THE NEW TAX BILL AND THE CHICAGO HOUSING MARKET

Since the passage of the new tax bill for 2018 I have had a handful of clients reach out to me concerned about how the market here in Chicago will be affected by the new tax laws, specifically the tax laws pertaining to home ownership. In the months running up to the new tax bill you may have seen posts on social media or even received e-mails from Realtor friends and the National Association of Realtors (plus local associations) speaking of the detriments of the 2018 tax bill. I thought this would be a good time to have a quick, clear, and honest write up about my personal thoughts on how the tax bill will affect the Chicago real estate market. Please note that I am not an accountant or a tax attorney and you should ALWAYS seek professional advice when it comes to any tax obligation or deduction.

I can only speak to how the tax bill will affect the Chicago market, specifically the downtown, near west, near north, and north side markets. These are the areas I specialize in and the areas where I have the most intimate knowledge of the market and the mindset of the homeowners, buyers, sellers, and renters.

First let us quickly outline the changes in the 2018 tax bill as it pertains to home ownership.

Mortgage Deduction Changes

For NEW home purchases the limit on deducting interest on a mortgage has changed from a mortgage value of $1 million to $750,000. Homeowners with existing mortgages over $750,000 up to $1 million can still deduct their interest up to $1 million. Furthermore, those homeowners can refinance and still deduct interest up to the old $1 million provided that the new mortgage is not greater than the refinance amount. The above holds true for 1st and 2nd homes.

The 2nd home interest deduction is NOT going away. First proposals of the bill had this provision but they were removed. If you are looking to purchase a second home the mortgage deduction may still apply to you provided that the combined amount of the mortgages on your 1st and 2nd home does not exceed $750,000. If you already own two homes with mortgages then you’re grandfathered in up to the old $1 million amount.

Home Equity Loan interest is no longer tax deductible. Previously this was deductible for a home equity loan / line of credit up to $100,000 in value. This is going away for both new AND existing home owners. HOWEVER, the interest of a home equity loan MAY still be tax deductible if the proceeds are used to “substantially” improve the home.

Property Tax Deduction 

The new bill limits state and local municipality tax deduction to a maximum of $10,000 per year. This is what concerned most people because it is not just your property taxes, but a combination of your property taxes AND state income taxes that you pay. No one is grandfathered into this tax law change. Previously this deduction was unlimited.

 

So as it pertains to real estate the above is a list of the most notable changes to the tax code for 2018. So the question on everyone’s mind in the real estate industry is how will the new tax plan affect home values.

The interest deduction changes do not concern me in the least. They grandfather in current homeowners and they still allow for a healthy deduction of up to $750k and they still include second homes. Our current market is fueled by primary home buyers. It is not fueled by investors like it was over a decade ago. We’re not seeing a bunch of condos going up targeting second home buyers that would push then over the $750k limit.

What does give me some pause for concern is the limit on state and local tax deductions of $10k, specifically because this is a TOTAL amount of tax which includes your state income tax as well.

The $10k limit will apply some slight downward pressure on the housing market, there is  no denying that. Limiting the amount of tax deduction, even if the overall bill ends up a net positive for your pocketbook, in theory does lessen the “reason” to purchase a home.

Will this downward pressure be enough to change home values in Chicago? No, I do not believe so. Keep in mind I’m discussing the markets I work in. I’m not talking about south suburbs, etc. I am talking about downtown Chicago, the north side, the west loop, etc. It has been my experience that those who own in these areas own because they believe in the neighborhoods and they love the neighborhoods. They have children in school and would not uproot them to save some money. More importantly, I don’t see many of these home owners and would be home buyers in a financial position where they would be drastically hurt by the $10k limit on state / local tax deduction.

With the above being said I do believe there are a couple other factors that we should discuss that could bring the property tax deduction into play. By itself I do not believe it is enough to move the market at all. However, I want to discuss two other items.

Multi-Family Overbuild 

We’re seeing a TREMENDOUS amount of building in Chicago of new luxury apartment buildings. In the past year we’ve seen occupancy rates decrease overall in class A luxury apartment buildings. Newer buildings are offering even more concessions and we will see these continue into the spring market as more buildings come on line and even more in 2019. With these concessions in BRAND NEW luxury buildings it is just one more obstacle to get first time home buyers to purchase as long as they don’t need to (having children for example might create a “need”). If they’re single or a couple with no plans for children the rent concessions of these beautiful buildings does provide downward pressure on the housing market. These are typically well to do individuals who pay a large amount of state tax and would be looking at homes, even if a one bedroom that have healthy property tax bills.

At the end of the day, I do not believe we will see any major market shifts across the board because of this. We may see it in certain areas of the market, One Beds priced from 400 to 550k for instance in the downtown market. But for the overall market I do not see much of an effect in Chicago. However, it is something to watch.

Fear Mongering 

Leading up to the passage of this bill and the many versions of it those in the Real Estate industry were posting on social media left and right about how you need to call your congressmen and congresswomen and urge them to vote down this bill. Posts would read “This will lower property values by over 10%” and the like. The National Association of Realtors and the Illinois Association sent me countless e-mails urging me to “take action!”

As much as I appreciate those in our industry looking out for the best interest of our clients and my profession, we sometimes do more harm then good. Think back to the crash. Enough said.

If this fear mongering continues it can be enough to unintentionally scare the market. It was posts like this which lead some of my clients to reach out to me worried. Most of these posts didn’t explain all the changes to the bill. When they did explain the changes they did so in a slanted way. I’m not trying to advocate for this bill, instead I’m just trying to give information and let cooler heads prevail. Frantic social media posting without giving consumers substance does no good and only confuses and panics people. What happens to markets when people are confused and panic?

In Summary…. 

At the end of the day the only way we will know how the market will adjust will be to watch it. From talking with clients and those in the industry, I do not see the Chicago market decreasing in home values. Our inventory is low. Buyers in recent years have been extremely well qualified and continue to be very well qualified. Those who want to buy are not changing their minds. Sure those on the fence may have some pause, but I don’t believe the tax bill will be enough to push them off the fence. If anything it will be other factors that may do so.

 

Paul Blackburn is an Illinois licensed Real Estate broker and Realtor with @properties in Chicago. He can be reached at Paul@PKBlackburn.com 

Why Rent Control Would Hurt Chicago

As some of you may have read Rep. Will Guzzardi, D-39th, has sponsored a bill that would remove the Illinois ban on local municipalities instituting rental control laws. While this removal would not put rent control into place it is a slippery slope that may lead to city councils, specifically the Chicago city council, passing rent control laws. While I do believe Mr. Guzzardi is trying to look out for his constituents, I do believe his logic and understanding of basic economics is flawed. I try to avoid political debates or political opinions in my blog, however, I do not look at this as political but instead as economical. I think it is important that rent control and its disastrous outcomes are explained.

First, let us quickly discuss what rent control is. Rent control is when the government puts a max price (a price “ceiling” if you will) on what a landlord can charge tenants. There are various ways in which this is implemented. Now it is important to note that rent controls must cap price levels below the prevailing market in order for them to have any effect. Otherwise, the cap would never be reached and the rent control law would be pointless. Therefore, rent control sets a rate of rent below the current market level. In Chicago, as with most areas where rent control is a topic of discussion, the goal that is looking to be achieved is to allow low income and middle income residents to stay in neighborhoods and not get “priced out.”

When rent control is in place prices are capped at below the prevailing market and several things happen.

  1. Landlords stop investing in their properties. They do so because they have less cash to invest but also because they will not see increased returns. Therefore conditions of properties deteriorate. I do not mean that they become inhabitable, but the overall the conditions of items that are not 100% essential end up deteriorating and therefore hurting the value of the property.
  2. New investment becomes less. If rents are capped below market value then there is little to no incentive for new rental units to be built. Therefore, supply does not increase. In a normal market, rents increase and therefore profits for landlords increase which entice new investment. The increased supply then helps balance the market.
  3. Existing tenants do not move. Tenants enjoying rent control have little to no reason to move out of their current place. Therefore, only those lucky few take advantage of rent control. The on the market supply shrinks. Because of this, landlords can become very picky. Since they can’t raise rents they might as well be as strict as possible and since supply has decreased they will have countless of applications. High credit scores and higher income requirements will become the new norm. Therefore those with less than perfect credit will be left in the cold.

We will also see a spillover in other neighborhoods that do not have rent control. The excess demand that typically would have been satisfied by increased supply in rent control neighborhoods will not move to other neighborhoods. However, these neighborhoods that do not have rent controls will still likely see less supply. After all, rental developers are not stupid. They know rent restrictions may be placed on them too so they in turn will have less an incentive to invest and therefore supply would become restricted in these markets as well. Therefore, since these markets are unrestricted we can expect to see rent increases greater than normal in these areas and in turn making these areas less affordable.

The reason why any price is exists is due to a supply and demand relationship. When the government tries to “cap pricing” what they end up doing is inadvertently lessening supply while demand remains the same. Therefore, those properties not affected by the rent control will increase dramatically in value. Both NYC and San Francisco have forms of rent control.

We would also see a black market exist among landlords and tenants. “Key money” is common in New York and other areas with rent control. Tenants will pay additional move in fees up front in order to help increase the overall effective rent. Tenants who no longer want to live in an a building or neighborhood, but do not want to give up their amazing rent control place will end up subletting their place. The market will always try to return to normal It is like putting up a damn. You may stop the river in one space, but somewhere else it will flood. The one thing that will not change however, will be a lack of supply as investors will not want to invest in real estate when they are dictated by the government what rents they can charge.

With landlords with less cash there will be less money to pay taxes with. There will be less money to make improvements with thus tradesmen will suffer. The upper middle class market will suffer as well as we will see a spillover into these rentals too as I mentioned before. Rents for those making good six figured salaries will increase. Don’t care about them you say? Well, they will have less money to eat out thus bartenders and waiters will make less tips. They won’t shop at that new mom and pop boutique down the road so that store may close. That cleaning person that came every week? Well, now they’ll cut that out of their budget. The worst part about all this is it will not be due to the free market system, instead it will be due to the disruption of the free market system.

According to the Library of Economics and Liberty, 94% of economists believe rent control not only does not work but is a terrible idea. The agreement cuts across political parties and economists such as Milton Friedman and Friedrich Hayek (who are on the “right”) agree with Nobel laureate Gunnar Myrdal (who is on the “left”). Myrdal stated “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.” I could not agree more. According to Crain’s Chicago Business the executive director of the Metropolitan Tenants Organization wrote ” One in five Chicago renters pays more than half their household income on rent.” Instead of fix the systemic issue that we have 1 in 5 renters paying half their income towards rent, politicians think the solution is to pass rent control? Why? Because fixing the systemic issues takes time, planning, and thought. It does not happen in one election cycle. So instead, politicians with zero understanding of basic economics, or worse their indifference to basic economics, try to move forward legislation that sells a dream to their constituents that will simply never be realized.

 

 

 

Trump Repeals FHA Premium Reduction – Here are the FACTS

If you’ve opened up CNBC or checked your Facebook wall, you may have seen articles and messages about President Trump repealing the reduction in FHA premiums. While some articles simply explained this fact, most articles have been presented in such a way that you might think anyone getting a FHA mortgage is left out in the cold. One of my agents even called me worried about how this might affect her client who is getting ready to close with an FHA loan. In order to put the speculation and worry to rest I thought I’d write a short blog explaining what happened with regard to President Trump and the FHA mortgage premium.

First let me give you a quick run down on what an FHA loan is. A FHA loan is a home loan that is insured by the FHA, Federal Housing Administration. Borrowers pay an insurance premium to FHA which protects lender from a borrower default. Typically FHA loans have less strict requirements than other loans and in many cases allow for a smaller down payment. However, borrows must pay a mortgage insurance premium on a monthly basis.

On January 9th a reduction in FHA insurance premiums was passed lessening the insurance premium by 0.25%. This was set to go into place on January 20th. President Trump instead repealed this and froze the current premiums in place.

The NAR along with other organizations said that in 2017 roughly 40,000 would be home owners may no longer be eligible for an FHA loan because this decrease was repealed. Many news organizations and online columnists have since written articles with headlines and opening paragraphs that make it sound as if there were 40,000 people under contract for homes and now they won’t be able to purchase. Nothing can be farther from the truth.

For anyone considering an FHA loan that might be freaking out right now…don’t worry, relax! Calm down. Here are the facts.

The FHA premium reduction would have saved the average FHA borrower $500 per year which works out to roughly. $42 per month. If you want to equate it to loan value, the premium savings on a $200,000 loan would have been $29 per month.

However if you were quoted a FHA loan price your payment is not going up. The FHA premium reduction was not set to take place until January 20th. Underwriting was not being used to qualify people under the new guidelines. If you were set to close on a home you’re still OK because you were quoted at the old price.

Reporters and columnists can argue all day long whether or not the FHA should lower premiums. However, writing articles especially with catchy headlines to imply many people can no longer purchase homes is down right unethical and detrimental to our industry as whole. Understanding the facts of this change is what is most important and not furthering a political agenda or increasing readership a website.

If you want to know more about the cost of a FHA loan simply call a Realtor or a great mortgage broker. In addition to FHA loans there are MANY great FHA alternative programs that can be even cheaper with similar down-payment and qualifications. Don’t let all these online media sources scare you away from looking into purchasing a home.

Should I List My Property For Sale or For Rent?

When it comes time to move for whatever reason; a new baby on the way, a job transfer or you simply want a change of pace, the initial instinct for many is to list their property for sale. The basic logic makes sense. You want to cash out and use that cash for your downpayment on a new home. However, we’re finding that many would be sellers are now considering holding onto their property and renting it out for the added cash-flow and to have a tenant help pay down their mortgage. This blog will be dedicated to asking you some basic questions so you can help decide if you should list your property for sale or list it for rent.

How much can you get in rent for your property?

The first thing you need to do is determine how much you can rent your property out for. If you cannot achieve a high enough rent amount to pay for your holding costs (your mortgage, your property taxes, association dues and insurance) then you need to consider if it is worth it for the difference to come out of your pocket.

Make sure you work with a Realtor who understands the rental market well. The rental market is starting to change and will continue to do so over the coming years (and not in the landlords favor). Make sure you also consider what time of year you are renting out your property in. For instance rents are typically much higher in May than they are in November.

Does your association have any rental restrictions?

Well, maybe this should be the FIRST thing you look into instead of rental price. Some associations prohibit rentals. Make sure yours does not! Other associations may have a rental cap and if they have met this cap (number of units they allow to be rented at any given time) then you may need to be added to a wait list before you can rent out your unit. Check with your association management to confirm any and all rental policies and restrictions. For instance, did you know that some associations may be pet friendly but do not allow renters to have pets?

Do you NEED cash from your current property to buy a new one?

If you’re buying your next property the question is can you afford to buy it without selling your current home. Look at your finances and talk with your mortgage broker regarding this. Do you need to sell in order to have 20% down payment? Or are you OK with just putting down 5% on your new property? Balance out the costs of this as putting less than 20% down typically means you’re responsible for PMI (Private Mortgage Insurance) which will increase your monthly costs on your new home.

What is the interest rate on your mortgage?

I was speaking to one of my clients recently who was deciding whether to rent or sell. She said her interest rate on her 30yr fixed mortgage was 3.35%. That is VERY cheap money! That played a role in her decision process of whether or not to rent or sell. She ended up renting out her place. If you have an incredibly low interest rate it might be a good idea to hang onto that property and rent it out.

Will it be difficult for you to manage the property?

Some condos are very easy to manage because the building maintenance staff can help with any issues that arise inside your unit. Other buildings may be self-managed and this may mean anytime there is an issue you will need to hire someone to come in and fix the problem. This should be taken into account. For instance, if you’re living in the same city as your rental property then management can be very easy even if you’re in a building that does not have maintenance staff. Conversely, if you are moving to Hong Kong for work then it might be difficult to manage your property especially given the time difference.

Can you hire local property managers? Sure, but there is a cost to that so you’d need to factor that cost into your decision.

What will be the financial state of your condo association in the future?

I have some clients who own properties in buildings that are on the downward spiral. There might not be any special assessments planned but my clients are seeing the quality of the building deteriorate and they’re worried that the building may have financial issues in the future. This is definitely something you need to take into account when considering whether your should rent or sell. Sometimes it might be better to sell, take your profits, and run!

Are you cash strapped?

There is no way other way to ask this but, are you living paycheck to paycheck? If you are then being a landlord might not be for you. It is important to have some cash saved in case you have any tenant issues or any property issues. Landlords need to understand that when tenants move out they’ll likely have to paint the property and make some minor repairs in order to get it ready for a new tenant. Do you have the cash to do that? If your dishwasher breaks can you replace it for the tenant ASAP? If your Washer / Dryer goes out can you replace it ASAP?

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is a broker and trainer for the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pkblackburn.com

Should I Buy or Should I Rent?

 

 

Ah, the age old question in real estate. Should I buy or should I rent? Well, if you ask any standard Realtor they will tell you BUY! But, if you haven’t figured it out yet I’m not your standard Realtor. I try not to drink the Kool-Aid and instead give you unbiased and practical advice. So in this quick blog I’d like to ask you some questions to help YOU figure out if you should Buy or Rent in Chicago.

Do you know where you want to live for the next 2 to 3 years?

This may sound like an obvious question, but it is a question most people don’t ask themselves. They may want to buy for the purpose of buying, but may focus more on what they can afford versus where they truly want to live in the next 2 to 3 years. So the question I ask you is, where do you want to be? Can you see yourself living there for the next 2 to 3 years? If so, then you’re at least one step closer to buying.

Can you afford home ownership?

Some sales people may say “You can’t afford NOT to buy!” Umm…yeah, whatever…that’s not the right answer. What I mean by, “Can you afford home ownership” is after purchasing the home will you at least have some sort of a financial cushion in the event there are any issues with your home. This can be small things like needing to replace an appliances to larger items such as roof repair on a single family home or a special assessment in a condo building. As long as you have some sort of cash cushion then you’re again one step closer to buying.

Is your family situation stable?

OK, this sounds like an odd question so let me explain what this means. Are you in the process of getting married and thinking of having kids in the next year? If so, then you might want to be looking to buy a place larger than a studio! Sounds like a silly question but you’d be amazed at how some people jump into things. Take your time to consider this. Let me give you good example of clients of mine who did the right thing.

I had a couple contact me off my blog about 4 years ago. They were an absolute delight to work with. We got along extremely well. They were looking at 2 Bedroom condos in River North / Streeterville for up to 375k. However, as we were looking over a month or so, they also started thinking more. They decided to put the search on hold for a bit to decide what they wanted and needed for themselves. A year later we were back on with our search and this time they were married and planning to have a child. Their search criteria now changed to a 3 Bedroom with lots of living space in the areas of Lincoln Park and Lakeview and now they upped their budget. They simply took some time to think about their situation and then they made a wonderful purchase where they will definitely be happy for at least 5 years.

What are you willing to do with your property in the future?

I’ve had some clients who have purchased a property knowing that in the next year they’ll likely move out of town. They still wanted to buy because they planned to rent out the property if they moved and planned to keep it as an investment. If you think you might be moving soon then buying might not be for you, or it might be if you have different goals for the property you are buying. However, if you are thinking of buying and renting out your property then you need to make sure you plan accordingly and purchase accordingly.

What tax laws will benefit me?

The interest deduction is a major factor for many buying today. The ability to write off interest (please consult your tax advisor as everyone’s situation is different!) on your home mortgage is a motivating factor for many. How much will you actually save if you buy? For many this could help make or break the decision in whether or not you should buy.

What is going to make you happy?

Making money on your home is a wonderful thing but focus on where you will be happy living. Look for the maximum value, but remember your happiness is a big part of that value consideration. Would you rather live in a property where you make only 1 to 2% appreciation a year and be extremely happy or would you rather live somewhere that is not your ideal location, but instead have a great chance of return down the road. Everyone is different, but only you can answer that question for yourself.

In some instances people can only be happy if they can remodel their kitchen and make their home exactly how they want it, which is something you cannot do if you rent. So again, if this is you, you’re one step closer to buying.

It is only a decision you can make

It is not a decision your Realtor can make for you, or your friends, or your mother. It is only a decision you can make for yourself. Take all of the above into consideration and make an informed decision.

 

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is a broker and trainer for the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pkblackburn.com

What to watch for in Real Estate in 2017

What should we expect in real estate in 2017 across the Chicagoland area? Will 2017 prove to be a year full of growth in Chicago or will rising interest rates temper growth? Will rent prices decrease due to excess multi-family building or will demand rise and keep up with supply? We all have our own thoughts and opinions; I’m sure you know I have mine. However, regardless of your opinions of the future of the economy, Chicago real estate or the real estate market as a whole, here are a few things to keep an eye on in 2017 in Chicago real estate.

1) Interest Rates

The Fed raised rates in the last quarter of 2016 and is expected to do so two to three more times in 2017. Sub 4% interest rates for a 30yr fixed is no longer in our vocabulary, but how high will interest rates go? Keep an eye out for how consumers react to rising rates. While the economy appears to be very robust and we are at what is considered full economic employment, it will be interesting to see how rising interest rates affects home buyer sentiment. In order to get a feel for the market talk to Realtors and talk to mortgage brokers to see how rising rates are influencing their clients decision making process.

2) Increased programs for low down-payment buyers

In the recent year we’ve seen several new programs come out that are what I call, FHA alternatives. They’re essentially low down-payment programs or programs that give rebates or closing cost credits that allow you to purchase a place with as little as 3% down. As these programs gain more momentum and awareness it will be interesting to see a couple things

a) How long will these programs last

b) How these programs are influencing demand in certain price ranges and areas

3) Keep an eye on how rental supply will influence both the rental and sales market

Increased supply on the rental market can greatly affect both the rental market and the sales market. Rent prices have increased drastically in the past 5 years in Chicago but they’re currently peaking and vacancy rates have increased in multi-family. New buildings are offering concessions as high as 2 months free. With more than 4500 units coming to the market in 2017, will people put off buying in favor of taking advantage of rent concessions? What happens if not only concessions increase but rent prices decrease as well? This coupled with rising interest rates could have first time home buyers thinking twice.

4) Supply….

Depending on the price range you’re looking in, supply is still low relative to the amount of buyers in the market place. We’re seeing increased supply of new construction in areas such as Ukrainian Village and increased high end supply in the Near North area but besides this supply has remained low which has help prices increase over recent years. Keep an eye on two things

a) New construction has been selling at a huge premium. Watch it’s market time in 2017

b) Will we see more existing construction come on the market to compete with new construction in 2017? Existing construction has been selling much cheaper than brand new construction. With rising interest rates existing construction may be more appealing given its lower price point.

5) Everything is wonderful…keep an eye on everything wonderful

Unemployment is at all time lows. Interest rates are still at all time lows despite recent rises. Property values in prime neighborhoods are at 2006 levels. The equities markets are booming. Startups are everywhere. Getting VC funding for new companies is like taking candy from a baby. Everything is going well. Keep an eye on leading indicators in all sectors of the economy that may signal a slow down. In real estate I am specifically watching the following in Chicago

A. Market Time of both existing and new construction

B. Absorption rate (How long does it take to sell all properties on the market if no new ones come on the market).

C. Price to rent versus the price to buy the same property. Currently it makes sense to buy given the increased rental prices. If rent prices decrease this could become a slippery slope.

 

The above is not meant to be a negative outlook or a “debbie-downer” of the real estate market. Personally, I think there are some areas that are a bit over valued but others that are very much under valued. I think the Chicago real estate market is strong, however, I do believe we’re now in a normalization of the market where prices will increase minimally to moderately each year and I think we will see rent prices decrease in the coming years.

Does this mean I shouldn’t buy? No, it doesn’t mean that. In some situations some people maybe should not buy. In others they definitely should. Each persons situation is different and that is why working with a Realtor that is completely transparent and honest with you is always the best policy. Anyone who tells you that buying is always the best option is nothing more than a salesman.

 

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is part of the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pblackburn.com

TRUMP TOWER IN CHICAGO -Now that Trump is President-Elect…

There have been many questions regarding Trump Tower in Chicago from the start of the 2016 presidential campaign and even more now that Donald Trump is the President-Elect. Since our group does a great deal of business in Trump International Hotel & Tower in Chicago I thought I would take the time to answer the real estate questions many people have asked in recent months.

Does Trump actually own Trump Tower (401 N Wabash Ave) in Chicago? 

Not completely. The building is broken up into two portions. The hotel portion, which Trump does own (although some hotel rooms are owned by individual investors) ends at the 28th floor.

The residential portion are individually owned condos and Trump no longer has any interest in the residential condos. These units start at 29 and run up to 89.

In short, Trump currently owns the majority of hotel rooms, the management company / brand that manages the hotel as well as all the convention and retail space in the building.

Will the name of Trump Tower in Chicago ever change?

Probably not. Trump has naming rights to the building and I don’t see him changing the name on his building.

Has the Trump election and presidency affected the pricing of condos in Trump?

It is too early to tell. The one thing we have seen is traffic drastically slow down on condos listed for sale in Trump. Most selling in the building at the current time do not NEED to sell (at least financially) so we haven’t seen any major price drops. Showing traffic before the election was very very slow. I think many buyers were concerned about values in the building so potential buyers wanted to wait on the sidelines to see what would happen to values.

Since the election traffic has picked up slightly for condos listed for sale in the building, but traffic is still slow overall.

Rentals are sitting on the market longer than usual, especially 1 Bedroom rentals which we’ve seen drop in price in the past 6 months. 1 Bedrooms would typically rent for at least $3,400 or higher (many in the $3,700 to $4,000 range). We’ve seen one unit rent for only $3,000 and another drop the price to $3,150 and still sit on the market.

Overall prices have not declined drastically, but there is apprehension among buyers regarding the future value of units in the building. On the rental end I think there are some people who simply do not want to be in the building because of the name (this is also true for some owners too). But, this is not the sole reason for 1 bedrooms having a difficult time renting. New construction rental buildings are giving Trump Tower a run for their money with excellent amenities and even hotel amenities such as my building, North Water Apartments, which is connected to the Loews Hotel.

Has hotel business declined?

I can’t speak for the hotel as a whole, but the hotel-condos that we represent are seeing the same or slightly better occupancy and room rates year over year (from 2015 to 2016). I do not know the numbers for November of this year yet, but November is historically a slower month for conventional style hotels.

Is there increased security at Trump Tower?

Yes. The increased security is nothing like you’ll see at Trump Tower in New York, but increased protests has caused the hotel and residential tower in Chicago to increase security and even close the garage to the public that is connected to the building. I haven’t had any major issues accessing the building with clients in recent weeks. However one of my clients actually got locked in the garage by accident due to the increased security measures.

 

 

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is part of the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pblackburn.com