Record condo numbers to saturate downtown
With sales slowing in weak economy, oversupply forecast
By Robert Manor | Tribune reporter
May 14, 2008
Nearly 6,000 condos, by far a record number, are expected to come on the market in downtown Chicago this year at a time when mortgages are tougher to get and sales have slowed dramatically, according to a report.
That adds up to a big worry about the Loop-area market, which has seen explosive growth in recent years.
"It's tremendously serious," said Steven Hovany, president of Strategy Planning Associates Inc., a planning and real estate consulting firm. "What you are going to see are buildings going into foreclosure."
Hovany predicts developers will cancel downtown projects for several years to come, until the excess housing is absorbed.
The developers won't even get the construction loans unless there is a large majority pre-con purchases.
Sales of newly built downtown condominiums plummeted by about 83 percent during the first quarter, to 201 units from 1,207 units a year earlier, according to a report to be released Wednesday by Appraisal Research Counselors.
Simple. Prices are too high. Lower the prices and the units will sell. Period.
Mike Hart, regional manager of Hanley Wood Market Intelligence, said developers are inclined to sweeten their offers but not necessarily lower the sales price. He said that means more free amenities included in deals, "whether it's flooring or something in the kitchen or maybe a free washer and dryer."
Well...so much for that idea. If they wait long enough, the cycle will return. But that might take 10-20 years. By then those condos STILL won't be worth it.
Lev said demand can change block by block, and some units are easier to sell than others. For example, Lev said, entry-level homes, meaning those costing less than $300,000, can sell to some first-time buyers because they aren't burdened by having a home to sell, and mortgages are available for people with good credit.
"It's the middle that is having a tougher time," Lev said. He defines middle-priced units as those costing somewhere between $400,000 and $800,000. He said those would-be buyers often have a home they must sell and cannot afford two mortgages for a protracted time.
Again, repeat it until it sticks: Cheaper homes sell. Cheaper homes sell. Cheaper homes sell. Besides, who can afford 2 mortgages for ANY time?? Anyone up for a Bridge Loan? HAHAHAHAH
