“People want to know where the bottom is — if they knew where the bottom is, they would jump up and buy… I don’t know when that day is, and I’m not predicting it.”
– Jameson Real Estate principal Charles Huzenis, in today’s Crain’s article about Chicago’s “condo chasm.” Only two downtown projects began marketing homes this year – the Spire and the latest phase of Roosevelt Square – and the authors of the Appraisal Research Counselors‘ latest Downtown Chicago Residential Benchmark Report doubt that any more projects in the downtown market will break ground this year.
According to the report, 685 new-construction and converted condos went under contract in the first half of 2008, 358 of which were pre-sales at the Chicago Spire. That’s a 73-percent drop from the first two quarters of 2007, when 2,443 homes sold.
“Clearly the ‘rush to buy’ has left the market,” state authors Ron DeVries and Gail Lissner.
Ten new-construction condo projects comprising more than 1,400 units have been canceled this year, and DeVries and Lissner predict additional cancellations, or at least a shift from for-sale condos to rental or hotel units, before the end of the year. Only two downtown projects began marketing homes this year – the Spire and the latest phase of Roosevelt Square – and the authors doubt that any more projects in the downtown market will break ground this year.
Buyers are still sitting on the sidelines, tougher lending standards are affecting sales, and contract cancellations are increasing, according to the report. One interesting but unsurprising trend that DeVries and Lissner mention is that incentives are now the norm in the downtown market: Free upgrades, free parking and free assessments are common, although not always advertised, especially when it comes to completed units. Developers who have to compete with resales in their own buildings are opting to build out with upgraded finishes in order to make their homes more desirable.