Is Chicago’s Housing Market Next?

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The smart money tries to cash out at the peak, no?

Does it always start at the top? Because there’s just no letup in dismal tidbits piling up about big-city high-end condo market: Manhattan, San Francisco, Miami – and now Chicago too?

Just last year, things were still so good on the Magnificent Mile, those tony 13 blocks of Michigan Avenue from the Chicago River north to Oak Street, of landmark towers, shops and restaurants – rents rank among the most expensive in the country – museums, hotels, and high-end condos.

April last year, the 65th-floor penthouse at the Park Tower on 800 N. Michigan Ave sold for $18.75 million, “to a firm with ties to ‘Star Wars’ creator George Lucas and wife Mellody Hobson, president of a Chicago investment firm,” the Chicago Tribune speculated. It was an all-time record. The real estate business was ecstatic.

But it might have marked the peak.

Now another penthouse at the Park Tower – a 4,000 sq. ft. two-bedroom – is for sale, asking $12 million, according to the Financial Times. A $7.5 million four-bedroom three-bathroom condo is for sale at the Art Deco Palmolive Building at the north end of the Mag Mile. Other lesser condos are for sale galore in the area.

And new supply is coming on the market. While much of the Magnificent Mile has landmark status and is off limits to developers, more than 500 high end condos are under development nearby, including the $1-billion, 93-story Vista Tower, with about 400 condos and 200 hotel rooms – according to the FT, “a joint venture between Chinese developer Dalian Wanda and Chicago’s Magellan Development.”

Sellers have come out of the woodwork in droves just when buyers are beginning to have second thoughts.

Home sales in the area have fallen by about half so far this year compared to the same period last year, Christine Lutz, a real-estate agent at Kinzie Brokerage, told the FT.

“The slowdown would be even more pronounced when you consider the large numbers of homeowners who listed homes but then yanked them off the market when they were unable to sell,” she explained.

And homes are sitting on the market longer, before getting sold – those that do get sold and not pulled off the market unsold. Homes priced above $1 million spent an average of 155 days on the market before they sold, according to real estate firm Re/Max, cited by the FT. That’s up from 118 days last year.



But wait … the overall market in Chicago is still holding up, according to Zillow. The median home value in Chicago, at $214,400, is up 2.7% over the past year. The Zillow Home Value Index sits at $221,000 and still seems to be moving in the right direction (chart by Zillow):

us-chicago-zillow-home-price-2016-09

The high end had done particularly well. The FT:

Furthermore, agents report that since 2012, until the recent downturn, it had been affluent areas such as the Magnificent Mile, the Gold Coast, and Lincoln Park, which had seen the strongest price increases.

But this direction appears to have changed. Hard data is, so to speak, hard to come by on this kind of stratification. According to the FT, citing data from Zillow: during the 12 months through March 31, prices at the top 10% of the market have plunged 16.6%.

In fact, local agents suggest the recent slowdown at the upper end of the market is a result of overzealous sellers attempting to cash in on a strong market.

“Rising prices encouraged people to put more homes on the market,” Bernadette Kettwig of Related Realty told the FT. “Now, the inventory in the $2-million and above segment of the market in places like the Magnificent Mile is exceeding demand and driving prices down.”

In other words? The smart money is trying to cash out at the peak, no?

They all know that real estate is only liquid on the way up. Once the market turns and prices head south, liquidity evaporates into the ambient air without a trace. It only reappears after prices have dropped low enough to lure buyers from the woodwork. And these buyers too often operate on false hopes, just slowing down the fall before it continues, until prices are truly compelling again. But by then, there may not be a lot of liquidity left anywhere.

Vancouver’s housing market is in turmoil, Toronto’s is spiking. So what the heck is going on? Read…  There’s No Plateau in a Housing Bubble, Not Even in Canada



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  35 comments for “Is Chicago’s Housing Market Next?

  1. d
    October 21, 2016 at 2:51 am

    The smart money has already got all its capital, and gain out.

    The greedy and smart with no capital or personal liability in, are still playing.

    I would like to see that zillow chart split into apartment/condo and stand alone for the areas it covers, as even in apartment tower citys like Chicago, NY, Etc.

    The apartment condo implosion is still hidden by the support from stand alone, and non spec unit prices, that are frequently not imploding

  2. VK
    October 21, 2016 at 5:06 am

    Wait, what! Chicago has a median home price of $214,000? That is 80% less than the Vancouver median home price. Although it probably is in a mild bubble, compared to Vancouver, London, Sydney, HK etc that’s a bargain price.

    • Petunia
      October 21, 2016 at 3:20 pm

      They have murdered over 600 people in Chicago so far this year. Maybe that has something to do with the perceived value of living in the city. Then there’s the problem with the city being broke and the only people left to tax are the rich.

      • Maximus Minimus
        October 21, 2016 at 5:35 pm

        Well, you’ve got the answer. Maybe Chicago could push prices up, and they will be prosperous like Vancouver.

  3. Vichy Chicago
    October 21, 2016 at 5:43 am

    If one adds in the financial situations of Chicago, Cook County, and Illinois then the real estate market is facing significant headwinds.

    Yikes.

  4. Richard Clark
    October 21, 2016 at 8:50 am

    It should also be noted in the very affluent North Shore communities of Wilmette, Winnetka and Kennilworth, there is extraordinary supply of single family homes for sale, in the $million plus range. Drive down a street and you will see multiple yard signs indicating a property is for sale, so there is price competition and supply problems visible everywhere.

    • Chicken
      October 21, 2016 at 1:00 pm

      Thanks for the tip but I hear the water quality is better in Mexico.

    • Petunia
      October 21, 2016 at 3:23 pm

      Those suburbanites are the middle class workers that had jobs in the auto industry. Now that the jobs are all going to Mexico who’s going to buy all those nice middle class houses.

      • Richard Clark
        October 21, 2016 at 5:12 pm

        Not even close to correct. These are very wealthy communities, Dr.s, lawyers, investment bankers etc. The historical trend is to reverse migrate back to the City once kids are grown, but that would then absorb City condo supply. But you need a buyer first.

  5. Tom Kauser
    October 21, 2016 at 10:34 am

    Charts and graphs and words and charts and graphs and words? Credit is drying up or some conservative official stole the budget for hookers and blow?
    When everyone tells you ” the place was bought as an investment”you are close to the bottom?

  6. Ptb
    October 21, 2016 at 10:53 am

    Cheap and easy money floods into a rising market and then over supply is created…then market drops. Pretty much you can spot this in every market that’s been rising since 2012.

    • Thomas B
      October 21, 2016 at 12:26 pm

      When do you think the US market in general will drop again? Thanks.

  7. kitten lopez
    October 21, 2016 at 11:42 am

    i love this i love this i love this… this is better than porn any day.

    • Chris from Dallas
      October 21, 2016 at 6:12 pm

      Hiya Kitty, as always you crack me up. How are you doing with your bike clothes business start-up?

  8. Matthew Lonergan
    October 21, 2016 at 11:43 am

    I live downtown Chicago. I see no let up at all. There are “luxury” condo and apartment buildings going up everywhere and they are renting and selling them as fast as they can build them.

  9. Lune
    October 21, 2016 at 12:09 pm

    I’m from Chicago, and still visit frequently. Despite the headlines about Chi-raq, downtown and the nice areas are still booming both in terms of jobs and people moving in. Plus, Chicago remains one of the cheapest big cities in the country (although probably the most expensive non-coastal city).

    That said, I wonder if the Vista tower will be the last big project of this cycle. There are several more skyscrapers in the works by Helmut Jahn and Rafael Vinoly in the south loop area that will most likely be canceled if the developers even smell a market peak.

    Heck, even the Vista could be in trouble if China implodes quickly (most of Vista’s condos are being marketed to Chinese investors). Even though they’ve started foundation work, one only needs to look at the big hole in the ground a few blocks away where the Chicago Spire was to be built to understand that breaking ground doesn’t necessarily guarantee a project will be completed…

    Here’s hoping that enough of that hot Chinese money flowing to Vancouver can be diverted to Chicago to complete the Vista. It would be a great addition to our skyline :)

  10. kitten lopez
    October 21, 2016 at 12:19 pm

    you know, i just wanna write a quick love letter to Wolf and you regular folks here, even the apparition known as “event horizon.” i love that Wolf even knew what you were, what you were doing. that’s a warlock who understands the magic of reality, reality of magic. i laugh.

    i laugh and i feel relieved that this place exists with such interesting folks who take the time to write cogent, thoughtful, heartfelt comments that make me feel connected to humanity once again and not so horrified at the “vastness of the universe.”

    that eternal adolescent fear subsides the older i get because i see we have our hands full here on earth with the ever-increasing solidity of the collective holographic illusion that life HAS to be this way and that’s what life is even all about.

    thanks for the arizona monsoon beer poetry and reminders of true spiritual love that reminds us we’re all connected enough to feel shivers and wind when something happens to our beloved. THAT’S what i’ve come to feel the more open and vulnerable i try to be in the midst of all this pain right now.

    thank you for putting up with me, welcoming me, responding to me, inspiring me, even EDITING me.

    i say all this because i do not want anyone to underestimate how important it is to be as aware of REALITY as possible so that more magic may find its mark beyond the collective bullshit illusion.

    thank you for being “the underground” to me, for an underground IS emerging and i will fan its flames wherever and whenever i can because i myself FEEL and KNOW how alive you all have made me and i haven’t met a one of you.

    acknowledgement and respect goes so much farther than you’d ever realize, and it often hits and affects the folks you had NO idea even existed. that’s why i thank you for being ANGELS in this day of incessant TROLLERY. the trolls are real, as they are the SCREAMS under these wheels of life that many of us suppress out of some kind of embarrassed politeness that is Death. thanatos. the darkest deepest death. zombie stuff.

    so thank you. it looks like thins are starting to finally snap. i’ve dared not write too much because i’m holding my breath…this is what i’ve been waiting for…what i was born for…what my life trained me for.

    thanks for being a place of collective SANITY in the midst of the bullshit, because i cannot be any kind of superhero when i’m floundering back at the remedial stage of constant disbelief that all this is fucking happening when it doesn’t HAVE to.

    there. no one’s wanted to SAY this, but i can feel it. the relief. because once you find your underground, your people, then you can stop questioning your madness so much and get shit DONE.

    i’m excited even as i’m terrified and sad. but it’s preferable to the interminable small talk of bullshit that enervates me. i stopped going to parties around here because they were like psychic blood suckings and i’d have to fucking LIE DOWN or i’d faint. people can’t lie to me with their eyes but their MOUTHS! i’d wanna say, “which conversation are we really having? the one with your eyes or your mouth?”

    as you can tell, people either get me/need me or are repelled by me. the vast majority are repelled. like Petunia, i’ve done the tango with my demons of reality long, long ago and life’s way too short for the bullshit mouth conversation.

    but you all make me feel …human. i was gonna say “normal” but that’s a horrendously bad word in this house.

    thank you. this isn’t just a MONEY site, Wolf. it’s magic. the real and true magic of the beauty of humanity beyond the deadening hologram of bullshit that is killing everything gorgeous and alive.

    this is hardly just a “money” site. so many of you are angels in disguise. and event horizon… i get what you’re doing. as an artist and performer, i GET it. do your thang. only try and not let the magic and power of your role and all you see, bite you back. that karma concept is just science. math, if you will.

    sorry this is long.

    and thanks, Chris from Dallas. James actually prefers the more PUNK nature of your sandwich board/dancing in public idea. i’ve been too terrified of courting more cops, but i like the DARE to go into fear. there’s always swagger and transcendence behind the stomach aches of stage fright.

    but i know a lot of you here already know this. i can tell!

    that’s why this place is so fucking cool.

    the new underground… emerging before my eyes. how exciting is THAT?

    besos and have a good day,

    x

    Kitten

  11. kitten lopez
    October 21, 2016 at 12:39 pm

    p.s. and it’s not just the last handfuls of articles and the comments that have me feeling that we’re at a newer level of “snap.” maybe it’s that a lot folks said it was gonna snap after the election. but more it’s that i’m seeing people close who’ve been trying to believe and run harder and finally crashing… i can FEEL it.

    us more feral kids who were taught to smell trouble in the wind, we intuitively know when things aren’t right even at other people’s dinner tables, and just like there’s a smell to the air right before any big storm, i can just FEEL it. we’re at a new level of collective disbelief and cynicism…a new phase past the tightly corseted bullshit… and this site just tends to let me check my feelings next to the actual “data.”

    you understand. there are no real words for these things.

    but even the report on the art world had me laughing because i wondered why the girl in front who used to airbnb her place out here and also in brooklyn, i was wondering why she’s been around and not hustling her “skyrocketing” art career??? because yeah… they WERE throwing lots of money around at the young uns in the arts unlike i’d ever seen before. people were telling ME to go cash in but i’d never dare. art is my religion. it’s in how i live my daily life now. can’t sell it for anything. i’d die.

    • Chris from Dallas
      October 21, 2016 at 6:49 pm

      Yes, Thank you Wolf for all the FACTS. WolfStreet is a Reality Shampoo, washing out all the BS the spin doctors have dumped in our brains.

      Despite all the evidence to the contrary, I still believe we need to count our blessings and follow our dreams. Here’s just one story that clearly demonstrates how hungry the world is for truth and basic values.

      50,000+ applications on a wing and a prayer of a return to a more wholesome COMMUNITY lifestyle and meaningful relations with neighbors that all know you by name. Interesting that the 3 families chosen were all from BC, with two families from Vancouver itself. As called by Wolf at least a year ago, Vancouver is on the bleeding edge of the destruction of the middle class.

      http://www.nytimes.com/2016/10/21/world/americas/cape-breton-whycocomagh-free-land.html?_r=0

      • kitten lopez
        October 22, 2016 at 11:06 am

        CHRIS FROM DALLAS! good morning, my dear brother! i just read that story and i agree that it was beautiful to see human dreams of community not only still exist, but are more alive than ever in this era of tech:

        “Despite all the evidence to the contrary, I still believe we need to count our blessings and follow our dreams. Here’s just one story that clearly demonstrates how hungry the world is for truth and basic values.”

        even as i’m sad and scared about the death of america and the coming question marks, i agree with you that now, more than ever before need to count our blessing and follow our dreams. PERFECTLY SAID.

        and to answer your question above, that’s why i feel like i’m riding the thermals finally. it’s a tricky place to get, but EASY once you “get it” and snap into a place of flow.

        i had my period this past week so i spent the week under a mound of art books and got a little carried away with the ENTIRE history of corsets and women’s fashion, but i’m so excited at how all of my ideas are fitting together so well… love, art, community, meaningful work as craft….

        because now i see doing a tiny anonymous zine about being a secret love goddess. my favorite thing to do with the older girls was to sit on fluffy shag toilet seats in a fog of aqua net while they’d get ready in the mirror and tell me how to do love.

        it fits with trying to make detailed artistic active workout clothes with the glamor of corsets and victorian dresses. i’ll workout in ’em, but that just means they’ll be comfortable enough for regular people.

        even those who don’t “buy,” i want them to see this stuff and be inspired to be MORE themselves out loud.

        i want women to feel gorgeous and powerful but in a different way than crushing their men to “win” little victories that kill the man you fell in love with. and being a slut is hardly empowering for ANYONE.

        so now i’m gonna do an old lady zine to go with my clothes or give away on the street.

        yeah.. .this is how i’m gonna do the clothing business! i SEE it. the spells we cast are in every STITCH now. you can’t get that in China or with bloody diamonds.

        (i’d not usually WRITE all this down as i think it’s rambly and makes it all sounds either mundane or megalomaniacal. but i know how it will FEEL in real life and i trust you already understand, actually.)

        have a good day and thanks for giving a damn. i’m going ALL OUT on this now (with the amount of detail and audacity) because as a new elder artist, i also have to throw down the most intense challenge to inspire others at a high level.

        it’s a form of rebellion to give too much of a damn, you know?

        (smile)

        x

        p.s. to be more specific, i’m about to start a mock up of a lace-up truly supportive waist base with boning or cording to hold a shape, around which i can build flattering comfortable jackets of many designs. i was even reading yelp reviews of customers of dark garden, our local custom corset shop, and it was astounding how the experience transformed both men and women. in ways that remind me of sitting on the toilet seat, being in awe of the power of being a Woman soon.

        sorry this got long. i’m in frizzy hair mad art mode. i LOVE being here, finally. i can’t believe how you and Petunia just FLIPPED me here like “that.” it’s all i think of. i like how it’s bigger than me and can never bore me. it’s a challenge for the rest of my days here. how PERFECT is that? so yes. i’m wildly grateful. thank you!!!! your ideas/time were not wasted on me.

  12. Chicken
    October 21, 2016 at 12:49 pm

    Your TARP dollars hard at work!

  13. Modalita
    October 21, 2016 at 6:42 pm

    Well, the evolution of the market has gotten really interesting here in Boston and I’m pretty sure it mirrors Chicago. Inside the city it has passed critical mass and the decline has already occurred. HOWEVER- the burbs are continuing to climb as relative to the city they are comparatively cheap. 35 miles out….rents have jumped another car payment on average compared to this same time last year.

    The end game to all this will be quite interesting. For right now…everything is awesome.

  14. r cohn
    October 21, 2016 at 8:55 pm

    Chicago condos have a huge advantage over those in SF
    No leaning condo towers

    • NotSoSure
      October 21, 2016 at 10:46 pm

      Ah, but our pension is more solvent. Leaning condo towers? By this time, we are so used to getting abused by the 1%, I’ve already setup a portion of my paycheck to contribute to the fixing of that tower. Call it the membership fee of the 99%

  15. No Rush
    October 21, 2016 at 8:59 pm

    Tax bills on the near North side of the city which includes the Gold Coast went up quite substantially recently and are scheduled to head higher every year for the next four to support pension obligations.

    First time poster – truly enjoy your site.
    Keep up the fantastic work!

  16. QEternity
    October 22, 2016 at 1:33 am

    Grew up in the city, still have friends in the suburbs, left for the LEft Coast a long time ago.

    A few years ago a friend sold his home for $350k or so. tax rate was $12k/yr. Another still there has a home that has barely budged off it’s $450k value in years, but his taxes are over $13k/yr. Gotta pay them retired Forest Preserve workers! LOL

    When I was younger I could walk the Near North Side from Irving Park to Oak Street along the lake or Clark or Boradway and never have fears day or night. Now? Never think of it. the po’ folk have made it a practice to come up from the S. Side & W. Side to come prey on those with the money. Wrigleyville used to be a nice place. Now, not so much.

    http://www.cwbchicago.com/

    Endless issues, none of them ‘local’ and not enough cops to deal with it.

    Chicago is in a tax death spiral, with the state not far behind. If you can get out now is the time!

    • r cohn
      October 22, 2016 at 8:30 am

      I thought that property taxes in NJ were the highest in the nation @ ~%2,but your numbers indicate that they are almost %3 in chicago

  17. QEternity
    October 22, 2016 at 2:05 am

    http://heyjackass.com/

    A little more reading entertainment on the lack of safety in Chicago

  18. Chris
    October 22, 2016 at 2:10 pm

    This is all total speculation, so take it with a grain of salt- I think it may be because of pending trade deal(s) which irreversibly switch on natural gas exports that have largely been barred for 40 years – since the 1970s- leaving US energy prices abnormally low, leading to a lot of energy intensive businesses locating here. However that energy advantage may be not long for this world due to pressure to allow export and trade deals that will basically open the spigot and use the international investment aspect as a pretext to keep it on nomatter what the effects of the change are. The opening of new markets will I suspect happen faster than anticipated, and likely will jack energy prices up (it sells for a lot more in other places like Asia, despite it costing quite a bit to compress natural gas into liquid form for transport) and the price increase may lead to a lot of allegedly energy inefficient (existing) postwar multifamily housing being declared “obsolete” and therefore open to condemnation by eminent domain as “blighted”. (Taken off the market, when its likely an improvement in insulation and double paned windows would solve the problem just as well) Speculators have been buying up older apartment buildings for the last two decades in anticipation of some kind of change like this. (I suspect now is a particularly likely time for it to happen because it then can be blamed on the Democrats) Likely a great many older apartments currently under rent stabilization ordinances will be turned into new market rate condos so prices will likely fall. When nat gas export became possible in Australia, energy prices jumped up quite a bit and something similar I suspect is perhaps likely to occur here. But again, I don’t know. This is again all speculatory and would likely only happen if prices went up a lot, which is made less likely by warmer weather, like global warming (summer heat could be addressed by more solar energy, its winter costs that are more sensitive to nat gas prices) .

    Another thing that might make energy prices rise a lot would be something like a big volcanic eruption in Iceland which would impact both solar and wind (reducing it) in the entire Northern Hemisphere. It would make sense to keep a healthy reserve in the ground against such an eventuality.

  19. Jo Brainer
    October 23, 2016 at 11:54 am

    Anyone can purchase a full size home in San Jose at a very reasonable price. Cupertino and Palo Alto have and have always had super high home prices to match their fine school districts.

    • October 23, 2016 at 12:04 pm

      “Very reasonable” for whom? The seller and real estate agent?

  20. No Rush
    October 29, 2016 at 10:29 pm

    Ran into a friend watching the Cubs game last night and asked him what the taxes are on his Lincoln Park greystone. It’s a nice house on a double lot. Increased from $51,000 to $93,000 /year and scheduled to go up every year for the next three.
    The only thing with productive growth in Chicago are the taxes.

    • October 29, 2016 at 11:56 pm

      Ouch! That’s a salty increase.

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