What Would You Pay for a 2-Bedroom Lakeview Garden Apartment? 1346 W. George
This garden 2-bedroom at 1346 W. George in Lakeview has been on the market since December 2010.
It is bank owned.
In that time, it has been reduced $50,000 and has gone under contract once (but was re-listed.)
The unit is currently listed for 53% under the 2004 purchase price.
From the pictures, it appears the kitchen and at least one bathroom are intact.
The kitchen has stainless steel appliances and granite counter tops.
You can see the windows for the unit in the picture above- just behind the fence.
It has central air and appears to have one car parking.
Is this a good alternative to renting?
Arcenio Salinas at Crosstown Realty has the listing. See the pictures here.
Unit #1346T: 2 bedrooms, 2 baths, 1150 square feet
- Sold in January 2002 for $292,000
- Sold in June 2004 for $369,500
- Lis pendens foreclosure filed in February 2009
- Bank owned in July 2010
- Originally listed in December 2010 for $224,900
- Reduced in January 2011 to $199,900
- Under contract
- Recently re-listed at $174,900
- Assessments of $150 a month
- Taxes of $4055
- Central Air
- Listing doesn’t mention washer/dryer
- It appears to include parking
- Bedroom #1: 15×14
- Bedroom #2: 12×11
“Is this a good alternative to renting?”
NOPE. And sorry to whoever paid that 2004 price. A crying shame…
I understand this property is not high end, but still why cannot the agent have the courtesy of putting some decent photos of the place.
wouldnt give a bucket of warm piss for that dump.
If the taxes would get reduced to under 1.5% of purchase price, I could see calling it a “deal” at *maybe* $125k.
Anyone think this would rent for more than $1200?
ugh. a dungeon. how depressing.
There would have to be no other options anywhere in the city before I lived in a garden unit. The dark, closed in feeling is a recipe for depression.
$370K? Even by bubble standards that’s a ridiculous amount of money to pay for a gloomy 2-bedroom garden apartment in a good, not great location.
Wow, those are high taxes for a garden unit.
If i wanted to live in a basement i could do it for free. (well at a the cost of listening ENDLESSLY to my mom telling me about antiques roadshow or dancing with the stars.)
“This property is being sold as is.” Does that mean short sale or pre-short sale or pre-foreclosure?
I’m getting nervous seeing all these wine racks at ground level — we installed one underneath a hanging cabinet. Well guess i’d better run to Tony’s and beat HD and Groove to all the cheap wine 😀
I dont understand the 2002 nor the 2004 price. What were people thinking???
How did it even appraised for those amounts????!!!!
Poor 2004 buyer…..unit will sell for half his purchase price.
if you plan to live in this place for 5 or more years, then upgrade to another place, you’d be able to keep this and rent it out for about what you pay monthly in mortgage and taxes
“rent it out for about what you pay monthly in mortgage and taxes”
Which ignores vacancy and maintenance and increases in taxes and assessments. You need to have rent *above* costs to make it work, unless a passive loss works in your overall tax strategy (doubtful if one is considering a place like this) (yeah yeah depreciation, don’t care).
“wouldnt give a bucket of warm piss for that dump”
I would give a warm bucket of piss for it fo sure!
“rent it out for about what you pay monthly in mortgage and taxes”
in addition to what anon (tfo) points out, when you go to get a loan for the next property, you could be limited to the amount they are willing to loan you.
i.e. $400K without this property
$300K with this property
Yeah, really, really unbelievable that it sold for 379k in ’04. Even at the height of the bubble, and even IF this was at the absolute coolest spot in Lincoln Park, I still wouldn’t believe it, but the location isn’t that good; decent at best.
This should never have been a detached unit in the first place. I can’t imagine what would drive anyone to buy this as a personal residence.
“Sold in June 2004 for $369,500”
OUCH!
Yeah, ouch is right! That is downright crazy!
Well the bank owns it so yes the pain is ours.
I hate realtor euphemisms. It’s not a “garden” apartment, dammit, it’s a BASEMENT apartment. You can call it whatever you want to call it ,but you are still in the basement looking up at feet walking past your window.
Yeah, this is definitely a basement apartment. A true garden unit is maybe 2-3 feet below grade at most, not 6 ft. Living in a basement has got to be depressing, and you hear all the street noise and have the potential for floods. Fail.
I think some person will pay just around ask for this one though, and will likely rent it out.
How long after the great blizzard of 2011 did it take for that place to receive natural light?
“The dark, closed in feeling is a recipe for depression.”
Isn’t that Chicago November-March?
too bad it’s not part of a duplex down… very hard sell – and i dont even mind garden apartments.
Agree, this is a hard sell. Safety, environmental, and psychological concerns limit the market for this garden unit. You will have to find someone not concerned with accessible windows, not concerned with privacy, not concerned with water or dampness, and not affected by a dark unit. Probably more concerns, but obviously the price needs to go way down by at least 50%. Taxes need to go down also.
Hah, got a reduction of taxes that I protested/appealed with Cook County. It was that .1% that you get without a lawyer that is done so that report says 90% who appealed taxes get a reduction. Any lawyer recommendations?
I’m going to hock this thread for a moment to post a link showing the fabulous deals that are out in the suburbs if you’re so inclined.
Check out this 5,400 square foot house in North Barrington. It’s in the Wynstone gated community (not the cup of tea for everyone)- which has a country club and a Jack Nicholson designed golf course.
This house is NOT on the golf course (which adds a premium) but it’s on a large lot nevertheless.
Sold in 1999 for $890,000.
Sold in 2007 for $1.7 million
Bank owned.
Bank listed it in December 2010 for $699,000.
Can’t sell it.
Now listed at $609,000.
You pay a $500 monthly assessment for the Wynstone association (not for the country club- this is to maintain the streets, pay the guard at the gate etc.)
How low will this one go? Will someone get it for under $500,000?
http://www.redfin.com/IL/North-Barrington/23-Deverell-Dr-60010/home/17131583
Here’s another one right across the street.
Sold for $1.1 million in 2006.
Listed at $885,000 and still not selling.
http://www.redfin.com/IL/North-Barrington/30-Ketterling-Ct-60010/home/17662432
In certain areas, the upper bracket is getting smoked. There just aren’t enough buyers anymore.
I’m intrigued by these homes Sabrina. Here’s one in Wynstone that sold for $950K back in 2006 on the market for $499K — on the golf course (although it looks a bit dated compared to the ones you mentioned). The listing mentions that a deal in Sept 2010 fell through…
http://www.redfin.com/IL/North-Barrington/1-Piermont-Dr-60010/home/17658642
It’s not surprising that after the bust the Wynstone homes have lost desirability. North Barrington is far out there. But I wouldn’t have expected price drops this large. But then again, large and uninspired tract homes 42 miles northwest of a major city are so … bubblicious …
I’ve always wondered about the premium attached to golf course properties. I’ve always suspected there aren’t legions of professional golfers buying these things so it is a curious amenity that so many seemingly love to live right next to a golf course.
What is it about golf? I don’t see people wanting to live next to baseball or football fields or basketball courts. Seems silly especially considering all it takes is a n00b like me working on their slice to bust a window.
Oh yeah and if I bust your window and you ain’t home I’m not sticking around or leaving a note to be culpable for it.
Bob the premium of living on a golf course is open space and large yards; not necessarily the game of golf itself, although that is a selling point. Would you rather live in a tract home with a view of your obese neighbor’s bedroom or a picturesque view of the 8th hole?
I’d rather live next to the woods. Nice trees, sounds & privacy without the maintenance/HOA fees of a golf course.
Jon that looks like its on the driving range not the golf course which is a big diff but still seems like a great deal. I like sabrina’s second one due to the lake in the backyard.
Actually I agree with Bob (may wonders never cease). I find Golf courses unlike trees and forest lifeless and sterile.
“Hah, got a reduction of taxes that I protested/appealed with Cook County. It was that .1% that you get without a lawyer that is done so that report says 90% who appealed taxes get a reduction. Any lawyer recommendations?”
dd – I recently appealed the assessed value on a recently purchased property. I got assistance from the Oak Park Assessor’s Office (I brought in the closing documents and they prepared the appeal for me). I heard back this week and received a 15% reduction in the assess value, but it should have been reduced by about 30% to bring the assessed value in line with the purchase price. Again, I spoke to the Oak Park Assessor’s Office and prepared a request for re-review…apparently there is a small window where the Board of Review will look them over again if you choose to submit additional support. I don’t have an attorney to recommend but, as others have suggested, if you hire one you’ll want one that has good connections with Berrios.
“I’m intrigued by these homes Sabrina. Here’s one in Wynstone that sold for $950K back in 2006 on the market for $499K – http://www.redfin.com/IL/North-Barrington/1-Piermont-Dr-60010/home/17658642”
THIS is the reason that people are going to start moving to the suburbs. Seriously, if you have a family and all you can afford is 500k for a place, where are you going to live: in a 2/2 duplex down in lincoln park, a 3/2 in a questionable area of uptown, or this beautiful safe house in the suburbs. I think almost ANYONE with a family would chose this place. That is why I would NOT buy real estate in Chicago unless it is in the best areas. There are TOO many good deals in the suburbs and the lure of the suburbs to people with kids is TOO great. Just wait and watch the mass exodus!!!
“Seriously, if you have a family and all you can afford is 500k for a place, where are you going to live: in a 2/2 duplex down in lincoln park, a 3/2 in a questionable area of uptown, or this beautiful safe house in the suburbs.”
Clio- I have to agree with you. While not everyone will want to live this far out in a gated community, there are still deals to be had in every single suburb. And for far lower than that in the city.
Sure- there will be those who will pay top dollar to buy SFH in LP and Lakeview. But when you start weighing $735,000 for North Center or Logan Square versus the same style/square footage of house in many suburbs for $500,000 to $400,000- you have to wonder if people won’t just be leaving the city in droves (“culture” and commute be d*mned.)
You get so much more for your money in many of the suburbs now.
“large and uninspired tract homes 42 miles northwest of a major city are so … bubblicious”
Actually- it’s not really bubblicious at all. The development was first opened around 1989 or 1990. That is well before any talk of real estate bubbles. Houses went for a million bucks back then- especially on the golf course. It’s a prestigious course because of the Nicklaus connection.
They’re all custom homes. Some need work now because of their age (yes- rich people want new kitchens every 20 years.) Lots of Schaumburg executives live in there (i.e. Motorola, Zurich Insurance etc.)
I never thought I’d see those prices in there. They didn’t even sell for $600,000 back in 1990.
And this one hasn’t even sold yet. Maybe someone gets it for $500k.
“I’m intrigued by these homes Sabrina. Here’s one in Wynstone that sold for $950K back in 2006 on the market for $499K — on the golf course (although it looks a bit dated compared to the ones you mentioned). The listing mentions that a deal in Sept 2010 fell through…”
Yeah- that one is on the driving range. They built some “smaller” homes on the range that they sold for less back in the day. Then that one you linked to sold for a lot during the “peak” of the bubble. I wonder if that one will go for less than $400k?
It would be insane if it did. But nothing surprises me anymore.
There are deals out there! If only people would look around.
“Clio- I have to agree with you. While not everyone will want to live this far out in a gated community, there are still deals to be had in every single suburb. And for far lower than that in the city.
Sure- there will be those who will pay top dollar to buy SFH in LP and Lakeview. But when you start weighing $735,000 for North Center or Logan Square versus the same style/square footage of house in many suburbs for $500,000 to $400,000- you have to wonder if people won’t just be leaving the city in droves (”culture” and commute be d*mned.)
You get so much more for your money in many of the suburbs now.”
agreed sabrina, but what happens when boomers start retiring en masse over the next 10-15 years? they are all in suburbs, most SHOULD have significant equity and will be able to accept lower prices to begin their retirement. how will all this future inventory affect the suburban home mkt?
I received notice this weekend from the condo management, @properties, that based on the appeal of the law firm retained by the HOA, assessed valuations for the condos and parking spaces in our building for 2009 were reduced 9.2%. The assessment on my unit and parking space dropped 8.6% from the revised assessor’s valuation. I will be saving a total of $890 per year. My share of the lawyers’ cost is $178.00.
The firm handling the appeal was Worsek and Vihon. They receive 20% of what they save each owner. They receive nothing if their appeals aren’t successful.
Chris M, thanks for your post. Our Cook County property is in an area where the assessment office was not helpful and there are no recent sales, so we will wait until next year. Lake County was a smooth 18% decrease.
Steve A, thanks for the information.
Who are the boomers going to sell to? Unless they lower their prices- they aren’t selling to anyone (and certainly not with higher interest rates.)
Again- there are far more boomers than Generation X’ers.
Also- you’d be surprised how many of the boomers do not own their homes outright (have taken out home equity loans etc.)
What about Gen Y ? I think there are more Gen Y than boomers and if you combine Gen X and Gen Y they FAR outnumber boomers. This is who will be buying these homes in about 10-15 years.
Gen Y?
They are 32 years old and under. Are the boomers going to continue to live in their big 4 and 5 bedroom suburban homes for another 15 years for those youngest of Gen Y’ers to be able to afford to buy their house?
Um…no.
The boomers will HAVE to sell to Gen X (which is a lot smaller.)
So- no Clio- you don’t combine generations (unless one is much richer for some reason than the one before it.) But as we have seen- Gen Y is coming into adulthood with massive education debt and one of the worst job markets in decades. They are not going to be buying the boomer houses.
But- neither will Generation X.
Analysts have been warning about the demographics for at least a decade (even before the bust.) They all said that there would be a glut of housing simply from the Baby Boomers trying to downsize (and then dying.)
I beg to differ, there are always people who prefer living in town rather than the burbs. I cannot see a place like down town Chicago becoming deserted because folks move to Schaumburg. Sure, because of schools and cost of living many would go out till their kids get to college, but I believe they will return after wards. Also even the suburbanites who can afford it, will buy in town condos, as will the young couples with small kids that are not at school age yet.
It’s already happened once Miumiu. People left the city in droves and downtown was a dirty, dull place. Heck, State Street was a dump until they got rid of the mall around ’95. 200,000 people left the City proper, almost another 200,000 left Cook county altogether. And don’t discount the dislike that many suburbanites have for the City itself.
No, Chicago will not be a Detroit. But it’s not going to get much better unless a lot of things change and we bring back a lot of jobs that were lost. Look at all of the loft buildings that were converted to condos in River North and the West Loop. Those buildings represent lost industries that are not coming back. This city was once a major manufacturing mecca and so much of it is gone.
Sabrina – learned something about Wynstone. A lot of the golfers who moved in there are de-camping to Lake Barrington Shores. The main complaint is that the association fees keep going up, although I’m betting those taxes have something to do with it as well. Golfers are saying that they’ve had enough of the fees and want out.
“I cannot see a place like down town Chicago becoming deserted ”
Not many people live in downtown Chicago. Even counting south of North Ave all the way down to Cermak all the way west to the river not many people live there in comparison to Chicago as a whole. Maybe what 350k people, if that?
There are 2.6MM people in Chicago and the most populous neighborhoods in 2000 were Austin, Lakeview & South Lawndale. Only one of these is featured commonly on CC. Large swaths of Chicago ARE becoming deserted and that will have repercussions for the remaining residents.
Sorry Anonemoose but I don’t follow your logic. So Chicago will loose its industries but Schaumburg and Oakbrook will create jobs and sustain themselves?
If the economy collapses in huge scales in Illinois, it will impact everyone. My point was in response to the fact that Clio and Sabrina seem to think city has no attraction and everyone makes decisions based on schools alone and size of the house they can get. If there is going to be an employment disaster and Chicago becomes Cleveland or Detroit, I doubt the suburbs will thrive either.
The homes may be priced low but the taxes aren’t. $23K on a $600K place? Don’t you have to have lived in a property for 3 Januaries to appeal taxes in Lake County? And then you’ve got running costs, heating and cooling a 5600sq ft detached home is going to cost significantly more than a 2500sq ft place downtown.
I don’t think people will abandon downtown. But the group of buyers who bought condos in the last 10 years in the city will not be replaced. People are realizing they’ll have to live in their property 10 years or more (to even break even) so buying the 1/1, the 2/1 or the 2/2 is no longer practical for many people.
They would love to buy a SFH but are completely priced out. So they’ll move to the suburbs to get better schools and more square footage for your money (not to mention less crime.)
I’ve said it before- but Chicago is not “urban” like NY. People will not give up their conveniences (and space) just to continue living in Lakeview or LP. If that was the case- we wouldn’t see so many 3/2 duplex downs with cribs in the second bedroom in the “good” school districts on the market. I always marvel that NY’ers are willing to do whatever it takes- space wise- to continue to live in their certain neighborhoods but Chicagoans aren’t (for the most part.)
“I always marvel that NY’ers are willing to do whatever it takes- space wise- to continue to live in their certain neighborhoods but Chicagoans aren’t (for the most part.)”
I have seen some hilarious spaces for rent in NYC, more specifically Manhattan. Like 250sf place with a convertible shower in the kitchen.
Or this 175sf microstudio inhabited by a couple and two cats.
http://www.nypost.com/p/news/local/manhattan/cozy_crazy_couple_makes_tight_studio_R15ToNFTaJE3c17zkw4efP
They are insane and I bet their cats hate them for being imprisoned.
If you’re willing to go well water and septic, this is doable. Lots of time these kinds of parcels with knock-down houses can be found on main arterials about 1/2 down from some strip center, and the city hasn’t ever extended water out to them.
“I’d rather live next to the woods. Nice trees, sounds & privacy without the maintenance/HOA fees of a golf course.”
Culture can be anywhere today, because most people are getting off the internet and smart phones. In a connected and wired world, there really isn’t an epicenter anymore.
“Sure- there will be those who will pay top dollar to buy SFH in LP and Lakeview. But when you start weighing $735,000 for North Center or Logan Square versus the same style/square footage of house in many suburbs for $500,000 to $400,000- you have to wonder if people won’t just be leaving the city in droves (”culture” and commute be d*mned.)”
typos: s/b 1/2 mile, and getting it off….not getting off
Agreed. But one reason is that so many suburbs are declining severely. Go visit the Ultra Foods at Barrington Rd. and Irving Park, it’s shockingly turned ghetto. The difference between flight in the 1970’s and today, is that in the seventies, the vast majority of suburbs were great, no so any longer. Suburbs now are filled with aging strip centers with dollar stores, check cashing places, vacancies, tattoo parlors, crappy sports bars, etc. It wasn’t like that at all in the Seventies.
“I cannot see a place like down town Chicago becoming deserted because folks move to Schaumburg.”
There’s vacancies all over the city, too. Increased tattoo parlors seem to go hand in hand with increased tattoos among the population.
Check cashing places…I think we know who uses those and it likely coincides with changing demographics.
Dollar stores can be found in decent areas, too–West Lakeview has one. Vacancies are all over the city, too, just walk down Clark St and crappy sports bars have been a staple of the suburbs as far back as I can remember.
Suburbs can definitely de-gentrify though I agree: I recently googled the shopping center in another state where I spent a few years as a kid and it has definitely gone downhill since judging by the tenants. When even Subway and Taco Bell move out you know there are problems there. I was completely shocked that shopping center changed as much as it did in 20 years for the worse (and now there’s a liquor store).
“a Jack Nicholson designed golf course”
When did Jackie get into designing golf courses? Is there a wannabe starlet at every tee?
“$735,000 for North Center”
That’s a price point basically missing from the market right now.
“200,000 people left the City proper, almost another 200,000 left Cook county altogether.”
The city’s loss of 200k is *included* in the County’s loss of 180k. The County, outside Chicago, gained 20k, while the City’s loss made it a loss of 180k in total.
“$735,000 for North Center”
“That’s a price point basically missing from the market right now.”
I hadn’t really focused on it, but just looked now and wow is that true.
“You get so much more for your money in many of the suburbs now.”
“I’ve said it before- but Chicago is not “urban” like NY. People will not give up their conveniences (and space) just to continue living in Lakeview or LP. If that was the case- we wouldn’t see so many 3/2 duplex downs with cribs in the second bedroom in the “good” school districts on the market. I always marvel that NY’ers are willing to do whatever it takes- space wise- to continue to live in their certain neighborhoods but Chicagoans aren’t (for the most part.)”
Basically what I’ve been saying for quite some time. Thanks for noticing.
“If the economy collapses in huge scales in Illinois, it will impact everyone. My point was in response to the fact that Clio and Sabrina seem to think city has no attraction and everyone makes decisions based on schools alone and size of the house they can get. If there is going to be an employment disaster and Chicago becomes Cleveland or Detroit, I doubt the suburbs will thrive either.”
Also true.
Traffic is a real killer. Imagine how much worse it would be without 9% unemployment and 200k more residents (granted many of those departures don’t commute on the Kennedy).
Pricing still needs to reference replacement cost. Try building a quality newer home for less than 175 sqft (one that people on CC wouldn’t make fun of). In the long run, prices will equalize out. Lot values of 300-400k imply a 4000 sq ft house still cracks $1M on a replacement basis. $1.5 no, and certainly not $2.0M. But 900-1.1 seems like a reasonable price level for 4000 sq ft and a 2 car garage within 5 miles of city center.
“Try building a quality newer home for less than 175 sqft (one that people on CC wouldn’t make fun of).”
Please. Anything could be made fun of here.
And the last $25 psf of that is in systems stuff that doesn’t get the credit it deserves.
“Try building a quality newer home for less than 175 sqft (one that people on CC wouldn’t make fun of)”
It seems that with the economies of scale with building costs building a 175sf residence wouldn’t make too much sense.
http://www.re-nest.com/re-nest/design/could-you-do-it-175-square-foot-apartment-for-sale-in-nyc-new-york-magazine-096236
“Pricing still needs to reference replacement cost. ”
But on a more serious note:
1) No it doesn’t.
and
2) Replacement cost has likely plummeted as well as there is an ample pool of underutilized labor out there. Materials have also likely dropped a bit from the boom (even taking into account the global commodities boom).
And $175psf is still too high, and there is already too much product out there competing with the new construction, which is explains why new home starts/sales reached another new low last month.
“Try building a quality newer home for less than 175 sqft (one that people on CC wouldn’t make fun of).”
I think you’re on to something there, and I’ve been grappling with this as well. One has to assume that a GZ lot will always be worth something, let’s say $200K minimum? Add to that basic hard costs, equal to 3,000 sf at $150 psf, and a new(er) SFH in the GZ probably won’t ever drop below $650K. It’s like looking at a stock that has “massive resistance” at some level. Or like the gold price, which probably won’t be below $1000/oz. again.
“Pricing still needs to reference replacement cost. Try building a quality newer home for less than 175 sqft (one that people on CC wouldn’t make fun of). In the long run, prices will equalize out. Lot values of 300-400k imply a 4000 sq ft house still cracks $1M on a replacement basis. $1.5 no, and certainly not $2.0M. But 900-1.1 seems like a reasonable price level for 4000 sq ft and a 2 car garage within 5 miles of city center.”
“Replacement cost has likely plummeted as well as there is an ample pool of underutilized labor out there. Materials have also likely dropped a bit from the boom (even taking into account the global commodities boom).”
Renter knows best.
“And $175psf is still too high, and there is already too much product out there competing with the new construction, which is explains why new home starts/sales reached another new low last month. ”
Too many 4000+ sf places with full modern systems in “better” locations on the northside? For under $1mm?
No one was claiming that it’s $175 psf to build stick houses on 1/3 acre lots in Kendall County.
“Traffic is a real killer. Imagine how much worse it would be without 9% unemployment and 200k more residents”
i do have to say, from my point of view over the last five year traffic has gotten better, still sucks but better. and once we hit $5/GAL this summer you will see it thin even more.
i have family in mt prospect that stopped taking the metra and wentback to driving to the loop because the traffic has gotten better.
Developers are barely building new in-fill these days either. The former tear downs are now rehabs. Has new construction become too expensive for most people? Imagine a city with no new buildings because it is too expensive!
What happens if there are not enough millionaires to afford these million dollar homes?
What if there are not enough hundred thousandaires to afford the $650,000 homes?
I just don’t buy it.
There are a lot of owners who ‘just don’t have to sell’ or can afford to take a loss but choose not to. That’s typical of the higher end.
However, when they do chose to sell, they will have to take a substantial loss and the longer they wait the more it will be. That’s they only reason why higher end SFH seems to be supported.
I’m not saying that a SFH 5 miles from the city center * on the northside * will be cheap, it will always be expensive due to the limited number availble; however, they will have come down significantly so that they can start moving again, the lot prices and construction costs will also fall as the remaining crapshacks are torn down and replaced during the next decade or two.
“Too many 4000+ sf places with full modern systems in “better” locations on the northside? For under $1mm?”
I’d say a brick facade build on a 125×25 lot is probably north of $200 / sq ft, from a lot scrape.
As Anon notes, the systems can drive costs well in excess. The vast majority of homes have inadequate ductwork plus city homes usually require 2 zones, sometimes 3 if you want to get fancy. Humidifier, UV air purification, air intake (for really tight homes), sump backups and ejectors, drain tile systems, alarm, CCTV / intercom / gate buzzer, tankless or high gain water heater, boiler (radiant basement), outdoor lighting controls, sprinklers, gycol outdoor heating, etc. You could spent over $200k on upgrades and many preferable homes have at least 50k in builder cost compared to a crappy suburban build. That is $12.50 / sq ft on a 4000 sq ft home.
On a frame house, Hardi siding plus 1″ polyiso insulation will run you at least 30k more versus crap vinyl over tyvek (7.50 / sq ft). No paint and it lasts 50 years. 2×6 construction and upgraded insulation, plus any degree of soundproofing will double that amount.
Then there are finishes. New subzero refrigerators run 8k at retail. Three woodburning fireplaces — another 15k. A master bath redo costs 20k, so figure at least 15k for a “I live in Lincoln Park style master bath”…
So yeah there is distressed capacity on the market. Just like we have high unemployment right now. But like all cycles, it turns. Mean reversion. In this case, cost reversion.
And yeah, building materials are more expensive than they have been in a long time. Metals especially.
Again, it’s difficult to overcome the fact that Feb had the lowest number of new home sales in nearly 50 years. Those figures include in-fill, not just homes in BFE. If anything, the infill should return before the BFE homes, there are so many vacant subdivisions anyway that the infill demand should be higher, but it’s just not. Im sure there are a variety of reasons for the low figures (tight credit, unemployment, supply/demand) but most assuredly price has something to do it with to. Go 5 miles south or southwest of the and see how much it costs to build a house – it ain’t no $175psf with a $400k lot.
“Imagine a city with no new buildings because it is too expensive! ”
That pretty much typifies the city of Chicago between 1960 and 1996. Other than some awkward looking townhouses in Lincoln Park, there wasn’t much build at all.
One thing the bubble did do – improve a crappy housing stock.
“and see how much it costs to build a house”
The cost of building is relatively static in a metro region. The same crew that builds in Orland Park can also build in Winnetka. So quality is lower (yes plainfield does not build Lincoln Park standards) or lot values are cheaper.
Yeah, the nubmer of new construction homes isn’t just distressed, it’s distressing! And depressing too.
This is a hell of a cycle! The industry as a whole needs to lower construction costs and material costs *significantly* if they want to start building more infill housing; because a lot of that exurb demand is *dead* and in some cases in some areas, sells far below replacement cost. And in places like AZ, they still can’t get rid of the excess capacity. Sure it might cost a $1,000,000 to build a 4,000 sq ft home with all the bells and whistles…but if they hold the line on that price…well,
what you see is what you get.
lowest number of new home sales in 50 years, since they started keeping records.
and I expect things to get worse.
“So yeah there is distressed capacity on the market.”
“One thing the bubble did do – improve a crappy housing stock.”
Maybe early in the bubble when the premium pricing actually stood for a premium product. But as we know by mid and late bubble there was a lot of McCrap built where developers cut corners and just rode the bubble. I’m thinking of the four story McCrapBoxes with cinder block siding and efflorescence on the front and water filtration issues.
There was a lot of crap brought online by the bubble as well. The more time that passes since the end of the bubble the easier it will be to spot the quality from the crap, IMO.
“I think you’re on to something there, and I’ve been grappling with this as well.”
Dan — we call it an asset floor when we acquire a business. A manufacturing business that owns its own plant and equipment is worth more than one that does not, holding all else constant. The value of the PPE, worst case scenario, is your floor. Same thing in real estate — there is intrinsic value in both cash flow rental opportunity cost and replacement value.
This is why the Nort Seit will never go out of style:
http://www.cityofchicago.org/content/dam/city/depts/dcd/tif/plans/T_011_AddisonNorthRDP.pdf
Show me a suburb that can even remotely compete with that, even accounting for graft. : )
“There was a lot of crap brought online by the bubble as well. The more time that passes since the end of the bubble the easier it will be to spot the quality from the crap, IMO.”
No doubt about that. I trust the city 1995-2000 builds a lot more than 2005-2008. I have heard excellent things about the high end builders from that timeframe — Environs, Managan, etc. They didn’t seem to do as many, and the finishes weren’t as ultra high end, but the quality was excellent and everything was done right. Lots of high end built ins and trim work, solid doors and deep framing — that stuff is very expensive over 5000 sq ft.
The other thing is the buyers from that era were actually financially capable of owning such a home. I find homes owned for long periods from that time frame were well cared for and invested in with lots of upgrades that they will never get paid for but are nice to have regardless (exterior landscape lighting, landscaping, etc).
“The value of the PPE, worst case scenario, is your floor. Same thing in real estate — there is intrinsic value in both cash flow rental opportunity cost and replacement value.”
In undergrad (1990s) we were taught the book value of a biz was it’s theoretical floor. Turned out that wasn’t true in a bear market.
The townhome on dearborn in today’s first was built in the 1980’s. Sandburg village IIRC was constructed in the 1980’s, and the sears tower was completed in 1970’s (granted not residential).
The reason chicago had so relatively little construction during those years wasn’t because of cost, it was because few wanted to buy new construction in Chicago, they flocked in droves to ranches in the suburbs. Old irving park was a beautiful vibrant area that became a run down neighborhood with dozens of boarding homes and old victorians converted to mutli units and studios with murphy beds; while the suburbs had a proliferation of building townhomes, and SFH. It’s not accurate to blame lower level of construction on price.
“That pretty much typifies the city of Chicago between 1960 and 1996. Other than some awkward looking townhouses in Lincoln Park, there wasn’t much build at all.”
“and I expect things to get worse. ”
Yet personal income, employment and investment gains are all going the other way? If so, not driven by fundamentals. Not that housing is an investment, because it isn’t, but most professional investors will tell you the time to buy in when people hate the category the most, absent fundamentals. Sounds like you made that case.
Most people hated Pets.com too – they were shipping plenty of cat litter around the country.
“#JMM on March 28th, 2011 at 2:45 pm
“and I expect things to get worse. ”
Yet personal income, employment and investment gains are all going the other way? If so, not driven by fundamentals. Not that housing is an investment, because it isn’t, but most professional investors will tell you the time to buy in when people hate the category the most, absent fundamentals. Sounds like you made that case.”
“
“In undergrad (1990s) we were taught the book value of a biz was it’s theoretical floor. Turned out that wasn’t true in a bear market.”
Book values are not market value or OLV (orderly liquidation value). They are an accounting concept which values PPE at depreciated cost. So, I would agree. Book values are largely meaningless — ask any public company CFO who takes a non-cash, non-operational impairment charge on goodwill.
JMM: http://cr4re.com/charts/charts.html?New-Home#category=New-Home&chart=NHSFeb2011.jpg
Check out that chart. Nobody thought it could get any worse, and it did.
“Most people hated Pets.com too – they were shipping plenty of cat litter around the country.”
Remember we are talking about an asset class, not the individual asset itself. There is a difference.
No dispute there. Why buy new when you can buy newer existing resale? I am surprised there are any spec developments whatsoever. Developers with a lot of balls, if you ask me.
But are you arguing that condition will continue forever (we’re talking 2 years from the near collapse of financial marekts — houses take about a year to build right)? If not, then what say you of the replacement cost once distressed supply is exhausted? Or of increasingly frustrated buyers who cannot buy a distressed home (the old “one for sale at this price”)…
“The reason chicago had so relatively little construction during those years wasn’t because of cost, it was because few wanted to buy new construction in Chicago, they flocked in droves to ranches in the suburbs.”
Actually, high interest rates were the primary cause. In effect, cost of building, but not the materials.
“Sandburg village IIRC was constructed in the 1980’s”
You don’t RC. It was built in the 60s–originally “planned” to be CHA–and converted to condos in ’79.
Just like Marina City. Except no board president running a prostitution ring.
JMM: I’m not arguing that it will continue forever, but, if prices for SFH within 5 miles on the north side cost $1,000,000 replacement cost…..there’s not going to be much if any new construction for years to come. SOmething has to give.
“Just like Marina City. Except no board president running a prostitution ring.”
And that Marina City was never planned to be CHA.
Fun fact: Original developer of marina city sold the project and left town (in disgust) after da mare’s guy explained the buck-a-truck “campaign donation” system.
“Pricing still needs to reference replacement cost.”
ABSOLUTELY NOT TRUE!!! When a market is in need of correction prices can theoretically go to zero regardless of cost of production. Can’t stay there forever and not much will get built until it exceeds this cost, once again, but ABSOLUTELY POSITIVELY NOT TRUE that this SETS a floor.
“I’m not arguing that it will continue forever, but, if prices for SFH within 5 miles on the north side cost $1,000,000 replacement cost…..there’s not going to be much if any new construction for years to come. SOmething has to give.”
There haven’t been that much in the last ten years, really, in that zone.
“SOmething has to give.”
I call it stop f’n building!
“The homes may be priced low but the taxes aren’t. $23K on a $600K place? Don’t you have to have lived in a property for 3 Januaries to appeal taxes in Lake County?”
I would go to the township office with sale documents in hand. You may get an immediate reduction or have to wait for the yearly cycle.
Bob, nice article on a tiny studio. The best part was, “They then jog to their jobs in Midtown, picking up along the way their work clothes, which are “strategically stashed at various dry cleaners.”
“Can’t stay there forever and not much will get built until it exceeds this cost, once again, but ABSOLUTELY POSITIVELY NOT TRUE that this SETS a floor.”
Duh. We’re well below replacement cost. See mean reversion comment.
“I would go to the township office with sale documents in hand. You may get an immediate reduction or have to wait for the yearly cycle.”
Immediate reduction not likely.
“Duh. We’re well below replacement cost. See mean reversion comment.”
Only the places where the prices don’t make us tuiomalb.
Note the assertion from one of the award stories for Contemporaine that construction cost was $150 psf.
“Duh. We’re well below replacement cost. See mean reversion comment.”
On same page no need to look, liked your list of systems
Back to the post. Gardens are the red headed step child of Chicago housing. They are an aborted concept, held over from not legal (illegal sounded too harsh) basement apartments in two flats. Close cousins to duplex downs where all the bedrooms are below grade. If you hate a garden, you should cut 50% of the cost out of the duplex. Below grade living spaces are only really appropriate for SFH’s where all the primary bedrooms are up.
“liked your list of systems”
I am just jealous and battle weary from putting them in. I have all but the glycol and it was a huge pain in the ass to renovate a 1920’s house with that stuff. City owners take that sort of stuff for granted. Just saying, it isn’t free nor is it cheap.
“I am just jealous and battle weary from putting them in. I have all but the glycol and it was a huge pain in the ass to renovate a 1920’s house with that stuff.”
Huge pita to reno a *90s* home with all that.
“City owners take that sort of stuff for granted.”
City owners of new construction homes done by the (few) good builders. And even then, not all of your list, unless you go all in, and most likely crossing that $200 psf line. And then you have to know that much of that won’t be coming back to you at sale, unless you find *the one*.
“Just saying, it isn’t free nor is it cheap.”
Can say that again.
Oh I remember well the invoices that came with the boxes of the 3 different replacement filters for the HEPA air handling systems… I have said before on here a house can be one f’n pain in the ass. I’ll take a condo/co-op any day.
Now anon, how do you get a tipping point in 03 on the definite monetizing. For me the point of no return was TARP many years later when all the sides were lined up with the same interest. Up til then I honestly thought all banks would go under and there we be some well deserved little perp walks.
dollar needs to be defined in argument as USDX dollar index which is not how I really like to look at things. i.e, Br Real increased spot 7% last year over USD but I do 8+% on demand deposit so really is more like 15% depreciation on dollar. We will not use this concept.
Sticking just to spot I have not really been bearish dollar since about Aug ’08. What you mistook for bearishness on the dollar was really a bearish bet on all fiat currency being simultaneously pissed on with the speed of the pissing being faster in west vs. developing. (Funny how no one says cash is king anymore) Hence long land, protein, energy.
Honestly since ’08 currencies are boring and the dollar decline is way overplayed in the media. Everytime the dollar drops you hear about it and every rally goes silent. In truth the dollar is almost exactly where it was in ’05 after the bitchslapping that it took 02-05. So basically rangebound last 3 years between 72-90 so near the lower band why sell when it looks like it will be so tough trying to get below 74 and a war to get below 72. To me little above 78 all the way to 88 so it appears to me the path of least resistance. Basically neutral (definitely not bearish) and would prefer my next bet be from the long side.
In general, as for changing my mind .. yeah yeah I do it 50 times in an hour, which is why I don’t like making these rorschach reads…
“Now anon, how do you get a tipping point in 03 on the definite monetizing. For me the point of no return was TARP many years later when all the sides were lined up with the same interest. Up til then I honestly thought all banks would go under and there we be some well deserved little perp walks.”
fan and fred (and fha) involvement, the overall size of the mess, the types of entities buying the rmbs, the actions of the comptroller w/r/t national bank exemptions from state mortgage law, the political landscape of housing in general.
You *really* thought all the banks would be allowed to go under? Perp walks, yeah, I expected that, too, but *every*one?
If late ’03 had been the peak, maybe every bank that was already dead-man-walking at that time could have been allowed to outright fail; by the time it really blew up, as Lehman showed, even just letting the worst 25% actually fail would have brought everyone down.
And, I’m cynical enough that “all the sides” = the banks and the guys behind the important Politicos. Their interests were fully aligned by ’03, and there’s *no way* you’ll make me believe that the continued lax fan/fred lending standards + OCC rules + lack of quick movement on *any* limits on risky lending wasn’t both *horrible* policy *and* *nakedly* political.
“fan and fred (and fha) involvement, the overall size of the mess, the types of entities buying the rmbs, the actions of the comptroller w/r/t national bank exemptions from state mortgage law, the political landscape of housing in general.”
Honestly ’03 was the year I walked out on everything and went wandering around Australia and New Zealand for about 7 months. Spent most of the next 2 years just wandering everywhere else. I can honestly say I knew nothing of the lending standard drop until about 05-06.
“You *really* thought all the banks would be allowed to go under? Perp walks, yeah, I expected that, too, but *every*one?”
Well not everyone but no one???? They took a lot of guys down in the S+L (not that I remember it firsthand) so I figured they had to take a good bunch down. I mean what Skilling and Lay went down for now has the FASB seal of approval?
And yes they all would have failed but it would have, in my eyes, been the better alternative to what we have today and are setting up for in the future. I just believe very strictly that nothing good can ever come from separating risk from reward.
From my experience in D.C. I wouldn’t disagree with aligned but I would define it a bit differently as I only have seen one side capable of understanding the complexity of the contracts while the politico side still seems constantly more focused on the security/shelter/food level of Maslows hierarchy. I swear explain to any senior politician something complicated that they can’t understand and they will just shake their head yes for fear of being seen as ignorant. You are talking and all he is thinking is when will you shut up so he can ask for PAC $.
“nly have seen one side capable of understanding the complexity of the contracts while the politico side still seems constantly more focused on the security/shelter/food level of Maslows hierarchy. I swear explain to any senior politician something complicated that they can’t understand and they will just shake their head yes for fear of being seen as ignorant.”
Right. One side gets it, and the other relies on that one side both for their information on how it works and their campaign $$. An extreme form of regulatory capture. The “experts” say it will crater housing, so they say “shit, we can’t have that with teh election only a year away”, so they go along.
As far as the lending standard drop, we go an 80-15-5 in early 2001. With the 5 entirely borrowed from other sources. Lending standards were crap and just kept getting worse.
“In general, as for changing my mind .. yeah yeah I do it 50 times in an hour, which is why I don’t like making these rorschach reads…”
Don’t let G look up one of your old posts. He will accuse you of being a liar and that he has proven you wrong.
JMM… I was sent to the showers here a few days ago, being called a liar, no biggie!!
Anon… crazy thing is I am seeing the exact opposite here. Feels like NYC in the 70’s scerpico style. Today they arrested all the illegal lottery guys and this is serious big business for the Senators here. Last month they closed off the whole police station and cleaned that out too. I swear this is bizarro world we are living in now.
Oh and I need to check but banks here charge something like 100+% annual on credit cards… obviously they are putting up big numbers these days…