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22 THE CHICAGOLAND COOPERATOR — SPRING EXPO 2019 CHICAGOCOOPERATOR.COM TRENDS Market Survey Where We Were in 2018 – and Where We’re Headed BY A J SIDRANSKY A ft er many years of expansion and growth nationwide, most co-op and condominium markets saw both turbulence and some overall decline in 2018. Th e market has turned from one favoring sellers to one more hospitable to buyers. Markets like stability—and 2018 was a year marked by uncertainty. Th is un- certainty can be pegged to several trends, the most prominent of which were fl uc- tuations in interest rates; changes in tax laws thanks to the 2017 tax bill depressing the tax benefi ts of home ownership; over- building (and potential overbuilding); and – despite the generally good employment fi gures – an undercurrent of declining con- fi dence in the overall economic picture. Chicago “Chicago isn’t one of the cool kids any- more” —at least not according to an article in Crain’s Chicago Business from last October. Th e Windy City is ranked 49th of 79 markets in the ‘Emerging Trends in Real Estate’ sur- vey, down from 42nd last year. Th e overall feeling is one of caution. “Wherever they put their money, survey respondents were cau- tious about the direction of the broader mar- ket,” said the article, “wondering how much longer the good times will last. Th ey’re not bracing for a bust, but they can’t see the mar- ket going much higher, either.” According to IllinoisPolicy.org, the rea- sons behind the stagnation and possible im- pending decline in the Chicago residential market include outmigration, property taxes, and income taxes—including both Gov. J.B. Pritzker’s new state tax structure, and the still-resonating impact of the change in fed- eral income taxes in 2017. Illinois in general —and Chicago in particular — is one of only 10 of the largest metro areas in the US to ex- perience a decline in population last year. Property taxes have also skyrocketed in recent years, according to IllinoisPolicy.org, and that has been aff ecting home aff ordabil- ity for many. Combined with the reduction in deductibility for state and local taxes, local tax burden has had an increasingly dampen- ing eff ect on the market. Another tax issue is the recent increase in state income taxes by the new governor. Conversely, some of those fi ghting the good fi ght in the fi eld every day may see things a bit diff erently. Regarding the con- dominium and co-op market in downtown Chicago and surrounding neighborhoods, Gail Spreen, Senior Vice President of Sales at Jameson Sotheby’s International Realty, says: “2018 was a reasonably good year, though a bit fl at. It really depended on the neighbor- hood. Projections are that 2019 will be simi- lar. We see a 2- to 4-percent increase in prices and volume in the coming year. Th ings must be priced right to sell. You can’t really push the market, because it’s not there to be pushed. It’s generally more of a buyer’s market.” Spreen also mentions other trends that refl ect the concerns described above about Chicago’s markets. “People are re-evaluating the own versus rent equations in light of the change in tax laws.” Downtown seems to still be the biggest draw, though, and there are healthy sub-markets in River North and the West Loop. New York According to Corcoran’s 2018 fourth quarter report: “Market-wide closed sales declined as potential buyers grappled with a confl uence of factors that created uncertainty in the market. Buyers’ concerns included ris- ing mortgage interest rates, tax-law reform, volatility in the fi nancial markets, foreign capital restrictions, and political distractions. As a consequence, many prospective buyers are choosing to wait on the sidelines until prices adjust to a more accessible level and other market factors calm.” Joanna Mayfi eld Marks, a broker with the New York-based fi rm Halstead, described the market this way: “In 2018, there were a couple ends of the market that were less impacted. We saw a number of buyers competing in the $700,000-to-$1.5 million segment. Th ere was competition, and even some bidding wars. In the lower and luxury segments, though, we saw fewer buyers, and no bidding wars. What I’m seeing right now is that competition is be- ginning to return. I’m seeing positive reports about the economy, consumer confi dence is better, and interest rates were down at the beginning of the year. So even at the lower end of the market, things appear to be pick- ing up. Th e truth is that interest rates – even small increments like a quarter point – aff ect the market. Two-bedroom units seem to be the most competitive right now. Th ere are even multiple bidding situations. Essentially, things look positive.” Boston “Th e trajectory of Massachusetts’ sky- rocketing real estate market fl attened as winter loomed,” reported realestate.boston. com, “leaving some to wonder whether we’re glimpsing the end of a 10-year-long bull run. Like people who predict the end of the Patri- ots dynasty each year, they will eventually be correct, but real estate experts say we’re not there yet.” As in other pricey markets, signs on the horizon of a potential end to the Boston real estate fairy tale are centered around tax policy and rising interest rates. Like New York and Illinois, Massachusetts is a high-tax state, and the result of the reduction of property tax de- ductibility on federal income taxes is begin- ning to make itself felt. Rising interest rates have also played a role, as buyers are very sen- sitive to every additional penny of monthly cost, the article continues. Bobby Wooft er, Principal Broker for My Boston Condo, sees the market as very healthy. “Th ere’s so much new industry mov- ing into the area: General Electric, Amazon, and others,” he says. It seems like a new build- ing is going up every week. Th at makes for a healthy market.” Th e people who work there need someplace to live. “Th e luxury boom continues,” Wooft er adds. He does see some dark clouds on the hori- zon, however. “Th ere may be a lag due to the climbing price point. It can’t just keep going up, passing the last deal. Th ere is more inven- tory than one year ago on the market – espe- cially luxury – but mid-market is very bullish and competitive.” One of the unique features that Wooft er mentions is the prevalence of small condo- minium associations in the Boston market and throughout New England. Dominated by three-unit multi-family buildings, owners oft en see greater value in converting to con- dominium ownership rather than selling the property as a whole, and the result is a large number of very small associations. “Resale of these units are strong,” Wooft er says. “Th ey are typically the ‘starter home.” Even what were once less popular areas like Roxbury are now coming around in this sub-market. Wooft er thinks that Boston is still a robust seller’s market. Available housing stock for sale is still very low, and he isn’t expecting a correction. “Existing zoning regulations don’t provide for new housing,” he says. Overall, 2018 was a mixed-to-down year for condo and co-op markets nationwide. Th e general expectation for 2019 is more of the same. Clearly, tax considerations, rate fl uctuations, and political uncertainty are major factors going forward. Perhaps the best advice to keep in mind is from Marks: “Markets are not dictated by what you want as the seller, but rather what people are will- ing to spend – as well as what you’re willing to accept. Sellers like to think about their ‘net’ profi ts, rather than thinking about what buy- ers are willing to pay.” In a buyer’s market, it doesn’t work that way. n A J Sidransky is a staff writer/reporter with Th e Chicagoland Cooperator, and a published novelist.