! Being sold “as is” – way under market value 95% complete – you put in last 100k of work (apps, elevator, etc.)! Home boasts tremendous light, hwdflrs, custom cabinets, eat-in chef’s kitchen, walk-in pantry, elevator, radiant heat, 5 decks & 2 laundry centers, exquisite finishes, master craftsmanship & great floorplan.”

It was originally listed for $1,999,999 and had been reduced to $1,650,000. It has since been reduced again to $1,600,000.

It’s got some steep competition nearby however. It seems Wolfram is full of million dollar homes that aren’t selling.

Only a few doors down is 1417 W. Wolfram. I don’t have pictures of this house, but it just went into foreclosure.

• Last sold in January 2004 for $1.295 million
• Foreclosure auction price of $1,383,203

Not too far away is 1351 W. Wolfram.  From the listing, it looks like it was newly built in 2005. The listing says it has Viking, Sub-zero and Bosch appliances.

1351 W. Wolfram: 4 bedrooms, 3 baths, 2 half baths,  2 car garage

• Currently on the market for $1.725 million
• First came on the market in March 2005
• Total market time of 441 days (but has been on and off the market for nearly 3 years)
• Amanda Samuels at Coldwell Banker has the listing

A little further west there are two new McMansions that are nearly identical right next door to each other. (The interior pictures on the listings are the same for both.)

1726 W. Wolfram: 5 bedrooms, 4.5 baths, 2 car garage

• Currently listed for 1.545 million
• First came on the market in February 2006
• Market time of 219 days (but has been on and off for about 2 years)
• @Properties has the listing

1724 W. Wolfram: 5 bedrooms, 4.5 baths, 2 car garage

• Currently listed for $1.475 million
• First listed in March 2005
• Market time of 292 days (has been on and off the market for nearly 3 years)
• @Properties has the listing

What do these properties say about the state of the upper bracket market in Chicago?

You be the judge.

Reuters wrote an article this week entitled, “Wealthy May Be Next in Line in U.S. Home Crisis.”

And wouldn’t you know it- the writer chose Hinsdale, Illinois as an example of how the bust was affecting the wealthy.  The article had some good quotes about the Chicago housing market. 

About Hinsdale:

“There is a section of the population here that over-extended themselves to buy here and then keep up the facade of wealth,” said Sharon Sodikoff, a broker associate at local real estate agency Prudential Homelife Realty. “In the next year or so they’ll be forced out in dribs and drabs.”

The average sale price in Hinsdale for the 12 months through September 30, 2007 was $1.15 million.

“The next wave of problems will come from prime borrowers who bought too much house or borrowed too much against it,” said Michael van Zalingen, director of home ownership services at Neighbourhood Housing Services of Chicago.

Inventory is rising in Hinsdale. It had risen to 17 months by the end of October 2007 versus only 6 months in January 2006.

What about Chicago, you ask?

“I’ve seen people who bought less than a year ago and have no equity in their homes simply walking away with no regard for the consequences,” said Genie Birch, a real estate agent at Chicago-based Koenig & Strey GMAC who covers the city’s wealthier districts.

Real estate agents say speculative investors who bought to make a profit are also walking away as the rents they charge fall behind the mortgage payments as their adjustable-rate mortgages readjust.

The article states that you won’t see as many foreclosures among the wealthier because they have the ability to call up the lender and make some kind of deal- presumably for a short sale.

“You won’t see many foreclosed homes here because that would involve public embarrassment,” Prudential Homelife Realty’s Sodikoff said. “But they will call their realtor and get them to quietly broker a deal to get out of their homes.”

Oh really? Remember this million dollar Hinsdale foreclosure at 805 W Hickory? I chattered about it in September 2007.

It was originally listed for sale in 2004 for $3.198 million. It went to foreclosure auction with a price of $1.301 million after spending three years on the market. It was sold in foreclosure auction.

Granted, there isn’t a tidal wave of similar foreclosures in Hinsdale or other wealthy communities.  But I’ve seen million dollar foreclosures in Wheaton, Burr Ridge and Highland Park in recent weeks (to name a few.)