Chicago Magazine reports:
Chicago's condo boom has stalled—caught in a perfect storm, with a flood of new units landing in a sinking real-estate market. And though the tough economy affects sales of single-family homes, too, the condo market draws some of the most fretful attention. After all, if a subdivision stops selling new homes, the builder doesn't build the next phase. If a family can't sell their home, there may be the choice to stay put. But a developer putting up a condominium high-rise has a mechanism in motion that doesn't stop so easily.
"Trump can't say, 'I've only got the first 60 stories sold, so I'm not going to build the next 30 stories,'" says Chris Huecksteadt, Chicago market director for Metrostudy, which tracks the statistics of the housing market. "Once they start building them, they're stuck with those units."
And, boy, did they start building. Between 2000 and 2006, some 22,650 new condos and townhouses came on line in the downtown neighborhoods alone, according to Appraisal Research Counselors, the independent analysts of the condo market. In most of those years, buyers seemed insatiably hungry, snapping up most of the units built. In 2005, the downtown market's best year, about 9,000 came on line and 8,000 of them sold. Hints of trouble appeared in 2006 when a surge in new deliveries left about 2,500 condos unsold at the end of the year. That contributed to the logjam that was 2007. The year ended with about 7,700 new and rehabbed condos and townhouses standing unsold (not all were finished or under construction, but all were actively for sale), according to Appraisal Research—and that was in a year when only about 4,300 new units were completed.
The proliferation will continue: Appraisal Research estimates that at least 5,900 units will be completed this year, with another 4,200 due in 2009—more, if all the proposed units get built (which is doubtful, in light of the excessive overhang).
More from
The Chicago Tribune:
Nearly 6,000 condos, by far a record number, are expected to come on the market in downtown Chicago this year at a time when mortgages are tougher to get and sales have slowed dramatically, according to a report.
That adds up to a big worry about the Loop-area market, which has seen explosive growth in recent years.
"It's tremendously serious," said Steven Hovany, president of Strategy Planning Associates Inc., a planning and real estate consulting firm. "What you are going to see are buildings going into foreclosure."
Hovany predicts developers will cancel downtown projects for several years to come, until the excess housing is absorbed.
For a town that appears to be losing population.Amazing.
