Flashback: Camping Out for Condos in 2005 While Sales Were Also Beginning to Falter
Camping out for condos wasn’t limited to California, Arizona and Florida during the height of the boom.
It happened several times at various buildings, mainly in the South Loop, but also in River North where developers sold out some buildings within days in the early 2000s.
Here’s a look at some of the frenzy.
This is from an Enterprise press release in November 2005 about 1400 Museum Park in the South Loop:
“Potential buyers of units at 1400 Museum Park reportedly camped outside the sales office for several hours before the doors opened in September 2005 and within two months the South Loop development was 65 percent sold.
That’s according to developer The Enterprise Companies. The energetic developer is churning out South Loop highrises like there is no tomorrow.”YoChicago New Homes Magazine Housing Profiles 1400 One Museum Park [November 9, 2005]But in the same year that buyers were camping out for units, cracks were already appearing.
From the Wall Street Journal:
While condo developer defaults and cash crunches are by no means widespread in the Windy City, some developers are either selling units for less than planned or not at all. Meanwhile, construction of condos and conversions of rental apartments into condos have gone on unabated, giving buyers a lot more options, including the option of saying no.
“We’re seeing in the last couple of months the sound of the bubble breaking in the Chicago central business district,” says Hans Nordby, who monitors real-estate markets and trends for Boston research firm Property & Portfolio Research Inc. “Projects are starting not to sell, they’re starting to go to the bank. The bubble is starting to break.”
Unlike some other markets, Chicago isn’t experiencing a pricing bubble but a supply bubble. Chicago ranks third in the nation in terms of condos that are expected to be completed this year, including new buildings and conversions of rental apartments. According to Property & Portfolio Research Inc. and Reed Construction Data, 18,586 condo units will be added to Miami’s condo inventory this year. San Diego is expecting 10,875. Chicago could see 8,533 more units.
But Chicago so far ranks first in terms of troubled condo projects as high prices and healthy supply have made some buyers more cautious. The median price for a downtown condo is up 34% in the past five years to $349,000, according to Appraisal Research Counselors.
Chicago’s Condo Market Shows Signs of Cooling [Wall Street Journal, Ray Smith, June 24, 2005]
I’m starting to wonder how much more prices have to fall for it to be safe to buy into a large condo building like aqua, millennium, silver, 757 and the likes? 15%, 20%?
Oh how some people wish they would have listened to articles like this before they bought at the top of the bubble?
“Unlike some other markets, Chicago isn’t experiencing a pricing bubble”
+
“high prices and healthy supply have made some buyers more cautious”
= confused conclusion.
“= confused conclusion.”
Evidence that even the “canary in the coalmine” articles like this weren’t really sure what was going on or could not conclude with pith that we were headed for a real issue.
There are little or no smoking guns that pointed to what we experienced — pieces were either critical of a particular asset class or of a particular location, or both (e.g., downtown condos), but not portending the doom that almost led to a complete failure of our financial services system.
I don’t think Chicago was all that over priced in general (relative to similar sized cities), but supply definitely got out of hand with the pick up truck developers and the out of control high rise development.
I was always cautious about the high rise developments. Too many neighbors to compete against when selling, too many investors, and apartment grade unit. Not to mention high assessments to care for crappy gyms, business centers, and over paid doorman. Don’t understand the appeal.
“portending the doom that almost led to a complete failure of our financial services system”
(no snark intended, I swear) I must have missed someone here claiming they foresaw the impact of the housing bubble on the finance sector. From that perspective, your criticisms of claims of prescience are totally legit.
However, you come across as asserting that anyone who was merely convinced that houses were trading at unsustainable prices and/or price increases can only “prove it” if they got rich off that believe. Which I think is unduly harsh.
A little (OK a lot) off topic…. has anyone else noticed the enormous optima development just off the edens at the old orchard exit? looks like there are a gazillion units, and i’m curious how the developer is doing in terms of sales. all glass, modern, in the burbs but can’t walk to anything without crossing the expressway (except the gym, and a cheesy hotel/restarant)… who’s the buyer? divorced dads, who need to stay close to this kids’ school, but wished they lived in the city? the size of the thing boggles my mind every time i drive by.
notjustlooking, that place has been profiled on yochicago. you might find something there that answers your questions. i recall in the comment section joe z arguing with others over its walkability. (there is a tunnel under the edens apparently)
they do have surprisingly cool views of downtown on the top floors.
That Optima place always blew my mind. You’d just round some bend on the Edens and BAM gigantic condo building. Never could figure out what their target market was.
“That Optima place always blew my mind. You’d just round some bend on the Edens and BAM gigantic condo building. Never could figure out what their target market was.”
If/when the Yellow Line gets extended to OO, that will seem forward looking. Until then, one only hopes (for their sake) that their cost of land was *low*.
Thx, CH. I’ll check out yochicago.
Creepy tunnel under the expressway? that’s almost as good a selling point as the new holocaust museum they just built next door. Real “neighborhood feel”.
Agree, the views are probably pretty cool from higher floors.
“If/when the Yellow Line gets extended to OO, that will seem forward looking. Until then, one only hopes (for their sake) that their cost of land was *low*.”
I’ve heard about the Yellow Line being extended to OO for about as long as the Yellow Line has been around. Banking *anything* on the CTA making capital improvements of any sort is pretty idiotic.
My coworker (25 yo Pac-10 grad) lives in the Optima condos with his brother. Not sure if that’s a typical market for it but that’s the only person I know there. It’s a beautiful building with beautiful facilities. He told me that the developer had two towers selling pretty quickly so then they got approval to build a third tower, which they are obviously not selling.
I had a friend who bought a few “investment properties” in Florida… he said when he went to buy a place in some subdivision development (0% down mind you), there was a huge line of people at the sales center, and on the way out of the sales center, people in the back of the line were asking him how much he paid and were offering more money than he paid…
It was then (summer of 2006 I believe) I knew to stay the hell away from the real estate market for a while.
I rent in that “1400 Museum Park” building and it’s nice, well kept up and very quiet, but I’m glad I’m renting and didn’t buy.
The real address is 100 E. 14th; sometimes people coming to visit me get confused by the 1400 nonsense (even though I’ve given them the real address) and end up at the building kitty-corner which IS 1400.
There were plenty of signs that the market was going to decline, but (with the exception a few people at Goldman who found a way to short the housing market) not many understood the magnitude.
CS exploded well above the historical inflation trend beginning around 2004/2005, supply out paced demographic growth, large numbers of condo units (esp. downtown) were bought by investors instead of dwellers, etc. Very few people understood “re-insurance” hedging schemes, counter-party risk or how the securitized market worked. Its amazing how junk rated MBS could be sliced with credit card debt and auto loans, and magically become an AAA investment. So much for correlated defualt risk models.
I am looking for sub-$500 per sq ft for a prime view/tier in those buildings.
“Its amazing how junk rated MBS could be sliced with credit card debt and auto loans, and magically become an AAA investment. ”
More amazing is that junk RMBS was pooled with more junk RMBS (but from Florida, instead of California!) and became AAA.
I rent at 100 E. 14th. Good way to see the outcome of development before investment. Problem looming with heating/cooling units .. very audible with on off switch, no steady quite stream. I sense special assessment.