We Love Authentic Lofts: 711 S. Dearborn in Printers Row
The Donohue Building, at 711 S. Dearborn, was the first building converted to lofts in Printers Row. To many, it is one of the few buildings that still retains its authentic, gritty, loft feel.
The part of the building with the 711 address (there is also 727 S. Dearborn which is the Donohue Annex), is brick and timber.
Unit #505 just came on the market with two bedrooms and a den. The listing says the loft was “renovated by a master craftsman in 2001.”
It has central air (not all units do) and a washer/dryer in the unit.
Unit #505: 2 bedrooms, 2 baths, den, 1650 square feet
- Sold in April 2002 for $426,500
- Currently listed for $499,000 (parking can be purchased in 801 S. Plymouth just to the south of the building for $35,000 to $50,000)
- Assessments of $742 a month
- Urban Search has the listing
When you say “just came on the market,” how recently do you mean? Because I would swear I’ve seen this one before… Lovely place.
Its tough to completely evaluate units on here because of assessments and taxes. We don’t know what our $741/month in assessments gets us nor the tax rates. If that near rent payment alone of an assessment doesn’t include heat, electric and water, then it doesn’t seem like a great deal.
Yeah beautiful place, but it doesn’t exactly scream energy efficient / how much would this cost to maintain?
Assessments cover heat and water. I forget if it covers electric. No doorman, so pretty much, the assessment is that high because the place bleeds energy. Such is life in an old loft with one boiler for everybody: the structure itself is drafty and energy-inefficient, and in a classic public-goods dilemma, since everyone pays the same amount no matter how much heat he or she uses, everyone has an incentive to use more heat than if they had to pay for it individually.
This has been listed on the MLS since 5/7/08.
Monthly assessment includes: Heat, Water, Common Insurance, TV/Cable, Exercise Facilities, Exterior Maintenance, Scavenger
Oh yeah, it is overpriced. That kind of goes without saying, it seems. In my opinion, the price should actually go under the 2002 sale price. Asking over $300 a square foot, in the South Loop, for a unit without outdoor space or a fireplace or doorman, with high assessments and parking not included? Good luck to them.
This is a landmark building. It is Chicago history. It is gorgeous and full of character — birdcage elevator (2 passenger elevators, all day, in the building — + 1 or 2 freight elevators), gorgeous, original maple floors, marked from where the printing presses that gave birth to *The Wizard of Oz* once sat.
It is a 2bed/2bath — it is NOT over-priced, and I’m sure it is priced to include room for some negotiation. Everybody loves some negotiation! 😉
Though this building IS in the South Loop, it is, more precisely, in Printer’s Row — NOT the same thing. And this unit is not like the 1000s of boring, cookie-cutter units being built into the sky, weighing down the market throughout much of the S.Loop area (and which will continue to weigh down the market for years after the developments are finished). Properties such as this DO require the “right” kind of buyer (one who appreciates historical significance, the beauty of one of the few REAL lofts in the city), but they haven’t and won’t depreciate the way all the boring, no-brainer buildings do. There are NOT many of them.
NOBODY builds buildings like this anymore.
The market is limited — which makes selling easier, and the living more unique.
In addition, MUCH Of the exchanging of properties happens between the people already living in the building. Many owners have purchased 2nd and 3rd units and have duplexed up or down, or have taken out walls. Some of the units on the top floor have amAZING skylights.
The building actually JUST redid/refinished and replaced (because of the landmark status, and inorder to preserve the building, they took them out, had them repaired/fixed/updated, and then put them back) ALL of its windows last year, so, the efficiency is probably somewhat improved by that. It’s boiler/radiator heat, so nobody is really using more heat than anybody else.
Though there is no doorman, there is a full-time maintenance staff in the building. They do an amazing job! They handle mail/pkg/delivery receiving and even pick up the trash from outside the building occupants’ doors. How’s THAT for service?
Because of the building’s age, it DOES require a bigger maintenance budget. However, per my best information, there has NEVER been a special assessment, and, part of the reason that the assessments ARE higher is to ensure that there never IS a special assessment.
Additionally, because of its landmark status, the taxes for the units in the building are all frozen/lower.
Rental parking is super easy in Printer’s Row. These buildings were not built as residences (they were printing houses/offices), thus the lack of parking.
Electric is NOT included in the assessment.
“The market is limited — which makes selling easier”
I’m not really sure I agree with that statement….??? While the unit may be unique compared to the hundreds of cookie cutter units on the market, the limited pool buyers is a HUGE problem for resale. I guess we’ll see how this unit does …
Forealestate, are you by any chance associated with this unit/listing? 😉
The $736 assessment for a “lofty”, high-ceilinged space like this is not bad, if it includes the heat. It really is more efficient to heat the building off one boiler, and it’s infinitely preferable to individual electric furnaces that would cost these units much more per month in heat bills, like some loft buildings in that area.
However, I’d be very concerned about FUTURE energy costs in this place. It looks uninsulated and drafty, and energy prices are going nowhere but up in the next few years. I wouldn’t be surprised to see assessments in this place triple over the next ten years, so tread carefully and consider whether the loft lifestyle is really suitable for most middle-income (under $200K a year)folk. Bring lots of sweaters and long johns.
Having said that, I’ll say that this is one very beautiful and romantic loft that has everything you live in a loft to enjoy.
Allow me to clarify–I do think it’s a great place. But that isn’t inconsistent with my thinking it’s overpriced. Even all the things the (listing agent?) poster wrote don’t bring the unit up to over $300 a square foot.
i am *not* the agent — i have no interest in the property. 😉
it’s just my favorite building. and i get SOOOOO tired of all of the boring stuff.
also, it’s WARM AS HECK in there in the winter!
people tend to crack the windows, frankly!
Most of the posters here should remain renters for the rest of their life and quit following the residential market. As renters, your only concern will be if you will get kicked out of your place or not when your yearly lease is up.
I have to agree with forealestate on this one (sorry Kenworthey.) I don’t know what it will sell for, but the other remodeled units in the building sold for close to their asking prices last year (after awhile on the market, but they did finally sell.)
If the unit is not remodeled- that’s a different story.
This building IS one of the prime Printers Row loft buildings- and for many displaced Manhattanites, the preferred building in the neighborhood.
The huge windows and overall ambiance truly are cool.
here is the price-per-square-foot history (based ONLY on the sales that happened via the mls — AND, only based on units with square footage info, so limited info . . .):
*unit 611, 727 S. Dearborn, 1550sft, 1bed/1bath, sold in Feb. 08 for 400k, @ $258/sft
*unit 512, 727 S. Dearborn, 3400sft, 3bed/2bath (in need of total rehab), sold for 878k in Apr. 07, @ $258/sft
*unit 504, 711 S. Dearborn, 2bed/1.1bath, 1450sft, sold for 382,500 in Nov of 06, @ $264/sft
*unit 1012, 727 S. Dearborn, 3500sft (PH unit), 3bed/3bath, sold for 1.05mill in Apr of 06, @ $300/sft
*unit 801, 711 S. Dearborn, 1600sft, 2bed/2bath, sold for 410k in Nov of 05, @ $256/sft
*unit 602, 711 S. Dearborn, 1400sft, 2bed/1bath, sold for 320k in Aug of 05, @ $228.50/sft — “priced for rehab”
*unit 202, 711 S. Dearborn, 1450sft, 1bed/1bath, sold for 319k in June of 05, @ $220/sft
*unit 302, 711 S. Dearborn, 1500sft, 1bed/1bath, sold for 385k in May of 05, @ $257/sft
*unit 709, 711 S. Dearborn, 1000sft, 1bed/1bath, sold for 223k in Mar of 05, @ $223/sft
Well, all of those units (with the exception of the penthouse unit) sold for far less than $300/sq ft. Excluding the PH and the rehab, and looking at the other two from 2006 and more recent, you’re looking at about $260 a sq. ft. (did they include parking?) At $260 sq. ft., the unit in question should fetch $429K. That is far lower than the usual “within negotiating” distance–it’s 15% below asking. Moreover, this is a declining market. Even if Printer’s Row declines less than its neighbors in the South Loop, it’s still likely to fetch less than it did in the last year.
Sabrina, consider 720 S. Dearborn, also an extremely cool, stable building. Of the two units that have been on the mls in the last year, one (#703) didn’t sell at all, and the other (#603), which is asking $250 sq ft, has been on the market for months.
“Most of the posters here should remain renters for the rest of their life and quit following the residential market. As renters, your only concern will be if you will get kicked out of your place or not when your yearly lease is up.”
Do I sense some frustration here?
Actually we should all get stated income (read liar) loans to buy a rapidly depreciating asset, so that when the loan resets, we are out on the street with our credit ruined. This way we can help the economy and the realtors can get their commission.
Life is long my friend, this game is just starting. Sit back and relax…
“‘Most of the posters here should remain renters for the rest of their life and quit following the residential market. As renters, your only concern will be if you will get kicked out of your place or not when your yearly lease is up.’
Do I sense some frustration here?”
Hey, he’s the one that says that the “expertise” of Realtors is needed to properly assess the market. He apparently isn’t quite ready to recommend against buying, but it would seem the uneducated masses have figured it out without his help.
btw, I’m not a “bitter renter”.
anon,
Repeat after me:
1. Real estate never goes down (even when it does)
2. its always a good time to buy
3. Buy now or be priced out forever
4. If you don’t buy you must be a “bitter” renter
There, Your real estate education is now complete. You can call yourself and “expert” now.
I do appreciate Steven’s presence with his unabashed cheerleaderness of the real estate market.
Lets weigh the risks here Steven:
Risks of not buying now: 1)rent increases, 2)getting kicked out of our place when the yearly lease is up, 3) “being priced out of the real estate market forever”.
Risks of buying now: 1) catching a falling knife on a heavily leveraged asset, 2) getting kicked out of your place when you fall delinquent on ever rising taxes and HOA dues, 3) paying steep transaction costs, 4) paying a much higher percent of our income for the privilege of home loanership (even after deducting the equity payment and tax break on interest).
Yeah…hmmm….call me a bitter renter then Steven. 🙂
Sometimes home ownership makes sense. There have been times when it has been cheaper than or equivalent to renting. This is not one of those times. Its not even close.
a price of 429k would be approx. 14% less than asking price here. if the sellers will sell for 429k, that would leave room for a price drop (if necessary) and room for negotiating afterward.
the most recent sale at 727 Dearborn was for 400k. the original list was in the 470s, it was listed for @ 424k at the time of contract/sale, and closed for 400k.
one should definitely consider the price per square foot, BUT, the subject unit also has 2beds and 2baths in there – a reason to expect the per-square-foot value to be a little higher.
no unit in the donohue or donohue annex buildings has parking; there is NO parking in the building and i don’t BELIEVE i’ve ever seen one listed in concjunction with a deeded spot at another location. parking can be purchased or leased, as previously indicated, from 801 S. Plymouth (across Polk from the donohue, at State & Polk) or rented from several other lots/garages in close proximity to the property.
The problem I have with buying right now is that stuff is really expensive. My fiance and I earn a decent living but we cannot afford to buy. Life’s little things take up a lot of money – eating out, utilities, student loans, car insurance, car payments, health care, the dentist, the vet. After I pay my rent I only have a little left for savings. If I were to buy the condo above I would have to significantly reduce my spending and divert all my extra funds to pay the mortgage. I find it insane that assessment fees are over $700 a month! My rent is only $850! Taxes are probably an additional $350 or $400 month and I haven’t even addressed the mortgage yet.
In essence, I don’t know how people afford these expensive units. Are there really that many lawyers, doctors, accountants and investment bankers who can afford $3,500 or more per month for housing? I don’t think there are.
I think that the problem with the housing market is that there are too many expensive homes and no one left to buy them. My fiance, and my peers, would all be great candidates to purchase this unit, but none of us can afford the mortgage for the place above at a 30 year fixed rate with a 10% or 20% down payment. If they would cut the price by 50%, I could afford to purchase the unit. I wouldn’t be easy to make the mortgage payment every month, but, at least it wouldn’t be impossible like it is currently priced.
Then again, I’d be the perfect candidate for this unit. I work downtown at a professional job and so does my fiance. I have no children, I’m in my early 30’s and the only debt I have is student loans. I also have perfect credit. (But not much down payment because my ‘down payment’ has been spent paying down the principal of the student loans). In fact, I don’t know too many other couples that make more money than my fiance and I. And if people like me cannot reasonably afford a 2bd/2ba loft like this then I don’t know who can. Taking on a jumbo mortgage to buy this condo is financial suicide in my opinion.
Maybe all the owners in the building are investment bankers. Maybe the owner worked for Bear Sterns and now he’s selling because he lost his job. Maybe he’s a dot com millionaire. Maybe the ‘rents help out with the mortgage every month. I don’t know anyone who would want to live downtown who earns enough money every month to pay the mortgage.
But what’s sort of ironic is that no one is buying them. Sales have dropped significantly and mortgages are tough to come by. That’s so ironic, that homes are now priced so high that no one can afford them.
Like I stated above, if the owner were to cut the selling price by 50%, I could afford to purchase this condo. The payments would probably be triple my current rent, but, it would be much easier to fit into the budget of a professional DINK couple. Fortunately, the case-shiller numbers show an unabated downward trend in prices. Maybe the price will get a 50% haircut, either by him or the bank. Because like I said, if households like mine cannot afford to buy this place, then I don’t know who can.
Homedelete – You may want to move to a more affordable area if you can’t find anything in your price range. Or you might want to ask for a raise at work…
My point is that I roughly estimate that this unit, at 499k, would cost me about 3,500 per month. I figure roughly 2400 for the mortgage plus 700 for assessments and 400 for taxes. That’s a lot of money no matter how you look at the situation. How many people can realistically afford a payment that large or are willing to do so? Not many – which explains why sales around Chicago have slowed to a trickle. This house should be within my price point and eventually, when prices fall to levels where people don’t commit financial suicide, it will be a potential purchase. Like I said, I make decent money and so does my SO, but this place is too expensive for a DINK couple like me. 10 years ago before the bubble this place would have been priced at what, 50 percent off the current price? That’s what it will take before people are going to return to the market again. Its totally scary, I know, to think that a 50 haircut would be more normal, but that’s what it would take for this place to be 2.5 to 3x my household income. You know, how it was pre-bubble
Homesite, no offense or anything, but if you can’t comfortably afford a $500K home and want people to slash their prices by half… why don’t you look for a $250K place to buy as a starting point?
It is your opinion that no one can earn enough money to pay the mortgage… Let’s face it, a lot of people work in professional jobs in Chicago and there are a lot of dual earning couples in the city that do make enough money to buy a 2bd/2ba unit. We personally know a lot of them. We are all in our late 20’s and early 30’s and no, we are not Lawyers, doctors, investment bankers… etc. We are IT professionals, project managers, Engineers, Consultants, nurses etc…
I don’t know what you consider a high combined salary, but with a combined income of $160K, you should be able to buy a place like this especially if you have planned and put away money diligently for a down payment. I think $75-80K a year for a 30 something in chicago is not too out of the ordinary for a corporate position.
If your rent is only $850 and you are barely saving enough money after all your other bills. You do not have the means to buy a place like this let alone a place that is $250K. A mortgage on a $250K home with 20% down will be higher than $850 (~$1170 with 5.75%).
uhhh.. ok… 10 years ago, your salary would also have been a lot lower than combined $80K for the same positions. I don’t understand this “idea” that this house “should” be in your price point? What gives you the right to say this? You either can afford it or not. If you can’t afford a place in your price point in an area, look some where else or like Steve said, find a higher paying job…
I know there a lot of over-priced condos out there and prices will correct more, but reality is reality. I find this idea that prices should fall down to the pre-bubble level so that SOMEONE here can FINALLY afford it just a bit far fetched.
based upon the information provided on the mls, the last mortgage on the property was taken out in ’03 for 380k (the purchase price/date for the last transfer of ownership is not stated — and i’m tired and too lazy right now to fish it up). the rate on the loan is 3.75 – indicating (to me) excellent credit and a reasonable payment. nothing about this property/the info provided indicates ANY bank involvement or desperation on the part of the seller. in fact, the information showing a number of transfers between the same people says smart people with the time, finances, ability, and intelligence to be handling their properties with trusts, etc. this property is priced within reasonable bounds and will NOT likely (i say this with 99.999999999% certainty — one never knows, but that would be insane) be discounted 50%. it’s worth an amt in the range of where it’s listed, per the market. so, even if it WAS a short sale or foreclosure, the bank whould KNOW it can get WAY more than 250k for the place.
one of my clients purchased a unit in the building . . . 😉 . . . and he was able to purchase it by saving up an amount equal to half of the purchase price for the downpayment. he is NOT a millionaire and isn’t a lawyer, doctor, or accountant. he’s just very, very careful with his finances, and was very smart with his investments. AND, luckily for him, he did not amass a large amt of student loan debt, even though he does have an advanced degree which he attained over 4 years of part-time graduate work while he worked 60 hrs/day — poor sucka! interestingly, he moved here from a city on the east coast where studio condos start in the 500s and his studio rent was 1800/mo. he thinks chicago is cheap.
what things cost is based on supply, demand, the market, etc. and it’s ALL relative. it’s a “free market” and what is fair – with regard to what a person SHOULD/deserves to be able to or WANTS to be able to afford – doesn’t really matter, frankly.
the donohue building is NOT an inexpensive building. it’s in a nearly perfect location – downtown, so, close to many peoples’ offices, very close to the blue line lasalle stop, close to the red line Jackson stop, close to the orange line, close to the brown line, close to the Congress (the 290), close to 90/94, close to grant park and the lake and LSD. and it has a lot of other great qualities – all of which comes at a price.
one gets what one pays for (repeat, repeat, repeater).
more property, less price means the consideration comes in some form other than dollars.
one can purchase a very nice house/detached home in beverly, for instance, for the same price. then, one “pays for it” with time on the train/commute instead of paying for it with cash – i.e., exchanges convenience for dollars.
it will be interesting to see how the increasing gas prices affect -if at all – the desirability/value of properties closer to the downtown area (less commute time and gas expense) v. properties further from the downtown area (more commute time = MORE gas expenditure).
*oh, and a correction to my previous post re the parking. the 499k price does NOT include parking, BUT, this listing does indicate a space is available for an additional 35k – so, that’s off site somewhere. probably at 801 Plymouth. sorry for my inaccuracy!
“…and he was able to purchase it by saving up an amount equal to half of the purchase price for the downpayment.”
I don’t know whether that is to be commended or mocked. Hey, I deplore the predatory lending tactics as much as the next soul, but if he’s *not* a millionaire or a person of means, why allocate such a large percentage of your net worth to your house? Unless, of course, his net worth far exceeds the purchase price — then it doesn’t matter. I bet your client was wealthier than you may be letting on…
I would not “save up” 250k and then plow it ALL into a house….
obviously, he is a person with a certain level of means. but, whether or not he is “wealthy” or “well-to-do” is completely subjective – the answer depends on whether the inquiry comes from someone of more or lesser means.
you are suggesting we “mock” a person who (unlike many potential buyers who are aghast/shocked at the idea that they actually have to possess any cash in order to qualify for a mortgage loan) carefully plans and saves in order to be able to purchase a home and lessen the mortgage amt, lessen his montly payment, and lower the rate on his mortgage.
interesting.
as far as whether or not he would be able to make more money by putting the cash in another investment (stocks, bonds, etc.), i’m sure that was a consideration. i believe, for him, it was a lifestyle choice – it was impt to him to have the ability to keep his monthly payment at a certain level while, all the while, still being able to afford the home.
if this is NOT a person’s priority, then, by all means, that person shouldn’t “plow” cash into a home purchase. i didn’t mean to suggest this was the ONLY way to purchase the property, or even the best way. instead, my intention was to point out ONE way someone affords to purchase said home – someone who is NOT 2 incomes, not a doctor, lawyer, or accountant.
and, apparently, my client thinks the property is a good investment. 😉
also interesting.
forrealestate:
Understood. I was not “suggesting” to mock such a decision, only pointing out that is one of many *possible* conclusions — obviously depending on the individual situation and many factors you illuminate.
word. 😉
forrealestate, the fact that there are “many potential buyers who are aghast/shocked at the idea that they actually have to possess any cash in order to qualify for a mortgage loan” indicates that your client did not make a good investment. Nobody did who bought a condo downtown in at least the past four years. Even longer if we factor in all of the losses due to owning costing more than renting.
Prices climbed because of a speculative mania. The manis was fed by the disappearance of lending standards, including loans to borrowers with reduced (or zero) down payments, no income verification and low teaser rates. The high percentage of sales to speculators contributed greatly as well. Both of these are gone from the market now.
The result is a huge reduction in demand which can only lead to large price reductions and numerous foreclosures, which in turn will feed the downward spiral. It has only just begun.
There will be knife-catchers all the way down to the bottom, a bottom that will be with us for years. A return to historical affordability levels is inevitable. It is the belief that bubble pricing will not collapse that is fantasy.
Jim, you’re right, $160k a year is enough income to support a $499k condo. However, according to the IRS, an income of $157k a year is in the top 5% of all households in America. Its arrogant to think that there are so many buyers out there that can afford $499k units because there are not. If there were so many buyers then there wouldn’t be a glut of inventory in Chicago. In my opinion, $499k is too much money for a 1600 sq ft 2bd/2ba condo in this building. Regardless of what other people paid during the bubble years with their toxic financing; $499k is out of the price range of too many people.
The problem with the anemic market is that there are waaaaaaaaaaaay too many $499k condos and not enough $160k incomed buyers. I’m not in outer-space with my reasoning here either. The problems in the real estate market speak for themself. Inventory is approaching the 12 month market, sales are down 30% per the article on this site a few days ago, and the case-shiller shows prices have fallen off a cliff. One of the simpliest explanations is that homes cost too much.
“There will be knife-catchers all the way down to the bottom, a bottom that will be with us for years. A return to historical affordability levels is inevitable. It is the belief that bubble pricing will not collapse that is fantasy.”
That’s classic. I love it. And IMHO a return to historic affordability levels may mean a 50% reduction in price on this unit from $499k to $250k, either in nominal or real terms, or a combonation of both. Too bad for this owner if he loses money but at the ‘bottom’ of the bubble, where that is, he’s going to be underwater and screwed. He may never get his money back.
“either in nominal or real terms, or a combonation of both”
You aren’t supposed to notice that inflation means prices are falling faster in real dollars. Or that everything will cost more so the home price drops won’t look as bad in nominal terms. Of course, wages won’t rise with inflation so the math might become obvious even to the sheeple when their wallets are empty. Oh, that’s right, this mania was fed with empty wallets (and open bank vaults) to begin with.
And now, the end is near…
sartre: Oh, the reason I’m not not a “bitter renter” is that I’m not a renter. I’m definitely bitter.
G: Have you stocked your bunker with enough water, jerky and ammo? But seriously, the most likely “way out” (with all it’s other bad effects) of this is half a decade of significant (8-10%) inflation. “They” (blame who you want) have been hiding it for a while–with the absurdity of “core inflation”–excluding food and fuel, which is exactly what is driving inflation.
There is no way to inflate out of this without wage inflation, and I don’t see that happening. Higher prices on everything but housing means less money to spend on housing (buying or renting.) What do you suppose that will do to prices/rents?
What I meant by “the end is near” is the fallacy that bubble prices can be sustained in real dollars. Case Shiller futures for 2009 and 2010 are already at 2003 index values for Chicago. So for anyone who thinks prices will hold or increase, your opportunity for riches is available.
Funny thing about your “water, jerky and ammo” comment is that it does include my top investment pick for 2008: food. Buy up all the non-perishables now that you will eat before their expiration and you will be sure to outperform nearly all other investments.
G,
Case Shiller futures aren’t that liquid of a market so I’m not sure how much can be inferred from them. I don’t think we’re near bottom, but don’t look to those futures as anything more than a suggestion of a leading indicator.
My suspicion is the powers that be will likely follow anon 8:01ams course. A half decade of 5-10% inflation (not the heavily fudged CPI) will help to ease the pain. The powers that be know what a huge negative wealth effect would hit the economy if they don’t provide some inflation to help offset the losses in nominal terms. Call it a stealth bailout.
I haven’t look at those futures as anything but a way to make money.
How will price inflation ease the pain if there is no wage inflation?
I don’t disagree that “inflating us out” is what the PTB are trying to do, just that it will create more harm than good. The bottom will be deeper and longer due to this policy (in real dollars.)
In the meantime, savers are punished for the excesses of speculators. Which makes me think that anon’s ammo tout might be the real winner.
I am tangentially involved in foreclousres because my firm has a foreclosure department. Buyers have been overextending themselves for years and now they realize the pain. It is a scary thought to think that 50% haircut in Chicago is appropriate and necessary, maybe inevitable, but I see it coming.
prices in this building are not going to fall by 50%.
that’s unrealistic.
panic + knife-catching paranoia! 😉
it must be very tiring to be both (a) right ALL the time and (b) so scared that everyone is trying to rip you off! ha!
the very, very simple truth is that if one rents, there is NO/ZERO chance of acquiring any ownership interest in the property or coming out with anything of one’s own in the end. building equity is likely and almost definite if one purchases – IF one does not purchase without any money down, etc.
even if one wants to call a purchase a gamble of some sort, then, well, at least a purchaser is TRYING to make some money rather than simply throwing his/her money away (to a landlord who DOES own, i might add).
by the way, “raise your hand” if you have actually been IN the donohue building and most all of the other buildings in the area! (and i am certain that some of you have!)
have you seen pretty much every building in the area? have you seen these units in the donohue? in person? and are you aware of the deals that happen OFF the mls (those count for appraisals/mortgage appraisals, by the way – assuming one can get one’s hands on the contracts)? between owners? this is a super-niche market and if you don’t have this kind of “i have actually taken the time to enter the building in person and see it with my own eyes” knowledge, then i think you’re talking a lot of smack! – purporting to know the difference between this building and the others in the area! – all via computer at your non-real-estate-related jobs! ha!
have you been to the book stores? hackney’s? kasey’s? the wine shop? did you ever spend an afternoon at gourmand?
in general, in the south loop, i tell investors that if they want to flip (if we are not looking at some kind of super-deal), they should look, look, look elsewhere.
however, if one is prepared to hold a property for 5-7 years, buying even cookie cutter in the south loop is not a bad idea. things will even out.
printer’s row is special, tho. it’s different. and the donohue is a niche market within a niche market. there are enough people with the kind of taste it takes to want to live in this kind of building to support the market – easily. just wait. the right one always comes along . . . .
50% haircut? If you are right our country will be bankrupt, the stock market will crash, and are financial system will collapse. My opinion is your salary level may be right on target with what you have to offer.
You know, I’ve thought about taking a mortgage out on my paid-for unit and investing the proceeds in an index fund, for this very reason. With the mortgage interest deduction, I’m fairly confident it would be a winning move. In times of inflation, be a borrower–particularly when Uncle Sam subsidizes your borrowing to the tune of 2% per year. If anyone can think of a reason I shouldn’t do this (I’m genuinely a risk-neutral kind of girl), let me know, because I can’t think of any.
G, you’re right that in real terms inflation solves nothing–but of course, psychologically, people think in nominal, not dollar, terms. Even people who know better, can’t help but *feel* like their house is worth more as a result of inflation-induced values. So the “PTB” are quite smart to do this, unfortunately.
forrealestate,
Are you trying to claim that purchases made off-mls are more expensive than those deals made with the intermediary of an agent? Because you realize that is patently absurd, right? The “off the books” purchases should be *lower* than what is reported in the mls (because transaction costs are lower, or else they wouldn’t be doing it that way), meaning the values you quoted are actually higher than what we would see if we were looking at all of the sales.
I think homedelete is probably alone in thinking this building will drop 50%. But drop it almost certainly must, unless the place is magic. Your own values you wrote above suggest that their asking price on this unit is far higher (at least 15%) than what they could actually get. You say $429K (a 2002 price, I might add); I say closer to $400K at best. And no, I’m not paranoid nor do I think people are out to screw others–but your speech about “renting is just throwing money down the drain” makes me doubt my confidence about that.
I mean, come on. Anyone out there who believes this, please play around with the linked New York Times rent-or-buy calculator, linked to the right.
i’m not saying the off-the-mls sales are for higher prices – my point was two-fold (and sorry if i failed to be clear!): (1)the people in the building stay in the building and often buy up MORE property therein, thus tightening/making smaller the no. of available properties in the area/building and (2) the market is not as small as the mls makes it appear.
what a property is worth (unfortunately for those of us who like clear-cut/number answers) is case-by-case. this is an annoying non-answer, but it’s true.
as far as what this unit is worth, i said in a previous post that IF the owners did decide to sell for 429k (IF — i did not say “this unit is worth 429k”), then that would be a diff’ of approx 14 percent from the current/original list price, leaving room for a price drop or two, and negotiation – if necessary.
i’m not sure what math suggests that this unit (a 2bedroom/2bath + den, with central air) is worth only 400k when the most recent on-mls sale was a 1bed/1bath, 1550 sqft, sans central air, sans den, for 400k).
it will be interesting to watch! 😉
forrealestate, you claim that “however, if one is prepared to hold a property for 5-7 years, buying even cookie cutter in the south loop is not a bad idea. things will even out.”
Have you neglected to include the savings that renting would provide in your calculation? How about the lost opportunity costs on the difference? Do you claim to be a RE professional while offering this “advice?”
The comps you presented indicate that this unit is worth maybe $260/sf today. A knife-catcher might come along, but their lender will require a large downpayment for any price over this amount. The lender will see those prices at peak in 05-06 and most certainly balk at going higher in 2008. Any other conclusion by an appraiser would be negligent at best, and most likely fraudulent.
Kenworthey,
I’m in a similar position where I’m thinking of buying when this all settles down. I’m fortunate enough to be able to pay cash for a place and therefore considering the same tradeoff about how much to borrow and thereby invest.
Leverage through borrowing can be a great way to increase wealth, but not without risks. There are a lot of smart people I know who worry that the stock market, even though off its recent highs, is still significantly overvalued. There are people who think it is overvalued based on fundamentals and also other interesting theories such as a demographic based approach. See:
http://www.advfn.com/stocks/the-really-useful-gold-thread_2768430.html
yes, i “claim to be a real estate professional.” he he.
i am not giving anybody advice; i am stating my opinion.
just as any other commenter.
my math is diff’t than yours, apparently.
and i do it every day.
rent buys nothing but time – for some people, this is the best investment.
but, if one actually wants to try to make money in this industry, then one has to buy in order to do so.
just wait. we can revisit in a year or two and you’ll see i’m right about this building. and the south loop (we might have to wait 7 yrs for this, but i’ll be around!). 😉
i still haven’t heard anybody say they’ve actually been in this building. or any other buildings in the south loop for that matter.
very interesting.
also, like trump says (i can’t believe i’ve stooped to paraphrasing trump! ha!), if you buy when all this has settled down, then you’ve already missed the bottom.
right now is dinner time.
the properties are getting cold!
ha.
i need to eat. i’m referencing little house on the prairie.
thanks for all of the interesting discussion!
I think it is interesting that people feel it is their right to purchase a home that is one of the reasons why we are in the trouble now. When I purchased my home 12 years ago, I worked 2 jobs and cut expenses to save my 20 % down. And it was one of the best things that I ever did. I did not view my home as an ATM and did not get carried away when friends came along and said to me you must purchase a new place during the bubble phase. I carefully choose a place based on my needs and bought in the best location in the city based on what I could afford at that time.
The lending standards back then forced a person to examine why they were purchasing a home and commit to it. There were no creative mortgages, no money in your bank account, tons of debt, and you could not get your parents to give you the loan for the down payment. If purchasing a home is right for you than do it if it is not than wait and buy what you can afford. Some one will buy a place in a vintage building like this and others when they can afford it. The one piece of advice I would have is to always buy in a down market. So stop hating and prepare yourself to purchase what you want.
PS. I rented in the south loop for 5 years prior to owning in the gold coast. And these buildings are lovely.
forrealestate, pick any currently listed condo in the South Loop that supports your claim “however, if one is prepared to hold a property for 5-7 years, buying even cookie cutter in the south loop is not a bad idea. things will even out.”
We can then quantify what kind of losses you would subject a “client” to. Otherwise you are just a shill, plain and simple.
It would be a fun exercise to compare our “math.” I also happen to do RE calculations daily for a living. I think the big difference in our “math” has to do with the fact that my pay does not depend on a sale taking place.
Just give me a current listing example and we will see what happens.
The arrogance of certain real estate professionals is particularly hilarious. The real estate market is crumbling around them and everyone knows it. Yet like the Monty Python sketch when the knight chops off his opponent’s arm and he responds, “but it’s merely a flesh wound” the used home sales people refuse to admit that the real estate world is undergoing a signficant correction and it will not return to ‘normal’ anytime soon. They’ll say whatever it takes to keep the unshakable facade that real estate is never a bad investment.
My brother-in-law is a residental carpenter and he was recently laid off his job. He’s looking for a new job and there isn’t much work for carpenters out there right now. My sister calls me up and asks if getting a 2 year degree in construction management from a local community college will improve his chances of getting a job. I told her no; I said that my brother-in-law should open a business to maintain, winterize and repair foreclosure homes for the banks.
One more nail in the coffin…
http://www.nakedcapitalism.com/2008/05/more-broker-woes-national-realtors.html
ha! it actually isn’t a bad idea – the winterizing of homes deal. it is definitely a MUCH bigger business now than ever before. and i see a lot of winterizing/securing jobs on homes that are NOT done particularly well — and that hurts property values even more (i’ve seen raccoons in basements, poop smeared on walls, everything! he he). so, ya, if he can get into that, good for him! sorry to hear he was laid off.
there is definitely a correction happening. and i think that’s a good thing. the lending guidelines and rules have shifted way too far to the conservative side, but that’s a start and it’s kinda always how it happens. but it’s good – noone who cannot afford to purchase and maintain a home should be buying one.
there is no “one current listing” that will show you/prove to you what i’m saying. there is really no point in arguing this with ya cause you see doom and gloom and i don’t – i see a correction that has long been due.
with buildings such as the one about which we are here commenting (the donohue), though, i don’t believe i’ve seen one foreclosure or short sale (there MIGHT have been one awhile ago – but i might be dreaming). it is said that there were homeowners/are homeowners being affected by the mortgage and real estate market drop, but many of those affected, frankly, were investors. they let the investment properties go first . . .
i am not going to convince anyone – nor am i trying to convince anyone – who sees it a different way. just sharing the insight i have based on my job and my research and experience.
also, i have been in all these buildings. ha HA!
burn! he he.
i base my predictions/viewpoint on my experience in the market, history, and the inevitability of the market correcting itself and the boat tipping back to stable. there isn’t really any MATH here that justifies it – just insight and, to be honest, a positive outlook and feel about the Chicago market. also, the fact that i’m busy as hell with both buyers and sellers — and i don’t have to lie or convince anyone in order to be busy. they come to me. 😉
it is in the best interests of mortgage co.s, real estate co.s, investors, homebuyers and homeowners, developers, carpenters, furniture salespeople and builders, etc. etc. etc., that the market correct and then stabalize. otherwise, as steven very succinctly pointed out, the country will go bankrupt. this just isn’t going to happen. lobbying dollars . . . constituent interests . . . things will correct.
ps. passive aggressively calling a fellow commenter arrogant isn’t very nice! being able to disagree is great. enjoy it. don’t be insulting. i have found that there is NO ONE truth. there is a point/place where the closest thing to truth lies – and that is at the center of the combination of EVERY individual’s perspective. coming to know OTHER perspectives affords us all the opportunity to get a little closer to that elusive truth. i am grateful to everybody who participates in the discussion for that opportunity!
“used home sales people”
I have (bascially) as little regard for the average realtor as the next person, but this is a really grating phrase. I get it; I just don’t like it at all.
There is comedic gold yet to be mined from the bursting housing bubble.
Can your BIL write comedy? I don’t know if your career suggestion for him is a good one. The banks aren’t exactly known for spending anything on REO’s. Shortsighted of them, for sure, but that seems to be what got them into this mess. Just like the realtor-shills, It is highly unlikely that those dogs can be taught a new trick.
(The mgmt co’s that handle bank REO’s are the best source for this work if there will be much of it.)
good thing i am not the average realtor, or, again, insulting. 😉
Homedelete – You mock our profession but you are the chump only making $50k in your early 30’s. The top 10% of realtors in Chicago make well over $250K. There are 2 types of professions in the world. Those where you work for the man, and those where you are the man. You may believe that you have the well regarded profession, but in truth you are just an admin person working for someone who had the balls to start a business.
forrealestate, how do you reconcile your new claim that “there is definitely a correction happening” with your prior claim that “however, if one is prepared to hold a property for 5-7 years, buying even cookie cutter in the south loop is not a bad idea. things will even out?”
Now I see, it has to do with “feelings.”
No wonder you backed off your claim that math is involved.
Oh, and there’s a better word than “used home sales people” for realtor like Mr. Heitman–which I will refrain from using this time around.
btw, SH, many (if not most) of those people who qualify as “the man” did not in fact start a business–they grew an existing business (e.g., Jack Welch) or joined the right organization (e.g., Goldman folks) or they’re good gamblers (e.g., prop traders).
And, really, 10% of realtors (using 2006 headcount, whatever it was) will make $250k+ in 2008? I’d wager that won’t be true. What’s the median? Less than $50k, even in a good year, right? No matter what, 90% of people won’t be in the top 10%.
” The top 10% of realtors in Chicago make well over $250K.”
Any data to support this?
I doubt you do. How do you suppose the current 30 percent YOY drop in transactions is impacting that “stat”?
i was a litigation attorney before this.
anybody bored and wanna insult more? 😉
oh, also, i worked as a cocktail server and bartended.
also, i was a marketing director for a nonprofit.
oh, and, i almost forgot: i wrote for a local music magazine for awhile too!
anyone?
there are jerks in every profession.
this license isn’t that hard to get – it all depends on what one does (no matter what profession) with one’s license, . . . on how hard and smart one works.
ps. i’ve worked for the man; working for me is much cooler!
A litigation attorney and you still pass nonsense like this off on your clients?
“however, if one is prepared to hold a property for 5-7 years, buying even cookie cutter in the south loop is not a bad idea. things will even out.”
There are “jerks in every profession.” Obviously.
well, at least i am civil and happy. as are my clients. 😉
So, I’m curious about most of the posters here. With all the calculations you guys have figured out, why are you not going out there and offering “your” prices on properties that you really like?
Again, just curious.
G: she doesn’t say at what price buying a cookie cutter in the south loop makes sense. And at least she isn’t ALSO being a giant asshat, like a certain other realtor suggesting that the south loop will be fine.
Homedelete, why are you calling me arrogant in a previous post? I am just letting you know that there are a lot of other professionals in the city that make good money in their early 30’s. I consider $75K -$80k good (but not rich by any standard) for a corporate position with 8-10 years of experience.
I just don’t think you are realistic in your goals. A couple with a combined income of $90K to $100K will do well looking in outlying neighborhoods where your budget will go farther. Am I wrong in saying that you maximum potential budget for a condo/home is $250K to $275K? This can get you a nice starting home but to think that a large condo in a great location should just drop 50% so YOU can afford it is just wishful thinking…
Jim,
Some of us do. Some are occasionally successful. Some, like me, did a couple of times a few months ago, and were told that the offers would be considered “insulting,” and it was strongly implied that I had wasted the agent’s time by scheduling an appointment to see the place.
There is striking distance for an offer on an asking price. My (very modest) experience suggests that if you offer more than 10% off what the asking price is–no matter how ridiculous that asking price is–it really isn’t worth the bother. Better to wait until the seller drops the price, *then* make an (even lower) offer.
So basically, I don’t make appointments anymore, but instead go to open houses. And I’m waiting for asking prices to be reasonable before I start wasting *my* time again.
oh my god! love!
you had me at “not a giant asshat!”
he he. 😉
Jim,
Short sales are a waste of time. We are still in the first inning of the collapse in Chicago. There is nothing but knife-catching available until capitulation occurs. Let the foreclosures increase the pressure for awhile. Besides, the shills are still all over the market encouraging suckers.
Buyers have plenty of time but can the sellers say the same?
anon, she made a lot of claims that are inconsistent. When asked for clarification, she was an asshat, perhaps not a giant asshat, but an asshat nonetheless.
oh! i missed this one! so much to read and about which to argue! la la.
“how do you reconcile your new claim that ‘there is definitely a correction happening’ with your prior claim that ‘however, if one is prepared to hold a property for 5-7 years, buying even cookie cutter in the south loop is not a bad idea. things will even out?’”
experience. history. things WILL even out. if one buys in a market like this, where developers/sellers are motivated to make a good deal and move some property, even if one does NOT get THE bottom-est of all bottom deals, the market WILL come back. if one holds a property for a reasonable amt of time, and is not trying to flip, after the correction (which will NOT mean the donohue lofts drop by 1/2 in price – and i think we ALL know that), prices will go up again.
or, am i wrong?
does anyone REALLY believe that prices will NOT go up again?
that the market will tank until real estate loses its value completely?
or, do we all agree that this is a slump, a time for some correcting, and things will return to “normal” (and i don’t mean to THE BUBBLE – cause that wasn’t realistic either)?
AND, if you DON’T believe that’s correct – and you DO believe we are headed for a never-ending dive – shouldn’t you be buying rental properties like crazy since EVERYBODY will lose his/her shirt and have to rent? (exaggeration acknowledged, enjoyed). 😉
circular, cyclical.
let’s talk about the sense-of-humor market.
anyone have any thoughts about that?
perhaps THAT’s where a few of us should invest our money and time.
cough. ha HA!
Nice straw man you erected there, forrealestate. The bottom will be here for years. That has been the case for every RE correction in the past. No problem with someone not getting the lowest price. But wouldn’t it be better to “miss” the bottom as it starts to rise again?
forrealestate says again “things WILL even out.”
wtf? I guess this is why she passed on the “math.”
i got a c- in fed tax (there was math)! i also fell asleep during that exam — and the bar exam. but i passed ’em both!
i think it’s fine to wait until it rises again. just don’t be so doom and gloom! it’s unpleasant! 😉 — AND, it is as unrealistic as denying the slump completely.
also, i DID a GOOD amt of math for you yesterday. i had to calculate – i actually used a calculator! – every one of those price-per-square foot numbers!
i’m tired today because of all of that MATH!
Yeah, people can say whatever they want but let’s say I’m in a counter cyclical industry that does well in recessions. Business is great right now. And the lax lending of the bubble has made a large mess and someone has to be paid to clean it up.
To address Steven Heitman’s insults, I’m 30 and I make almost $90k and my SO of the same age makes about $50k. Not that I’m trying to brag or anything but I think that a household income of $140k a year should enable me to buy a 2bd/2ba loft converstion in the south loop with a reasonable mortgage payment. As I discussed above, my income does not allow me to buy said condo unless I am willing to throw down in excess of $3,500 a month. Yes I can ‘afford’ the condo with my income but no, I am not interested in quintupling my housing payment to say that I ‘own’. I get a better rate of return repaying the principal on the student loans than I do paying a mortgage on a depreciating asset. According to Case-Shiller, a housing asset in Chicago deappreciated on average about 10% last year. Including the elegant ‘Donoghue’ building, which is just another overpriced loft, albeit a very nice place to live. But in the end, this seller has major problems because the target demographic for their loft, i.e. my high income professional DINK household, cannot reasonably afford it. And like I said, if people like me aren’t buying these condos, I don’t know who is. Oh that’s right, HARDLY ANYONE IS. That’s why sales are down 30% YOY.
Hey f, I think that the most dubious statement you made is the implication (pretty clear in what you wrote) that buying in, say, the CMK buildings on S Mich right now would put the buyer in a situation that “WILL even out” in 5-7 years.
I don’t buy that and it comes across as bad advice–because: (1) It’s almost certain that you’ll be able to rent a nearly identical unit in the same or a nearby building for the next 5-7 years, (2) The rent is almost certainly going to be less than the total, net cost of ownership on a monthly basis, (3) it’s unlikely that your sale price in 7 years will be higher than the current purchase price in real terms, (4) if the unlikely happens, there will be competing new construction, because there’s still plenty of space around there.
I don’t really disagree with you about the Donohue, but still think that the ask on this unit does not reflect the current market. All of the white boxes in the bona fide south loop are a disaster waiting for the unsuspecting.
HD–The loft is totally “affordable” for a 2d year attorney at a big law firm. If there’s any second income at all, $3500/month just isn’t that big a nut. There are plenty of people who make that much money; there are many fewer who find the true loft really appealing.
And, at your income level, $850/month makes you more frugal than most your age. That’s not a criticism, but so many hear and on other housing boards act like there’s nothing between reasonable frugality and being an absolute sprendthrift–there is. I’m not suggesting that $500k for loft isn’t on the spendthrift end of the spectrum, but it isn’t absolutely nuts. Buying this loft for $500k and expecting any meaningful real appreciation is nuts, tho.
I do expect that you can today find a 2/2 loft in the (greater) south loop for under $350k; however, expecting that you SHOULD be able to find that 2/2 in one of the nicer loft buildings for around $250k is an unreasonable expectation.
Thanks for all your comments forealestate. It’s appreciated.
I’ve been in the Donohue and its a great building. It’s nothing like the new construction buildings going up all over the south loop and for that reason it will hold its value better than the others.
Will everything get hit? As G likes to say, it’s a “credit problem” and that will affect all parts of the country.
But not everyone wants to wait years and years to buy a home to LIVE in. Yes, even if it means that asset will depreciate.
If you’re going to buy, it’s likely smarter to buy something in a building like the Donohue, than it would be in the newer construction building (as has been mentioned here.)
Interestingly, I also consider the loft on Plymouth that was just reduced to $299k to be one of the better buildings in Printers Row as well. Yes, that unit is not updated, but you don’t get more authentic than that unit (other than the Donohue). And that’s not selling.
homedelete… you are confusing me. I thought you stated you were barely saving any money each month after paying $850 in rent and your bills??? If this is true, how can you support an increase to $3500 a month for housing??? Are your loans payments really high? (Cars + student loans).
Making $90K a year is good. $140K per couple is good too, but again, I don’t think it’s enough to buy a large loft with $700 assessments in a prime location unless you are putting down a lot of money.
Why not look in buildings like Clinton Complex (500 S Clinton) or Gotham lofts?? You can get decent sized 2 br/2ba (not 1600 sq ft, but say ~1200 to sq ft) for about $300K to $350K. (hey! I agree with Anon on this one although Clinton Complex is not that far west from Printers Row!)
Anon, all of your points are well taken.
1) It is affordable for an attorney at a big law firm. And how big was the class of 2006? I once read it was 650 attorneys. That’s right. There were about 650 new biglaw attorneys in Chicago for the class of 2006. That’s a very small target market; it’s like trying to sell your condo to Bill Gates – he’s rich and has the money! And if Bill won’t buy it he can always sell the condo to a dot com millionaire! There must be a couple of hundred of them too!
2) $850 is pretty frugal that most people. My low rent is also a reflection of my superior credit rating. My landlord doesn’t have to charge me a higher rent to compensate for the non-payment and eviction risk. And I’m a little NW because I wanted to be near 90/94.
3) I stand by my prediction that there will be a 50% reduction in real and nominal terms. 10% Case-Shiller plus 4% inflation is 14%. We’re already a 1/3 of the way there buddy….the trend is your friend, the trend is your friend…..and the foreclosures and REO’s on my desk keep piling up; it’s relentless…I can’t even see the light at the end tunnel.
Homedelete – It is typical to spend 30% of your gross monthly on housing. Your gross monthly is $11,600 and 30% would come out to $3,500. Perfect for your situation so I think you should buy the property.You currently spend 7% of your gross monthly on your housing. If you are spending your remaining take home on meals and entertainment you may want to think again about what a bad investment really is. Buying a depreciating asset may acctually save you money:)
Also:
Don’t blame the agents for all of the properties that are priced unrealistically. I’m not an agent- but I’ve heard stories of clients who are being completely unrealistic about pricing their properties either because:
1. They don’t understand that the market has changed.
2. They “need” to make XYZ amount in order to “afford” the bigger property they want to move up to.
3. They have no equity and still want to move and can’t afford to lower the price.
I’m sure there are other scenarios the agents have seen. But it’s not always the agent’s fault!
It’s incredibly difficult to tell someone that they’re not going to make money on a property (or, heaven forbid, they’re going to lose money.)
This is only the early innings of this correction. It takes time for slowing sales and new pricing reality to work its way through the system.
forrealestate again, “just don’t be so doom and gloom! it’s unpleasant! — AND, it is as unrealistic as denying the slump completely.”
There is no “doom and gloom” coming from me. The return of housing affordability is as welcome as it is inevitable. That fact is what you must find “unpleasant.” What, are you afraid of the repurcussions from those you may have led into debt slavery with your keen “math?”
Nothing is more “unrealistic” than your dismissal of this inevitable market collapse as a mere “slump.”
Happy days, indeed.
If Homedelete has large student loans (and other debts) it’s probably unrealistic for him to spend 30% of his income on housing and still have money for savings, retirement etc.
Someone also said “why doesn’t he look in the outer areas?” which is interesting- as we were just discussing a unit in Rogers Park that was priced in the upper $400,000s (yes it was large and you can find smaller and cheaper units.) Rogers Park used to be “affordable”- but not anymore.
G:
Most homeowners don’t remember the mid-80s when Chicago area home prices didn’t rise at all. You bought a property to live in for like 20 years- with no thoughts of EVER selling back then because it would be foolish to.
We talk a lot about condos here. It’s a different calculation when you buy a condo versus a single family home (in Chicago at least.) For the smaller one and two bedroom condos, how many people realistically will WANT to ride out the slump for all those years in those units?
We chatter about a lot of these smaller properties here that have had amazing turnover in the last few years. Heck, some of the properties I’ve covered have sold three or four times in just this decade. What happens if all of those owners have to ride out the slump?
It’s going to be very unpleasant indeed.
I spend a lot of my money repaying my student loans. A lot. When they are paid off in a couple of years I will have the extra 3500 a month to spend on a condo. But is it wise to spend 3500 a month on a 2 bedroom condo? I can’t justify it. Maybe I am a bitter renter. I’m ok with that. But I’ve seen just as many bitter owners who are debt slaves to their underwater homestead. The decline in prices is welcomed and inevitable. If you can’t see what’s coming then you must be blind.
I could look elsewhere but why should I? Its not like I expect a sfh in glencoe to be 400k. A loft in the donoghue is a box with 2beds in a 100 year old building. There’s no land, no rec room, no pool, no florida room. Chicago isn’t an island like manhattan. There really isn’t any justifiable reason for the crazy high prices except for the comps, which were determined by funny money over the last few years.
as far as buildings in the south loop, i generally feel/think (i am not advising anyone here) that it is NOT the best place to buy – with exceptions. there are always exceptions.
printer’s row – an exception.
there are also certain buildings that should have a giant NO painted across them in red, but one can’t buy spraypaint in the city anymore because of tagging, so . . .
in addition, printer’s row is just bad*ss. buying a home IS an investment, but it is ALSO buying a home. one doesn’t live in money.
and, if one works or goes to school in the loop or south loop and WANTS to own, then, well, after we have “the talk,” ok – south loop it is.
and, g, what is doom and gloom is the extreme notion that everybody who IS invested in the market is going to lose their pants. it’s just not the case. sell low, buy low. that’s where the market is for a lot of avg peeps.
lastly, i have not lead a single soul into debt slavery.
part of the reason i am IN this particular job is that i have control over what i do and what i don’t do. if i think a client is making a bad decision, then i tell the client. it is NOT in MY best interests to screw ANYBODY.
to be vague and arty about it, screwing anybody is bad business/personal karma – no matter what side of the table the screwee is on.
to be business-y about it, screwing somebody means fewer referrals and a bad rap. this market is MUCH smaller than some may think. i KNOW other agents and they know me. and it doesn’t take long to get a bad reputation.
also, i get to pick my clients. so, i make a conscious decision to work with smart ones – people who can hold their own and don’t NEED me to talk them into anything. we work together. having a stupid gullible client is a liability – and boring. 😉 and i could be surrounded by stupid and gullible (in addition to pompous) for 200k/yr at a lawfirm. ha ha!
i much prefer this.
and as far as the pricing in the donohue, nothing funny has happened to it. the prices, generally speaking, have risen over the years along with the market. the prices are higher in THIS building – as they are in a number of other especially desirable/unique buildings (6 N. Michigan is a newer/diff’t ex – but still) – because the market will take it. maybe not everyone has a great love for the aesthetics of this building, or can afford the prices, but some do. and, those “some” always do pay the prices, setting the pricing for the building – making the market.
the building is surrounded by outdoor space – close to grant park, the lake, etc. and it does actually have an exercise (i.e., rec-ish) room. and a few units DO have roof space. i think, though, it is the history and the beauty of the building – the fact that one can’t find it anywhere else and it can’t be copied – that appeals to the buyers that buy there.
and, per my best info, people are paying around 770/sq ft at 6 n mich for some units (i just did math again – man; also, there haven’t been closings yet at 6 n mich, so this is just per my experience/rumor/knowledge/etc!). see?!?! the donohue? cheap.
😉
Homedelete – I don’t have the numbers in front of me but I believe Chicago in general has appreciated around 5.5% from 1995 to 2008. Inflation is running around 3% for this period which leaves a 2.5% nominal appreciation rate on owning a home. Now think about the trend that has occurred over the past 10 years. Have people trended back to the city or have people trended to the suburbs? I think the answer is to the city. So there is some justification for appreciation above the inflation rate. Do you think the trend will continue to support urban living with higher gas prices? I think the demand is going to accelerate over the next 5 years create appreciation for properly purchased properties.
Now that we all agree that demand in Chicago’s more desirable areas has increased over the past 10 years, now let’s talk about supply. The increase in demand over the past 10 years created an opportunity for increased development and redevelopment of some Chicago’s less desirable areas. Now I think we all agree that this development has been overdone and introduced a mass of speculation on the part of investors. The real problems we are seeing are in the areas with heavy new development (South Loop, West Loop) and neighborhoods with redevelopment (Logan Square, Humboldt Park). Speculators who gambled on this new development and those that overpaid for transitioning areas (shiny appliances on worthless plots of land) are the ones that will end up struggling. Values in these areas can easily decline 20 – 30%., but then again they increased 20 – 30% in a very short period of time. People who purchased at FMV in stable neighborhoods (Lincoln Park, Lakeview, Gold Coast, Old Town, ect) never experienced out of line appreciation rates and WILL NOT see crazy declines. Sure people in these areas pay a lot more for a 2 bed, 2 bath in Lincoln Park then they did 10 years ago but not only is the neighborhood ALOT nicer but the units are a lot more upgraded then they were. Let’s not forget that a building is always going to be a depreciating asset. Land is what appreciates and why you have to make sure you are purchasing on land that is in high demand. Buying a $300,000 building on a $50,000 lot in Rogers Park will create a depreciating asset. Buying a $250,000 building on a $350,000 lot in Lincoln Park will create an appreciating asset.
Who was it that said location is everything in real estate? Oh yeah, that was me…
Why is it a bad thing when gas prices shoot up but a good thing when real estate prices skyrocket? Wouldn’t the world be a better place if there wasn’t 12 months worth of inventory in Chicago because more people could afford to buy?
Steven Heitman & forrealestate, is it ever not “a great time to buy?”
SH says, “location is everything in real estate.” I guess that means you believe that price is irrelevant? Is that because “real estate only goes up?”
The “increase in demand” was everywhere due to suicidal lending. That is why there are already price reductions in every neighborhood. SH must be defining “stable neighborhoods” as “not as bad as others.” That must be more realtor-speak because it is not defined that way in the dictionary (or by the PMI companies.)
The cognitive dissonance is quite amusing, but it is also pretty insignificant in the context of market forces.
Hey G – Did you ever consider that you do not know what you are talking about? Take Lincoln Park for example. Do you think the 50 or so $3 million homes that have gone up (and sold) off of armitage does not increase the direct area’s land values? Do you think the people who purchased these $3 million homes care about lending standards? These people put 30% of the purchase price down in cash (at a minimum) and have not a care in the world about interest rates or housing slumps. This area of Lincoln Park has been transformed from a nice place to live to where the top 1% income earners call their home.
I would not reccomend to anyone to purchase anything in many areas of the city. There are however many areas that continue to increase in value. If you can’t understand this then you don’t understand supply and demand.
“Steven Heitman & forrealestate, is it ever not a great time to buy?”
The answer to your question is no. There is always an opportunity to make money in real estate with a purchase. You just have to fully understand the forces working with or against you. I will come right out and say it. If you purchased one of th cookie cutter, apartment looking units on State or Wabash you are an idiot. There has yet to be a time when supply and demand in the south loop have been in a.
Oh silly Realtors®, stop it. No one should borrow money to buy an asset that is declining in value (rapidly in some cases) like most residential real estate. Let me state something very very clearly. In REAL dollar terms, home prices will NEVER return to the peak prices of this housing bubble. Homes are a place to live in and at best is a storage of wealth (if you maintain it) but most generally is a poor investment. But in one of the worst real estate price declines, it is horrible investment. 95% of potential buyers should wait to buy. Every post by “G” that I have read has been right on target…he/she tells it like it is….THANKS G!
Lastly, have seen all the celebs trying to bail on their expensive trophy homes that they bought thinking it was a great investment? Come to Florida and take your pick!
Hi Homedelete and company,
I have a number of client that make between 75K-200K and routinely buy units in this price range. The real difference is they have NO debt, no student loans, an 10-30% down payment. Yes, often this is thanks to their generous parents who paid for their college and grad school in full and provide down payments. However, there are people in their 20’s-30’s who can afford these units.
Whoa- is someone saying that buyers have NOT over-extended themselves in Lincoln Park?
I’ve seen foreclosures in every part of the city- including in LP. Yes, the number isn’t as great in LP as in other neighborhoods, but it’s happening all the same.
Let us also not forget that we’ve already seen a $6 million foreclosure on this site. You’d THINK someone buying that kind of property would have the downpayment or be buying it in cash.
Things aren’t always as they seem.
Sabrina – I follow Lincoln Park closely. The last foreclosure in Lincoln Park was at 2220 N Kenmore. This was not over extending but mortgage fraud. 2 townhouse like units (worth $500K or so) each were purchased at the same time for $825,000. The rear unit came on the market (bank owned) at $400k (6 offers 1st day) and the front unit is rumored to be coming on the market July 1st.
Yes people in LP have over extended themselves but at a much smaller ratio than other areas. The people in LP are much more likely to fight off the financial strain than go into forclosure. think you will agree that the foreclosure rate is very very low in Lincoln Park. This is due to more responsible buyers combined with stable prices.
Just my two cents. Let me know if you see something different.
I can’t believe I’m agreeing with Steven but he has a point.
LP and LV are two prime neighborhoods. During the boom other non-prime neighborhoods were bid up to close to or the same price per square foot as these two. Not to say LP and LP won’t lose some value but I don’t think it will be comparable to “transition” neighborhoods such as south or west loop. Why pay lincoln park prices for any neighborhood other than lincoln park?
Also the only segment that can really buy now (aside from the small number of high end buyers) are entry level homeowners. People in their mid-20s->early-30s and these people are drawn to LP and LV neighborhoods. They’re not going to substitute some place like south loop which has basically nothing but new construction. New construction does not make a neighborhood as south loop owners and investors are going to learn painfully.
This coupled with the fact that there wasn’t much building in LP during the boom leads me to believe the pain will be substantially less than most other neighborhoods.
Your product has become so expensive that the only market left is high income 30’s somethings with generous gifts from their parents. That’s a very small niche market. I wish you the best of luck with that business plan. Because you know, real estate is so scarce, and demand from yuppies will support high prices indefinitely. Yeah, that’s it.
“Streeterville Realtor on May 28th, 2008 at 9:19 pm
Hi Homedelete and company,
I have a number of client that make between 75K-200K and routinely buy units in this price range. The real difference is they have NO debt, no student loans, an 10-30% down payment. Yes, often this is thanks to their generous parents who paid for their college and grad school in full and provide down payments. However, there are people in their 20’s-30’s who can afford these units.”
I love the ‘it’s different here’ argument. You know, 20/30 something first time homebuyers all want 2 bedroom condo conversions in Lincoln Park. They all plan to have multiple children and raise them in a box in the city. None of them plan on returning to the suburbs from which they came nor do they plan on moving to a neighborhood on the northside. Single family homes are for ‘other’ people. You know, LV and LP are the epicentres of all cutural activity in the 6 county area and, of course, everyone wants to live there. So therefore, prices will not drop as much as other areas.
“Bob on May 29th, 2008 at 7:04 am
I can’t believe I’m agreeing with Steven but he has a point.
LP and LV are two prime neighborhoods. During the boom other non-prime neighborhoods were bid up to close to or the same price per square foot as these two. Not to say LP and LP won’t lose some value but I don’t think it will be comparable to “transition” neighborhoods such as south or west loop. Why pay lincoln park prices for any neighborhood other than lincoln park?
Also the only segment that can really buy now (aside from the small number of high end buyers) are entry level homeowners. People in their mid-20s->early-30s and these people are drawn to LP and LV neighborhoods. They’re not going to substitute some place like south loop which has basically nothing but new construction. New construction does not make a neighborhood as south loop owners and investors are going to learn painfully.
This coupled with the fact that there wasn’t much building in LP during the boom leads me to believe the pain will be substantially less than most other neighborhoods.”
Homedelete,
There are only 65k people living in Lincoln Park and 95k living in Lakeview. There are 9.5MM people living in the Chicago MSA. Do I think the MSA is large enough to support the prices in Lincoln Park and Lakeview? Yes.
There will be some price depreciation in LP and LV more than likely. I’m also guessing it will be noticably less than Chicagoland. So far it has been: it hasn’t happened yet however while Chicagoland has dropped 10%.
So far the proof is in the pudding. Show me sales in LP 10% off their peak and I’ll be a believer.
I think the more interesting point from Streeterville Realtor about his clients is that despite making what most would consider “good money”- $70k to $200k a year- they still must “often” get their downpayments from “generous parents.”
Without the parental money- are they buying? Would they even have the now nearly required 10% downpayment?
I wonder.
I don’t follow lincoln park, but glancing through sales it seems to have held up pretty well. High end seems worse than “entry level” (below $1.5 million).
Here are a few SFR resales reflecting declining prices. I’m sure i can come up with more. Condos will likely be worse – if i’m truly bored this morning may check them.
1844 bissell sold 1/05 for $615,000 then 9/07 for $590,000
2106 sheffield – sold 8/05 for $1,260,000 then 6/07 for $1,180,000
1873 mohawk sold4/05 for $3,680,000 July 07 for $3,075,000
1838 Burling 2/05 $3,306,700 8/07 $2,848,750
There are many more examples of increasing prices based on sales/resales in the past three years. However, i also found some listings that are priced at or below previous sale price, so they will soon show declining prices as well (or maybe not so soon).
Bob: You’ve been punk’d.
“bubbleboi on May 29th, 2008 at 8:02 am
I don’t follow lincoln park, but glancing through sales it seems to have held up pretty well. High end seems worse than “entry level” (below $1.5 million).
Here are a few SFR resales reflecting declining prices. I’m sure i can come up with more. Condos will likely be worse – if i’m truly bored this morning may check them.
1844 bissell sold 1/05 for $615,000 then 9/07 for $590,000
2106 sheffield – sold 8/05 for $1,260,000 then 6/07 for $1,180,000
1873 mohawk sold4/05 for $3,680,000 July 07 for $3,075,000
1838 Burling 2/05 $3,306,700 8/07 $2,848,750
There are many more examples of increasing prices based on sales/resales in the past three years. However, i also found some listings that are priced at or below previous sale price, so they will soon show declining prices as well (or maybe not so soon).”
“Show me sales in LP 10% off their peak and I’ll be a believer.”
Okay, it’s only one, but take a look at 2013 N Howe St. It’s approximately 44% (yes, forty-four percent) off of peak. It’s a 4500 sq ft SFR just off of Armitage. If you look at the property records, you will see it was purchased with less than 20% down (notwithstanding SH). Just one example.
I don’t think that anyone is arguing that LP and LV won’t fare better than the south or west loop; what’s being said is that LP and LV are not immune to losses in real dollars.
Lincoln Park Condo declines – 2 bed 2 bath units, $500 to $750 price range
628 wrightwood 5E – 3/05 $560,000 5/07 $534,500
2152 racine #3 3/06 $579,000 2/07 $539,500
2635 racine #3 – 6/05 $585,000 10/07 $536,765
2720 Dayton – 5/05 $623,000 2/08 $540,000
This is just one category of units showing losses, many priced to sell at a loss, if and when they close.
As i think many here would agree, new construction condos are faring worse than SFR’s or existing condos.
Take a look at 1724 N Dayton. I can show you 5 gains for every loss you bring up.
HD: “I stand by my prediction that there will be a 50% reduction in real and nominal terms.”
Well, if there’s a 50% reduction in nominal terms, it will be a lot worse in real terms. Are there going to be a number of condos selling for 50% below prior (nominal) price? Defintiely. Will (parts of) South Florida see a 50% drop in nominal median? Pretty likely. Will the Chicago metro median drop 50% in real dollars? Possibly. In nominal dollars? I doubt it.
Take a look at 2720 N Dayton. This is acase where the buyer just plainly over paid. There is not a 2nd floor walk-up in Lincoln Park that sells for $623,000. 2nd floor walk-ups sell for $540,000 which is more than they sold for back in 2005. This buyer was not advised properly and paid 3rd floor (penthouse) prices for a 2nd floor unit. This is not an example of declining markets but is a good example of why you need a good broker to advise you on your purchase. This buyer used ADL Realty for his buying agent. ADL is a one man shop that I would bet offer discounted services. The buyer probably saved $7,000 on the purchase but ended up losing $80,000 for over paying. Find a good realtor if you want to purchase. They will eat you alive if you don’t.
“I can show you 5 gains for every loss you bring up.”
So, do it, Steve. I’ve given a 40%+ loss on an SFR in the heart of LP, with a sale in 2006 and another in 2008. Let’s see your 5 winners over a similar time period. A house that shows a gain from 2000 to 2008 doesn’t count–of course that’s gone up. Oh, and another 15 for the 3 that bubbleboi posted.
And let’s see your 20 2/2’s b/t 400k and 900k that have gains. If it’s so darn obvious, this should be easy.
Have to work right now but I will get back to this later.
“This is acase where the buyer just plainly over paid.”
Ah, the truth comes out. The declines aren’t because of an eroding market, it’s because everyone overpaid. And they overpaid b/c they used bad realtors (i.e., not SH).
Anon,
Its not the realtors job to advise the client not to buy. Their job is based on commissions. Every prospective buyer knows this. If the buyer is looking for a realtor to tell them NOT to do a transaction then they are a fool.
Caveat emptor rules here. I blame the banks and the CDO holders and their shareholders/stakeholders more than the realtors: they were supposed to understand risk and had incentives to do so.
The realtors never had any incentive to do anything other than promote sales/transactions and everyone knew that. I don’t blame someone for engaging in legitimate behavior that maximizes their remuneration. Thats a little un-american..
“Anon,
Its not the realtors job to advise the client not to buy.”
I’m again reminded that sarcasm doesn’t translate easily. I was mocking Stevo for blaming a decline on a buyer who overpaid rather than the overall market–I expect that he will say that every decline can be blamed on another foolish buyer with a bad realtor.
Anon – You are basically an idiot. Ask 20 realtors if any 2nd floor walk up should have sold for $623K in 2005 and they will say no. These buildings are very similar and the going rate for a 2nd floor unit is around $500k depending on the upgrades. 3rd floor units in these building sell for the $600’s depending on roof decks and upgrades.
It is not my opinion but a fact. You are making yourself out to be a moron! Value is not subjective but can easily be supported with real market data.
Status Area Street Number Street Name Unit Number Bedrooms List Date Contract Date Closed Date Sold Price
CLSD 8007 916 WRIGHTWOOD 2 2 10/11/2004 5/4/2005 7/25/2005 489000
CLSD 8007 2529 HALSTED 2S 2 5/17/2005 6/12/2005 9/12/2005 489000
CLSD 8007 2621 WILTON 2 2 3/14/2006 4/6/2006 7/14/2006 489000
CLSD 8007 837 Wrightwood 2 2 1/4/2007 2/16/2007 3/8/2007 499000
CLSD 8007 939 MONTANA ST 2 2 5/31/2006 6/14/2006 7/14/2006 500000
CLSD 8007 916 WRIGHTWOOD 2 2 12/12/2006 1/10/2007 2/26/2007 500000
CLSD 8007 2720 DAYTON 2 2 9/14/2007 1/15/2008 2/12/2008 540000
CLSD 8007 2635 Mildred 2 2 1/30/2008 2/24/2008 3/31/2008 540000
Above are the comps for 2 bed, 2 bath walk up buildings. Any idea whay this guy would have paid $623K with the baove comps? Me either. He overpaid.
MLS # Status Area Street Number Street Name Unit Number Bedrooms Parking Approx Sq Ft Contract Date Closed Date Sold Price
5061031 CLSD 8007 2529 HALSTED STREET 3S 2 None/Not Applicable 1700 3/23/2005 6/27/2005 550000
6213399 CLSD 8007 821 WRIGHTWOOD 3 2 Off Alley 7/28/2006 9/29/2006 550000
6071506 CLSD 8007 2623 WILTON 3 2 Off Street 4/27/2006 5/5/2006 575000
6636786 CLSD 8007 2700 HALSTED 502 2 Underground/Covered 8/10/2007 8/27/2007 580000
6086583 CLSD 8007 837 Wrightwood 3 2 Assigned Spaces-1, Off Alley 1200 6/10/2006 7/5/2006 625000
6793554 CLSD 8007 2645 MILDRED 3 2 Assigned Spaces-1, Underground/Covered, Owned 4/5/2008 4/30/2008 625000
6787358 CLSD 8007 2635 Mildred 3 2 On-Site 4/25/2008 5/12/2008 640000
Status Street Number Street Name Unit Number Bedrooms Parking Approx Sq Ft Contract Date Closed Date Sold Price
CLSD 2529 HALSTED STREET 3S 2 None/Not Applicable 1700 3/23/2005 6/27/2005 550000
CLSD 821 WRIGHTWOOD 3 2 Off Alley 7/28/2006 9/29/2006 550000
CLSD 2623 WILTON 3 2 Off Street 4/27/2006 5/5/2006 575000
CLSD 2700 HALSTED 502 2 Underground/Covered 8/10/2007 8/27/2007 580000
CLSD 837 Wrightwood 3 2 Assigned Spaces-1, Off Alley 1200 6/10/2006 7/5/2006 625000
CLSD 2645 MILDRED 3 2 Assigned Spaces-1, Underground/Covered, Owned 4/5/2008 4/30/2008 625000
CLSD 2635 Mildred 3 2 On-Site 4/25/2008 5/12/2008 640000
Street Number Street Name Unit Number Bedrooms Closed Date Sold Price
2529 HALSTED STREET 3S 2 6/27/2005 550000
821 WRIGHTWOOD 3 2 9/29/2006 550000
2623 WILTON 3 2 5/5/2006 575000
2720 DAYTON 2 2 5/11/2005 623000
837 Wrightwood 3 2 7/5/2006 625000
2645 MILDRED 3 2 4/30/2008 625000
2635 Mildred 3 2 5/12/2008 640000
Sorry for the scattered numbers but the above works. See anything out of place. Oh yeah, 2720 Unit 2 paid a similar price for what others paid for a penthouse unit. wonder why he did that.
SH says “I can show you 5 gains for every loss you bring up.”
Still throwing out straw men arguments instead of backing up what you were called out on? Didn’t we do this yesterday?
Stevo:
How ’bout we do comps IN THE BUILDING? I’m not sure about unit numbers, but there are 4 (yes, FOUR) units at 2720 N Dayton. All sales to individuals, unless noted:
B: Sold 8/01 for $250k (to Conover Prop LLC)
Sold 12/03 for $325k
Sold 7/04 for $456.5k
1: Sold 8/01 for $575k
2: Sold 10/01 for $544k
Sold 6/05 for $623k
Sold 2/08 for $540k (that is, BELOW 2001 PRICING!!)
3: Sold 8/01 for $573k
Sold 8/04 for $685k
So, I’d guess that there’s something about this building that you, oh great RE master Stevo, don’t know about. That “outlier” at $623k was 10% less than the 3d floor after a year with 10-15% “appreciation”–so really 20-25% less than the 3d floor unit.
Who’s the “moron” now, Stevo?
PS: Still waiting for the 20(!!) comps for SFRs in LP that sold for more in the last 6 months than they did in 05 or 06.
SH said “Hey G – Did you ever consider that you do not know what you are talking about? Take Lincoln Park for example. Do you think the 50 or so $3 million homes that have gone up (and sold) off of armitage does not increase the direct area’s land values? Do you think the people who purchased these $3 million homes care about lending standards? These people put 30% of the purchase price down in cash (at a minimum) and have not a care in the world about interest rates or housing slumps.”
There are currently 27 detached single-family homes for sale over $3M in Lincoln Park per the MLS. There have been 7 closings of the same in the last 6 months, and only 2 in the last 3 months. That puts supply at just over 23 months or 40 months, based on 6 and 3 months sales, respectively. Is SH certain that buyers of these properties “have not a care in the world about interest rates or housing slumps?”
SH said, “Take a look at 1724 N Dayton. I can show you 5 gains for every loss you bring up.”
Here are the four recent resales of $3M+ sfh’s in LP:
1724 DAYTON 12/31/2005$3,200,000
1724 DAYTON ST 4/30/2008 $3,550,000
1823 MOHAWK 4/7/2005 $3,680,000
1823 MOHAWK 7/26/2007 $3,075,000
1838 BURLING 2/27/2005 $3,306,700
1838 BURLING ST8/3/2007 $2,848,750
2009 HOWE 2/20/2007 $3,150,000
2009 HOWE 12/3/2007 $3,300,000
Notice why SH highlights 1724 Dayton? It appears deceptive to claim that home is indicative of the market. Was it intentional, or just incompetence?
Hey G, don’t forget about 2013 N Howe–
6/7/2006 $4,200,000
3/28/2008 $2,375,000
Nice catch, anon. I didn’t search for those that sold for less than $3M on the resale.
Correction: I didn’t search for those that listed for less than $3M on the resale.