Homes & Relocation Detail
New York vs Chicago
Which city’s property market is in the best health? What about the rental market? Where are the best investment prospects? Hanna Lindon presides over a heavyweight property punch-up
Market performance
NY: House prices have fallen across the US this year, but New York has been less affected by the credit crunch than many other areas. According to the Manhattan Market Overview by Miller Samuel and Prudential Douglas Elliman, the number of sales in Q2 2008 dropped 21.8 per cent from the same quarter of 2007. On the other hand, the median sales price of a Manhattan apartment exceeded $1,000,000 for the first time in the history of the report, representing a 14.5 per cent increase; condo prices were also up.
William Vilkelis, vice president at Barak Realty, says: "Condos and luxury properties are showing good turnouts, although not necessarily the number of offers experienced a year ago. Many sellers I've spoken with are of the mindset that they will wait until after the election, after the uncertainty of who the next president will be, before deciding to sell."
Chicago: Although the Chicago property market has suffered less than other major metropolitan centres in the US, it has still experienced a severe downturn.
"I have experienced first hand that a large number of current sales in the market are foreclosure and short sales," says Monica Walsh of Chicago real estate agency M. Walsh and Associates.
"Due to the skyrocketing number of these sales, many Chicago neighbourhoods are experiencing depreciation between 10 and 15 per cent. Basically, the foreclosures and short sales are dragging the markets down."
Santiago Sanchez, with Chicago Real Estate International, agrees that the market has experienced strong depreciation. "We have noticed a drastic increase in requests for short sales due to homeowners' hardship," he says.
Prices are not expected to pick up significantly in the near future.
Affordability
NY: Despite a fall in prices this year, New York is now the least affordable major housing market in the country, according to a report released by the National Association of Homes Builders (NAHB). It is the first time that a major metropolitan area outside California has been the least affordable market in the 17-year history of the report.
"Los Angeles was the least affordable housing market at this point last year, but prices have fallen a lot more in Los Angeles than in New York," says Gopal Ahluwalia, an NAHB economist.
The median home price fell slightly this year in the Big Apple to $481,000 from $510,000. This meant that 11.4 per cent of homes sold during the quarter were affordable to families earning the median income of $63,000, up from 6.3 per cent in the second quarter of 2007. Despite this, New York still became the least affordable area in the States this year.
Chicago: Homes in Chicago have become more affordable in the past year, but restricted mortgage availability coupled with a stagnant economy means that many Chicagoites are still struggling to buy their own home. According to Moody's Economy.com, an index of affordability rose to 92 per cent at the beginning of 2008, up from 87.2 in the third quarter 2007. However, it has yet to cross the 100 mark – the point at which property becomes affordable again.
The average Chicago sales price in June–August 2008 ranged from $528,750 in Roscoe Village to $47,250 in Riverdale.
Rental market
NY: The Big Apple's rental market is currently feeling the effects of the credit crunch. Average Manhattan rents have decreased across the board this summer, according to a report by The Real Estate Group, with the only exception being the class of apartment with no doorman and one bedroom. In a year-on-year comparison, August 2008 prices were also lower than August 2007.
"I often used to hear about this common consensus that, when the sales market deteriorated, the rental market would go stronger and vice versa," says Daniel Baum, CEO of The Real Estate Group. "While this symbiosis may have existed in the past, the current rise in unemployment rates and curtailment in the creation of new jobs seems to be negating this widely accepted principle. In short, the Manhattan real estate market, as a whole, is down."
Those looking to maximise the rental potential of their NY purchase should avoid one-bedrooms apartments in Battery Park and the Lower East Side.
Instead, look at buying a doorman two-bedroom in Murray Hill, where price recently increased 4.7 per cent, or a non-doorman one-bedroom in Chelsea.
Chicago: According to a report by the Investment Instruments Corporation, the median monthly rent value for 2008 Q1 in Chicago was $1,328 – an increase of 2 per cent on the same quarter in 2007. "Things are looking good for any landlord who has two-, three-, or four-bedroom apartments for rent in Chicago that are coming up in the Lakeview, Lincoln Park, Roscoe Village, North Centre, Bucktown, Wicker Park, Ukrainian Village or East Village neighbourhoods," says Chicago real estate agent John McGeown. "I have seen a drastic increase in rental rates this season."
Lincoln Park and Lakeview seem to be the best prospects for those looking to maximise their rental income – one-bedroom apartments in these areas which cost $800 last year are now going for close on $1,000. Buena Park, Edgewater and Rogers Park have also seen dramatic rent increases this year.
Investment prospects
NY: Experts have mixed opinions about what the future holds for New York property. A survey of city estate agents by The Real Deal saw some pessimism for this autumn, with Corina Saldivar, sales agent at DJK Residential, saying: "I predict prices will head down in the third quarter compared to the first half of the year." Darren Sukenik of Prudential Douglas Elliman, on the other hand, expects to be busy. "I have buyers waiting to pounce; they all seem to think September to February is when they will be doing so," he says.
Duncan MacKenzie, NYSAR chief executive officer, was also optimistic for the future. "We expect that additional buyers, particularly first time buyers, will be coming on to the market in the coming months to reap the benefits of the recently enacted federal housing stimulus package," he said. "New York's housing market will clearly build momentum as buyers continue to realise the benefits available to them in the 2008 market."
Chicago: The prospects for Chicago property in the near future are not looking particularly good. According to a report by Chicago Real Estate International, the real estate market is not expected to recover from the effects of the credit crunch in the short term. "We are projecting that the real estate market will remain relatively stagnant or declining for the next few years, with serious price reductions and depreciation," says the report. "Additionally, the country has been slammed hard with foreclosures and could take years to recover."
But buyers shouldn't despair yet. A report by Downtown Chicago Condos indicates that the Chicago market is better placed to weather the credit crunch than many other US cities. "The big picture is that Chicago has a robust real estate market and the downtown, lake front and Loop will continue to attract residents looking for diversity, excitement, and to be close to work without long commutes," it says.
Credits
www.millersamuel.com
www.prudentialelliman.com
www.barakny.com
www.chiacgo-appraiser.com
www.illinoisbienesraices.com
www.tregny.com
www.rentomatic.com
www.sudlersothebysrealty.com
www.ny.therealdeal.com
www.djkresidential.com
www.nysar.com
www.bestchicagocondos.com
www.nahb.org
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