Last week we looked at a suburban couple that bought a condo in Chicago just for the fun of it, and those “lifestyle” buyers are powering the market for second homes in Chicago. Nationwide, vacation home sales rose 4.7 percent to a record of 1.07 million in 2006, according to the National Association of Realtors. On the flipside, sales of homes intended purely as an investment fell 28.9 percent from a record 2.32 million in 2005 to 1.65 million in 2006.
Faced with rising prices and a virtual deluge of inventory, real estate speculators – those who buy into a building under development, then plan to sell for a profit once it is constructed – have largely fled the market. “Pure speculative investors, which probably during the boom time were about 20 percent of our marketplace, have for the most part shriveled up,” says Herb Emmerman, CEO of Equity Marketing Services. “If you read the newspapers, they tell you that you shouldn’t buy real estate. The recessionary market has given those investors pause. There are still some that are buying; it’s not down to zero, but it certainly has put a major dent in the speculative market.”
With demand for new-construction condos somewhat inflated by investors that have since retreated, housing analyst Gail Lissner says, developers are seeing slower sales, and some of their proposed projects may fall by the wayside. Not necessarily a bad thing, says Emmerman. “We have a market correction,” he says. “It’s taken some of the investment buyers out of the market, and it’s put more of an emphasis on developers marketing appropriately and building buildings in the right places for the right dollars. You can’t just put up anything and hope that the buyers will buy it, as some developers did during the boom times.”
Michael Maier, vice president of sales and marketing at MCL Companies, saw larger numbers of speculators when sales opened at ParkView (pictured), 505 N. McClurg Court, in April 2005, but that segment of the market has since quieted. “People just are not able to buy a home and flip it for $100,000 like they were a couple of years ago,” he says. “The market is more competitive.”