Reports of a “housing bubble” may have been greatly exaggerated in downtown Chicago compared with other housing markets nationwide, real estate experts say.
Downtown condominium sales slowed from the record levels of 2005 to a “strong, extremely active market” in the second quarter of 2006, according to housing analyst Appraisal Research Counselors’ latest Residential Benchmark Report.
“The downtown Chicago new-development market continues to exhibit strength despite lingering talk of a housing bubble, a softening in the resale market and a reported slowing in other major real estate markets in the U.S.,” said Gail Lissner, vice president of Appraisal Research.
According to Lissner, the biggest story for 2006 is the amount of new-construction condominium inventory being announced. “If this pace continues as expected, the number of new-construction condominium projects launching marketing programs during 2006 will exceed any year in the recent past,” Lissner noted.
Appraisal Research reported that a total of 3,739 new-construction condos were sold during the first half of 2006, down 24 percent from 4,898 during the same period in 2005, in the area bounded by North Avenue, Ashland Avenue, Cermak Road and Lake Michigan.
Despite the second-quarter downturn – to 1,496 units from 2,243 units in the first quarter – year-to-date sales are higher than in any year except 2005.
And alongside big volume have been big prices. Buyers shopping for a new downtown residence priced below $300 per square foot will be hard-pressed to find a unit, according to the report.
“All of the new downtown high-rise condo projects that started marketing programs in 2006 were priced above the $300-per-square-foot mark,” Lissner said. “However, other developments will be starting marketing programs later this year that will offer lower-priced residences.”
Lissner said those units might be in low-rise walk-up buildings on the far edges of the downtown market.
“The luxury segment of the market, priced at $500 to $699 per square foot, showed excellent strength, but weaker demand in the ultra-luxury price range of $700-plus a square foot continues,” Lissner said.
“Demand continues to be very thin for ultra-luxury units, with the market becoming more competitive as new project announcements dilute market share,” she said.
However, Appraisal Research sees continued demand along the Michigan Avenue corridor between Oak Street and Roosevelt Road. “We are seeing strong demand for residential units either on Michigan Avenue or within one to two blocks of Michigan Avenue,” Lissner said.
James Kinney, president of Rubloff Residential Properties, agreed. “Apparently there is great value in a Michigan Avenue address,” Kinney said. Rubloff is the exclusive marketing agent for the tony 86-unit Ritz-Carlton Residences, planned for the 600 block of North Michigan Avenue.
Rubloff recently reported that 30 percent of The Ritz-Carlton Residences, which average $1,076 per square foot, have been sold. Prices average $1,040 a square foot at Trump International Hotel & Tower, according to Appraisal Research.
What are buyers of ultra-luxury condominiums looking for?
“It’s all about special services for high-end buyers, who likely will be corporate CEOs,” said Lucien Lagrange, architect for the 40-story Ritz-Carlton Residences, where whole prices range from $1.25 million to more than $9 million.
At The Ritz-Carlton, Prism Development is planning for the 12th floor to be a residents’ club with a concierge.
“We’ll have dry-cleaning available for our residents. The Ritz-Carlton staff will bring groceries to their house, and deliver the mail right to the door. If a resident has a pet, they’ll provide walking services for it,” Lagrange said.
At The Ritz-Carlton, a resident will leave in the morning, come back and find the bed is made, Lagrange said. “A CEO appreciates it when he comes home from a long day and finds that his bed has been made for him. “It’s something he doesn’t have to worry about. And he doesn’t have to worry about his shirt coming back from the cleaners. It’s taken care of for him.”
Real estate columnist and media consultant Don DeBat has written about Chicago-area housing and mortgage markets since 1968. He is chief executive officer of DeBat Media, Inc.