The cooldown in the Chicago’s condo market in late 2006 and early 2007 has left at least one expert predicting doom and gloom for many investor buyers.
With the inventory of unsold downtown new-construction condos growing to more than 6,400 units at the end of 2006, New Homes Magazine columnist Don DeBat recently asked Steven Good of auction company Sheldon Good & Company about the outlook for speculators in 2007.
“It will take two or three years — or longer — to work out the condo glut and market thousands of downtown investor units,” Good told DeBat. “The worst-case scenario is many of them may eventually end up in foreclosure because lenders have no incentive to give the investor borrower a break.”
Buyers who wisely selected lower priced studio and one-bedroom units still will be able to resell them at a profit, however the two-bedroom penthouse for $700,000 will be tough to market, Good predicted.
The only alternative is to rent the condo, but even with low vacancies and higher apartment rents downtown, Good said it is very likely the investor will not be able to break even.
“When you add real estate taxes and assessments to the mortgage payment, an investor’s negative cash flow easily could exceed thousands of dollars annually on one condo,” he said. DeBat will have more to report in next month’s column.