Photo: Joel Wintermantle/Chicago Tribune
Bungalows on Hutchinson St., a block north of Portage Park, on Chicago's northwest side.
Q: I’m turning 35, single, and gosh—I am torn about what to do real estate wise. I know the Chicago market has heated up, so maybe I shouldn’t do anything! I am an architect and engineer’s daughter and love bungalows, history, and just great design. I try to believe one can balance the practical with the aesthetic at a reasonable price. What would make the most sense for investing in a place to call home? Apparently condos don’t have a great resale value, and while I don’t want to put the horse before the cart, I am not sure if I should be looking at houses in great school districts. Plus, I might be priced out of them with my budget, but am willing to save more to get a good return on my investment. —Keala
A: Keala, the shortest answer is: Buy now. Prices and interest rates have both started rising, so the longer you wait, the less you can afford.
It’s at least six years before schools matter to you, as you don’t have a child yet. I’d buy something that works for a young, childless person. Six years from now, you’ll have the advantage of having bought at low prices and low interest rates, so selling won’t be as costly a proposition for you as for somebody who bought when both of those were higher. And there will always be young people who don’t yet have kids but are looking for housing.
In fact, their numbers are already growing. A National Association of Realtors economist released this chart that shows the number of new households formed in 2012 nationwide was over a million for the first time since 2006. The number was more than twice what it had been in 2008, when fewer new households formed than in any year going back to 1980, the economist’s earliest data. People are coming out of their parents’ basements! They’re not all going to buy homes—many will rent—but it’s a reminder than under normal circumstances, there are always young people looking for homes.
I wouldn’t say that condos consistently have a lower resale value, only that they have had a lower resale value in recent years in Chicago. We had an enormous glut of condos, both newly built and recently converted from apartments, going into the recession, and that overstock contributed to a big crash in prices. But over the years, the oversupply has been burned off. A report out from Appraisal Research Counselors last week said that developers had 732 unsold condos on their hands in the first quarter of this year. Five years earlier, they had 8,222.
The appeal of living in or near the center of the city just keeps growing, and for many people, condos are the only affordable way to do that. I don’t think you should consider a condo a lesser investment as long as it's in the city's downtown neighborhoods, or in a walkable, shoppable central part of a suburb that is served by public transportation.
Your affection for bungalows is also something to pursue. Bungalows are all over Chicago, in hot, expensive neighborhoods—and in not as hot but very livable and affordable sections, too. They’ve served generations of Chicagoans well, and there might be one on the market right now that would suit you for the next several years.
What’s your real estate question? Maybe I can shop for neighborhoods or property types for you, or maybe you’re wondering if you got a good deal. Whatever you want to know on Chicago-area residential real estate, ask me at dennis@rodkin.com. I answer your questions every other Tuesday.