Downtown Chicago is nearing the end of a four-year construction boom period, in which more than 18,500 new condominium units have been completed. Many of the homes set to deliver in 2009 are already under contract, but there don’t appear to be many units coming down the pipeline after that, writes Appraisal Research Counselors‘ Gail Lissner in the winter issue of New Homes.
Only three new downtown buildings totaling less than 500 units have obtained construction loans in 2008 and started construction this year. Thus, there will be little new inventory of condominium units delivered to the market in 2010 and 2011, and likely into 2012.
Because of the weakness in the housing market, developers are postponing or cancelling their plans for potential new projects. During 2008, 11 proposed condominium projects were cancelled, with developers closing their sales centers and refunding deposits to the buyers. With the problems in the housing market along with the financial markets, these projects were not gaining adequate pre-sales in order to obtain construction loans. In addition, developers are finding that construction financing is extremely difficult to obtain with lenders also requiring substantial equity, another hurdle in an already near-impossible scenario.
What does that mean for buyers? Read the rest of Gail’s column now, or pick up the winter issue of New Homes after Oct. 30.