Buying a Second Home in Chicago – Chicago Pied-a-terre

“What do I need to know about buying a second home in Chicago?” We are seeing a large number of buyers enter the market to purchase a second home in Chicago. Many of these buyers live in the suburbs of Chicago and are purchasing a condo in the city to enjoy on the weekends (or during the week if they work late) but also for investment. With interest rates at or below 4% and condo prices still at record lows many suburban buyers are entering the market. But what do you need to know about buying a second home in Chicago?

Location: We’ve all heard the old saying “Location, Location, Location” and it is very true. It is even more relevant if you’re buying a second home in the city because you will likely not be spending much time in your home as you may be dining out, seeing shows, enjoying summer events, etc. Buy a location that you’re going to love. If you are always at Millennium Park for free concerts start your search in Lake Shore East. If you have a boat at Burnham Harbor then start in the South Loop. Above I mentioned that many who purchase second homes are also looking at the purchase as an investment. While there are certain areas of the city that may be better investments than others, good deals can be found in any neighborhood. It is important that you’re going to enjoy the location to the fullest.

Doorman Building: If you’re buying an “in town” I typically recommend you purchase a condo in a building with a doorman. Since you won’t be at your unit 24/7 it is comforting to know that if you forgot to turn your heat on or need your unit check on someone is there to do it. It also helps if you have someone coming into town and you want to allow them to use your condo for the weekend. A doorman can give keys to your children, friends, family, etc. if you give permission.

Understand What you can and can’t do with your unit: Rental restrictions in buildings have increased over the years. For multiple reasons that I won’t get into now, some condo associations limit your ability to rent out your unit. If you never ever plan to rent your unit then no worries. However, if one of your investment strategies or future plans may be to rent the unit then you will want to pay particular attention to whether or not the building you are buying into allows rentals.

Understand your future needs: I’ve had some second home buyers look only at 1 Bedroom condos at first but then they started to think about eventually using the condo full time. With this being said it is important to fully understand your future needs for the condo. Do you plan to eventually move into the unit full time? If so, how much space will you need and want?

Walk-ability: This fits in to “Location, Location, Location” but pick a location where you can easily walk to things such as a grocery store, restaurants, etc. If you’re using the condo as a second home then it should feel like you’re on vacation when you’re using it. You want as much at your finger tips as possible.

What are the best areas to buy a second home in? This all depends on your personality. What areas of the city do you like the best? My experience with clients has been that Streeterville, Gold Coast, (east) River North, and Lake Shore East have been the most popular areas to search for a second home. All these areas offer inexpensive options as well as some of the most luxurious in the city.

Paul Blackburn is an Illinois Licensed Realtor and Broker with @ Properties in Chicago. He can always be reached via e-mail at Paul@PKBlackburn.com

The Chicago Housing Market – No Inventory, No Inventory!

The Chicago Housing market has changed dramatically, at least in Chicago’s most desirable neighborhoods. In areas such as the Gold Coast, Lincoln Park, Lakeview and yes, even the “over built” South Loop, inventory has almost all but disappeared. The problem facing buyers today is one that we haven’t seen in years. The question that many people have is “Why can’t we find what we’re looking for?” Why is inventory low?

The first and most obvious reason why inventory levels are low is because we are seeing a large amount of buyers, many first time home buyers and empty-nesters buying second homes, entering the market. These buyers have nothing to sell and have quickly soaked up excess inventory. Investors have also come into the game and have picked up the less desirable properties even in problem buildings where financing is difficult. These investors are flush with cash and most foreclosures in the desirable areas of Chicago are seeing 10, 15 or even 20 offers in a matter of days.

Rising rent prices and low interest rates have spurred first time home purchases while low yields in other investments has spurred investors to throw cash into the housing market. So this covers the increase in demand but what about supply? Why is supply not keeping up with demand?

While demand has increased prices have only slowly started to rise. Many home owners are still either under water or cannot sell their home for the price they feel is “fair.” Many “would be” sellers are simply not putting their home on the market because pricing has not reached the level is needs to be at for them to feel comfortable selling their home.

What does this mean for the future of the market? As long as interest rates remain low prices will slowly start to increase. As pricing increases we will see those sellers sitting on the side lines start to list their homes. It will be a very slow process but it will be a healthy one.

Will developers get back into the market in Chicago? Developers have already entered back into the market but not on a large scale. We probably won’t see any new high rise condo buildings anytime soon since financing for such projects both on the construction loan side as well as on the buyers side is still very difficult. Instead, we will see smaller projects (3, 6, 8, 12 units) built in high demand areas. We are also seeing developers entering the single family home market. They’re not building spec, but they are building to suit.

I see all these buildings going up in Chicago, what are they? Chicago is filled with construction cranes once again but NONE of these are condo buildings. They are, instead, rental apartments. With rental prices at double digit % gains year over year, developers are jumping into the market. Some may say all these buildings seem excessive. These people would be right. Naturally developers over build. If there is a demand for 3000 units, they build 6000. But that is a conversation for another day.