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Lincoln Park Weathers Ups, Downs in Realty Market

By Ted Cox | October 7, 2014 8:36am
 Lincoln Park is atop the city's 77 neighborhoods in average listing price, at $1,010,633 for the week ending Sept. 17.
Lincoln Park is atop the city's 77 neighborhoods in average listing price, at $1,010,633 for the week ending Sept. 17.
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Conlon Real Estate and VHT

LINCOLN PARK — Property values rise and fall over time, but one thing remains constant in Chicago: toney Lincoln Park remains one of the most desirable, and pricey, neighborhoods in the city.

All homes for sale aren't listed but of those in Lincoln Park that are, the average is above $1 million, according to the latest Trulia Heat Map.

Real estate in Lincoln Park, like many other places in the city, is a mixed story.

Lincoln Park is atop the city's 77 neighborhoods in average listing price, at $1,010,633 for the week ending Sept. 17. But that's down 3.4 percent from this summer. Its $570,000 average sale price is up 9.2 percent year to year. The median sale price — the midway point for all homes sold —  in Lincoln Park was $340,000, down 11.8 percent from a year ago. The latter figure, experts say, reflects stronger sales with less expensive properties.

Overall, though, Lincoln Park's housing stock of luxury homes is mirroring a generally healthy national trend of higher-priced properties selling better.

"Lincoln Park and Old Town, in my opinion, have a more residential feel," said Berkshire Hathaway Realtor Ron Goldstein, who specializes in the high-end market. That's especially true compared to the Gold Coast, he added. "There are more condos in the Lincoln Park and Old Town area than there are in the Gold Coast area."

Overall, the city's realty market is rebounding from the recession of six years ago, though its recovery is lagging behind other cities — and there are some estimates that we won't see 2007 property values again for another decade or more.

Zillow Inc. 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.

Zillow predicts Chicago real-estate prices won't peak again until 2026. By one estimate values are still 24.4 percent below their peak in March 2007.

Still, 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. And, according to Zillow, Chicago property values rose 8.8 percent over the last 12 months, above the national average of 6.3 percent.

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.

"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."

Blitzer said "the 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."

Goldstein, who specializes in luxury business in Chicago and Miami, said Chicago "never saw the appreciation other major cities did."

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

Lincoln Park is one of the areas that has bounced back the fastest, he added, and saw minimal declines. "Especially if you're talking the luxury market, not at all," Goldstein said. "The luxury market has a huge uptick we've seen in the last five years" while other city neighborhoods were still bottoming out.

Still, while other neighborhoods have fluctuated, Lincoln Park has remained relatively stable over the years and the decades. "It has been, always," Goldstein said. "It's close to the lake," the city's greatest natural resource, and the lake isn't going anywhere. The shopping along Clark Street is a natural draw as well.

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

"It just depends on the property and the location," Goldstein said. "There's no rhyme or reason with what's happening with real estate right now."

Other neighborhoods go through hot and cold phases, he added, but Lincoln Park remains relatively steady.

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

The so-called Great Recession and its associated foreclosures continues to have a lingering impact.

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.

Many sellers are still waiting to put their properties on the market, Goldstein said, "and they need to be educated, though, that prices are increasing."

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.

Real estate speculators have helped boost properties in some citiies, such as Las Vegas, but Chicago hasn't seen that same sort of aggressive speculation, Goldstein said.

However, he has seen a noticeable impact brought on by the influx of tech firms and their employees who Mayor Rahm Emanuel has been courting since he took office. Lincoln Park and the Near North Side have benefited, he said.

If Chicago hasn't enjoyed the same bounce-back as some other cities in home prices, the commercial market for investors is said to remain relatively bullish, according to a recent article in Crain's Chicago Business.

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 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 under 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 just 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.

Yet 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.

"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?"

Standard and Poor's Blitzer said state problems 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. ... 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," Blitzer said.

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 for neighborhoods like Lincoln Park, 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 "just because they can," he added.

"We're fortunate to have good schools in Chicago on the luxury side," Goldstein said. Many in Lincoln Park send their children to top-rated local private schools like Francis Parker, 330 W. Webster Ave., and the Latin School of Chicago, 59 W. North Blvd.

Even so, Goldstein added, the local public schools tend to be "good, very good," thanks to contributions the area's well-to-do residents to to make to the schools and the interest they show in improving them.

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

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