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Northwest Side Real Estate Sees Signs of Recovery

By Ted Cox | October 6, 2014 8:45am
 The Cssaedy family in front of their new home on the Northwest Side.
The Cssaedy family in front of their new home on the Northwest Side.
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DNAinfo/Mina Bloom

JEFFERSON PARK — Not all roads lead to Jefferson Park, but enough train lines and expressways do to make the neighborhood a transportation hub among Chicago neighborhoods — and a bargain for house hunters.

For decades, Jefferson Park, like Edison Park farther along the Metra northwest line, has been renowned as a haven for city workers fulfilling the residency requirement.

"They're full of city workers, which is wonderful," said Jan Kupiec, a Baird Warner realtor who specializes in the Northwest Side. "And that's not going to change."

Neither is the price dynamic, most likely. According to Kupiec, Edgebrook is tops on the Northwest Side thanks to its high-performing Chicago Public Schools. "Edison is a little more affordable than Edgebrook," she added. "Jefferson Park is even more affordable than those areas."

 The Cassedy's home is typical of the impressive houses located on quiet streets found in the Edgebrook neighborhood.
The Cassedy's home is typical of the impressive houses located on quiet streets found in the Edgebrook neighborhood.
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DNAinfo/Ted Cox

Indeed, according to the Trulia Heat Map, Jefferson Park properties on the market have a current average listing price of $321,000, slightly behind the $342,000 of Norwood Park and $381,000 of Edison Park going farther northwest.

Yet, for the quarter ending in September, Jefferson Park's average sale price was $233,000 and its median sale price was $223,000, both up 6 percent year to year, while Edison Park's averages in those categories dropped. That means that, with its key attribute of being where the Metra meets the Chicago Transit Authority Blue Line with their adjacent stations, along with its ready access to the Kennedy, Jeff Park has weathered a recent slowdown in the Chicago realty market better than most, perhaps because it attracts not just city workers, but suburban workers doing the reverse commute and seeking the livelier atmosphere at home of something closer to the city center.

Citywide, the realty market is rebounding from the recession of six years ago, but the recovery is lagging behind other cities — with some estimates that we won't see 2007 property values again until for a decade or so.

The Zillow Inc. realty website says Chicago lags behind New York City and especially Los Angeles in the recovery. Zillow estimated that L.A. property values would recoup their recession losses next year, with New York City following suit in 2019.

According to Zillow, Chicago property values rose 8.8 percent over the last 12 months, above the national average of 6.3 percent, but that still leaves values 24.4 percent below their peak in March 2007. They're predicted to rise again over the next 12 months, but at a slower rate of 2.6 percent, while nationwide home prices rise by 4.2 percent. At that rate, Zillow predicts Chicago real-estate prices won't peak again until 2026.

"Prices are going to continue to go up, but the pace has been easing back," said David Blitzer, who runs statistics for the Standard & Poor's Dow Jones Indices, one of the leading databases for the realty market. "And that's true in almost all the cities. We've seen the same sort of gradual loss of momentum."

There are signs of optimism, though. The realty data service CoreLogic found last year that housing prices rose in all of the 235 Chicago-area ZIP codes for the first time in seven years.

Nationally, said Blitzer, "he bigger you were, the harder you fell."

"Denver and Dallas are already back or possibly a little above their peak before the financial crisis. They didn't go down quite as much. They didn't have the huge rise and huge collapse," he said.

The real-estate bubble was biggest, Blitzer said, in Phoenix, Las Vegas, Miami and Tampa, Fla. "Those four cities had the biggest run-up and the biggest collapse."

Ron Goldstein, a Realtor at Berkshire Hathaway who specializes in luxury business in Chicago and Miami, agrees, saying Chicago "never saw the appreciation other major cities did."

Yet Goldstein remains bullish on the local real-estate market. "Things are absolutely looking up," he said. "I'm busier than I've ever been.

The Trulia heat map showing values by neighborhoods shows home prices generally up, but with much variation.

"Humboldt Park is hot right now," Goldstein said, following the rise in nearby Logan Square, which has driven some buyers seeking better deals south and west.

On the Northwest Side, "generally, all these areas have the same trends," Kupiec said. "It just comes down to a difference in housing prices.

Kupiec said on the Northwest Side, "I think it's turned more into a buyer's market."

"The first six months [of the year], I felt was more of a seller's market," she said. "The inventory was low, and properties tended to go under contract immediately, many with multiple offers.

"I saw a change in June, when the activity really slowed down," she added. "And then it picked up again in July, but it is not as strong as it was the first six months."

Kupiec said the slowdown "is pretty much citywide," explaining, "The inventory increased." Yet "interest rates are still low, which is wonderful," she said.

Jefferson Park has benefited from that. The Trulia Heat Map ranked it 21st among Chicago's 77 neighborhoods in current popularity, based on Internet searches in specific neighborhoods, just beyond Norwood Park at 20, and ahead of Edison Park at 38.

The so-called Great Recession and its associated foreclosures continue to have a lingering impact. The Chicago market was hard hit by foreclosures, with that having an immediate and lasting effect on the property values around them.

A study of the Chicago market from 2008 to 2012 conducted by the Regional Economic Applications Laboratory at the University of Illinois at Urbana-Champaign found that a single foreclosure within a tenth of a mile can drop property values more than $3,000. Three to five foreclosures in the same area can cut values more than $5,500, and those cuts are exponential if six to 10 or more than 10 foreclosures hit an immediate area, dropping values more than $7,000 or even $9,000.

According to Goldstein, the city is just beginning to finish off that foreclosure backlog. The process has taken longer in states where foreclosures go through the courts, like Illinois, rather than going through a more expeditious administrative process.

According to Zillow, 18.8 percent of all homes nationwide are "under water," with equity values less than what's owed on them. In Chicago, however, that figure is 32.9 percent through March.

That creates a double bind, with many homeowners determined to wait out the market to get their value back, thus depleting the inventory of available homes. Many Realtors complain right now about the lack of inventory, to the point where they say there's never been a better time to post a good property at a fair price for a quick sale.

One drag on the bounce-back, according to the University of Illinois at Chicago study "The Great Recession's Impact on the City of Chicago," is the state's dependence on property taxes to fund essential public services like education. That study specifically blames Mayor Richard M. Daley's "broader policy agenda that focuses on public safety, neighborhood investment and avoiding property-tax increases" over the 22 years before Rahm Emanuel took office.

"That's more of an indirect effect," said UIC Professor Rebecca Hendrick, lead author of the study.

That study cites Daley's privatization lease agreements on parking meters and the Skyway, with the money going to fill budget deficits during the recession and defray increases in the property taxes. More recently, the Board of Education has authorized maximum increases in its tax levy, and Emanuel has warned of what he's called a "$600 million pension cliff," again resulting from pension payments put off during the Daley administration.

While Emanuel has thus far held the line on city-instigated property-tax increases, most recently through a hike in telephone surcharges, many worry that making up the pension shortfall Daley created will mean increases in the property tax in years to come, a concern for both homeowners and renters, but also anyone considering buying a home in Chicago.

"If you don't know what the state and local governments are going to do next, that has a chilling effect on a buyer's appetite," said Laurence Msall, president of the Civic Federation, a business-oriented government watchdog. "Without a doubt, the worst economic-development climate is one of uncertainty.

"People don't know what the return on any investment is going to be. The state continues to lurch from one fiscal crisis to the next," he added. "It has a residual and corrosive effect on the City of Chicago and Cook County."

The Civic Federation recently put out a study of property values across the city and county. It showed that overall Chicago property values had continued to decline in the 2012 tax year to levels of a decade before. Yet, because tax levies continues to rise, homeowners might actually see their tax bills rise even as their assessed value declines, which threatens to create a spiral of diminishing value.

"Increasing property taxes affect the value of a property," Msall said, and not in a good way.

Hendrick said the property-tax burden is actually relatively light in Chicago, which can raise revenues in other ways, as in the case of the increased phone surcharge for emergency 911 services.

"The other thing no one has really been able to tackle is the impact that the State of Illinois is having on all of this," Hendrick added. She said it was a common topic of conversation with her academic colleagues from outside the state.

"They're all aware of how bad off financially the State of Illinois is, and that certainly has to be having a confounding effect on the City of Chicago," Hendrick said.

"Chicago is the primary economic engine for the State of Illinois," she said. "How many people are not moving here, how many people are not getting jobs here or not taking jobs because they're probably more aware of the problems with the State of Illinois?"

Blitzer believes state troubles have a minimal impact because Chicago is the economic engine that runs the state, not vice versa.

"My sense is when people look at at that, as far as the value of housing, first they're concerned about schools and local services no matter what," said Blitzer. "And then to some extent they're concerned about their property taxes, but they probably look more at the local community than the statewide finances."

Yet that's hardly good news for Chicago, given the continuing grief over Chicago Public Schools and the murder rate and, yes, the possibility of hikes in property taxes, all of which Blitzer said "absolutely" affect home values.

"Schools are always gonna be a drive," Goldstein said. Yet the good news, from where he stands, is that all this turbulence has a minimal impact on the luxury market, where he estimated eight out of 10 families send their children to top-level private schools like Parker and Latin "just because they can." Rising taxes also have a minimal drag on those properties.

"The luxury market has a huge uptick we've seen in the last five years," Goldstein said.

Meanwhile, areas like Humboldt Park continue to rise in spite of Chicago's drawbacks.

"There aren't great schools there," Goldstein acknowledged. "Will they get better? Probably not in my lifetime."

Yet the area remains a new hot spot, especially for younger couples. "People are going west," Goldstein said. "They'll be there, they'll buy their place, because they can afford it in the $100,000-$200,000 range, and then five years from now they'll move to the suburbs and a better school system. That happens a lot."

Lana Cassedy just bought a house on the Northwest Side with her husband and three young children — the eldest, not coincidentally, just entering kindergarten.

Initially, Edison Park was “at the top of our list,” she said.

“But the school’s reputation wasn’t as strong, and the [real estate] inventory was just not available for what we were looking for,” she said.

They chose a home in Edgebrook, where top school choices are available, including highly-ranked Edgebeook Elementary and Wildwood Elementary.

The reputation of area school was “ a big selling point for us.”’

But they also “wanted a neighborhood in the city where we felt our children could ride their bikes around the neighborhood and make friends with the kids down the street as they got older,” Cassedy added.

On the first day the family moved into their new home, “several of the neighbors came by to introduce themselves, and people stopped us on the street while walking my daughter to school just to stop and say hello. ,’” she said.

“It was really amazing to us that a community like this existed in the city. Literally every time I am out for a walk with the kids, or at a neighborhood store or restaurant, we meet new people and neighbors from the community.,” said  Cassedy.

Cassedy said she hears of people who grew up in Edgebrook and have moved back to raise their children there.

“Although I do think Edgebrook’s real estate is priced high for many young families, it has been worth it to us to make the sacrifice,” she said.

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