Tuesday, March 14, 2017

Chicago's Lincoln Park luxury home glut portends the future?

Lincoln Park
Greg Hinz of Crain's Chicago Business attacked the Chicago-is-the-next-Detroit hypothesis last fall by citing property values in the larger city as "evidence" that the Chicago dystopians are wrong.

That's a fatuous argument.

Property values stay high and keep climbing until, well, they don't.

Fleshing that thought out a bit, a number of factors figure in to property values. Supply and demand is the most prominent. What if there are too many sellers and not enough buyers? That's the case right now with luxury homes in Chicago's Lincoln Park neighborhood on the North Side.

From another Crain's writer, Dennis Rodkin:
In February, sellers put 69 luxury houses on the market in Lincoln Park, more than during any month in the past two years, according to a report compiled by Niko Apostal, a Keller Williams broker. The new listings brought the total to 183, also a two-year high.

At the same time, "sales have remained steady," Apostal said, which leaves a disproportionate number of homes unsold as inventory swells.

The result: "prices are coming down," he said. "It's natural." Lincoln Park homes that went under contract in February had a median asking price of just under $1.5 million, or almost 20 percent below the year-earlier figure, about $1.85 million. Their final sale prices will not be known until the transactions close. In January, closed sale prices on Lincoln Park houses were down almost 14 percent from January 2016, according to data released last month by the Chicago Association of Realtors.

The asking prices on existing listings are feeling the downward pressure, and so are their sellers. A handsome house for sale on Montana Street recently took a price cut to below the $2.1 million that its sellers paid for the place in 2007. Listed since June at $2.1 million, it's now asking just under $1.94 million.
Could this be an anomaly? Perhaps.

But Chicago has many problems which include rising property taxes brought on by massive unfunded pension liabilities that still haven't been adequately addressed, the nation's highest sales tax, a soaring murder rate, ubiquitous red light cameras installed by a crooked vendor, and a corrupt and inept municipal government that is topped off by a deaf state government run for the benefit of the public-sector unions.

Hope in the future drives property values. Home buyers want to invest in a place where they believe they'll be happy and safe. And whenever the time comes to sell their home, they want to be confident they'll get more than what they purchased it for.

When too many people want to sell their homes--the downward cycle begins. When there is no hope they'll be the change no one wants.Well, traffic will move better. When I was in Detroit two years ago I didn't encounter a single rush hour traffic jam.

Decline and fall.

Fifty years ago the residents of Detroit's Boston-Edison and Brush Park thought it was inconceivable that their pristine neighborhoods would be become ghettos. But then too many people took the expressway out of the city into the suburbs and beyond and they didn't look back.

From my post at Da Tech Guy:

Unfunded pensions are why Chicago will be the next Detroit

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