Chicago Condos and Real Estate Values Update
Chicago condos and real estate values have dropped in a little in the last 6 months so if you were priced out of the market before, you may be able to afford the right property now. You can find some of the hottest properties in Lakeview, Lincoln Park and Old Town (Gold Coast) for about 5-7% less than they were last spring. 5-7% may not sound like much but on a 2 bedroom 2 bath condo with parking on the north side, it may have brought the price down from $350,000.00 to $325,000.00. Saving 25K on your mortgage makes things a lot more affordable. And there is a ton of inventory available. Just check Chicago Craigslist or Realtor.com. Both sites are full of new condo listings every day.
I am writing this because I think people have forgotten that even though there are some people who bought places that were too expensive and on adjustable loans, there are other people out there that are just moving for real reasons. Work, marriage and family are all legitimate reasons to sell your home or condo, not everyone is in financial difficulty. You can sell your place in this market with a little more marketing and a little more time. You shouldn’t write it off completely. There are people looking to buy who have good finances and are not at all at risk, and one of them might be interested in your property although you won’t get as much as you would for it before.
It is also important to look at condo buying and home buying in general as a long term investment in order to make sure you don’t loose money on the purchase. If you think about it, your home is likely the most expensive thing you will ever buy and pay for so you want to make sure you are getting the best deal buying and selling. A few thousand dollars with mortgage interest tacked on can lengthen the time to pay it off by years and sink in additional tens of thousands of dollars over the life of the loan. So buying wisely is very important. Here are a few condo buying tips since I have gone through this process before:
1. Buy something less than you can afford. If the bank says they can give you a loan for a maximum of $320,000.00 don’t use that as your price target, because it will be extremely hard to pay the payments and you could very easily loose it. Tell the realtor your price limit is 275K and they will show you condos around 280-285K. Then when you make and offer on a condo try and offer about 5% less than the price and expect to meet somewhere in the middle. The difference in monthly payments at 7% interest is about $300 which is a $3600.00 when you add it up every year. What else could you do with $3,600.00?
2. Don’t view it as a short term investment. In order to make money on a home or condo you have to live there for more than 10 years at current rates. So, don’t buy and count on selling in 3 or 5 years because you will loose money on the deal. Remember buying is easier because you don’t pay the commissions or taxes on the transaction. Selling takes money out of your profit when it is a 5% commission for the realtor and a 2% sales tax in Cook County. This also doesn’t include movers and redecorating costs of the new place. You need 10 years of appreciation to pay for the move and all the fees and still make it out ahead.
3. Don’t buy a condo unless you love it. Seriously. I didn’t love my place and now I hate it. If I would have gotten all my list of needs and wishes I wouldn’t want to move ever. Location is included in this. If you are planning on buying a home way out in the boonies of the far west suburbs or far north side, consider your hour or two commute to work across the chicagoland area or to get downtown. This will seem negligible at first and then will drive you nuts the longer you have to do it. Unless you take public transit, your costs will also be higher when you spend all that time stuck in traffic burning up gas. A central location is best if you switch jobs a lot. (or you could just rent)