Every time we turn on the TV or read the paper, we hear and read about the terribly failing real estate market.  Cocktail party chat now revolves around the houses on every block that have had numerous price reductions and still no contracts, even in LaGrange. Declining homes sales and lower prices can be downright scary…..especially if you are the seller everyone is talking about or if you have any inkling you will be a seller in the future.

Some have taken their homes off the market and decided to outwait the market…if they can.  Others must sell because of retirement, relocation or they just plain have outgrown their current family residence. 

At the end of the day, real estate is no different than any other product or service in the world.  The prices are determined by the basic business principle called “the Law of Supply and Demand”. 

In the early to mid 2000s when lending standards were substantially relaxed and many alternative financing options became available, more and more Americans could qualify for some kind of mortgage (even if they had not job or income) and therefore demand for housing grew substantially because just about anyone could get a mortgage.  There was so much fast and furious demand that the supply of homes for sale decreased at a rate we had never seen before. 

As with any product or service, when there is a lack of supply and great demand, prices can rise dramatically.  We have observed the same phenomenon with gas prices, Google stock, I-phones and movie stars.  When there is great demand and only so much supply of product or service, prices go up proportionately.  And this is exactly what happened to real estate. 

It got to the point that there was so much demand that it was common to have a “bidding war” on a large percentage of homes.  In fact, as agents and sellers (and even the buyers) expected it.  And so prices rose dramatically until…………pop….those that shouldn’t have gotten a mortgage and those who now can’t could no longer buy and……….the demand decreased but the supply remained the same.

Since the demand has decreased dramatically and the supply hasn’t, there is now an oversupply of property as compared to the demand for it.  Mortgage standards have tightened and many buyers that could have or did qualify before don’t anymore.  There are just simply less buyers that can qualify.         

No one knows what to do including the our national government.  Postponing foreclosures or bailing out banks is not going to create more buyer demand…..it will just keep people in their current homes….maybe.

There are several things that can save our home values and even and grow them.……One strategy is to create demand by increasing the population in a given area.  Sounds very strange….doesn’t sound possible and certainly using conventional means of having more babies to create more buyers.  It just can’t happen fast enough to make a difference. 

But in the Lagrange-LaGrange Park-Western Springs area,   we have a very unique opportunity in front of us that could expedite our real estate value recovery, grow our communities and protect our home values. This opportunity could increase the population with 600-700 quality potential buyers in the next several years.

This opportunity is currently being considered by our Village of LaGrange board members.  The Village’s Plan commission that reviewed this project has given its unanimous seal of approval after over six months of intensive study. 

This opportunity is called “Lagrange Place”.  It is a project that would transform the vacant parking lot and the dilapidated building formerly the YMCA on corner of LaGrange Road and Ogden into an impressive gateway into our LaGrange area communities.  It would complement the Triangle retail center with additional boutique style retail stores while infusing our community with additional population for our struggling retailers and at the same time substantially increasing the real estate and sales tax base so that our current residents would bear less of the brunt.

On the North side of the property 26 upscale 3 bedroom townhomes would be built which would average approximately 2,100 square feet (larger than most homes in our area).  Each would have a 2 car attached garage, high end finishes including 9 foot ceilings, granite counters and stainless appliance packages and would sell for about $450,000-$500,000. These will be for sale upon completion.

On the South side of the property along Ogden avenue, there would be four story condominium buildings with a total of 284 units of various  sizes  built over 1-2 levels of underground parking covered with a green space common area.  In addition, there would be some 1^st floor for retail storefronts.

These units would be upscale units mirroring the downtown Chicago lakefront condominium communities including mixes of studios and 1, 2 and 3 bedroom condos with 9 foot ceilings, granite kitchens and stainless appliance packages nestled on groomed parkways and public space. 

In the past, it has been a lender’s requirement that a new condominium building is 30-35% pre-sold before funds are supplied for ground breaking, which can postpone or stop a development.  But in the case of a partial rental community, funds can be supplied immediately.  This contemporary plan generally enhances the developer’s immediate cash flow to be supplied for required lender interest payments (which the lender likes because it reduces their risk).  

Because of the current buyer’s fear and paralysis of the challenged real estate market and the mortgage lenders reaction to the mortgage crisis which has made it much harder for buyers to obtain a mortgage, the current trend in these planned condominium communities is to start these developments as upscale rental communities and convert them to condominiums several years later.

The initial rents proposed in LaGrange Place are proposed to be anywhere from $1200 to $1300 per month for a studio, $1395 to $1595 for a 1 bedroom, $1795-$1895 for a 2 bedroom-2 bath and $2295 to $2495 for a 3 bedroom-2 bath, far above median or average rental prices in mid-priced communities.

Here is the point.  In several years, when the condo conversion takes place, rental residents are given an option of right of first refusal (by law) to purchase their units or move.  They have had the opportunity to “try out” the condo and the community before a long term commitment.  I represented a large area conversion several years ago and based on my experience with 124 converted units, some will buy their units but certainly many will look for larger “move up” existing single family detached homes. 

Because they have lived in our community, developed friends and gotten to know it well, this will create new demand for existing homes.   I have never heard anyone say that regretted moving to LaGrange and they seldom leave unless they retire.  In my experience, even retirees have been so committed to our community and have built so many ties to friends that often they keep a condo in the area just to come back to for months out of a year.

As many of these upscale condo renters look for houses in our community, demand for homes will increase, supply of existing homes will remain stable while government services will be funded by additional real estate taxes and sales tax generated by the development itself(instead of increases to us). 

Once again, when supply (homes for sale) is constant and demand (buyers looking to buy) increases, we will see a strengthening of house prices while creating an even more vibrant community. 

Communities today are fighting to get developments like this because they see the long term picture.  We, on the other hand, have been handed an opportunity on a silver platter with no fight or concessions.  This will greatly enhance our community in so many ways. 

Many of us remember LaGrange of twenty years ago when the store fronts were half filled and home values were very sluggish.  LaGrange was certainly not considered a “hot” community. 

The vision and action of our Village government with support from business and residents, has certainly moved us in a very positive direction.  We now have the opportunity to see our community rise to the next level. 

We, as residents, businesspeople and LaGrange village government have the opportunity to support a development that will make LaGrange the premier suburban community in the Chicagoland area.