The Q2 2008 Residential Benchmark Report from Appraisal Research Counselors (ARC) serves up a variety of generally downbeat news for developers of new downtown Chicago condo projects.
ARC notes growing competition from resales and rentals:
Many of the buyers who are purchasing units are looking at their resale and rental alternatives. Virtually all of the major buildings which have recently been completed are seeing large amounts of inventory being remarketed, either for resale or for rental, which has been a trend in the market. However, the difference in 2008 is that many of these newly completed buildings are not yet sold out and the developers are now finding their unsold inventory is competing with resale inventory. Thus, we expect this competition will ramp up during the year as units are delivered.
Buyers need to look carefully when comparing resale units with developer units:
… when developers anticipate that their unsold inventory will be competing with resales within the building, they typically decide to upgrade their remaining inventory so that it is more marketable and desirable than the resale alternatives.
In previous posts we quoted ARC on vulture funds, growing inventories and rising contract cancellation rates.