LAKEVIEW / LINCOLN PARK CONDO MARKET IS PICKING UP!

The condo market in Lakeview and in Lincoln Park is picking up and fast! Remember the days when you could stroll around the neighborhood and see 10 condos for sale on every block? Well, those days are long gone! Inventory levels in both Lincoln Park and Lakeview are the lowest in years. Builders are getting back into the game and selling out fast as well!

Currently I’m working with a couple who want a large 2 Bedroom or 3 Bedroom condo under 500k in Lakeview or Lincoln Park. They are open to all areas of these neighborhoods and believe it or not we can’t find much. The quality inventory that they have liked have all received multiple offers within days of coming on the market or within days of a substantial price reduction.

The buyers in this market are well qualified buyers. They have cash, they have credit and they have flexibility to work around the sellers demands. Whoever thought the sellers would be back in control?

Why is Inventory Low?

In my opinion supply is low for a few reasons:

1. OVER 20% OF SELLERS ARE UNDER WATER: Many sellers are currently under water. In Lakeview / Lincoln Park this is true for your smaller 2 Beds and for your high rise buildings in comparison to many of the duplexes that have held their value a bit better. However, at the end of the day there is a chunk of the population that cannot sell unless they want to bring cash to the table or go through the short sale process.

2. SELLERS CANNOT GET WHAT THEY WANT: While prices have stabilized and inventory is flying off the shelves we are not seeing a large increase in pricing. There are sellers who may not be under water because they had a substantial down payment, but they still do not want to take a loss on their property. These sellers are not coming to market.

3. DEMAND HAS INCREASED: Overall demand has increased. As the economy has improved, or at the very least become “stable” we have seen more buyers come to market. Rent prices have increased causing many renters to become buyers after finding the rental search process frustrating and exorbitantly expensive. Interest rates remain at record lows as well posing the question in many potential buyers’ heads “Why am I not buying right now?”

 

So at the end of the day what does all this mean? Does this mean that we will see prices rising again? Not necessarily.

When we look at the reasons why supply is look we have to understand that there is still a want for these people to sell. Just as there has been built up demand due to uncertainty in the market there is also built up supply from those who want to sell if prices ticked just a bit higher. I believe what we will see for the coming years are prices slowly increasing but then some sellers taking advantage and putting their units on the market in hopes of achieving what they wanted. Supply will continue to come on line, but just at a slower pace. Buyers will remain ready, willing and able to move forward once they find the right place.

The one thing to keep in mind in all this is while inventory levels have decreased, buyers are still picky. They want quality! At the end of the day if you don’t have a quality unit to sell you will not sell it and you will need to deeply discount the price. Buyers now are pickier than ever. They want to buy, they’re eager to jump into the market, but they’re conservative!

RENT PRICES SKYROCKET IN LAKEVIEW/BOYSTOWN

We all have read or at least heard the stories regarding residential rent prices going up, but by how much? In one of my last blogs I reported that the downtown rental market saw an increase of just over 13% from the same time last year (February through April). However, many of my recent Lakeview clients have started to become frustrated with the lack of good inventory on the market. So, I decided to run my own numbers for Lakeview and this is what I found:

2010 from March 1st to May 15th: 384 Units Rented with an Average Price of $1,554.31

2011 from March 1st to May 15th: 468 units Rented with an Average price of $1,797.15

This is a year over year increase of a whopping 15.6%, a significant difference from the increase downtown. However, what about other areas such as Lincoln Park? Then what about areas further north such as Uptown and Edgewater? Everyone says that Uptown and Edgewater are cheaper to live in than Lakeview but are the same things happening to prices up there?

First, lets start south in LINCOLN PARK:

2010 from March 1st to May 15th: 273 units rented with an Average Price of $1,831.95

2011 from March 1st to May 15th: 304 units rented with an Average Price of $2,053.52

This is a year over year increase of 12.1%

If we head north to UPTOWN:

2010 from March 1st to May 15th: 87 unit rented with an Average Price of $1,393.36

2011 from March 1st to May 15th: 126 units rented with an Average Price of $1,393.40

Virtually no change at all! While more units were put on the MLS for rent, rents remained stable.

Again, if we head even further North to EDGEWATER:

2010 from March 1st to May 15th: 73 units rented with an Average Price of $1,158.22

2011 from March 1st to May 15th: 109 units rented with an Average Price of $1,188.86

This is a 2.6% increase from the same time last year. A very modest increase, something that can be expected in a healthy economy.

So the question is, why are certain areas seeing rent increases and others not? Well, I believe there several factors.

Areas such as Lincoln Park and Lakeview are very desirable. As incomes start to increase again for those who have jobs, these are the first areas people want to live in and move to. For those who are new to Chicago, these are the areas where all the restaurants and bars are. These are the areas where many Chicago transplants may have friends and family living. It is a natural area to look for a place to rent if you are new to Chicago, if you are moving out from your parents home, etc.

What I believe is fueling the demand and increase in the # of rentals for Edgewater and Uptown are area residents who want to get more for their money. Uptown and Edgewater have nowhere near the amount of bars and restaurants that Lincoln Park and Lakeview do, however, they do offer very nice communities and a much great value for the dollar. I believe throughout the year and into 2012 we will see a steady increase in rent prices in Edgewater and Uptown, however, nothing in double digits. Furthermore, I believe we will see continued growth in rent prices in Lincoln Park and Lakeview, however, we are starting to near a ceiling. 15.6% growth in Lakeview is simply not sustainable, especially when there are neighboring communities, along the same transportation routes for a fraction of the cost.

The last contributing factor are the sales prices are condos in these areas. Areas such as Uptown and Edgewater saw a great decrease in prices over recent years, while Lincoln Park and Lakeview simply did not. Therefore, rents have more room to increase in Lakeview and Lincoln Park because housing did not decline to levels that entice renters to give up their flexibility and buy a home. However, in Uptown and Edgewater there are many properties that have declined in price 20%, 30%, and even more in price and the perceived value of buying in these areas versus renting are greater.