They’re growing rare, but deals remain for those in the know
Wouldn’t it be nice to turn back the clock to that golden age, just six months ago, when interest rates sat obediently under 6 percent? What a party that was. Chicagoans dived gleefully into the housing market, spurred by the kind of interest rates posted in February 2005, when the average 30-year fixed-rate mortgage stood at a mere 5.14 percent, according to Freddie Mac.
Such rates allowed buyers to get “more house” than they might have, and lured droves of renters into homeownership. In 2005, 24,471 condos were sold citywide, an increase of 12 percent over 2004 and a staggering 88 percent jump over 2000, according to the Chicago Association of Realtors. Even rising home prices didn’t slow the market down.
But by February 2006, interest rates had crept up to an average of 6.23 percent, according to Freddie Mac, and appeared destined to rise further, according to Frank Nothaft, the company’s chief economist.
Interest rates are still quite low by historical standards, but they’re allowing buyers a little less purchasing power than they had only a year ago. Continued price increases for new construction also are eating into buying power. Chicago’s median condo price was $284,900 during 2005, up 6.3 percent from 2004 and 76 percent higher than the median in 2000, according to CAR.
“There are a lot of people in the market who need to buy something for $200,000 or under, but it is getting very difficult,” says Charles Huzenis, a principal in Jameson Realty Group.
Difficult but not impossible, according to Gail Lissner, of housing analyst Appraisal Research Counselors. “There are always deals out there for the astute shopper,” Lissner says.
Developers are building smaller units to keep costs down, Lissner notes. And even when supply and demand are balanced in the market, as they appear to be at the moment, developers often decide to offer buyers incentives. There’s always that sales goal to attain or that construction loan to pay off.
A good place to start looking for deals, especially if you want to live downtown, is one of the many rental buildings converting to condominium ownership. Last year, more than 4,000 units in rental apartment buildings turned condo in downtown Chicago. It was the most active year for condo conversions since 1979, and 2006 is on track for another bumper crop, Lissner says.
Former rental apartments are frequently older and smaller and so they tend to be priced reasonably for first-time buyers. And these buildings often are located in lakefront neighborhoods with enviable lake and city views.
Fancy a condo in Streeterville, close to the lake, Navy Pier, and Water Tower Place? Hawthorne Development Corp.’s Pearson on the Park, 222 E. Pearson St., was offering one-bedroom condos “as is” from the $170s at press time.
A unit in “as is” condition hasn’t received a makeover since its days as a rental. It’s likely missing the kinds of finishes in high demand in 2006: granite counters, stainless steel appliances and hardwood floors. The look may be more Corian counters, carpet and white stoves, but such units give price-sensitive buyers a foot in the door in popular neighborhoods that might otherwise be out of reach.
Even the updated units in renovated buildings often cost less than condos with similar finishes in brand new highrises in the same neighborhood. At Pearson on the Park, one-bedroom units with upgraded finishes and fixtures were priced from the $190s in early 2006. The most expensive three-bedroom condos, which offered balconies and the best views, were priced in the $590s. By comparison, prices for the bulk of units at new Streeterville highrises, such as at Avenue East, 550 St. Clair and 600 North Fairbanks ranged from the $300s to $2.1 million.
In the Gold Coast, “as is” condos also were available from the $130s at the vintage art deco highrise, 1400 N. Lake Shore Drive, which RDM Development is converting. The builder is offering a package of “Modern Luxury” upgrades for kitchens and bathrooms. Those homes include new appliances, soaker tubs, designer lighting and granite countertops. In-towns with the Modern Luxury package were priced from the $150s at press time, one-bedrooms from the $190s, two-bedrooms from the $270s and three-bedrooms from the $450s.
“There will never be another property in this location at these price points,” says Matt Garrison, of Coldwell Banker Residential, which is marketing the development.
The studios and one-bedrooms at The Flats on LaSalle, 1140 N. LaSalle St., might not be ideal for big cocktail parties, but with prices starting under $100,000, they allow a first-time buyer to live in the Gold Coast for a monthly payment that’s comparable to or lower than typical rent in the area. Up the street, Gallery 1250, 1250 N. LaSalle, also offers efficient units, in a newer building, priced under $200,000.
For some, the downside of buying into older, converted apartment complexes is that there can be fewer amenities – expansive fitness centers, swimming pools and party rooms. The upside is that fewer amenities can equate to lower assessments. With a conversion, however, it’s important to assess the quality of the renovation, especially when it comes to the building’s mechanical systems, roof and common areas. Low assessments can quickly go through the roof if water starts to come through the roof, or antiquated pipes.
The homebuyer who isn’t concerned with purchasing downtown, can find deals by searching south, north and west of the city center.
Neighborhoods such as Uptown and Edgewater are no longer the deals they used to be. In 2005, the median condo price in Uptown was $251,717, a 50 percent increase over the last five years, and in Edgewater, the median condo was $200,000, up 54 percent from 2005.
Rogers Park, the northernmost city neighborhood on the lakefront, is a little more affordable, and some pockets still offer deals, especially on vintage condo conversions. The median condo price in Rogers Park during 2005 was $194,900. Beautiful beaches are plentiful in these parts; hot restaurants are not. Much of the neighborhood still feels edgy, but buyers priced out of Lake View, Uptown and Andersonville are heading north, says Charles Huzenis, of Jameson Realty Group.
“It’s still transitional, but it’s turning,” he says. “We are bringing a lot of product through from developers with one-bedrooms in the $150s, and two-bedrooms in the low $200s.”
In February 2006, Jameson was marketing Farwell Avenue Condominiums, 1652-1660 W. Farwell Ave. Two-bedroom units were priced from the $190s to the $210s at the 39-unit development. Basement-level condos were selling in the $170s, according to sales agent Jeff Singer.
Heading south, west
Buyers are likely to find better lakefront deals by looking south of downtown.
Like Rogers Park, South Shore, eight miles south of the Loop, offers great beaches, but few services and neighborhood amenities.
Crandon Park Condominium, 7036 S. Crandon Ave., is a converted apartment building where prices started in the $160s for basement-level condos in February 2006. A three-bedroom unit with 2.5 baths and a two-car garage was priced in the $290s, according to Michelle Browne, a principal in Mak Browne & Associates, which is marketing the project.
“We are seeing move-up buyers who absolutely believe South Shore is a coming neighborhood,” Browne says. One buyer moved from the South Loop because she thought that area was getting too crowded, according to Browne.
Areas west and southwest of downtown, including McKinley Park, also offer deals, though they tend to have less new construction than central neighborhoods. In February 2006, The Habitat Co. was offering one-bedroom loft condos priced from the $190s at McKinley Park Lofts, 2323 W. Pershing Road. The development, which is close to the 69-acre park in McKinley Park, is attracting teachers and police officers feeling the pinch of housing prices farther east, says Rick Gardella of Habitat Residential Brokerage.
Bargains can also be found at developments that sit on the outskirts of gentrified neighborhoods because developers know that these areas can’t command the lofty prices that their higher-profile neighbors do. Buyers can find a home for less money, and top restaurants and shops a short walk or drive away.
LR Development’s Roosevelt Square is a mixed-income community under construction on the site of a former Chicago Housing Authority development on the edge of University Village. It offers affordable and market-rate housing as well as CHA replacement units. The development’s market-rate condominiums are priced from the $260s, and its two-bedroom townhomes are priced from the $440s. Roosevelt Square, which is bordered by Cabrini Street, Racine and Blue Island avenues, and 15th Street, is close to the Loop and the University of Illinois at Chicago campus.
Developers also are carving out pockets of reasonably priced housing on formerly industrial land along the North Branch of the Chicago River. The area is being promoted as “West Roscoe Village,” as developers borrow cachet from a hip neighbor.
MC Development is offering two-bedroom, two-bath condos priced from the $260s to the $380s at North River Court, 2609 W. Belmont Ave. And a former sausage factory at 3001 W. Cornelia Ave. is being transformed into Cornelia Court, a development of 63 townhomes. Two-bedroom units at Cornelia Court were priced in the $470s, while a four-bedroom, 2,904-square-foot townhome was selling in the $540s, according to Jerry Houlihan, of First Chicago Realty, which is marketing the project.
“You get twice the space for less money than you’d spend on a condo east of here,” Houlihan says. Unit prices likely will increase by about $50,000 come spring, when construction is underway, says Terry Farmer, of developer Cornelia Court Associates.
At developments, getting in early and snapping up a unit at pre-construction prices can be a major source of savings. Condos are frequently priced lower in the initial stage of a project because developers must meet a “pre-sale requirement” before construction can begin.
Buyers who don’t jump in early enough to take advantage of pre-construction pricing might benefit from waiting until the project is winding down. Developers anxious to sell their last few units and move on to new projects often unveil incentives. Want free parking or some fancy upgrades in the kitchen? Perhaps you’ll be in luck.
In January 2006, Dubin Residential was offering $10,000 worth of free upgrades on four remaining townhomes at Kilbourn Court, 4506 W. Belmont Ave., in Kilbourn Park, on the Northwest Side. The developer was offering buyers a free washer and dryer, as well as upgraded tiles, cabinetry and carpets. Dubin was even throwing a hot tub into the deal on certain units.
Prices at Kilbourn Court ranged from the $340s for an 1,800-square-foot residence to the $380s for a 2,100-square-foot home at press time, according to Dubin marketing director Mike Kelahan.
The developer of 918 West Ainslie Condominiums was offering buyers free washers and dryers. At press time Jameson Development dangled free parking spots before buyers at Jefferson Tower, 200 N. Jefferson St., as did developer The Gammonley Group, at 1111 Wabash.
Free upgrades remain the most popular close-out perk, but price discounts and breaks on closing costs are also available. Close-out deals were being offered on rowhouses at Lennar’s Concord at Jefferson Park, 4902 W. Eastwood Ave. Two-bedroom homes previously priced from the $450s to the $480s were selling from the $410s to the $440s in February 2006.
The Enterprise Companies offered rebates of up to $3,000 on its loft condos at University Commons, 1000 W. 15th St. At Tower Suites, part of the Park Place Tower condo conversion at 655 W. Irving Park Road, developer Crescent Heights dangled close-out credits of $10,000 to $30,000, which buyers could apply toward assessments or the cost of a unit.
Terrapin at press time was giving buyers at The Residences at Grand Plaza a credit toward their monthly assessments, from the time of closing through the end of 2006. At DK/Equity’s 400 North LaSalle, buyers are getting a break on assessments until January 2008, and Robin Development Corp. is offering buyers at Grand Orleans, 330 W. Grand Ave., no assessments for a set period of time.
City government also provides its share of deals for those willing to do their homework. The city offers teachers, police and firefighters up to $3,000 in assistance on a home or condo purchase and up to $7,500 if the unit is in one of the mixed-income developments built on former Chicago Housing Authority sites, says Molly Sullivan, spokesperson for the Chicago Department of Housing.
The Department of Housing also collaborates with private developers to provide a number of affordable housing units within market-rate developments, especially in appreciating neighborhoods. First-time buyers who earn up to 80 percent of the area’s median income qualify for the Chicago Partnership for Affordable Neighborhoods (CPAN) program.
Eligible homebuyers are first-timers (have not owned a home within the last three years) with incomes up to 100 percent of the median for the area. Purchase price assistance may be available for households with incomes up to 80 percent of the median, who demonstrate a gap between the amount of the first mortgage they can secure and the “affordable” sales price of a unit. Purchase price assistance comes in the form of a deferred loan at 0 percent interest, which is reduced on an annual, prorated basis.
If buyers resell to another affordable buyer, the second mortgage is transferred to the new owner and needn’t be repaid. If the unit is sold at market price, the write-down amount is repaid to the Chicago Low Income Housing Trust Fund.
In early 2006, a number of market-rate developments across Chicago offered a CPAN component. In Avondale, Dubin Residential’s Shoemaker Lofts, 3927 W. Belmont Ave., had 35 two- and three-bedroom CPAN units priced from the $160s to the $220s. Chateau Design’s Addison City Villas, 3911 W. Addison Ave., offered a handful of two-bedroom units priced in the $150s.
The CPAN program has only been available for four years, but as Chicago housing gets pricier, and more people become aware of the program’s existence, competition for these units is growing, says Mike Kelahan, of Dubin Residential.
“We see a lot of schoolteachers, police officers and blue-collar workers who have good jobs and incomes, but might not be able to qualify for a loan at market-rate prices,” Kelahan says.