To Hahaâ€™s question â€œWhy is this market so different from LP/Gold Coast?â€ Iâ€™d suggest that in many respects Hyde Park and Lincoln Park are completely dissimilar markets. Iâ€™d say that the only similarities between the neighborhoods are that they are both anchored by Universities and that they tend to attract an internationally diverse buyer pool. Homes in Lincoln Park that are in or near the same price point as homes in Hyde Park Kenwood are as different as night and day.
As a 19 year resident of Hyde Park Kenwood, youâ€™ll find no one as upset as me that I still cannot buy a pair of socks or thermal underwear in the neighborhood. On the amenities/restaurants/shopping questions, Lincoln Park has Hyde Park Kenwood blown out of the water without question.
When it comes to zoning, lot sizes, Historical significance/Vintage features, and to a lesser degree parking (more true in Kenwood than Hyde Park), then Hyde Park Kenwood wins handily.
You could not pay me enough to deal with the relative congestion of a Lincoln Park/Wrigleyville and the subsequently higher levels of activity (i.e. crowded sidewalks and streets, drunken revelry post Cubs games) relative to Hyde Park Kenwood. Obviously there are a huge number of people who disagree with my assessment and thus create a significant demand (and thus price increase over Hyde Park Kenwood) for properties in Lakeview, Lincoln Park and like neighborhoods.
For example Brownstone Development created a development of 6-7 homes on the East side of Drexel Avenue on the 4700 block a few years ago. The Drexel Avenue homes were all brick and priced starting at about 630K. On Addison Street the same company built the exact same homes at the same time except the Addison homes were frame instead of brick. The prices on the Addison Street homes started at 1.2 million.
Itâ€™s very unlikely that I would ever pay twice the price for the exact same property based on its location. I completely understand that one area can offer significantly more â€œvalueâ€ to some buyers over other areas due to amenities, perceived safety, school performance, etcetera.
By contrast I have a very positive price reaction to having a home on an RS-1 zoned lot with a minimum lot square footage of 6,250 as opposed a standard Chicago lots 3,125 (much more typical in Lincoln Park). Itâ€™s a lot easier to have privacy when your neighbors are twice as far away from you as on typical Chicago lots rather than when they are right next to you separated by a knee wall on your roof deck or a 6â€™ security fence on the ground (as is much more typical of some of the LP rowhomes that Haha mentions).
What one buyer values (i.e. Art Deco, Tudor, Miesian modern, privacy, secure parking, the ability to walk to many restaurants, etc.) might be completely irrelevant to another buyer. All buyers value properties very differently. Value (and thus price) is a relative proposition not an absolute.
This gets to the question of a home being worth â€œwhat someone will pay for it.â€ While Realtors probably too often lean on that concept with questions like â€œwhat do you think itâ€™s worth,â€ as long as that question is backed up by solid homework/research into area pricing- then there is no problem. Only absent the research and work to investigate whether or not a buyerâ€™s offer is made in an appropriate range, does this â€œwhat do you think itâ€™s worthâ€ question become problematic.
Many buyers in this range of price points tend to pay cash for their purchases (or at least pay cash for a significant portion of the purchase price). This is important for a few reasons. Assuming that a buyer puts down an 80% down payment of a million dollar purchase price then the buyer would only be taking out a loan for $200,000.00. In this scenario the bank assumes that if they would ever have to foreclose on the property and resell it, then the bank would only lose money if the million dollar property had devalued beyond their risk level of $200,000.00. Why would the bank not say yes to that loan?
There is much less risk to the bank in scenarios such as these and thus there is much less pressure on the appraisal. In the cases of all cash transactions rather than being an evaluation which could derail a loan in process the appraisal becomes simply a reference document for the buyer (or an evaluation which could potentially reopen a price negotiation). However when dealing with a cash transaction, it is often harder to counsel caution to a buyer and we all know what happens to fools and their money eventually. Everyone on this thread appears to be doing enough homework to avoid being uninformed about this particular market.
Broker Associate, Sudler Sotheby's International Realty