The rent is too damn high — but interest rates are high too! If you’re thinking of buying your first house or moving on up or interested in buying the GOAT’s suburban mansion, what should you do? We asked Jen Laskov — a broker for the Lowe Group Chicago, the city’s number-one sales team — to take the temperature of the 2023 real estate market. You may not be in the market for a Highland Park mansion, but a place in Logan Square might be a good investment.
InsideHook: Interest rates are much higher than they were this time last year, but far from an all-time high. What do you tell potential first-time buyers with interest rate-based concerns? What about homeowners who are locked in with a good rate?
Jen Laskov: Many home buyers who put their searches on hold as rates ticked up at an unprecedented rate last year have come back around this spring. They understand the rates they saw a year ago are in the past and not [returning] anywhere near the foreseeable future. Buyers have adjusted their expectations to the new interest rate realities, and we are still seeing many multiple-offer scenarios because of the lack of inventory issue. Twenty years ago, rates in the 6 percent range were considered historically low, and 40 years ago, the rates were double digits.
What’s the next big Chicago neighborhood?
Logan Square is one of Chicago’s hottest neighborhoods, where prices continue to increase at a rate faster than many other neighborhoods in the city. It’s nestled just north of Bucktown and just west of Lincoln Park, with access to the Blue Line, the highway and plenty of green space with the boulevard systems. The Logan Square Farmers Market was voted as best in the city, [and there’s] a hipster scene as vibrant as its nightlife. This trendy neighborhood is a foodie haven, with many of Chicago’s award-winning restaurants and mixology bars. Logan Square boasts amazing architecture including beautiful churches and greystone-lined streets, which maintains the history and character of the neighborhood as developers convert greystone two-flats into impressive single-family homes, and even old churches into condos and apartments buildings.
How much does how much you put down matter?
Putting down at least 20 percent will usually get you the best interest rate possible, along with a lack of PMI [private mortgage insurance]. However, there are lenders who offer competitive rates with only 10 percent down and no PMI.
What exactly is a jumbo loan?
Jumbo loans are meant for those who need to borrow more than the conforming loan limits set by the FHFA. In 2023, the conforming loan limit was raised to $726,200. Jumbo loans have stricter approval requirements compared to conventional loans, such as higher credit scores, larger down payments and lower debt-to-income ratios.
What’s your biggest red flag when touring a house?
Musty odors are always the number-one red flag. Buyers do not want to have to deal with water infiltration — or worse, mold remediation. Sellers should remedy water infiltration issues before coming to market or risk deals falling apart from inspection, and subsequently netting less proceeds from the sale versus remedying the issues upfront.
Does Manhattan Have a Luxury Real Estate Problem?The borough’s most expensive residences aren’t selling as well as you might expect
What are the economical improvements homeowners should do? Conversely, what’s the biggest waste of money?
Fresh paint, refinished flooring and fresh landscaping — these are the biggest bang-for-the-buck projects. Kitchens and bathrooms do sell homes, but the best return on investment is when you can enjoy your rehabbed kitchen or bathroom for a few years, since you may not recoup exactly 100 percent of that investment.
Personalizing a home with wallpaper is not necessarily a waste of money since it’s enjoying your home and expressing your personal style. This is one expense that is usually not recouped on a sale, however, because it’s very taste-specific.
Should I even consider a house or condo on the market for 60 days? 100 days? Is there a cut off?
You should absolutely consider a home with longer market time. Longer market time may be an indicator of a property that is priced too high, and a seller may be more negotiable if they have been unsuccessful selling after many showings. A more normal balanced market can be two, three months of market time historically, so depending on the particular segment, it’s not necessarily a red flag to see 60 days. The average market time varies between different price points and types of homes — for example, condos, single-family homes or co-ops.
What do you tell clients interested in Airbnb-ing?
Airbnbs have grown in popularity as they typically net higher income than traditional rental properties, but there are many factors to consider, such as start-up costs to furnish and decorate, time invested to manage the Airbnb or paying property manager fees, the wear and tear on the property, constant cleaning, seasonal demand and the regulations many cities have to limit Airbnb properties. Many buyers inquire about buying a condo to Airbnb, but the reality in Chicago is that it is very rare to find an association that allows them. Overall, investing in an Airbnb property can be a lucrative opportunity if you do your research, manage your property effectively and are prepared to deal with the unique challenges of short-term rentals.
If you were going to buy an investment property for renting, where would you look?
Investment properties to purchase for renting are often multi-unit buildings with walking proximity to public transportation and neighborhood amenities such as grocery stores, gyms and restaurants. A 6 percent cap rate, or capitalization rate [the annual net operating income / property value], is usually a good rule of thumb when evaluating a property’s return on investment (ROI).
What would you do to sell Michael Jordan’s mansion?
Finding the rare buyer who is willing to take on this monstrous project because of the sheer size of the 56,000 square feet, highly personalized mansion with 1990s finishes has proven to be difficult, considering the home has been on the market since 2012. You are more likely to find these types of estates in Miami or LA and not the suburbs of Chicago.
If I was the listing broker, I would get creative and see if there was a TV renovation show that would entertain the idea of sharing the expenses to rehab so that this could be marketed as a unique investment opportunity for a buyer who also has an affinity for fame. Perhaps an entire multi-series documentary featuring Michael Jordan himself, rehabbing his beloved domain along with the entertaining power struggles between him and a pompous interior designer. It would be a meaningful investment for MJ with unlimited exposure potentially to international buyers with deep pockets — all while keeping this icon in the limelight. I’d watch that show!
This article was featured in the InsideHook Chicago newsletter. Sign up now for more from the Windy City.