In Chicago’s Lakeview neighborhood, an ugly home with awnings in the 1100 block of West Barry Avenue sold for $500,000 late last year. In its place now stands a five-bedroom home with more than four bathrooms that’s listed for sale for more than $1.5 million.
In Lincoln Park, @properties agent Emily Sachs Wong recently handled the sale of three adjacent vintage homes, each that sold for more than $1 million. They were knocked down so one home could be built on what had been three standard city lots.
Buying properties not for the homes but for the land underneath them, then promptly tearing them down to build something far grander, has been going on in Chicago and its suburbs for years. That trend eased off after the recession, but it has since roared back and encompassed more neighborhoods, sending up prices and crimping affordability for some.
Pent-up demand and low interest rates, along with desirable neighborhoods and schools, are a driving force in the teardown craze.
“With (mortgage) rates as low as they are, people want to get in and live there for 20 years,” Sachs Wong said. “If someone can afford a lot of house, they are doing it right now because money is cheap. When rates go up, they can’t buy as much house.”
Of the three houses that were razed, Sachs Wong said, “They were lovely, but someone wanted that exact piece of land, that exact location.”
Median house sale prices in August were $1.2 million in Lakeview and $1.6 million in Lincoln Park.
Now, homebuilders are moving west. One of Chicago’s hottest areas for teardowns is the North Center neighborhood. Developers are spending more than $500,000 to buy the old houses and two-flats, approaching homeowners with offers to buy properties that aren’t even listed for sale yet.
For the first time, the number of teardowns in North Center, an area bordered by Montrose Avenue, Diversey Parkway, the Chicago River and Ravenswood Avenue, may surpass the city’s other 76 community areas this year, according to data analyzed by Chicago Cityscape, a website that tracks neighborhood building projects. When a demolition permit and a construction permit are issued within 90 days of each other, it’s called a suspected teardown.
North Center had 58 suspected teardowns during the first nine months of the year, compared with 26 in Lincoln Park and 47 in Lakeview. For all of last year, there were 60 suspected teardowns in North Center, compared with 50 in Lincoln Park and 62 in Lakeview.
“We’ve seen a lot more developers in North Center,” said Jimmy Ronan, a principal at Ronan Developers. “It’s almost like a gold rush.”
Just how hot is the land under these old homes? How high are the prices of what’s coming down in North Center and what’s going up?
Last December, a home in the 2100 block of West Belle Plaine Avenue sold for $520,000. In early August, a new six-bedroom home on the lot was listed for sale at $1.38 million. It went under contract almost immediately, and the sale — at list price — closed five weeks later.
In March, a two-flat in the 3800 block of North Hoyne Avenue sold for $805,000. This week, the city issued a demolition permit for the property, and a masonry home is planned.
In September, a home in the 3900 block of North Seeley Avenue sold for $650,000. This month, marketing began for a $1.7 million home planned for the lot.
The median sales price of a detached single-family home that sold in North Center in August was $1.03 million, up almost 23 percent from $842,000 in August 2013, according to data provided to the Chicago Association of Realtors by Midwest Real Estate Data, the local multiple listing provider.
“It used to be strictly Lincoln Park and Lakeview,” said Tim Sheahan, a real estate agent at Conlon: A Real Estate Co. “They went up to (North Center) because they could get a little more for the money. Now the schools are so good in that neighborhood, and Lincoln Square is such a vibrant area, it’s a destination.”
When Ronan bought his first teardown in Lakeview, in the 3200 block of North Seminary Avenue in the mid-1990s, he remembers getting teased that he overpaid, spending $160,000 for it. A year ago, a teardown down the street sold for $675,000.
Today, Ronan is paying more than $500,000 for teardowns in North Center, 20 to 25 percent more than just two years ago but still less than in other neighborhoods. He tries to find properties before they come on the market, saying it’s hard to make the numbers work without building a new house that sells for about $1.3 million.
Finding buyers hasn’t been a problem. In March, Ronan paid $565,000 for a teardown in the 1900 block of West Henderson Street, and the $1.5 million, six-bedroom, four-bath, 4,200-square-foot home he planned for the lot went under contract before he broke ground.
At the same time, though, he’s starting to look at properties in Logan Square, where teardowns sell for half of what they do in North Center.
Though new home construction raises neighborhood home values, there are negatives, too, and agents like Sachs Wong worry about the inability of some families to afford a home with a good public elementary school like North Center’s Bell or Coonley, which are much touted in home listings. “It pushes people that even make a good living out of the heart of the city, there’s no question,” she said.
Builders and real estate agents expect that buyers who like the neighborhood but not the price of new construction will gravitate toward older brick two-flats and convert them into a single-family home, or to older frame cottages priced at $750,000 to $850,000.
But potential buyers who want the high-end finishes and accouterments of new construction aren’t always willing to compromise, regardless of the price.
Janis Bates and her family moved to North Center more than a decade ago, buying a vintage home with a lot of curb appeal for less than $600,000. Though she made improvements to her home, she watched others on the block get razed and replaced by behemoth homes that hug the property lines.
Last year, the family tried to sell its home and move to another city neighborhood. Priced at under $800,000, the home had an unfinished basement, but the biggest complaint was that it had only one full bathroom and no master suite. After pulling it off the market last year, the Bates family finished the basement, adding a full bathroom, and now has no immediate plans.
The Nebraska native continues to watch older homes in her neighborhood get torn down, and she hasn’t minded seeing some of them disappear.
“Some of them deserve to be torn down,” Bates said. “We’ll go up and down the block and go, ‘That one, that one, that one.’ About five more can go and not be missed.”
Still, she worries that the attributes that attracted her to the neighborhood, namely its diversity of residents and home styles, are being replaced.
Homebuilder Donald O’Sullivan, another longtime North Center resident and owner of Westend Management, believes the area is still ripe for continued redevelopment. O’Sullivan is close to completing a home in the 1800 block of West Berteau Avenue that is replacing a home he bought this spring for $450,000 before it went on the market. It recently listed for sale for just under $1.35 million, and he’s looking for other opportunities.
“When people stop buying, we’ll stop building,” he said.
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