If you’re eager to buy a new, mint-fresh condo in downtown Chicago and grab the best value for your dollar, watch for upcoming auctions by developers.
That’s our take-away tip from the annual presentation and analysis of new-construction condos and townhomes in downtown Chicago by Appraisal Research Counselors (ARC), a highly respected firm that works closely with local developers.
Says ARC’s Gail Lissner: “New projects are outpacing sales and the gap is continuing.” Her prediction: “We'll see more auctions as an exit strategy."
Where to find out about condo auctions? One such place is SheldonGood.com, the Web site of an auction house that works with many local (and national) developers to unload unsold inventory. CEO Steve Good agrees with Lissner that, "without a doubt," there will be many more condo auctions this year. (More on how to buy a condo at auction in a future post. Meanwhile, you can start your education with this article from the Chicago Tribune.)
ARC defines downtown as roughly the area between Cermak Road and North Avenue and between the Lake and I-94. Since sales of new-construction condos account for roughly only one-third of all condo sales in the entire city, ARC’s “downtown” market comprises a small, but important, section of that one-third.
We’re basing the ARC comments and figures on media reports, because the firm firmly refused our requests for information, claiming its report – even a summary – is for “clients only.”
Bolstering Lissner’s outlook for more auctions was this insight from the firm’s Ron DeVries: “The weakening (local) job market is likely to dampen 2008 sales. Job growth will slow to about 32,000 new positions, down from 43,000 a year ago.” Such a decline of 26% would be a key indicator since in real estate, we're told, the rate of job growth has more impact on sales than does the rate on mortgages.
Another insight: For now, prices of new-construction downtown condos are holding their own. “Condo prices have maintained themselves,” Lissner was quoted as saying. Sellers, presumably developers, “are just holding out,” she added. A recent media report described various give-backs by developers, so maybe that is another reason prices are holding.
Bottom line: Buyers, if you’re looking for a newly built condo in “downtown” Chicago, 2008 might be a good year to buy. Then again, 2009 might be an even better year. If you do buy in 2008, don’t plan to resell the unit anytime soon. Based on ARC figures, it may take a couple of years, or more, for demand for that particular product to equal supply. See chart below:
(Cermak Road to North Avenue, Lake to I-94)
| Year | Units Finished | Change | Units Sold | Change |
| 2008 | 5,900 (est.) | +37% | NA | NA |
| 2007 | 4,300 | +4% | 3,783 | -35% |
| 2006 | 4,150 | +38% | 5,783 | -29% |
| 2005 | 3,000 | NA | 8,162 | NA |
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