Q & A with Charese David, Real Estate Broker
Q: What was the shift in the Chicago real estate market around the mid-2000s?
A: Developers bought cheap land on the north side. They found there was a market for homes and condos. This was risky back then, but it paid off. It’s similar to what happened in the 80s and 90s. There was a time when it was unsafe to go west of Halsted. That area steadily grew and became more popular. Now real estate in that area is very expensive.
Q: How has this affected the current market?
A: Now that the neighborhoods have improved, buyers are searching in more areas. They see a variety of properties in the same price range in different neighborhoods to see how far their money will go. One of the biggest implications is when a seller discovers they can’t get what they paid for their property, even in a great location. There might be too many other similar or even bigger properties on the market at a better price point. It’s possible that the surrounding neighborhoods have become more desirable since the seller initially bought the property. While others who bought in what once was a less desirable area, for a cheaper price, are now finding they are in that same competition pool. Sellers need to lure buyers with quality of workmanship, spaciousness and maintenance of the property. Location to public transportation is also key.
Q: Why have these neighborhoods improved?
A: Since 2005, a lot of the elementary public schools have achieved a strong, academic reputation. Two great examples of this are Coonley School in North Center and Audubon School in Roscoe Village. They have strong input from the community of parents and given grants or money from the city to create programs that attract families. The public high schools are slowly gaining better reputations. Schools like Lakeview are offering programs underwritten by colleges such as DePaul.
Corporations are also drawing people into the city as they move their headquarters downtown. For instance, the city has offered tax credits to huge companies like Boeing, McDonald’s and Google if they move into the city to stabilize the commercial realm.
As people migrate into these neighborhoods, the demand for local businesses, shops and restaurants increase. This includes upscale grocery stores such as Whole Foods, Trader Joe’s and Mariano’s.
Q: What are buyers looking for now?
A: Condos are selling faster than single family homes. New construction single family homes have higher price tags and taxes, so many families are looking at suburban alternatives. Even though city schools have improved immensely, there is still uncertainty about the future. And suburban public schools offer competitive, if not better, education.
Q: What is your advice to homebuyers post-housing crash?
A: According to Crain’s, 20% of homeowners were still underwater on their mortgage in the first quarter of 2016. Chicago has a higher percentage of underwater mortgages than any other big city. The real estate and mortgage industry was corrupt in 2005-07, offering false home values and appraisals that drove the housing market up. Plus a lot of buyers could get 100% financing.
If you can’t put a down payment on a home, don’t buy it. I recommend that my clients put down at least 10%. If the home value doesn’t increase by the time they sell, this will at least cover closing costs and commissions when selling.
My advice when buying a home is to expect to stay in a condo for five years and ten years in a single family home. There’s a better chance that you can break even over the years. Plus you’re paying less to own a home than it would be to rent. Buyers get a homeowners exemption, tax break and interest deductions on tax returns. If buying a condo, buy in a building where the rental cap is at least 25%, so you’re able to rent it you need to move.
Q: How is rental market in Chicago?
A: Rentals are expensive, but millennials like them because they tend to be more transient with jobs and lifestyle. Some can’t afford to buy because their debts are high and they aren’t making as much money. In general, salaries of average worker haven’t increased much since 2007, but cost of living has gone up exponentially.
Q: What are the current up and coming north side neighborhoods?
A: Albany Park, Avondale, Edgewater Glen and Bowmanville are growing because buyers get more space for the money. You can get a feel for a neighborhood by checking out the restaurants, grocery stores and coffee shops. Starbucks tends to show up in trendy neighborhoods on the verge of turning. Also keep tabs on schools by speaking to the parent network to understand how people feel about the school, it’s staff and education. A lot of that information isn’t published.
Q: Any final thoughts?
A: As a global city, Chicago is attractive to international corporations. There are many reasons for this including the ability to fly direct to most cities and the commercial and residential markets are cheaper than cities on either coast. We are a corporate-driven city (with no hurricanes or earthquakes!). Lake Michigan is one of the largest freshwater lakes in the world. Chicago has some of the best sports teams, a thriving culture and amazing architecture. I’m seeing more empty nesters buying in the city. They come because of the culture like the opera, symphony, theater district and Millennium Park. Chicago continues to thrive.
