A glut of unsold inventory is likely to be the biggest challenge for the downtown residential real estate market in 2007, according to Gail Lissner of Appraisal Research Counselors. Lissner presented an overview of the Chicago market today at an A.R.C.-sponsored luncheon at The Standard Club in the Loop. She said that announcements of new construction condos, adaptive reuse condos and townhouses outpaced sales last year, creating a spike in the number of unsold homes.
It remains to be seen how quickly the more than 10,000 units in the pipeline for 2007 will be absorbed, according to Lissner. “It might be a good time to take a little bit of a vacation to let the market absorb some of this inventory we are seeing,” she said. “I don’t think we really want to see it grow larger.”
While Lissner didn’t say how the oversupply may affect home buyers, she suggested that it has dampened some developers’ enthusiasm for new projects. “It’s possible that some of these deals might not get started immediately,” she said. “We’ve seen a few small projects put on hold due to slow sales and increased construction costs.”
Whatever happens this year is likely to have a big impact in the South Loop, with its high concentration of new construction projects. A whopping 51 percent of unsold inventory is located in the South Loop, according to Appraisal Research Counselors’ figures. The West Loop came in a distant second with 17 percent of unsold inventory. River North has 10 percent.