The Q2 2008 Residential Benchmark Report from Appraisal Research Counselors (ARC) serves up a variety of generally downbeat news for the downtown Chicago new construction market.
Yesterday’s bad news was increasing contract cancellation rates. Today’s is growing inventory:
The inventory of new homes being delivered continues to grow each year. The total number of deliveries in the Downtown market has been growing each year since 2004 when 2,500 new units were delivered; in 2007, nearly 4,800 were delivered. 2008 will be a record year for deliveries, with over 4,900 units expected to deliver, and over 4,600 also expected to deliver in 2009. With this increased completed inventory comes increased unsold completed inventory, and there is the added risk that financially strapped developers will be under pressure to unload their completed units to pay off debt.
Our original projections for 2008 deliveries changed from our 1Q 2008 report, mostly due to typical project delays, with some buildings expected to deliver in 4Q 2008 and now more likely to deliver in 1Q 2009. In addition, one 300-unit building which was delivering in 4@ 2008 is now being sold to a rental operator and is no longer included in these totals.