Buying Condo Thoughts (if living for 1-2 yrs) (Chicago, Naperville: condos, how much)

[BRU67]

Originally Posted by Gaylord_Focker

This is what I’m worried about. Why isn’t the market appreciating in arguably the second best downtown in the US?

Interesting question. To understand the answer, you need to go way back in time. The South Loop was really the first hip loft neighbourhood we had. It started to develop residentially in the late 1980s. It was great timing as during the 1990s, Chicago's white collar professional job market exploded, and the Daley administration cleaned up the Loop, particularly the formerly seedy southern part. So there was a lot of speculation that the South Loop would blow up.

So prices went up very fast, to unrealistic levels. When I was looking at lofts in the South Loop c 2000-01, it was not uncommon to see an asking price double what the buyer paid a just few years prior.. And obviously they did nothing but move their stuff in and live there.

Of course, developers wanted to get in on this action so a lot of residential projects went up. Then, the projects spread to the West Loop, and apartments were being rapidly converted into condos in Lakeview, Lincoln Park, Bucktown, and other wealthy areas.

Just as things we're getting white hot, the dot.com bubble burst and the Chicago job market contracted quite a bit. That obviously put the brakes on development and the crazy condo price increases.

However, a few years later, the real estate boom began and staved off collapse. But strong supply, moderate white collar job growth, and the exploding West Loop and other new gentrifying areas like Pilsen, Bridgeport, Logan Square, and Bronzeville prevented condo values from increasing very much overall.

Once the pandemic hit, the desire to live near downtown waned, while a lot of people who own condos want to get out and move to a big house and take advantage of the low interest rates and the percieved shift to remote work.

I think that's why you're seeing weak condo prices in general and in the South Loop in particular now. Sadly I'm not sure that's going to change. If remote work becomes permanent, you're going to see a lot of office space in the Loop proper get converted to residential, which will glut supply. And the West Loop is so hot right now, it's really sucking the energy out of other City condo markets. And Millennials in general seem to be more interested in multi units when they live in the city, versus a private condo with an assessment like their predecessors did.

[dadave]

Originally Posted by BRU67

Your numbers do not include the costs when you buy, including mortgage closing cost. Maybe those won't be as much as when you go to sell but you will still have cost when you buy.

It does:

Purchase
Appraisal fee + credit/debt report - $500
Title - $2000
(Escrow - tax and insurance which is to pay forward tax and insurance so I separated that out for annual)
Majority of the fees from lender is waived for me
Total at purchase $2500 for closing

I assumed 3% interest to calculate my interest portion of my mortgage

When selling: I assumed 10% of sale value at $150,000 to get $15,000 for selling close cost. This assumes no appreciation and selling at purchase price.

But very valid points of special assessment not baked into hoa for old condos. Also I do believe rental is affordable there seems to be plenty of option. May not be able to re coop my purchase price. So as much of a reward selling, definitely valid high cost risk

[Gaylord_Focker]

Originally Posted by BRU67

Interesting question. To understand the answer, you need to go way back in time. The South Loop was really the first hip loft neighbourhood we had. It started to develop residentially in the late 1980s. It was great timing as during the 1990s, Chicago's white collar professional job market exploded, and the Daley administration cleaned up the Loop, particularly the formerly seedy southern part. So there was a lot of speculation that the South Loop would blow up.

So prices went up very fast, to unrealistic levels. When I was looking at lofts in the South Loop c 2000-01, it was not uncommon to see an asking price double what the buyer paid a just few years prior.. And obviously they did nothing but move their stuff in and live there.

Of course, developers wanted to get in on this action so a lot of residential projects went up. Then, the projects spread to the West Loop, and apartments were being rapidly converted into condos in Lakeview, Lincoln Park, Bucktown, and other wealthy areas.

Just as things we're getting white hot, the dot.com bubble burst and the Chicago job market contracted quite a bit. That obviously put the brakes on development and the crazy condo price increases.

However, a few years later, the real estate boom began and staved off collapse. But strong supply, moderate white collar job growth, and the exploding West Loop and other new gentrifying areas like Pilsen, Bridgeport, Logan Square, and Bronzeville prevented condo values from increasing very much overall.

Once the pandemic hit, the desire to live near downtown waned, while a lot of people who own condos want to get out and move to a big house and take advantage of the low interest rates and the percieved shift to remote work.

I think that's why you're seeing weak condo prices in general and in the South Loop in particular now. Sadly I'm not sure that's going to change. If remote work becomes permanent, you're going to see a lot of office space in the Loop proper get converted to residential, which will glut supply. And the West Loop is so hot right now, it's really sucking the energy out of other City condo markets. And Millennials in general seem to be more interested in multi units when they live in the city, versus a private condo with an assessment like their predecessors did.

Hard to argue with any of that. Just my personal belief, but with global warming I think the Midwest becomes more popular in the future. I also believe living downtown or in an urban environment will be coveted again one day. Maybe wishful thinking on my part. Idk

[BRU67]

Originally Posted by dadave

It does:

Purchase
Appraisal fee + credit/debt report - $500
Title - $2000
(Escrow - tax and insurance which is to pay forward tax and insurance so I separated that out for annual)
Majority of the fees from lender is waived for me
Total at purchase $2500 for closing

I assumed 3% interest to calculate my interest portion of my mortgage

When selling: I assumed 10% of sale value at $150,000 to get $15,000 for selling close cost. This assumes no appreciation and selling at purchase price.

But very valid points of special assessment not baked into hoa for old condos. Also I do believe rental is affordable there seems to be plenty of option. May not be able to re coop my purchase price. So as much of a reward selling, definitely valid high cost risk

Ok, I stand corrected on the closing cost. But even so, I stand by my other comments, and just feel renting would make more sense. But obviously, you need to choose.

[BRU67]

Originally Posted by Gaylord_Focker

Hard to argue with any of that. Just my personal belief, but with global warming I think the Midwest becomes more popular in the future. I also believe living downtown or in an urban environment will be coveted again one day. Maybe wishful thinking on my part. Idk

I think that might be exaggerated to be honest with you. Climate shifts have occurred for hundreds of years. Look at how many record highs and lows were set in the 1800s. So I don't think it's going to get so hot that everyone's going to flock to Chicago. I guess anything is possible, But I wouldn't bake that into my investment strategy.

[ChiGuy2.5]

Originally Posted by Gaylord_Focker

Hard to argue with any of that. Just my personal belief, but with global warming I think the Midwest becomes more popular in the future. I also believe living downtown or in an urban environment will be coveted again one day. Maybe wishful thinking on my part. Idk

I agree with you actually. I've thought the exact same thing. Although, I think any change in climate is going to take a very long time to actually start affecting population shifts to the north. Certainly beyond my lifespan.

A more immediate benefit to being in Chicago is that it isn't located on the coast, nor do we have any significant risk of natural disasters. The potential for war with Russia would make me nervous if I was on the west coast. So many southern states have been getting hammered with Tornados lately, especially Texas. There is plenty of fresh water here too which areas like Georgia just don't have, especially Atlanta. Along with areas in the west along the colorado river which is being drained faster than it can recoup.

All things equal, Chicago is great aside from winters and our politics. Illinoisans really shoot themselves in the foot every year they continue to elect leaders who are bought by unions. It's sad we can't dig ourselves out of the mess we made.

[BRU67]

This is very interesting...

https://www.weather.gov/lot/Chicago_Temperature_Records

There were almost more 100 degree days in each the 1930s and in the 1940s than there were from 1990-2020 combined. The record high of 105 was set in 1934. The longest streaks of 90+ days occurred in the 1950s. Viewing the data as a whole, the extreme highs and lows are all over the place. I take the climate change hysteria with a grain or three of salt, not that we shouldn't strive for less emissions and less trash of course.

[umbrellacake]

Originally Posted by Gaylord_Focker

Hard to argue with any of that. Just my personal belief, but with global warming I think the Midwest becomes more popular in the future. I also believe living downtown or in an urban environment will be coveted again one day. Maybe wishful thinking on my part. Idk

??? All the most expensive real estate in the city is all in downtown/downtown adjacent, what are you talking about? And the most urban/walkable neighborhoods are the most desirable and expensive. People are paying millions to live in Wicker Park, Lincoln Park, Hyde Park, Lakeview, etc. Nobody's paying that to live in boring suburban neighborhoods filled with strip malls and drive thrus like Jefferson Park, Mt.Greenwood, West Lawn, North Park, etc.

[BRU67]

Originally Posted by umbrellacake

??? All the most expensive real estate in the city is all in downtown/downtown adjacent, what are you talking about? And the most urban/walkable neighborhoods are the most desirable and expensive. People are paying millions to live in Wicker Park, Lincoln Park, Hyde Park, Lakeview, etc. Nobody's paying that to live in boring suburban neighborhoods filled with strip malls and drive thrus like Jefferson Park, Mt.Greenwood, West Lawn, North Park, etc.

Times, they are a' changin', to borrow from the 1960s counterculture movement. Everyone thinks we're going permanent remote so they want to be on big land away from problems with their dog and family. Small condos downtown are like toxic waste right now.

Will that last? I've my doubts. But it certainly adds an element of risk to real estate investing that didn't exist 2 years ago.

[umbrellacake]

Originally Posted by BRU67

Times, they are a' changin', to borrow from the 1960s counterculture movement. Everyone thinks we're going permanent remote so they want to be on big land away from problems with their dog and family. Small condos downtown are like toxic waste right now.

Will that last? I've my doubts. But it certainly adds an element of risk to real estate investing that didn't exist 2 years ago.

Lots of companies are going towards a hybrid schedule at the minimum. Seeing less and less remote work job openings as we get pass covid. Google in Fulton Market just had a massive event where they welcomed back hundreds of employees back to the city in office for 3 days minimum.


Fulton Market is the fastest growing office market in the nation. West Loop is building almost 10,000 apartments right now. Even condos are selling easily in this area.