When addressing the status of a tower like Museum Park Place South, it’s hard not to consider many of the trends and patterns mentioned in the latest Appraisal Research Counselors Downtown Chicago Residential Benchmark Report.
We have seen some developers delaying closing as they contemplate their alternatives, i.e., cancel contracts and operate the property as a rental, secure FHA financing to help enable buyers to actually close on their purchases, etc. Developers are concerned about ending up with a stalled condo development, one in which very few closing have taken place and then the developer is left with large contract fallout and a nearly empty, completed condo building.
Back in June, Coldwell Banker agent Ralph Oliva said the second Museum Park Place tower, nearing completion at 1901 S Calumet Ave, would start delivering units the first week of September. I’ve heard nothing to the contrary so far, but given the delays in closings at other South Loop towers – Lexington Park Condominiums and 1555 Wabash come to mind – it’s fair to wonder whether Enterprise will move ahead with closings on time.
Fannie Mae is now requiring 70% (up from 51%) of [a condominium development’s] units to be under contract to person who will use the home as their primary residence or second home before it will buy the mortgages in a condo building…Fannie has also made it more costly for home buyers by instituting additional closing costs for borrowers with less than 25% down payments (with a fee of .075% of their loan).
If Coldwell Banker’s listings are to be trusted, Museum Park Place south is still nowhere near the 70-percent mark in sales. A search this morning found 159 homes for sale through the exclusive broker, the exact same number as in March. With a total of 276 units in the tower, Enterprise will need another 21 contracts and not have any existing contracts fall off prior to closing just to hit the half-sold mark, which is needed to secure the much-desired FHA backing for qualifying homes.
Proper pricing is absolutely critical in making any type of headway in achieving a sellout of inventory…many projects which have achieved the best sales velocity during 2009 were those which had readjusted pricing, either on an individual unit basis or throughout the building…
The first-time buyer market appears to be the strongest segment of the market currently. Several factors come into play including the $8,000 first-time buyer tax credit, the availability of FHA financing (3.5% down), the freedom from having to sell an existing residence, and the large amount of inventory which is priced for the $250-$350 PSF buyer…
There is weaker demand for the larger units in middle market buildings. Looking at the unsold inventory int he individual buildings engaged in marketing, it is very evident that the three-bedroom units lag the market in terms of sales and generally sell at the tail end of the marketing program. With this product type targeting the trade-up or trade-down (empty-nester) buyer, this buyer generally must sell an existing residence in order to make a new purchase…In addition, this buyer is more apt to have suffered stock market losses in the last year, which could impact his ability or desire to make an expensive purchase.
Museum Park Place South has seen two rounds of price cuts since early May. The first brought down prices on one-, two-, and three-bedroom homes by $1,000 to $49,000, or up to 9 percent off original list prices. More recently, Enterprise reduced the prices of several two-bedroom homes by $18,000 to $58,000, or 5 to 14 percent off original prices. Still, the building hasn’t seen the kinds of 20-percent discounts that tend to garner real activity.
If $250 to $350 a square foot is the sweet spot for first-time buyers in the downtown market, just 31 of these 159 homes (all two-bedrooms) fit the bill. And although Museum Park Place South isn’t as flush with three-bedroom inventory as other Museum Park towers, it still has its share: 26 three-bedroom / two-baths with 1580 to 1625 are still for sale from the $560s to $590s.
Along with those three-bedroom condos, the remaining stock of Museum Park Place homes includes:
- 22 one-bedroom / one-baths with 725 to 830 square feet, priced from the $290s to $310s
- 19 two-bedroom / one-baths with 1,035 square feet, priced from the $340s to $390s
- 92 two-bedroom / two-baths with 1,070 to 1,245 square feet, priced from the $340s to $510s
Amenities in the tower include a fitness facility on the first floor and a swimming pool, club house and sundeck on the roof.