Waiting for the Bottom? It May Already Be Gone.

Homebuyers trying to time the real estate market today may think they have it down to a science. They watch the news, read the papers, hear that prices are dropping, and assume the bottom hasn’t arrived. So they wait.

There’s just one problem. The bottom – at least the bottom for interest rates – appears to be gone. And it just so happens that interest rates are a very powerful determinant of how much home you can afford and what you’ll pay each month – even more powerful, in some instances, than price.

Conforming 30-year mortgage rates are already a half-point above their October lows, clocking in at 4.625% heading into the second week of December. This is consistent with the Mortgage Bankers Association’s (MBA) prediction that the average rate on the 30-year loan will increase to 4.7 percent in the first quarter of 2011, and could reach 5.1 percent by the end of next year. Meanwhile, a recent forecast by the University of Chicago Booth School of Business predicts that Chicago home prices will remain near their current levels, while the U.S. economy will enjoy stronger than expected growth in 2011.

In Illinois, the economy is fighting its way back. State unemployment has gone down for seven consecutive months, and a great start to holiday shopping indicates consumer confidence is on the rise. While the Fed has stated its intention to purchase an additional $600 billion in Treasury securities, the MBA says this move is priced into current rates.

It may be hard to believe, but in the long run it makes more financial sense to buy a home at a higher price with a lower interest rate than vice versa. So instead of trying to time the bottom for prices, get the best interest rate you can on a mortgage and home that’s right for you.

For more information on how interest rates affect purchasing power, please feel free to contact me. And please remember that I’m never too busy for your referrals.

Interest rates can impact your payments and purchasing power more than the price of a home.

Monthly principal & interest per $100,000 borrowed
4.25% $492
5.25% $552
Loan amount with $2,000 monthly principal & interest
4.25% $406,000
5.25% $362,120

Courtesy of Guaranteed Rate

The Right Time to Buy or Sell

With winter approaching, many homebuyers and sellers assume now is the time to put real estate matters on hold. That logic may have held true in years past, but in the current market the idea of hibernating for the winter may not be the best decision. Following are a few reasons why right now is the right time for both buyers and sellers to be in the market.

Good Time to Buy
1. Price – The #1 reason qualified individuals are reluctant to buy today is a fear that prices will fall. And they may. But according to a recent story on MSN.com, “it doesn’t really matter in the long haul.” Housing affordability is near an all-time high, and according to the S&P/Case Shiller Home Price Index, local prices have increased for six consecutive months through August.
2. Interest Rates – Mortgage interest rates are 30% lower than they were four years ago. When you layer today’s rates on top of prices that are 30% lower, you get monthly principal and interest that is only slightly more than half of what it was four years ago. That’s a big deal.
3. Less Expensive Than Renting – According to the latest Trulia.com Rent vs. Buy Index, it is less expensive to own a home in Chicago than it is to rent. The 50-city index is calculated using the average list price compared with the average rent on two-bedroom apartments, condos, townhomes and co-ops listed on Trulia.com.

Good Time to Sell
1. Buyers Are Serious – It may be fun to drive around and look at open houses on a beautiful summer day, but when the weather starts to turn and people get busy with holiday schedules, kicking the tires on a new home is usually the last thing on someone’s mind…unless, of course, they actually need to buy. Sure, there are fewer buyers in the fall and winter, but the ones who are out there are serious.
2. You’re Moving Up – The thought of losing equity on a sale doesn’t appeal to anyone, but in this market, sellers who trade up have more to gain than to lose. That’s because, dollar for dollar, the more expensive home they’re buying almost certainly has come down in price more than the home they’re selling, which means move-up buyers will actually come out ahead provided they have the finances to complete a transaction.
3. Less Competition – While inventories remain high relative to past markets, the number of homes for sale in the fall and winter is generally about 25% less than in the spring. In addition, the recent moratorium on foreclosures has kept thousands of homes off the market. Those homes will eventually be put up for sale. So if you can capture the last few weeks of fall, you will face less competition than if you wait until next spring.

If you’re considering buying or selling, there are many more reasons why it makes sense to do so now. To talk about your specific real estate needs, call or e-mail me today. And please remember that I always appreciate your referrals.

What’s Driving the Sale of Downtown Luxury Condos?

While the local housing market struggles to climb out of the doldrums, wealthy would-be homeowners are plunking down sky-high sums for lofty, luxurious homes in new downtown condo towers. What’s driving those sales? Timing, timing, timing.

By Dennis Rodkin, Chicago Magazine

In the first few months of 2010, as some local developers slashed prices or staged auctions on their newly built condominiums, a small segment at the upper end of the condo market flourished. As Gail Lissner of Appraisal Research Counselors notes, “There are always wealthy people with the ability to buy.” The big difference lately is that those well-heeled folks have been shelling out princely sums to buy luxurious new condos in downtown high-rises. “These are not speculators buying cookie-cutter condos,” says Lissner. “By and large, they are buying to live in these really high-end, unique places.”

Consider these numbers: From the beginning of the year until the middle of May, about 40 downtown condos have been sold for $2 million or more—and most of those condos were in buildings that opened in the last two years. (Some sales may have not yet appeared in public records.) They ranged from an $8.182-million sale at the Elysian—the 60-story tower at 11 East Walton Street designed by Lucien Lagrange—to a three-bedroom unit that went for a little more than $2.24 million at Aqua, the much-praised skyscraper at 225 North Columbus Drive that Jeanne Gang designed for Magellan Development. (The Elysian sale was the highest price paid for a Chicago condo since November 2006, when a 61st-floor unit at the Park Tower—at 800 North Michigan Avenue—went for $8.275 million.)

To update an old real-estate adage: timing, timing, timing. Many of these new elite homeowners made their decision to buy several years ago, while buildings were under construction or still in the planning stage—and before the recession punctured the real-estate boom. With those condo towers now ready for residents, the folks who agreed years ago to buy are finally inking the deals.

That’s generally what’s been happening at the Elysian. Since January 1st, at least 16 buyers there closed on condos priced at $2 million or more (in addition to the $8.182-million sale already mentioned, one condo went for $7.25 million and another for $6.9 million). That’s on top of a first round of December 2009 closings at $2 million and up. Meanwhile, at The Legacy (which recently opened at 60 East Monroe Street), three units priced at more than $2 million were among the first closings in the building—and usually the earliest buyers sign off on the earliest closings. (Since condos on a building’s bottom floors are often finished first, some lower-level, lower-priced units bought during construction can also be among the earliest closings.)

Buyers who signed contracts before the bust could have opted to cancel their contracts when the economy soured—as did numerous buyers of medium-priced homes. But “10 percent [the standard deposit on a condo] is a lot to walk away from” on a multimillion-dollar sale, Lissner says. Still, as she suggests, it’s also likely that for many of these rich buyers “their lifestyle hasn’t changed in the downturn.”

Many rich people have not had to worry about the tight mortgage-financing climate that has contributed to the drag on the larger real-estate market. Mortgage lenders have been requiring bigger down payments, higher credit scores, and more detailed documentation of financial histories from average buyers. These aren’t issues [wealthy potential homeowners] have to think about. On top of this, their buying had nothing to do with the $8,000 federal tax credit.

That is especially true of well-to-do buyers who made their purchase decisions recently. In early May, someone paid $2.3 million for a previously owned condo on the 51st floor of the Trump International Hotel & Tower (that building, at 401 North Wabash Avenue, opened in 2008). Another buyer spent $3.45 million in April for a 54th–floor condo at 55 East Erie that an investor had held on to since 2003. These new purchasers are almost always cash buyers. They see the value in buildings like Trump and the Elysian, and they’re banking on knowing that whenever the market gets better, they will be holding valuable real estate.

With all this talk of pricey purchases, don’t get the idea that the market’s doldrums haven’t affected luxury condo sales. Look at 50 East Chestnut, where prices start at $2 million. Tucked into a prime Gold Coast location with a full-floor layout for each of its 34 condos, the building notched 17 sales from its opening in late 2007 through the end of 2008. Since then, there have been only two sales, one in 2009 and another in the first four months of 2010. The condo that sold this year did go for $3,335,875, but a unit of the same size one floor up went for $3.964 million in late 2008.

Once again, timing may have been a factor in these stalled sales. The building opened several years after an earlier wave of luxury condo towers—such as Park Tower (which opened in 2000) and the Fordham (which opened at 25 East Superior Street in late 2002)—welcomed their first homeowners. And the opening of 50 East Chestnut coincided with the market’s collapse, which leads to the conjecture that some buyers may have canceled contracts. (Developers are reluctant to discuss sales downturns, and public records are equally mute.)

It’s also important to note that high-end sales weren’t restricted to only the new condo towers. At the 21-year-old Bloom­ingdale’s building (formally called 900 North Michigan), a new block of condos, built on eight floors vacated by the J. Walter Thompson ad agency, recently hit the market. Three of those condos were sold this year for more than $2 million, including a three-bedroom unit that went for $4.75 million in February. Since being converted to condos in 2004, the Metropolitan Tower—built in 1924 at 310 South Michigan Avenue—has tallied more than 100 sales, with prices ranging from $250,000 to $800,000. But there have also been two sales in the $3-million range and three in the $2-million range; in 2008, the building’s 5,400-square-foot penthouse went for $6.144 million. And at the venerable Palmolive Building (1929), where condos were installed five years ago, a buyer closed on a $2.315-million sale just as this issue was going to press.

Granted, these eye-popping numbers need to be put in perspective. First, while precise statistics are hard to come by, anecdotal evidence (including past stories in Chicago) suggests that the number of high-end downtown condo purchases—the sales of new condos at places such as the Fordham, Park Tower, and the Palmolive, as well as resales on East Lake Shore Drive, in Water Tower Place, and at other locations—during the boom years would more than likely dwarf this recent spike.

Nor should one conclude that the condo news from downtown signals a newfound disdain for palatial ground-level houses. In fact, high-end single-family homes have been selling as well. In May, for instance, a Lincoln Park mansion priced at $8.5 million went under contract after only one month on the market. But the sales of expensive single-family homes have not occurred in one concentrated locale and so failed to make as big a splash. Anyone interested in buying a comparable house today will find plenty of luxury offerings, but they are widely dispersed—from Winnetka to Chicago to Hinsdale—and many of them have been lingering on the market for months, if not years.

Another thing to remember is that even though the sale prices for sumptuous downtown condos are high, in some cases they have actually deflated since the boom years. Consider the May sale at the Trump mentioned earlier. The condo’s origi­nal owner first put the unit back on the market at $3.2 million in June 2009, shortly after the developer delivered it. Whether the latest buyers had waited patiently for prices to come down or only became ready to buy this spring, they got the condo for $2.3 million—a 28 percent discount from the seller’s original asking price.

But that doesn’t mean the original owner took a loss, particularly if he bought at pre-construction prices (public records don’t reveal when he first agreed to buy or what he paid). A more characteristic exchange involves the couple who bought a $4.417-million unit in the new bank of condos at the Bloomingdale’s building in 2008. This year they resold the place for $4.75 million, realizing a tidy 7.5 percent profit.

Then there was the couple who closed on a $2.427-million unit at the Elysian in December 2009. A month later they turned around and sold the place for $3.2 million—a whopping 32 percent profit. It is unclear whether the couple had bought the property with the intention of flipping it. Maybe their lives changed in the years since they put down the deposit. Or maybe, with their eyes on the skies, they had simply decided it was time to trade up.

Problem Buildings in Chicago – Watch Out!

We hear it on the news everyday that foreclosures are increasing. Now is the time to buy, now is the time to get a great deal through a foreclosure or a short sale. While I agree that now is a great time to buy, those looking at certain building in the Gold Coast, River North, and Loop areas need to be very careful. Sometimes there is a reason why a condo is selling at only $200/SF in the Gold Coast.

To save time I am going to come right out and tell you the problem buildings.

10 East Ontario, 345 N. LaSalle, and 440 N Wabash.

There are others, however, let us stick to these for this topic. They are American Invsco buildings. Many people who bought into these buildings could either not afford the units or decided to sell them after a couple of years. Because of both reasons we have seen a huge influx of units in these high rises, especially at 10 E. Ontario (Ontario Place). Whenever supply exceeds demand, price of supply must lower, in order to increase demand. We have seen this at Ontario place and unfortunately many units are now going “short sale” (sales price is less than the mortgage amount) or going into foreclosure. Whenever a building has large amounts of foreclosures we see a few things happen.

ASSESSMENTS: Let’s just think logically. If you cannot pay your mortgage, can you pay your assessments too? Which do you typically let go first? You let your assessments go first, they usually won’t affect your credit like several late mortgage payments would.

Currently at 10 E. Ontario there are 64 units on the market, if half have stopped paying their assessments, this means that the association is seeing less cash come in. Which means one of two things happen.

1. Maintenance on the building gets neglected or,

2. Assessments are increased or a special assessments is called

Neither of these are good for unit owners or owners trying to resell their units.

FINANCING: Especially now, banks are looking at buildings and associations very carefully. If the building has an excessive amount of foreclosures then the banks will simply not lend. This means that for the most part the only people able to buy into the building are cash buyers. This will then decrease demand substantially for the building, while supply remains the same.

I hope this was not too dry for you, however, I want to stress that it is very important you ask yourself why a condo is so cheap. Look into the building, check blogs on-line, as a realtor, do a google search; make sure that your future investment is sound and secure. There are plenty of great deals on the market in great buildings, be sure to buy one of them instead!

Two Downtown Condo Projects Switching to Rentals – The Mondial & The Trio

According to Crain’s two downtown condo projects may switch to rentals – the Modial (900 W. Huron), which is a 141-unit in River West and the Trie, a 100 unit building in the West Loop. Mr. Berger the developer of the Mondial says he has recently cancelled 50 purchase contracts and returned earnest money to the buyers. He is quoted saying “Do you think someone who has a contract for a $450,000 unit that they signed two years ago is going to close?” “They aren’t going to close, so why allienate the marketplace? We have to do the responsible thing.”

I give Mr. Berger great credit for seeing reality, not being bitter and doing the smart thing.

WHAT ARE THE CHALLENGES THE MONDIAL & TRIO WILL FACE IF THEY GO RENTAL?

The largest challenge they will face, will be their initial challenge of restructuring their construction loan. Both have their loans coming due in the next year and their banks will need to extend them, or re-finance the loan. However, I do not see this being an issue. It is the smart thing for any bank to do given the current economic climate.

The Mondial & Trio will also need to face the challenge of running the rental building. Not too big of a deal, they can farm it out.

The next challenge they will face is a market place with declining rents. Not a huge deal for them, they are into the building cheap, they are the developers!

HOW WILL THIS CHANGE THE RENTAL CLIMATE IN CHICAGO?

In total it will add an additional 241 units to the market, an increase of 10% in comparison to the amount of dedicated rental units that were expected to hit the market over the next 2 years. This will only assist in driving rents lower throughout the downtown market.

One of the largest reasons these buildings will help drive rents lower is because they are condo quality. Hardwood floors for instance is something that is not found in most “all rental” buildings. Renters are becoming more discerning as they are seeing how many private condo rental options are available to them.

I believe at the end of the day the Mondial and the Trio will do well as rental buildings. Perhaps in 5 to 7 years they can convert back to condos; however until then they will join the ranks of several other projects throughout Chicago, such as The Lofts @ Roosevelt Collection that have now gone ALL RENTAL.

And a recent crains article claimed that rental prices are going to increase soon in Chicago…haha…idiots

Is now the time to buy in Trump Chicago?

I have been blogging about Trump Chicago for a while now and have always said that many great deals could be had, but I have never called a bottom. Never once I did I say you MUST buy now. Never once did I say the opportunities are going away. Well folks…I am going to start changing my tune.

Over the past few weeks I have had conversations with several different people looking in Trump who wish to combine units. I have rented several units to clients who have expressed interest in soon making offers. We have clients now going directly to Trump to look at inventory that is not on the resale market. We have clients who are now starting to pay a premium to get a view because the owners know they can ask for it, they are the only ones on the market.

If you have been on the sidelines waiting to buy in Trump I recommend you start looking NOW. Prices are not going up and the building still has some time before that happens, however, inventory is shrinking and if you are looking for the PERFECT unit I suggest you start looking to buy soon because you want your options to be open. You do not want to buy into the building after the market has started going up because chances are you will not get a GREAT deal, only a good one.

The AQUA – Why are more people not talking about this building?!

Trump Trump Trump Trump…that is all Chicago is talking about. Then there is the occasional article about the Spire…then we might hear about Waterview, Perhaps the new Ritz Carlton project…but why is there not more talk about the Aqua? You may remember it from the news when the Fairmont group backed out of their hotel plans in the Aqua but besides that no one has been speaking a word about this soon to be occupied Chicago gem.

The Aqua will house both Condos and Apartments along with a soon to be named hotel. Pre-Leasing has already begun for the apartments and it appears that move in will be this May. The Aqua is the building below that has those strange looking balconies. Each balcony will be unique says the developer…not a single one will be like any other.

The Aqua

The amenities of this building can easily start to compete with the best of Chicago and will probably win. The two floor shore club for Aqua residents boasts 3 Pools, Sky Lounge, Outdoor Garden with Grills, Cabanas, Fire Pits, Walking/Jogging Paths and much more. In total, the outdoor recreation deck will be the largest out of any building in Chicago. The Fitness center will be the most expansive in the Lake Shore East neighborhood. The building will also boast 24hr Doorman, Party/Billards Room, Yoga Rooms, Business Center, WiFi internet access, Bike Storage, Hot Tubs, Library, Coffee Bar & Lounge, On-Site Dry Cleaners…the list goes on.

The interior features are lush as well featuring Grohe faucets, Snaidero cabinetry, Bamboo flooring, Floor to Ceiling Windows, Limestone in all Baths…again the list goes on. The views from the Aqua are incredible as well allowing you to see the Lake, Millenium Park, Lake Shore East Park and of course the amazing Chicago Skyline.

With all this being said, I wonder why more people are not talking about this building. I have spoken with several people who have purchased units in the Aqua and they all cannot wait to move in. I think they believe they are moving out of the country because all they talk about is sitting by the pool on their cabanas, reading a book and having a drink. Perhaps when their mortgage statement arrives they will awake back to reality. However, even then they will know they are living one step closer to paradise.

So how much does the Aqua cost? Well, here is the break down if you plan to purchase a condo in Chicago’s newest gem.

Currently available on the market…

One Bedrooms from $340,999

Two Bedrooms from $705,000

Three Bedrooms from : $1,029,000

If you plan to rent one of the apartments in the Aqua you can expect the following in rent prices

Studios from $1464 to $1660

Convertibles from $1550 to $1806

One Bedrooms from $1926 to $2350

Two Bedrroms from $2900 to $3111

Trump Chicago Hotel Condo SHORT SALE

So we’ve been waiting for this to happen, Short Sales in Trump on the Condo Hotel Side. We’ve had one listed for a little while, however, the pricing has finally hit new lows. While I am proud to represent this listing with Crown Heights Realty, the pricing shows what has happened to the condo hotel market not only in Chicago, but throughout the country.

401 N. Wabash Unit 2018 is our listing. It is a Studio Hotel Room with 604 SF priced at $350,770 which is an incredible value in comparison with what they were selling for over the past few years!

If you are looking for a great deal on a Hotel Condo in Chicago then this is it! The problem? You cannot finance it. It does not matter what your credit score is, what you do for a living, or if you are the almighty himself, you will not be able to obtain financing. Condo-Hotel are considered a Quasi-Commercial loan and banks simply do not want to take the risk on these types of loan products at the current time. So you MUST be a CASH buyer for 2018.

2018 is also a short sale so you will have to wait a little while for bank response. However, it very possibly could be worth the wait. Please contact me to schedule a showing.

Trump 2018