ARC: 592 New Condos Sold Downtown in 2008

From an article by David Roeder in today's Chicago Sun-Times:

It sounds like a bad joke, but it's true: The downtown residential market is so awful, it's shrinking.

Last year, the number of new condominiums slated downtown declined by almost 3,000 units. And in the fourth quarter, the number of residential sales was a negative 250 units.

How can that be?

The numbers are drawn from an annual survey that Appraisal Research Counselors (ARC) reported Tuesday. They are the worst results anybody can recall for the reports, which the company has compiled since 1997.

Gail Lissner, vice president at Appraisal Research, said the residential inventory fell as developers scrapped projects they would have delivered in a couple of years. The sales figures went negative in late 2008, she said, because buyers began canceling contracts and some developers were caught fudging sales data from earlier in the year.

Overall, 592 condos sold in central Chicago during 2008, the survey found. The result was abysmal for a market that has generated annual sales of 4,000 to 8,000 units.

Lissner said business came almost to a standstill as a lack of credit joined with the recession to scare buyers or render them unable to qualify for a mortgage. The same conditions denied developers the funds to build.

She saw little prospect for recovery this year. "Buyers are going to need to be convinced they have good job security," Lissner told a luncheon audience of real estate executives.

But she said that for all the gloom in the industry, condo prices downtown are holding close to steady. The company's report covers lakefront neighborhoods from North Avenue to McCormick Place, extended to include the West Loop.

Appraisal Research's check of sales data in existing condo towers showed that since 2005, prices in a few buildings are up 10 percent to 20 percent. They include 195 N. Harbor Drive and 360 E. Randolph, where lake views proved good investments.

But other buildings registered a price decline of 10 percent to 20 percent. Leading losers were 345 N. La Salle and 33 W. Delaware, where Lissner said desperate sales by speculators were a factor.

Another condo conundrum: even though projects are being scrapped, nearly 5,000 units are expected to be delivered in 2009. "We're at the tail end of what really has been four years of record deliveries," Lissner said.

The new arrivals were conceived and financed around 2006, before credit problems took hold. But Lissner said hardly any new units can be expected downtown in 2010 and 2011. "We're looking at several years of very limited new inventory," she said.