Crain’s: New Downtown Condo Sales Down 83% from 2007
Crain’s has an update on sales of new construction downtown condos. (“Downtown” is usually defined as Cermak Road on the South to North Avenue on the North.)
It isn’t pretty. But it also shouldn’t be surprising, given what we’re seeing with the lack of sales of the flips.
Downtown condominium developers suffered their worst first quarter in at least a decade, selling just 201 units — an unwelcome trend as unsold condos start piling up.
The total represents an 83% drop from first-quarter 2007, when downtown developers sold 1,207 units, according to a report by Appraisal Research Counselors, a Chicago consultancy. The only quarter with lower sales in the past 10 years was the last three months of 2001, after the Sept. 11 attacks, when developers sold 92 units.
The speculators who drove the condo boom a few years ago have all but disappeared, and tighter lending standards have made it harder to finance a purchase. The weak economy also is taking a toll, says Appraisal Research Vice-president Gail Lissner.
“Buyers are concerned about whether the market has hit the bottom,” she says. Many are asking, “if they buy today, are they going to look foolish 30 days from now?”
More developers are willing to negotiate on price but “in general, developers are not slashing prices,” Ms. Lissner says.
The report doesn’t include sales from The Spire. (The Spire said it would not reveal sales figures until “the summer”- which is interesting unto itself if you think about it.)
Developers sold 3,724 units last year, a 54% decline from the record 8,162 sold in 2005, according to Appraisal Research. At the current rate, they’ll be lucky to match even the 3,258 units sold in 1998, the weakest year in the past decade.
With sales stalled, the supply of unsold condos keeps growing. Developers have yet to sell 5,561 units that have been completed or are under construction, up 79% from 3,114 units available at the same time last year, Appraisal Research says.
This data brings up several questions:
- How many buyers were investors in the last few years? I saw estimates of 20-30% a few years ago. Could it have been even higher?
- Will the first quarter be just a blip in the sales data (as the quarter after 9/11 was) and return to “normal” levels in the next few months or will this be the story for the rest of 2008?
Stay tuned.
Downtown Dead Zone [Crain’s]
This suggests the downtown condo market has frozen. I think it would be foolish to completely discount the weather: February was bad in both 2007 & 2008 but I seem to remember a better March in 2007.
One thing I think drove the downtown bubble other than easy money and speculation (that were variables present everywhere), was also that younger people tend to view ownership as a status symbol.
No more evident is this when talking with someone upon asking them where they live, without even inquiring as to their renter or owner status, they inform you that they “own a condo” in neighborhood x. To them ownership is more than just the utility value of having a roof over one’s head, its a status symbol. And much like a fancy sportscar, these days its an expensive one.
Just ask yourself do people ever go out of their way to proffer the extra information that they rent a place when inquiring as to where they reside. 😀
at this sales rate we have about 25 months of inventory, yet they keep building…
Its jsut a sign of the times for some youngsters, When I was in my 20’s it was all about having a stock portfolio and pretending you were wise enough to know how to day trade and actually make money. The post college 20 somethings I haired in the last 2 years didnt have any money, but made a big dea lout of owning a place at X
Personally I think the way to make money in real estate is to open a bar outside of the courtroom that holds forclosure hearings
Satre:
25 months? Unless my math is wrong I come up with 6.9 years worth of new condo inventory (that’s if sales remain at 201 condos per quarter.) Even if you suppose that goes up quite a bit- you’re still looking at, probably, 3 to 4 years worth of inventory (if everything gets built that is planned.)
Sabrina,
I think your math is off. I would include all of the never lived in flipper units as “new.” That would add at least another year or two to the estimate.
Then again, I guess agent007 could be right and they are all getting rich with their buy and hold strategies. ROTFLMAO.
Yes- G- I too would include the flipper units- but since those weren’t included in the original numbers in the article, I left them out.
We all know if those flipper units are also included, the inventory soars even more. And we also know not many of the flips are selling either.
It could be 7 or 8 years worth of inventory- depending on what happens to sales going forward.
Sabrina,
you are correct. I read the 201 condo number as monthly instead of quarterly. This is even scarier…