Second Biggest Story of 2009: Fate of the Luxury Market
Trump Tower Chicago started closings in 2008 but it will likely continue to be one of the top real estate stories in 2009.
Currently, there are 143 units on the MLS in the building (out of 758 units).
- 117 for sale
- 26 for rent
Some may be both for sale AND for rent.
Waterview Tower construction is still halted. The Spire is apparently halted (depending on who you talk to.) 2520 N. Lincoln Park stopped advertising on the radio in recent months.
The Ritz-Carlton development on Michigan Avenue is one of the few luxury buildings currently under construction. The sign on the side of the building recently said it was still 40% sold.
But the whole story in the luxury market isn’t just the new construction. There appears to be a large number of older luxury units also on the market.
For example, over 10% of the units in The Palmolive, at 159 E. Walton, in the Gold Coast are on the market.
Building stats (out of 98 units):
- 11 for sale
- 3 for rent
Some units may be both for sale AND for rent.
What will be the fate of the luxury market in 2009?
I thought I heard that Teng was “this close” to bankruptcy, likely over Waterview.
Said it recently… will say it again. This year the “luxury market” is the one in huge trouble.
Due to there basically being no IO loans anymore, and jumbo’s becoming incredibly hard to come by with high rates, as well as many more flippers and forclosures entering the market very soon, I just don’t see how the luxury market will sustain itself.
There’s also trouble on the demand side. Many people formerly in the luxury market lost jobs and/or income this past year, or are very worried about their income going forward. People don’t pay $1 million for a condo when they don’t know if their job will be there in a few months.
Losing 40% of an investment portfolio in the market decline over the last year likely obliterated some down payments as well.
With increasing supply and decreasing demand, it isn’t hard to see how things will end for the luxury housing market.
It’s a screwy time, but people with money will still buy into unique buildings in good neighborhoods.
In my opinion, The Palmolive is incomparable. Same goes for LP 2520. You just don’t find that type of product in LP.
With respect to a decline in advertising, that’s across the board and to be expected during this time of year.
It’s going take awhile for these types of units to be absorbed, but there are buyers for these homes. Unfortunately I’m not one of them.
Dave,
I don’t know a lot about the Palmolive, but from what I know about LP2520 is that I guess it is way, way too big for the potential market. 325 units at the highest $/sf costs in the city? Sorry but I don’t think there are enough buyers. Maybe if this had been a 100 unit project or something smaller. While I’ve been predicting the death of the 400k 1/1 in Chicago for some time now (outside of RN/Streeterville/Loop), I really can’t fathom a 500k 1/1, especially in Lincoln Park. My guess is it never gets built.
The Case Shiller numbers came out today. Chicago’s index is down to September 2004 levels and is down almost 11% in the last year (as of October).
Long term trend graph is here along with other data:
http://blog.lucidrealty.com/chicago_real_estate_statistics/
I am a buyer in LP 2520, but I think that Dave is right on about the number of other buyers. I bought on a low floor at a reasonable sq. ft. price, but I just can’t imagine that there are many people who would pay twice as much just to be on a higher floor. I know it’s a nice view, but the pricing seems way out of line for as many units as they want to sell. We’re hoping they build, because of that nice park. But I wonder if they will.
SR said: “Palmolive is 93 Units Sabrina”
Thanks for the update but apparently none of the realtors seem to know how many units are in the building because it’s all over the place on the realtor websites. Obviously- it has changed over the time period because some owners combined units.
So the number I cited, if 93 is correct, means that an even higher percentage of the units is up for sale.
This is a long PDF file that everyone should read.
http://www.designs.valueinvestorinsight.com/bonus/pdf/T2_Housing_Analysis.pdf
The luxury market is still active in Chicago. It has just changed. Luxury buyers and sellers are more educated on market conditions. They realize that real estate is truly the cornerstone of our economy and during these times often pay cash to get a better value..
Wow. That about sums up how I feel about realtors.
It’s funny I never understood the cash for better value thing. I always got cash for all my sales, whether from a bank or seller. Maybe it makes you feel more secure about the buyer but why as a seller would I give a better price for cash unless I am fudging the transaction price? And even then it’s only worth about 10% on anything over 500k profit.
Its because you don’t have to wait as long to close, thats why you can fudge down the price. Usually you have to wait about 60 days to get approved for a typical mortgage, with cash, that is gone, and therefore you have the power to demand a lower price.
And LOL @ Ron
Realtors are idiots and don’t know much more about a listing than a typical person that spends a few minutes researching some property on the internet. And just because someone has money, that doesn’t mean they know anything about “markets”. And just because someone has a RE license doesn’t mean they know anything about “markets” either.
The only thing realtors are good for is obtaining keys, flipping light switches, opening doors and cheauffering.
So I close 15-30 days earlier at 3% a year opportunity cost and a few expenses removed. Thats a good 3-5k I would be willing to shave off a price for someone per million. Still doesn’t add up to me. To me it was something brokers or buyers always seemed to say in order to sound impressive but I never understood it.
Sonies. I think the average realtor has about a high school education. Not that I am a big believer in “higher” education beyond college but not even going to college says quite a bit. Of course Ron went cause he’s Jewish and his mother would have sat shiva for him if he didn’t.
AMW.. thanks for the powerpoint. Nothing new but nonetheless fun to see all at once.
Gary,
Thanks for the Case-Shiller chart. Prices have a ways more to fall. It looks like the intersection between the index and the pre-1999 long term trend will intersect in late 2009 – somewhere around late-2002 or early-2003 nominal pricing. The likely overcorrection thereafter will probably be a good time to get in on some deals for those with equity to throw around.
But in the meantime…
Also Ron, if your website is “chicagoluxuryrealty.com” why the hell do you have two “featured” pieces of crap on the north west barrio part of town one for $135k and one for $99k.
Good for a laugh at least. Oh the irony…
To Sonies and Ze Carioca…my website is just being set up for the new year..(Having just joined Rubloff 2 weeks ago).Hiring a real estate professional for the acquisition and disposition process is certainly much more than obtaining keys, flipping light switches, opening doors and driving clients around.My MBA is in marketing and I utilize it in my day to day operations at Rubloff(I also sell commercial properties)..I am also TRC certified and can conduct transactions on a global level.I analyze and educate my clients on a regular basis about the current real estate market and am a value add to my client base. Check out http://www.919westwisconsinstreet.com to see some of our professional work.
“To Sonies and Ze Carioca…my website is just being set up for the new year..(Having just joined Rubloff 2 weeks ago).Hiring a real estate professional for the acquisition and disposition process is certainly much more than obtaining keys, flipping light switches, opening doors and driving clients around.”
Ok care to give some examples of what else is involved? I’m pretty sure I covered the job description pretty completely. Oh but I forgot filling out forms that are 12 pages long, when in reality, they only need to be 3 pages tops.
“My MBA is in marketing and I utilize it in my day to day operations at Rubloff(I also sell commercial properties)..I am also TRC certified and can conduct transactions on a global level.”
How exactly is a piece of paper from Phoenix Online University used in the day to day operations at Rubloff? And if you have a real MBA from a decent school, why on earth would you be a realtor. All you need is a GED to get a job as a realtor. Sounds like you wasted a lot of money just to be a realtor.
“I analyze and educate my clients on a regular basis about the current real estate market and am a value add to my client base. Check out http://www.919westwisconsinstreet.com to see some of our professional work.”
I’m curious as to what you are educating them about. Probably the same “now is a great time to buy/sell real estate never goes down in value” shtick that every other NAR brainwashed moron is spewing.
That listing site has been mentioned on this site before. It is nice, albeit deceiving. That’s the 2600sqft house with 1500 sq ft. of outdoor garden right?
Sonies- My MBA is from UW-Madison a top rated business school and BS is from University of IL.-Champaign. I actually love buying and selling real estate. I separate myself from the pack of “NAR brainwashed morons” that you refer to by being a trusted advisor to my client base and actually have built up a substantial referral business.You’ve made it quite clear that you don’t like the professionals in our business so I welcome the challenge to change your mind..and..now is a Fantastic time/opportunity to purchase in the luxury market!
Well I can’t hate a fellow Illini, so good for you enjoying what you do. Sadly there aren’t many smart realtors out there at all and they make ones with brains look bad.
Happy new year!
Now would be a fantastic time to buy in the luxury market… if I could get something for half of the 2006 bubble price. 500k for a 1/1 condo anywhere in Chicago is ludicrous. And the market is proving me right based on the large number of these places for sale and the very few sales that have actually closed.
I agree that the luxury market still exists though I am not so sure Mr Ron knows what it is. Anyway, I’ve looked at a lot of “luxury” floor plans over the last few years and most are crap. No amount of granite, marble, stainless steel and hard woods can turn a bad floor plan into a luxury unit. Trying to maximize the number of units you can cram into a building rarely results in luxury.
There are an awful lot of developers and sellers that think their condos are in the luxury market. They aren’t.
Buyers used to be an option arm away from luxury. Look where they are now!
Some recent resales at the Trump have been at less than $600 per square foot. 46J, 1475 feet, closed for $875K ($593 per square foot) and 44A, 3948 feet, closed for $2.2 million ($557 per square foot). It may take a while for these “friends and family” investors to flip all their units. Until they do, how will the developer or the banks sell units at anywhere near the current “list” prices?
Teng is also now identified as “engineering firm #1” noted in the recent Blagovitch criminal complaint. (Published by Tribune’s web-site) Teng’s CEO also commingled Teng’s engineering firm operating funds to pay for development budget charges from Teng’s/Dvorak’s real estate development. Developer “wanna-be”/CEO proceeded with construction without having loan in place, funding construction from operating funds. When he failed to obtain a construction loan project stopped in mid-construction. Teng Engineering firm filed a lien against Teng Development firm to recover its funds. which aren’t even conventional consultant engineering billing charges.
Brian, amen, I can’t see the luxury in most “luxury” developments here, it’s the decade’s most overused word. And all these developments are skint on the biggest luxury of all; space (quality space, especially).
From what I’ve heard, there are buyers combining units @ LP2520. The building is out of my league, but I don’t think it’s overpriced given the quality and location. It should be noted that units facing the lake are more expensive. But that’s always the case — regardless of the building.
A quick look on the MLS and you’ll see downtown one bedrooms with lake views priced in excess of $500K. Take a look at 161 E. Chicago and you find one bedrooms priced well in excess of $500K. That particular building is around 20 years old and I’m guessing some of these units could use a little nip and tuck. That being said, if I had the resources, I’d spend my money at LP2520.
I don’t want to sound like a shill for 2520, but judging from the sales center that I saw when it was located in the old hospital building at Lakeview and Deming, the standard finishes were hands down the best I’ve seen in Chicago. I really think the building is priced in accordance with any high end building in an awesome location.
As I recall, units not facing the lake were reasonably priced for the type of building that LP2520 is. In fact, I was shocked at the good prices. The cool thing is that these units will be overlooking a beautiful private park and an old chapel.
I want the building to get built, I think it fills a void in LP and will add to the city’s skyline.
Yes, the economy is crazy, but those with money will still spend it when they are presented with a quality product. I’m outta here, I’m off to buy some lotto tickets. Happy new year everyone.
Wasn’t there a 1 bedroom listed on thissite a while ago for well under 500k. Kinda remember it since I almost moved into this bldg but was in no mood at the time to do a full renovation and rip up someones blue marble kitchen.
Dave,
Unless they sell 80% of the building before breaking ground it probably won’t get built (in the next two years). Its nearly impossible to get a construction loan these days, you have to have massive equity lined up, and for a 300 million dollar project like LP2520, good luck, that’s all I have to say.
Lincoln Park 2520 is absolutely moving forward. First off, almost every buyer is a true buyer (there are virtually no “flippers or investors). Many people are combining units, so when there is one transaction, many times 2 or three units are sold. It is estimated that the project will end up with around 250 units because so many people are combining units. Recently, several people have been inquiring about upgrading to larger floor plans and have brought in friends and family to purchase. Some of the features of this building are: unobstructed park and lake views, full time concierge, game room, theater room, party room with catering kitchen, dry cleaning drop off, conference room, work out room, his and her locker rooms with sauna and steam, 50 ft. lap pool with terrace, one and 1/4 landscaped park and private gardens that will be surrounded by multi-million dollar SF row homes. The development is also pending LEED certification and will be environmentally friendly with “plug-ins” in the garage for electric cars. Every parking space will have storage and the garage is available as valet or self park. It is truly and amazing development and despite the challenging real estate market, LP2520 remains strong.
http://www.lincolnpark2520.com