Here’s something we don’t often hear from Chicago real estate agents: “Condos are not a good deal. It’s one of the biggest wastes of money you could ever do.”
But that’s what Tom Caravette, owner of BBC Realty in Wicker Park, told us yesterday. “My advice to a lot of these guys who are looking for condos is bypass this stuff,” he said. “Get a single-family home.”
We called Caravette to quiz him about the market in Wicker Park and Bucktown, where condos are pretty pricey. In 2007 (through August), the median sales price of a condo was $405,500 in these neighborhoods, according to the Multiple Listing Service of Northern Illinois. In Caravette’s view, it’s a mistake to spend that much on a condo, which he argues won’t appreciate significantly. “Show me the money,” he said. “Show me where your clients have made 10 percent return on their condo. Show me where they made 5 percent.”
For the price of a Bucktown condo, you could buy a bungalow on the Northwest Side, he said. He acknowledged that you don’t get the same hipness or nightlife, but he argued that you do get some pretty nice neighborhoods and probably a higher resale value down the road, especially if you put some work into the property or expand it.
For buyers who are dead set on buying a condo in Wicker Park or Bucktown, Caravette said he advises them to stick with units built in the last two or three years – new enough to have updated features and finishes, and old enough to have some kind of track record. “Your best bet is a high-profile unit on a main street with the glam and the fab and the glitz, so people will be sold on the way you’re sold on it,” he said.
Zejas?
“Your best bet is a high-profile unit on a main street with the glam and the fab and the glitz,”
^ It’s interesting he says that, since there are a number people here who say “why would anyone want to live on (insert high traffic major street name here)?”
up,
The Wicker Park / Bucktown high-traffic street is going to have a lot more walkable amenities nearby than Ashland Ave further north or west on Belmont, etc.
z,
Your misspelling of my name appears to be deliberate. Your misunderstanding of my sentiments doesn’t.
where do I start?
First of all, not everyone buys condos (or homes etc.) as an investment in hopes of making major money from appreciation. I bought mine a year ago, fully expecting it to lose 5-10% of its value in the short term. I bought it becuase home ownership and a having a great place to live means a lot to me.
“Your best bet is a high-profile unit on a main street with the glam and the fab and the glitz, so people will be sold on the way you’re sold on it”
Sounds like Eric (just kidding), but the key is the second part of the statement, “sold on the way you’re sold on it”…when the market slows down, people will see through this philosophy as it really just boils down to the hype created in the last 10 years (by real estate companies like @properties, imo). As supply increases and the hype fades, buyers will realize that there are “high-profile unit[s] on a main street with the glam and the fab and the glitz” everywhere.
I’m personally thrilled at the idea that more of my condo dwelling neighbors will be long time residents/neighbors, get rid of the flipping subset and a lot of the irritations with this demographic disappear rather quickly (ie, the ones who show up indignant at community/alderman meetings howling how crime is hurting their property value – as if everyone else is somehow enamored with street crime, gangs and the like).
Carter: “…as if everyone else is somehow enamored with street crime, gangs and the like.”
Great, great point.
I think saying that buying a condo is “one of the biggest wastes of money you could ever do” is a huge overstatement (take my last trip to Vegas, for instance). Still, I understand the theme of his comment — that those looking to flip quickly may want to think twice before investing for the short-term.
Carter: “…the ones who show up indignant at community/alderman meetings howling how crime is hurting their property value – as if everyone else is somehow enamored with street crime, gangs and the like”
To be honest, I’m happy when anyone (short or long term resident) gets involved in their community and presses their alderman to do their job (whether their intent is to increase property values or is more sincere). IMO, the bigger problem is residents who don’t get involved at a community level (heck, I’m having problems getting anyone in my condo assoc to show concern about issues in our own homes!)
I see your point, but I don’t consider purely selfish motivations of flipping for a profit to be “community involvement” – do investors go to their banks and financial advisers and just start screaming about their rate of return on mutual funds when the conditions affecting them are half a world away?
There’s a much higher bar when we’re talking about “getting involved” in a productive sense.
This BBC broker guy must purely be talking about the investment side. And if this true, I’m not sure where he’s seeing the explosion in appreciation for $400K bungalows over the next 5 to 10 years.
I’ve researched many and been involved in purchases in bungalows from North Mayfair and Jeff Park to Norwood and Edison Park. There are some flat prices at $400K if you bought in the last few years.
A house is a great purchase in general, if you need a house for you personal situation and want to live father from the city. So, yes, you can find a decent $400K bungalow… but it’s not easy to find one updated or near a train.
It is also curious that he suggests living on a major drag. In my experience, more people will go out of there way to make it clear… no busy streets.
Thanks for the shout Alan…and I agree with your statement about ownership (although I don’t expect a loss on my latest personal home even if I sold today).
I’m pretty choosey when it comes to which “busy” street to live on, but clients have a brain. One friend bought on Western when a really argued against it. But traffic on Western is different than Milwaukee and there seems to be a good amount of change on Milwaukee in Wicker Park.
I’m totally insulted by the way… I’ve never used the terms “glam” or “glitz”. Although I do like to throw around, “This is city living!”
I’d imagine the “busy drag” issue has a lot to do with whether one has kids or not, and is as much a safety concern (if so) than a noise issue.
I see lots of SF houses for sale in the low $400K range by the Belmont/Kimball stop, I’d imagine many need HVAC updating, but that’s a one-time fix (although a hassle, to be sure, I wish I had had the money to do it before we moved in), I do imagine the current work on the Blue Line isn’t helping much, the train has been a massive drag for going on a year now.
I am glad to see people like Alan who realize that home ownership is about more than just making money. I am so sick of all the talk about whether renting or buying is better and how a home is an investment. Yes it can be, but there are a lot of intangibles that aren’t being accounted for on the ownership side. I want to live in a vibrant neighborhood, near public transportation, and close to downtown. If we had bought on investment potential alone there is no way you are going to get that. You would probably have to go to an up and coming neighborhood more than likely where you hide in your home for the next 3 years b/c crime is still a problem and there aren’t any places to go yet. This is an exaggeration, but you get my point.
People need to start separating their investing strategy/portfolio from home ownership. There are plenty of ways to get the benefits of real estate investing without tying it directly to your home. It is great if your home is going to make you some money, but basing your home purchase decisions purely for investment purposes is really going to limit your choices for a decision that has a huge impact on quality/enjoyment of life.
My understanding is that the price per square foot for attached housing has passed that of detached housing, which seems to speak more positively for the demand for condos. Though I still agree with Carter and Alan that a home should first and foremost be a place to live.
The ‘Modern Communities’ report released by GfK Roper Consulting showed an oversupply of large-lot single family homes:
http://www.newurbannews.com/MarketAprMay07.html
Quote:
“Large-lot housing — currently 53 percent of US housing stock — became the most popular housing to build in the post-World War II era, and it has been supported by conventional zoning throughout the nation. Nelson estimates that we already have 23 million more of these units than will be in demand by 2030. Yet builders are adding to this oversupply.”
Read it and weep Zekas and Rojas.
Not sure about that – go to the source story:
And Chicago isn’t even on the list of the “top 100” cities where the drop is expected.
I think that people buy condos because it is what they can afford in where they want to live. I would love to move into a single-family house, but have researched the hell out of Portage Park, Jefferson Park, and the like–and just don’t see anything great about living there. I’m a city person through and through, but if you’re going to need to rely on your car anyway and have no restaurants and shopping nearby, there are several inner ring suburbs that offer more amenities! So, sometimes being a city person just means living in a condo–unless you’re rich. I mean, come on–do you really think people are going to rent for their entire lives? That’s not exactly a great long-term investment either. I’d take home-ownership over that any day.
Jane is all gloom and doom, and only looks at one side of the story. She could be right, but could just as easily be wrong. The future market could break in either direction.
I think that’s true in large part, but the other major reason people buy a condo (or downsize to one) is to not have to deal with all of the hassle that owning a piece of property entails – be it repairs on an older building to raking leaves to shoveling snow.
I am in my 30s, own a condo, and have many other friends in their 30s or late 20s that own condos in the city. For some it’s a pit stop on the way to the suburbs, but many of us are trying to make city condos our long-term homes. Some have bought large three-bedroom condos on quiet side streets near parks so they can raise families in the city, and I applaud them for that. It’s not that we don’t want single-family houses, but just that we can’t afford them in neighborhoods that offer what we want. It will be interesting to see what happens as our families age…
Jane, Jane, Jane
As usual, I read it and understood it, and you didn’t do either. You have an agenda that will survive any state of facts, because you don’t exhibit much interest in facts.
Does your gaffe here cause you any embarrassment? I doubt it.
As Carter points out, Chicago is not on the list of cities that are expected to experience a decline of 1% or more.
Read it and weep?
Please get this, and get it once and for all: whatever the facts are, I’m not going to weep or cheer. I simply want to know what the facts are and try to put them in perspective.
I’ve been through several disastrous downturns in the housing market, and several spectacular uoward surges, and long stretches of stagnation. I know real estate doesn’t always go in one direction, either up or down.
What is your beef with people who refuse to drink your Kool Aid? Are you joining the bubble crowd that seems to have a love affair with ignorance?
How do you do a waste?
The great thing about the current drop in the market is that it does make it possible to get a single family home in the city again. And not just in the far NW side, but in south Logan Square, East Humboldt Park, and many other neighborhoods close in on the Blue Line. Hell – 3 years ago I bought a 2 BR, 2 Bath single family for just under $240K (a few blocks from the Western stop). If anyone is looking for a single family home close to Bucktown/Wicker Park just walk around the area bounded by California, Milwaukee, and Armitage. There are plenty of houses well under $400K. The area is not zoned for condos, so you aren’t competing with developers for a property.
Across the city developers are not scooping up every lot they can get their hands on like they were a few years ago, which makes it possible again to by a “fixer upper”.
Carter,
I actually represented a buyer on a home on the 2800 Block of North Whipple a year ago… it was rehabbed quite well, modern and spacious, and went for $409K. We got a deal… this was far the exception. $400K usually doesn’t get you as much. I was referring to the farther northwest of the city where $400K will get you a re-hab job in a spot with nothing to walk to.
I do believe this area of Avondale/Logan Square you mention by the Belmont Blue Line stop should and could be a boom area. Things have been slow there however. But the commute to down town is really good from the Blue Line stop (and the Logan stop just south).
My contractor and close friend owns a two-flat a half block from the Blue Line there on Kimball. My client, he and I go to the Small Bar on Albany all the time (think its Albany and Wellington). You can find the neighborhood “hipsters” there. He loves the neighborhood… easy to drive or take the train anywhere, and even had a Bar Crawl a few weeks ago.
There are a ton of bungalows available for $400K, some move in ready. But mostly, these homes are pushed way out from what most of my buyers consider desirable neighborhoods. They would rathe buy a $400K condo in a hotter neighborhood.
As long as I’m writing, favorite spots for the $400K house would be “Move In Ready” are Jeff Park, Edison Park as close to the Northwest Highway “down town” strip (Norwood border too), maybe North Mayfair because it isn’t that far west, Gladstone Park, and Peterson Park if your lucky.