Condos of all sizes and shapes were king of Chicago’s downtown housing market last year.
With the interest rates at historic lows, the downtown market posted record sales of condos during 2004, the biggest year in recent memory, real estate experts say.
According to Appraisal Research Counselors’ Downtown Chicago Residential Benchmark Report, a whopping 6,298 condos (including new construction, adaptive reuse, converted units and townhouses) were sold or reserved during 2004.
“Record-breaking sales velocities were achieved during 2004, with new contracts and reservations climbing more than 83 percent above the 2003 sales level,” noted Gail Lissner, vice president of Appraisal Research. The sales totals included 2,100 new-construction condominiums, 1,008 adaptive-reuse condos, 562 condo-conversion units and 182 townhomes. In addition to these “hard” sales, which require signed contracts, thousands more units were reserved by buyers.
In its quarterly report, Appraisal Research noted that contracts and reservations for 2004 far surpassed numbers for the last several years. Such trends always raise questions of overbuilding, but in addition to a massive number of new condos being announced, 2004 saw a net decrease of unsold inventory in the market. There were 525 fewer unsold units last year than the year before, according to Appraisal Research.
The West Loop, the South Loop and the pocket of the Near West Side around the University of Illinois at Chicago campus showed the strongest sales in the downtown area, according to Appraisal Research, followed by the Loop, the New East Side and South Streeterville.
The new downtown condo projects that started marketing during 2004 represent a diverse group of housing styles and price points, ranging from approximately $250 per square foot to more than $650 per square foot.
What factors shaped the hot 2004 condo market? Appraisal Research listed the following trends:
Wide variety of projects. Developers offered a wide assortment of condo types, from lofts and rowhomes to mid-rises and highrises. “With a diversity of product type, sub-markets and pricing, these projects tend to generate strong sales figures in the early stages of marketing programs as buyers clamor for the early-bird pre-construction discounts,” Lissner said.
Hollywood-style presentations. Well-staged grand openings of condo sales centers were aimed at instilling a sense of urgency to compel buyers to sign refundable reservations early on. “Increased reliance on reservation programs in the early stages of a marketing program generated tremendous sales figures, although it also resulted in a lesser conversion factor when contracts were ready for signing,” Lissner said.
The loft revival. Adaptive reuse product returned to its roots, with conversions of the older industrial buildings, which were affordable for both first-time buyers and investors. New loft developments sprouted up in both central neighborhoods, such as the West Loop, and locations that are new to the product type, such as McKinley Park. Current developments include Van Buren Lofts, University Station, University Commons, Odyssey Lofts and McKinley Park Lofts.
“The Bean” factor. The opening of Millennium Park pushed luxury buyers southward, as they finally discovered the sub-markets south of the Chicago River, with strong demand for luxury units overlooking Grant Park and Millennium Park. Both the Loop / New East Side and the South Loop experienced strong sales during 2004, Lissner said. Magellan Development’s Lake Shore East community saw strong sales at buildings like the Lancaster, the Regatta and 340 on the Park. Metropolitan Tower, a conversion of the Britannica Center office building at 310 S. Michigan into 245 luxury condos overlooking Grant Park is continuing the recent trend, which began with the Heritage at Millennium Park, a 356-unit tower at 130 N. Garland Court, behind the Chicago Cultural Center.
Campus condos rock. New development around the University of Illinois at Chicago (UIC) campus the West Loop has proved popular with buyers. Strong sales at projects including University Commons, University Station and Roosevelt Square gave this part of the Near West Side a bigger piece of the housing pie. The large mixed-use University Village development, which kicked off the current boom, has seen continued success as new units come to market.
Back-to-the-city movement. A diverse group of buyers purchased homes in the city, including many who currently reside in the suburbs. “These suburban buyers include empty nesters planning a move downtown and buying a primary residence, or desiring an in-town, or pied-a-terre, for occasional usage. Others were purchasing a ‘kiddie-condo’ for their young adult children, or merely speculating on the market,” Lissner said.
Bargain-rate financing. Low mortgage rates in 2004 may have spurred many potential buyers to make a decision to purchase, experts said. Interest rates remained at historically low levels, encouraging buyers to purchase homes and lock in rates before a spike occurs.
However, in 2005, rates are starting to creep upward again. In early March, benchmark 30-year fixed mortgages averaged 5.85 percent, up from 5.79 percent a week earlier. A year earlier, 30-year fixed-rate loans averaged 5.41 percent.
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., www.dondebat.net.