Second Biggest Story of 2018: Will There Be a Luxury Condominium Glut?
Construction continues on luxury housing in Chicago, with several new luxury condominium buildings announced last year.
There are so many, I can’t even keep up with them while they are under construction.
Curbed recently put together a nice list of 47 buildings over 100 feet that are under construction in Chicago (these are not all condo buildings). But it shows you the extent of the building.
They range from a 14 story luxury tower at Huron and Dearborn to the 94 story Vista Tower on Wacker Drive in Lakeshore East.
Here are a few of the developments:
- One Bennett Place at 451 E. Grand: 69 stories with 400 apartments and 100 luxury condominiums currently under construction. I haven’t found any recent update on condo sales.
- Vista Tower at 363 E. Wacker Drive: tallest of the three towers is 94 stories. According to Curbed, as of November 21, 2017, the developer said 40% of the 406 condominiums were under contract. These are priced from $1 to $18 million. It will also have a 200 room hotel.
- 56 W. Huron: 10 full floor residences and one duplex penthouse priced from $1.375 million to $3.99 million for the penthouse. This building is now under construction. The building’s website indicates that 2 of the units have been sold. You can see all the details here.
There are plenty more.
Most of these condo units aren’t listed on the MLS so they’re not showing up as inventory even though the buildings are under construction.
Luxury housing has always done well when the stock market is hitting new all time highs.
Is there truly demand to meet all this supply?
Or will buyers be able to pick up some bargains later in 2018?
56 Huron has me shaking my head. This seems to be a pretty big jump in projects and they have 20% “sold”. Either foreign money or they’re connected using someone’s retirement funds
Vista might work, just need enough HNW retirees/snowbirds to buy in
Not sure if there’s that much demand for >$1MM properties. If definitely will put pressure on anything older than 5 years
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Will there are good headwinds from stock market gains, that may be more than offset by the impact of the tax law changes, the likely very high tax bills on the $2MM+ units (and general Chicago & Illinois issues).
While ultra high net worth folks may worry a bit less about deductibility, many wealthy (HNW) individuals could find it easier to swallow the upfront costs of a $1.5-2 Million+ condo (particularly when selling a suburban house), but chafe at the monthly costs of assessments + tax they’d likely face at some of these buildings. Facing close to a $30,000/ yr. tax bill (that now costs the full 30, not an after-tax $20K) might sway some people. And, potential buyers may wonder about future appreciation potential.
As long as the stock market is making new highs, these units will sell. It will be interesting to see when the next global recession comes, how well units with massive property taxes and assessments hold up to those that are relatively cheap in comparison.
Anecdotal but: luxury 3 flat in Old Town had a “50%” sold tag on it last fall during construction (Fall 2016); Its now Jan 2018 and they are all still for sale @ $1million+ listings. All the stories about north shore real estate sitting and price chopping… I’d say they slow down is well under way at the top end.
“luxury 3 flat in Old Town had a “50%” sold tag ”
How can a 3 unit project be 50% sold?! (OK, maybe one of the units is a duplex and represents 50% of the value, but just seems like an odd statement!)
@JAH, just checked, it is a 3 unit, not 4. Duplex Up Duplex Down and simplex in the center. The simplex is contingent.
“luxury 3 flat in Old Town had a “50%” sold tag ”
How do units in 3 flats ever sell? Isn’t it just asking for trouble? All of you are on the “board.” One bad person and you’re screwed. Let’s say one jerk decides to smoke and make all of the other units smell bad. Is there any recourse? What if one person stops paying assessments and flees the country and it takes years before everything is settled (this happened to a friend)? What if the simplex unit blasts music all day and night? At least in larger buildings, the board can fine people or absorb the lost assessments easily.
Or you get two great neighbors and everything is harmonious. Its all a crap shoot. Take your chances with few or many, both can go wrong. I’m in a large high rise now, thankfully with a great board, but it’s almost guaranteed that I’ll have at least one asshole neighbor on one side of me, or above or below at any given time. Board could go crazy, smokers could move in next door, all this would seriously bum me out. In a 3 unit building odds are pretty reasonable that things will be ok.
@ Jenny: I think in really nice areas where the 3 flat is very expensive the idea is the cost factor weeds out the bad apples, however in marginal or gentrifying areas, especially post 2008 years, there was terrible trouble with foreclosures and investors buying units and converting them to rentals. Imagine being surrounded by renters with 4 or 5 bros’s in a 3 bd partying it up every Thursday through Sunday and no recourse – my nightmare.
Friend of mine was basically the board in her 3 flat in SoPoCo. She had the middle simplex. Duplex up was owned by a Cubs player who rented it to another Cubs player. It was empty half the year (she liked the quiet that meant). Duplex down was owned by an investor. So she basically had to run it. Occasionally the Cubs player’s assessments wouldn’t come through and she’d have to call his agent, but a check would show up the next day when that happened. When she sold, she basically gave everything to the downstairs investor and said “have fun!”
“Friend of mine was basically the board in her 3 flat in SoPoCo. She had the middle simplex. Duplex up was owned by a Cubs player who rented it to another Cubs player. It was empty half the year (she liked the quiet that meant). Duplex down was owned by an investor. So she basically had to run it. Occasionally the Cubs player’s assessments wouldn’t come through and she’d have to call his agent, but a check would show up the next day when that happened. When she sold, she basically gave everything to the downstairs investor and said “have fun!””
Thanks for the insight nonya. What would have happened if it wasn’t a Cubs player in the top unit and they weren’t paying the assessments? She’d have to go to court against them. What a pain.
That’s why 3 flat condo associations are a nightmare. Just wait when the units get older and you have to do real maintenance like tuck pointing, replacing bad decks or roofs or even windows. There’s hardly ever reserves with these buildings either.
luxury 3 flat in Old Town had a “50%” sold tag
which building? north of north or south of north?
and there is a lot of competition in OT now.
“What would have happened if it wasn’t a Cubs player in the top unit and they weren’t paying the assessments? She’d have to go to court against them. What a pain.”
Exactly. The fact that it was a wealthy player who could obviously pay and whose agent would immediately handle it if there was any delay was good. Unpaid assessments for a high rise are something they can handle. For a small building it can be devastating.
I used to own in a 6-flat in Evanston. One of the units was bought at a high price (’06-’07, I forget) on a 97% mortgage (don’t think it was subprime, but was still dicey). Couple divorced a year later, husband kept it another year, then moved out. Foreclosure took a while and no assessments were paid for some time. Board decided it wasn’t worth the money to go after the previous owner in court, blood-from-a-stone and all that. Once bank finally finished foreclosure, they started paying until they sold it.
“That’s why 3 flat condo associations are a nightmare. Just wait when the units get older and you have to do real maintenance like tuck pointing, replacing bad decks or roofs or even windows. There’s hardly ever reserves with these buildings either.”
A friend had to pay her neighbor’s share of the cost to re-do the roof in their small association. It wasn’t worth it to the association to go after this person. Another friend had a drug dealer move in to their smallish building and break ins ensued and property values fell. It took over a year to force the drug dealer out because he owned the unit.
All condos you are going into business with strangers. A successful condo dweller has to either be a type A that wants to run the board or a type F that is so laid back that they don’t know what the hell is going on. Anything in between is heartache.
A friend of mind had a condo, they lived in it for 5 years, sold for a slight profit and nothing bad ever happened. True Story.
“A friend of mine had a condo…”
Link?
“A friend of mind had a condo, they lived in it for 5 years, sold for a slight profit and nothing bad ever happened. True Story.”
wow!
I had a condo, lived in it for 6 years and I think maybe two or three bad things happened (neighbor upstairs left the toilet running and it overflowed into my bathroom yay, and two small under 1k special assessments to fix the facade) but I also sold for a slight profit.
I will never ever live in a condo again though… people are the worst
If I can ever afford to get out of a condo, I’ll leave. People really are the worst.
I did end up getting a new job, but it’s more of a lateral move unless the bonuses the new company claims to give out are real. I will be in this condo for a few more years at least.
““A friend of mine had a condo…””
“Link?”
You’re right. I don’t have a link. I was lying.
I knew you were lying Brad. Please be aware that fake stories are sniffed out here at Cribchatter and exposed. My hope is you won’t be trying this again. In fact, some other poster claims to live in Chicago and some other poster refuses to believe it. So making things up is an intolerable fo pah.
“If I can ever afford to get out of a condo, I’ll leave. People really are the worst.”
Have you ever thought of doing one of the inner suburbs Jenny? You could get a great 3-bedroom townhouse in downtown Oak Park for far less than the same in the GZ. And there’s a lot going on there now. They keep building new apartments, there’s plenty of restaurants, a nice movie theater. You can take the metra or the El into the loop easily.