New condo buyers sitting pretty in the catbird seat as builders scramble for sales While
2002 may be the worst of times for condominium developers, it may
be the best of times for would-be condo buyers. “Condo
buyers are in the catbird seat as more and more developers scramble
to make up for slower sales at the end of 2001,” said housing
analyst Garry Benson, of Chicago-based Garrison Partners. A new
study from Appraisal Research Counselors Ltd. for the downtown Chicago
condominium market this year paints a cloudy picture for developers.
At the end of 2001, some 4,356 newly built condominiums were unsold
and sitting on the market, reported John R. Jaeger, vice president
of Appraisal Research Counselors, who noted that many residences on
the market have been re-listed by investors. That
compares with 3,196 units at the same time a year earlier, and 1,882
units at the end of 1999, according to the firm’s Downtown Chicago
Residential Benchmark Report. Even
though mortgage interest rates inched below 7 percent to the lowest
level in more than 30 years in the fourth quarter of 2001, condo sales
downtown, including new-construction residences, lofts, conversion
units and townhomes, hit the skids. “Many
factors contributed to this decline in buyer traffic, including the
aftermath of Sept. 11, the recession, job loss, uncertainty in the
economy, and the holiday season, a traditionally slow time for housing
sales,” Jaeger said. On the
brighter side, Christmas and New Year’s brought a gift-wrapped
package for condominium buyers in Chicago – sales incentives. “A
multitude of sales incentives are still being offered to buyers and
realty brokers,” noted Gail Lissner, vice president of Appraisal
Research Counselors. “Look for everything from $2,500 to $15,000
in free upgrades, from a washer and dryer or granite kitchen counters
to a free parking space valued at up to $30,000,” she said. Other
developers are offering to buy back the condo after three years if
an owner can’t sell it. Another incentive is a 12-month mortgage-rate
lock. Some developers are willing to buy out apartment renters’
leases to get them to sign sales contracts. Sweet
Realtor perks include double commissions, gift certificates and referral
fees or cash back at closing, Lissner said. Just
how slow is the condo market in the city? “As
buildings are nearing occupancy, large numbers of units now are being
offered for resale, often by investor owners,” Jaeger said. “This
pattern is much more pronounced than in the past.” At the
169-unit Farallon, a condo high-rise at 600 N. Dearborn in River North,
the owners have listed 39 percent of the residences for resale at
the time of closing. At the 99-unit Huron Pointe, a condo high-rise
at 421 W. Huron in River North, 29 percent of the residences already
have been listed for resale. Jaeger
said a major difference between the new-construction condominium market
in 2001 and the market in 2002 is that “virtually all of the
buildings that delivered in 2000 were sold out or nearly sold out
at the time of completion.” Only
a few new projects were brought to market during the fourth quarter
of 2001, Jaeger said. The short list of brave new construction developments
includes Prairie Tower at Central Station, 390 N. Canal, Pointe 1900,
Cullerton Station and the Belvedere. There
also are some bright spots in the condominium marketplace, according
to Appraisal Research. Opportunities
for developers also exist in the condo conversion market, Jaeger suggested. “This
is an excellent time to announce a conversion project in the primary
downtown boundaries, between North Avenue and Cermak Road, because
there is only one active project within that area,” he said. At the
end of 2001, River City, a South Loop conversion by American Invsco,
had only 316 units remaining to be sold, Jaeger said. |