I’d like to thank Vern Kellie, of Imaging and Printing Corp, Chicago, for sending bringing this article to my attention.
First-half downtown condo sales fall even further
By: Alby Gallun August 16, 2011
(Crain's) — The fifth year of the great downtown condo bust is starting to look a lot like the second, third and fourth.
Downtown developers are on pace to sell fewer than 600 condominiums for the fourth straight year as the slump drags on and downtown denizens flock to apartments instead.
They sold just 261 condos and townhomes in the first six months of 2011, down from 406 a year earlier, according to a report by Appraisal Research Counselors, a Chicago-based consulting firm. It was the poorest first-half showing for downtown developers at least since the market peak in 2005.
Many developers have slashed prices to spur sales, but the shaky economy, worries that condo values have further to fall and a tight lending climate continue to work against them.
“This is probably the new norm,” says Appraisal Research Vice-President Gail Lissner.
The firm's numbers reflect sales contracts, not closed sales. Appraisal Research also tracks closings, which totaled just 385 units in the first half of 2011, down from 1,116 a year earlier.
There is one bright spot in an otherwise gloomy market: Developers continue to convert condo buildings into apartments amid booming rental demand, reducing the once-large supply of unsold condos.
Since 2008, eight downtown projects that were built as condos have gone rental. Developers are now sitting on just 1,911 unsold units, down from 7,689 in second-quarter 2007, according to Appraisal Research. It is the lowest supply since 1997, when the firm began tracking unsold condo inventories.
Sales have reduced the supply as well, though a big share of them are coming from developers that have slashed prices. Projects like 757 Orleans and Silver Tower in River North and 200 N. Dearborn in the Loop were among the top sellers in the second quarter, thanks to aggressive discounting.
Many buyers expect a deal whether developers are advertising them or not. Magellan Development Group, the developer of the Aqua tower near Millennium Park, gets about four or five offers a week, one or two that are “pretty credible,” the rest from “bottom feeders,” says David Carlins, president of the Chicago-based firm.
“We still have got a whole lot of people who are looking for an unbelievable bargain, and it's out there, but it's just not us,” he says.
Prices at Aqua, an 82-story tower at 225 N. Columbus Drive, range from $306,000 for a studio up to almost $2 million for a penthouse, according to Appraisal Research.
Buyers have closed on 158, or 60%, or the 262 condos in the tower, which also includes apartments and a hotel. Magellan isn't feeling any pressure yet to cut prices; the project's construction loan doesn't mature until the end of 2013, Mr. Carlin says.
Yet considering how hard it is for buyers to obtain financing, Magellan has set up loan programs with two lenders, MetLife Bank and Alliant Credit Union, to finance purchases in the building. Mr. Carlins is also optimistic that sales will pick up when a nearby grocery store and restaurants, along with a new Radisson Blu hotel in the tower, open this fall.
Longer term, he believes rising apartment rents will draw more buyers into the market as they compare the cost of renting vs. owning. But before that happens, the lending market has to open up, and buyers have to be confident that condo prices won't fall further, he says.
“The condos in my mind are around the corner,” he says. “It's just a long corner.”
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If you go to this Internet address, you’ll find a shocker of a bar chart that – at a glance – shows how incredibly deep the recession - in condo sales in downtown Chicago - has gotten.
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