A new record was set in the top-priced, second-home market in November in Wisconsin. Lake Geneva saw three homes sell for at least $5 million. Lake Geneva is 80 miles north of Chicago. Here in Chicago, during the same month only one home sold in that price range, a Glencoe estate bringing in a cool $8.5 million.
If you add in the sale in September of the Lake Geneva estate which went for $9.55 million, it would not be an exaggeration to say “we’ve had a good season of top-of-the-market activity here,” as David Curry, a Geneva Lakefront Realty broker said.
Those four sales alone have already surpassed 2015. Last year Walworth County had just three homes that sold in this super-price range.
In the 15 years prior to that there had never been more than one sale per year in that price range.
Curry added that “If we had five more $5 million listings, I could sell them this year. People are knocking on doors.”
In one more of what has been a long run of high-profile sales, a New York investor purchased the Bronzeville building where Mariano’s grocery store recently opened.
Mariano’s opened the new store at Martin Luther King Drive and Pershing Road on October 11 this year. Just about two weeks later the building was sold for $34 million. The sale should not affect the grocery, which has a twenty-year lease with four five-year options to extend the lease. Rent goes up every five years.
Not too long ago another Mariano’s location in north suburban Vernon Hills sold for $36 million.
Chicago Neighborhood Initiative was part of the venture that developed Mariano’s. The Initiative is a non-profit that helps areas around Chicago where development is sorely needed. Other interests behind the development were Chicago firms WBS Equities, Safeway Construction, and Bartlett-based Abbott Land & Investment.
The total cost of the original development is not completely clear, but in 2014, when the CNI announced plans for the project they said it would cost as much as $24 million.
The iconic North Shore neighborhood of Lake Forest has one of slowest real estate markets in its peer group. Homes that were sold in May were on the market an average of 186 days. In the middle of June there were 97 homes which had been listed at least 6 months ago. Other areas with similar homes had less than 20 for sale that long. Hinsdale had 46 homes and Highland Park 57.
“It’s been slow up here,” says Marina Carney, an agent for Griffith, Grant & Lackie. “We’re all feeling it,” says Berkshire Hathaway Home-Services Koenig-Rubloff Realty Group agent Sue Beanblossom, in Lake Forest. “It takes a long time to get something sold in Lake Forest today.”
According to Midwest Real Estate Data, at the end of May Lake Forest had enough homes to supply sales for 14.5 months. In just about all its peers, such as Hinsdale and other North Shore suburbs, the inventory is quite smaller. For those other areas it was between three and 10.5 months at the end of May. A rule of thumb is that a healthy, balanced market has about six months of inventory.
Winnetka is a similar suburb to Lake Forest, but considerably smaller. Nevertheless, seven homes priced at over $5 million has sold in Winnetka in the past three years. In Lake Forest only four have sold.
Real estate agents say that the problem is three-fold: the age of the homes in Lake Forest; the extremely high asking prices; a long commute to downtown Chicago, combined with low-motivated sellers.
Several parameters have conspired to raise the price of homes in the Chicago area: mortgage rates below 4 percent; home loans are easier to come by; strongest job market since the recession; more people wanting to buy homes. And now, as the housing market enters the traditional season for home purchases, a shortage of homes has added more fuel to the fire of rising home prices.
The real estate website Trulia conducted a study showing that people across the country are finding it difficult to find a home they want to buy at a price they can afford. In Chicago and the surrounding area, and in Illinois in general, sales continue to rise, according to the Illinois Association of Realtors.
“Illinois continues to see sustained growth in sales and median prices, indicating the market is poised for a strong rollout for the spring selling season,” said Mike Drews, president of the state Realtors group, in a statement.
Home sales in the nine-county Chicago area rose by 6.1 percent in February, compared to last year, and prices rose by 7.1 percent. The median price for homes and condos sold was $187,500, compared with $175,000 in February 2015.
In Chicago itself things were even worse: The median price for homes and condos was up by 12.3 percent, to $238,000 from $212,000 in February 2015.
“There was a lot of movement in 2013 and 2014, but 2015 slowed,” said Carla Walker, an agent with Berkshire Hathaway Home Services Koenig Rubloff.
Despite a downturn in the rate the rest of the country is taking out mortgages, the Chicago area has seen an upward spike in home loans at the end of 2015 as compared to the same time period the year before.
In addition, area re-financing also grew during the fourth quarter of 2015, rising at a rate of over double the national average.
Chicago-region buyers received 20,870 mortgages to purchase homes during the last three months of 2015, representing an increase of 3 percent over the last quarter of 2014 when 20,275 mortgages were acquired. In the rest of the country the national average of purchase mortgages fell by one percent.
The number of mortgages taken by home buyers is not a direct measure of the total number of homes purchased, since some people do not use a mortgage to buy a home, if they have enough cash. The Chicago area experienced a 6.6 percent overall rise in home sales for 2015 as compared to 2014.
Real estate is a popular investment vehicle and there are some useful tax breaks that investors should be aware of. One of those which has been becoming more popular over the past 10-15 years is known as a 1031 exchange, named after section 1031 of the tax code.
Here is the background: In March 2002 the IRS issued new guidelines called Rev. Proc. 2002-22. These guidelines were created to help buyers and sellers of real estate who were conducting 1031 exchanges. These special property sales were based on the exchange of the property for a “like-kind” property. This exchange allows the sellers to defer paying capital-gains taxes on the sale. In the broadest of terms, the investor is swapping (exchanging) one business or investment asset for another. Even though most swaps are taxable as sales, if you come within the parameters of section 1031, there will be either no tax or limited tax due at the time the exchange takes place.
Back in 2002 IRS ruling addressed itself to something called a Tenant in Common, or a TIC. A TIC allows investors to own just a partial interest in a 1031 property, which can be entities such as shopping malls office buildings, and other commercial properties. The ruling established the fact the TIC properties indeed qualify as a realistic option for 1031 exchanges.
Most sponsors, or firms which create TIC deals, demand relatively high minimums, usually around $250,000. In the past there have been some firms with considerably lower minimums, however. Some niche firms set the limit as low as $50,000, such as Rob Hannah’s Strategies Group LLC, a company that specialized in structuring and then selling shares in TICs.
There are a few caveats when considering the use of a 1031 exchange to defer taxes.
A 1031 exchange is not allowed for personal use, only for investment and business property.
A 1031 exchange does not always have to be real estate, although it usually is. It is even possible that the sale of a work of art can be considered qualified for a 1031 exchange.
The definition of “like-kind” is wide. The terminology here can be misleading so check before you make any deals.
You are allowed to do what is known as a “delayed exchange.” Because the chances of immediately finding someone with the exact property you want who also wants the exact property you have means that most exchanges are delayed via three party (Starker) exchanges. This type of exchange requires a middleman who holds your cash after you sell your property. He then uses that cash to buy your replacement property on your behalf. This three party trade is considered a swap.
There are two important timing rules to keep in mind when conducting a delayed exchange. Once you sell off your property the third party intermediary gets the cash, and within 45 days of the sale of your property you have to designate the replacement property in writing to that same third party intermediary. The second restriction is that you must close on the new property you are purchasing with 180 days of the sale of the old property.
As soon as you receive the cash for your property, it is taxed.
There are a few other rules to be aware of. As you can see, 1031 exchanges are not simple things, and we recommend getting advice from a professional before jumping in to this potentially lucrative tax benefit for investors.
Considered by many as Chicago’s First Great Hotel, The Palmer House is up for sale.
The historic hotel is probably most famous for the on-the-premises invention of one of America’s most beloved confections: the chocolate brownie. Bertha Palmer is responsible for our added waistline inches and dental caries, all of course well worth it. She was married to Potter Palmer, the man responsible for the success of the grand hotel. Here is how it happened:
“Bertha Palmer, who was president of the Ladies Managers of the World’s Fair, was doing box lunches for all the guests but she wanted something other than piece of pie or cake. So she came to the hotel and charged the chef to make something like a cookie. Denser, like a cookie, but chocolatier. She loved chocolate. And ergo, the brownie,” Palmer House historian Ken Price said.
It is not just brownies that has made Palmer House special. Less than two weeks after Palmer House opened on September 26th, 1871, the Great Chicago Fire left the hotel nothing but a pile of ash. From the ashes rose the second incarnation of the hotel two years later, setting several precedents for their new establishment.
Price explained: “First, totally fireproof building. Second, is first utilization of Edison’s invention the lightbulb, Bell’s invention of the telephone, and actually this contraption called the vertical railroad, which became the Otis Elevator.”
A new study conducted by Zillow puts the median rent across Chicago at what turns out to be a not-so-high $1,642 per month. Just compare that figure to a typical rental in San Jose, the Silicon Valley town outside San Francisco: $3,398 per month.
According to Zillow’s study the Chicago figure is pretty average for the United States in general, only slightly higher than $1,382 per month. Additional good news for Chicagoans is that their rents seem to be holding pretty steady in comparison to the rest of the country. Rentals in Chicago only 1.4 percent this past year, compared to an increase of 4.5 percent in the rest of the US.
It is expected that rents in downtown Chicago will be eased when new construction there is completed.
The cheapest rentals out of 35 of the country’s largest cities are in Pittsburgh where the average stands at only $1,097.
Tribune Media, owner of Chicago’s 36-story Tribune Tower, announced that it has acquired the services of real estate investment banker Eastdil Secured to explore the different options for selling or re-developing the property.
President Murray McQueen of Tribune Real Estate said that this deal can be “an incredible opportunity.” He added that they expect a lot of interest in this property from a large assortment of private and institutional investors and developers.
The Tower was built in 1925 and was granted landmark status in 1989, and is the home of the Chicago Tribune.
A McDonald’s is being considered to fill the space left empty by the long vacant Myoda Computer Center in Hoffman Estates outside Chicago. Myoda, located at 1070 North Roselle Road was taken over by a bank five years ago when the mortgage on the property was foreclosed.
Hoffman Estates is planning other improvements to their village, including putting in a traffic light this autumn at the entrance to the shopping center on Roselle Road.
If the plan for the McDonald’s is given a green light, then Hoffman Estates will have two of the newest McDonald’s in the area, instead of one of the oldest ones. That’s because the old McDonald’s is coming down as soon as a new, already approved, McDonald’s at Barrington Square Town Center opens up.
The Myoda building is a two-story structure that housed a computer store, but also had space for other tenants. The land is now owned by the BBCN Bank, which is planning to sell the property to a broker, who will then contract a lease for a new 4,338-square-foot McDonald’s complete with dual drive-through lanes.
If approved work on the new McDonald’s most likely won’t begin until the beginning of the next construction season, said Peter Gugliotta, Director of Planning, Building & Code Enforcement for Hoffman Estates. Once begun it should take between four to six months for the fast food restaurant to be completed.