Crib Chatter

How does someone who buys a condo for over a million dollars get into financial trouble barely a year later?

I am seeing more and more of this.  The foreclosures are not just buyers with a subprime loan in a so-so neighborhood.  Many of them are also richer people living above their means, and also with a risky loan, who are losing their homes.

The latest is:

18 W. Chestnut in River North/Gold Coast:

• Sold for $1,100,000 in March 2006
• Auction price of $926,858

I don’t have any details of the unit (size, amenities.)  But these owners got into financial trouble almost immediately on this loan.

According to the Chicago Tribune, foreclosures in Cook County, which is Chicago and some surrounding suburbs, are up 30% so far compared with a year ago.  From the Tribune:

“There were 28,000 foreclosure filings in all of last year, and now we’ve already had 28,000 in Cook County through the third quarter of this year,” Mary Richardson said.

“I give them a realistic picture, that they’re not going to get a house for 40 cents on the dollar,” said T.J. McKinney. “If you can get a house in the preforeclosure process [before the home is auctioned], the reality is maybe you’re looking at a 15 percent discount” from retail.

Foreclosure filings are up about 30 percent in Cook County, he said. “While there’s more quantity now, there’s less quality.”

The article discusses how it’s difficult to make money on foreclosures right now and so newbie investors should be cautious about getting into the foreclosure game.

Given the number of ARMs that will be adjusting in the next several months, it would seem that we are only at the beginning of the foreclosure process. It will get a lot worse before it gets better. Why buy in now? There will be more deals later.

400 N. La Salle was originally an apartment building in River North which was then converted into condos soon after it opened.  It’s one of those buildings you may have walked or drove by a million times and not noticed it.  Not that there is anything inherently wrong with it.  But it looks like, yes, an apartment building.

The developer is still trying to sell units in the building several years later.  

How are the original buyers faring?  They should have rented rather than bought their one bedroom condos.

Unit #2112: 1 bedroom, 1 bath, 723 square feet, parking is extra but available

• Sold in November 2005 for $259,000
• Currently listed for $289,900

Unit #1501: 1 bedroom, 1 bath, 853 square feet, parking is extra but available

The pictures above are of Unit #1501.

• Sold in February 2006 for $296,000
• Currently listed for $329,900

You can see with both of these buyers, unless they get nearly their asking price, they will either break even or lose money after paying realtor and closing costs.

Most likely, they’re going to lose money on this deal.

Why do people keep insisting on buying one bedroom condominiums in downtown Chicago?  How long do they think they’ll live there?  The average time in a unit downtown is only 2 years.

In this market, you will lose money if you buy a condo and live in it for that little amount of time.  There is not the appreciation of the past few years.

Why not just rent instead?

Koenig & Strey has the listing for #1501.  @Properties has the listing for #2112.

This is another home in the category of “they just don’t build them like this anymore.”  Yes, new construction is nice, but you’ll never get anything that looks anything remotely like this beautiful mansion at 1501 W. Jackson.

The Jackson Historic District is a strange few blocks of beautiful European row homes and single family homes a few blocks just east of the United Center in the West Loop.  You go from industrial grit in the West Loop to a tree-lined street and then back to industrial grit and parking lots.  From the Chicago Landmark District website:

These blocks are virtually all that remain of Chicago’s once-fashionable Near West Side. The houses, as well as the Church of the Epiphany, were built in the popular architectural styles of the period–Italianate, Queen Anne, Second Empire, and Romanesque Revival.

According to the house’s website, the home was built for lumber magnate Benjamin Franklin Ferguson.

1501 W. Jackson:  5 bedrooms,  4.5 baths 6000 square feet, 3 car parking, coach house in the backyard with a studio and two bedroom apartment, also a one bedroom apartment with separate entrance in the basement (used to be the servant quarters.)

• Currently asking $2.250 million

The main house has 12 foot high ceiling and many of its original features are completely restored.  The wood work is stunning.

For more pictures check out the excellent website with an extensive slide presentation. (yes the music is kind of funky- but it does evoke old world elegance.) 

This house is pricey for the West Loop even if it is on three city lots (as the listing says).  There are several other historic mansions, not nearly as big or ornate, also for sale in the Jackson Historic District- all under $2 million.  It also is on a corner that looks directly onto the nearby college so that might turn off some buyers.

Scovell & Sabatini at Sudler Sothebys have the listing.

The Farallon at 600 N. Dearborn in River North is famous in Chicago housing market history if only because it was the building that seemed to set off the condo boom in River North and Streeterville.  When the sales center opened in the late 1990s after years of little new construction, condo units sold out in only 24 hours. There was craziness in the air.  From New Homes Magazine in 1999:

Magellan Development Group set a record for the year with its one-month sellout of the 183-unit 28-story highrise at 630 N. State Parkway – and then broke that record with an immediate sellout at the Farallon Condominiums, 600 N. Dearborn. President Joel Carlins says that the 171-unit planned highrise sold out in one day.

“We had a list of about 400 prospective buyers that we had to turn away from 630 N. State Parkway who expressed interest in our next building in the neighborhood,” Carlins says. “We notified them that we would start taking applications for the Farallon on Sept. 2, about two weeks before we planned to start our advertising and public relations program. There were about 100 people waiting for us to open the sales office and there was a steady stream of buyers throughout the day. By day’s end we were sold out.”

It was the first signal that demand was there for new construction condos.  Developers have not looked back since.

The building was completed in 2001.  How have owners fared since all of the big hoopla?

It has been difficult for many owners in the building. Original owners have made some money, but not as much as you might think. And owners who bought in the last several years are basically losing money after paying realtor fees and closing costs. Let’s look at several units recently on the market and their sales history:

Unit #603: 1 bedroom, 1.5 baths, 760 square feet, 300 square foot terrace

• Sold in August 2004 for $280,000
• Recently on the market for $309,900 plus $35,000 for parking

Unit #902: 1 bedroom, 1.5 baths, 925 square feet, corner unit

• Sold in March 2002 for $267,000
• Sold in May 2004 for $297,500
• Recently on the market for $309,000 plus $35,000 for parking

Unit #1209: 1 bedroom plus den, 1.5 baths

• Sold in July 2004 for $292,500
• Recently on the market for $299,000 plus $35,000 for parking

Original investors from 2001-2002 have managed to “make” at least $50,000 to $75,000 but what is that when investors in new condo towers like Avenue East, 600 N. Fairbanks, MoMo, the Columbian and 340 on the Park are trying to flip for $100,000 to $200,000 or sometimes more- in only two to three years?  (If those investors can get their flipping prices.)

Any owner who bought in the last three years in the Farallon is stuck, as you can see from the prices listed above.  Appreciation has been virtually nothing.

Making money off a one bedroom condo in only a few years is difficult, even in the best of markets.  It’s been even more difficult in the Farallon.

340 on the Park, the massive 58 story tower along Millennium Park at 340 E. Randolph continues with its closings as flippers continue to try and re-sell units (or, in some cases, rent them out.)

I’m counting 17 units on the market as re-sales with the one bedrooms starting at over $600,000 (which includes the parking space.)  Some of those don’t look on the park- but have the north facing view.  Expect to pay more for the park/lake view.

There are also 23 units for rent.  Numerous of the rentals are on Craigslist- such as this 1 bedroom for $2600 a month.

So far, none of the flips have re-sold.

The first flip has appeared on Craigslist for MoMo, the new Smithfield building at Randolph and State Street across from the Borders and Macy’s (aka Marshall Fields) in the Loop.

If you walk by on State Street, the lobby looks completed.  The Joffrey Ballet will have its headquarters in the base of the building and expects to be moving in in early 2008.

The Craigslist flip indicates that the closing will be in April 2008 (but the unit is on a higher floor.)

31st Floor Unit: 2 bedroom, 2 bath, 1365 square feet, south east view

• Currently for sale for $600,000 which includes a parking space
• Asking $10,000 down to initiate the contract plus $5,000 on February 1, 2008
• MoMo prices went as high as $530,000 originally from the developer

 The second million dollar foreclosure has appeared in 33 W. Ontario at Millennium Centre.

Unit #51E:

• Sold in December 2004 for $1.45 million
• Sold in January 2006 for $1.8 million
• Auction price of $1,452,350

As the Spire dominates the Chicago housing market news, getting lost in the shuffle is the struggle other developers are having selling their top product.

David Roeder, housing columnist for the Sun-Times,  wrote today about a lawsuit between Prism Development, developer of the Ritz-Carlton condos at 664 N. Michigan Avenue, and the Metropolitan Water Reclamation District over the use of an alley behind the Farwell Building that is owned by the MWRD.  But more interestingly, he states that the sales of the Ritz are only at 40% (out of 86 units.) 

Sales were at 40% weeks ago.

Basically, there have been no sales in weeks. 

I would consider the Ritz development to be one of the better on the upper end.  Michigan Avenue is hot and people want to live there.  They are putting in upper end finishes and the building will have a boutique feel.  I would think the building would attract quite a few international buyers.

But I guess not.

If even the Ritz can’t sell its units, what hope is there for the others?

The luxury market is dead right now.

Prices at the Ritz start at $1.25 million.

You rarely see large terraces downtown anymore- even on Penthouse units- as the new construction buildings are so tall and the price per square foot so high that developers would rather put more liveable space into a unit, then add on a large outdoor terrace.

But they have it all wrong.  The very epitomy of luxury is a downtown condo with the ability to create a gardeners paradise just outside your door.

In order to get the large terrace, many times you have to look outside of new construction to the older vintage units.

Such is the case with 220 E. Walton Unit #11E.  220 E Walton is a 19 unit vintage Gold Coast/Streeterville mid-rise.  From the listing:

Never Before On Market! Elaborate Vintage Penthouse W/ Over 2400 Sq. Ft. Of Outdoor Terrace Space! Expansive S,e, & W Views Of Both City & Lake! Spacious And Open Floorplan, Private Elevator Entrance W/Private Vestibule, Many Original Vintage Details*$443 Loan Special Assess. Effective Until 10 07 & $747.Special Assess. Effective Until 12/07* Totaling Mthly Assess. To $4761. * Creative Owner Financing Available

Yes- from the pictures it definitely looks like it has never been on the market. There are no pictures of the kitchen or baths so I shudder to think what those look like.

But you’d be buying it for the massive terrace anyway.  Clearly, that needs work as well (as it’s currently not landscaped) but with a little elbow grease, both the unit and the terrace could be spectacular.

Who doesn’t love those cool lions guarding the terrace?

220 E. Walton #11E: 3 bedrooms, 3.5 baths, 4500 square feet (2400 of it is the terrace), no parking

• Listed at $3.25 million

Mary Bennett of Koenig & Strey has the listing.