Market Conditions: Condo Construction Perks Up But Are We Celebrating Too Soon?
Small condo developments are selling out across the North Side of the city. And they are selling out the units quickly.
But no one is saying that the era of new large scale condo towers is coming back any time soon.
“It will be a very long time before you see a high-rise tower,” says Mr. Ruttenberg, founder of Belgravia Group Ltd. “Whatever you see built will be small in size and extremely specialized.”
With the condo glut disappearing and much of the financial mess cleaned up, a few new projects are sprouting downtown and in the neighborhoods, like the first crocuses after a harsh winter. In another encouraging sign, some downtown developers who rented unsold condos as a survival strategy a couple of years ago are putting them back up for sale—and people are buying them.
If optimism has yet to return, rising sales and stabilized prices for existing condos have purged much of the pessimism from the market. Yet a full recovery is still years away, condo experts say.
The market will cross a key hurdle when developers start converting entire apartment buildings into condos, a possibility that’s hard to fathom today considering the strength of the rental market. In the meantime, builders will have to think in the dozens of units, not the hundreds.
“They’re taking baby steps,” says Gail Lissner, vice president at Appraisal Research Counselors, a Chicago-based consulting firm. “This is where the recovery begins.”
Some developers who were stuck with condos in the bust have even begun re-listing them.
While sales by developers have yet to rebound, the condo glut has shrunk in part because many unsold units have been rented out. Developers were sitting on 1,113 unsold condos in the third quarter, down from a peak of 8,222 in 2008, according to Appraisal Research.
Some developers are confident enough about the market that they have put their unsold condos back on the market after renting them out during the bust. The developer of One Place Condominiums, a 96-unit project in the South Loop, stopped renewing leases and sold 12 condos in the third quarter, the sixth-highest total for all active downtown projects, according to Appraisal Research. A developer’s representative did not return phone calls.
“When we see product coming back on the market,” says Ms. Lissner, “it’s an indication that the market is not oversupplied and that there is demand.”
There’s a lot of media buzz about the “recovery.”
But are we celebrating the demise of the bust too soon?
Why ‘small ball’ is a good sign in a condo development [Crain’s Chicago Business, Alby Gallun, November 26, 2012]
Your headline is odd. The comments in the article seem guarded and extremely reasonable.
““It will be a very long time before you see a high-rise tower,” says Mr. Ruttenberg, founder of Belgravia Group Ltd. “Whatever you see built will be small in size and extremely specialized.”
“Yet a full recovery is still years away, condo experts say.”
““They’re taking baby steps”
If celebration means recognizing reality, rather than staying rigidly locked in permanent bear mode, then yes, it is time to celebrate.
Yeah I don’t see much celebration but rather guarded optimism
At least this isn’t a NAR pump article about how you are missing the recovery or some other nonsense
I agree with JM
I agree with Vlago who agrees with JM
Where is Clio when we need some dissention? I’m sure he’d say the market is HOT HOT HOT and that we’ll be all priced out by above 2006 prices in a few months!
Off-topic, but this is one of the nicer Hancock units I’ve seen (aside from the original kitchen), and the price has been reduced quite a bit. I’d be interested to discuss on CC if Sabrina would consider posting.
http://www.urbanrealestate.com/property/175-E-Delaware-Unit-8011-CHICAGO-IL-60611-DJ6UBV6L64MPK.html
Park Monroe is starting their Phase II on 40th and 41st floor.
That could be the first “new built” in downtown Chicago. Their Phase I are almost sold out.
hard to imagine a kitchen more blast from the past awesome than that hancock unit’s
CH,
Agree about the kitchen but I’d replace it before moving in. Compared with the modern feel of the rest of the place, it doesn’t go at all.
Dan, according to Redfin #8011 was delisted back in Sept. also in addition to the kitchen it has two original baths. I doubt it would be a cheap update even though it has great views.
Too bad. I didn’t know it had been de-listed. Also, I hadn’t thought about the baths. I should have noticed there were no photos and that should have raised a red flag. It would have cost a lot to re-model, but if the buyer got it for $600,000 or so, it’s a good deal for a 3 BR with good views in that building, IMO.
“A venture led by Chicago-based Glenstar Properties LLC is converting the upper floors of an office tower at 55 E. Monroe St. into condos. With the project’s first, 168-unit phase almost sold out, Glenstar is launching a second phase that will encompass 48 units.”
Good lord, how long have they been selling those units??? It must be going on 5 or 6 years now. The ONLY was these people have been able to avoid complete disaster is because interest rates have overall remained ridiculously low due to price-fixing and manipulation by the Federal Reserve. This is the best reason to understand that the Fed will continue ZIRP for at least another 2-3 years. If interest rates were to double, the entire RE complex, the entire nation would immediate become bankrupted, unable to service the pathetically low debt service, and they’d be unable to refinance. I don’t see the Fed board of governors letting their cousins in the RE biz go bankrupt as an entire clan all at once. Rates to remain price-fixed and low.
Helmethofer, you are correct. The Fed has done its job in preventing the complete disaster that could have occured if they took the advice of the Ron Paul’s of the world. Yet you make it seem like its a bad thing. Strange.
“The Fed has done its job in preventing the complete disaster that could have occured if they took the advice of the Ron Paul’s of the world.”
Bwahahaha. The “Ron Paul’s of the world” were ringing the warning bells years before the debt bubble burst. The complete disaster already came and went. At this point, the Fed is merely setting the stage for the next big credit bubble and it is getting plenty of help from various pieces of the federal government. Ron Paul’s words from a 2003 hearing on Fannie and Freddie:
“He has been looking at it for quite a few years and has kept it alive, trying to point out some of the problems that the GSEs face with the excess of debt and some of the problems that we face. But I think that, from the conversation I have heard today, the consensus is that we just do not have enough regulations and all we need is a world-class regulator and everything is going to be okay.
I think we are failing to look at the real problem and the cause of our crisis we face. I am concerned that we are going to have a world-class adjustment to the distortions that we, the Congress, the Fed, and the Treasury have created over these last several decades; and it seems like there is essentially no concern about that.
These programs were originally set up to help poor people get affordable housing; today we have a program that helps people buy a house for over $300,000 and get subsidy for their mortgage payment. At the same time, the administrators of these programs make millions of dollars. So I think we have lost our way on this.
But the biggest concern I have is that Congress is not looking at the real problem, and to me it has been this implied credit and implied guarantee of this credit, are we going to get rid of this line of credit? Not likely, because that would cause a bit of chaos. But that is what has really blown these markets up, and they are distorted.
Also, we have the Fed very much involved in this. They probably wouldn’t admit it, but the Fed on occasion will buy GSE securities. Foreign central banks buy these securities because it is implied that the Fed is going to come to the rescue.” http://commdocs.house.gov/committees/bank/hba92231.000/hba92231_0f.htm
Don’t worry, I know words like those are beyond the comprehension of those who worship at the altar of big government. But those occasional GSE purchases have now morphed into QE3 to the tune of $40 billion a month of mortgage toilet paper to try to buy mortgage rates down another few bps so we can pretend this country has a solvent banking system. Bubbles like the one we saw from 2003-2008 are nearly impossible to re-inflate, but you can bet that the citizen who did everything right will be the forgotten man who will have his wealth siphoned off either through taxation (whether current or delayed) and inflation.
who has time to write such an long analysis?
“but you can bet that the citizen who did everything right will be the forgotten man who will have his wealth siphoned off either through taxation (whether current or delayed) and inflation.”
This is why it’s sound advice to anyone to max out, to the degree their able to, their contributions to Roth IRA and Roth 401k plans. I have a feeling taxes 30 years from now are going to be materially higher for (almost*) all income brackets.
*there will still be those who pay no tax but they’ll be less than 47% is my guess, as the 53% won’t take huge increases lying down.
“hard to imagine a kitchen more blast from the past awesome than that hancock unit’s”
Bro, do you even pun, cause you misspelled kitschen.
There are several tear-downs in Lakeview right now. 2 on Seminary (School to Roscoe), two one School (near Racine), and one that is done on Clifton (just north of school). These are all 2 bed 2 bath units or duplex-downs or ups all going for at least 450K. There isn’t a lot of inventory with less baths with 2beds that are new units.
It seems there are more condo owners than renters lately in my neighborhood.
The 47% thing is idiotic. It was a dumb thing for an elitist hack to say. If you’re suggesting the 20% who are the true poor with nothing and old people and people with disabilities should have their taxes raised by a few hundred dollars, which is devastating for a person in that situation, when 100% of that money is otherwise going into the consumer economy and through again repeatedly, and which is a drop in the bucket compared to other policy approaches, then say it. Show your algebra and make a case for it being a good policy. Call it “Raise Granny’s Taxes.” If you want to reform entitlements, make a realistic proposal, but the next 27% or so pay a pretty high effective tax rate because of the regressive nature of payroll taxes, so be honest when you tell the truck driver and the waitress they need to pay more. Most of all, tax policy should drive compliance, the more of the underground, untaxed economy that comes into the light the better.
“This is why it’s sound advice to anyone to max out, to the degree their able to, their contributions to Roth IRA and Roth 401k plans. I have a feeling taxes 30 years from now are going to be materially higher for (almost*) all income brackets”
I never understand this argument, for many isn’t it the exact opposite? If you are working now, maybe you have some deductions, maybe you’re in one if the middle or higher tax brackets, the last dollars you make in a year, those marginal dollars, they’re paying a high current tax rate. The deductions are gone, you’re into the bracket you’re in, that’s your marginal rate. Aren’t we likely to have a similar system in the future, with marginal tax rates? And aren’t we likely to provide some tax advantages to capital gains and dividend income as compared to wage income, just as we do now? And aren’t you likely to move from a higher wage income and lower capital income to a lower wage income and higher capital income, plus assets? I expect that my marginal tax rate now exceeds my marginal tax rate at retirement, both on a real basis and on a nominal basis.
JJJ–you have a lot of assumptions baked in regarding the future and the status quo being maintained. I have far fewer in mine insofar as mine merely rely on the Roth rules not being changed retro-actively (its possible but the contribution limits are so low on IRA and the adoption %age so low on Roth 401k I don’t think it’ll be an issue any time soon).
However, after the Obama administration informally abrogated the legal precedent of the order of priority of creditors in bankruptcy court (hedge funds on the margin caved to their pressure so it wasn’t technically force de jure, but it was just short of) with GM and Chrysler I suppose anything is possible.
But when I look at the debt being accumulated I feel safer with my savings being post-tax. Plus for those able to maximize (such as myself) the post-tax amounts equate to increased contributions. At the end of the day I suppose it depends on where you expect to be in the economic peking order. Your one statement was prescient: “aren’t we likely to have a similar system in the future, with marginal tax rates?”
They’ve done studies of lesser homids in cages I’m aware of regarding reward mechanisms. And it seems hominids have a fairness trait within them that can be de-motivational if they perceive/see inequitable outcomes. Point is this is a human trait as well and if some wind up far ahead of others I wouldn’t expect those monies to be necessarily protected. If you’re in the middle of the pack I’d feel much more confident like you do.
Tax advantages for dividends don’t exist currently, in fact they’re economic rents the government taxes twice. Don’t look for tax advantages to exist for capital gains in the future either–that loophole’s going to get closed. And don’t expect to maintain the same (real) income in retirement and have a lower marginal tax rate.
Also JJJ, while Tea Partiers might not like to admit it with their reminiscence of a 50’s America that never quite existed as they envisioned it, that was the time when America’s debt to GDP was highest as it’s ever been in it’s history. I’ll leave it to you to figure out what marginal tax rates where during that diner decade.
And guess where our debt to GDP ratio is approaching? Maybe time for Bob to play some Doo Wop.
“The 47% thing is idiotic. It was a dumb thing for an elitist hack to say.”
It was dumb insofar as he was older and didn’t understand the age of new media that anything you say at any time can be used against you. It was also dumb in that it was Jimmy Carter’s grandson who did the recording, who got into an _invite only_ event. Its pretty hilarious actually.
He probably wouldn’t have won anyway. But it is ironic Romney garnered 47% of the popular vote. And it’s his birth year, too.
Sounds like mostly conspiracy theory for policy, criticizing Obama for being slow with firefighting and a misunderstanding of how dividend taxation works. Really everything in your last paragraph is wrong. It’s additional income that hasn’t been taxed before. Qualified dividends and carried interest are colossal advantages. What’s the argument against treating that income more like wage income? Not hyperbole and rhetoric, the actual argument.
I make a decent amount in dividends, but I’m willing to pay higher taxes on them if it’s part of a deal that will put the country on a path toward fiscal sanity.
Speaking of which, why is Obama heading back on the “campaign trail” to promote his fiscal cliff solutions, and why are Reid and Boehner duking it out in the press? Put those three, along with Pelosi and McConnell, back in a room together and don’t let them come out until they’ve come up with a responsible plan. They need to stop politicizing this.
“criticizing Obama for being slow with firefighting ”
You don’t understand what precedent this sets for investment going forward. Nor would you likely understand how Dodd-Frank solidifed the top 5-7 banks as TBTF who now have a materially lower cost of debt than their competitors. They are now ensconced at the top of the financial services peking order for all eternity after Dodd-Frank.
“Really everything in your last paragraph is wrong. It’s additional income that hasn’t been taxed before. Qualified dividends and carried interest are colossal advantages. What’s the argument against treating that income more like wage income?”
Was not aware of qualified dividends–news to me. I concede this one to you.
“What’s the argument against treating that income more like wage income?”
No argument from me. Wasn’t even aware of this exemption–but it doesn’t change the basis of my supposition regarding retirement planning. Hate to tell you you can’t raise taxes enough on those earning more than you to avoid taking a hit on this going forward. You can deny the debt problem you can hope we can kick the can down the road (without inflation doubtful for 30 years), but at some point we’re Japan. And Japan is royally F’d beyond repair.
“who has time to write such an long analysis?”
It’s mostly a cut and paste of Ron Paul’s warnings about unsustainable housing debt back in 2003.
“Qualified dividends and carried interest are colossal advantages. What’s the argument against treating that income more like wage income? Not hyperbole and rhetoric, the actual argument.”
Well, a qualified dividend is a distribution of income that has already been taxed once at the corporate level. If you jack that to ordinary income rates, the all-in fed/state statutory rates on dividend income would be up to between 60-80% depending on where you live.
Carry should be taxed as ordinary income, it is payment for a service.
“Well, a qualified dividend is a distribution of income that has already been taxed once at the corporate level.” Fair enough, I thought that someone was making an argument that it’s taxed twice at the personal level. Anyway, supposedly you’re right, but in practice there’s a low effective tax rate and the cumulative tax rate on dividends, I expect, is still lower than the highest marginal personal income tax rate. Reforming corporate income tax is a much more complicated proposition.
[different person]
“You don’t understand what precedent this sets for investment going forward.”
You say this, but you’re the one who wasn’t aware of qualified dividends.
“I make a decent amount in dividends, but I’m willing to pay higher taxes on them if it’s part of a deal that will put the country on a path toward fiscal sanity.
Speaking of which, why is Obama heading back on the “campaign trail” to promote his fiscal cliff solutions, and why are Reid and Boehner duking it out in the press? Put those three, along with Pelosi and McConnell, back in a room together and don’t let them come out until they’ve come up with a responsible plan. They need to stop politicizing this.”
It’s impossible to tax our way back to solvency. Impossible. There is no possible way to tax people, even the children born today, over 40 years’ time to repay $16 trillion of UST debt and fund all the unfunded liabilities. The debt and unfunded liabilities are growing further. There is no way to tax our back to solvency on this. Repeat it again.
The US needs to start electing some math majors or accountants to our government positions. Geesh.
We’re already over the fiscal cliff, and the question is how we are going to land. Read today in Crain’s RE Daily, there’s a story about a shopping center on Clybourn that’s in default and going to special servicer. Then look at their annual debt service in the article. Fully leased here are the numbers:
“Clybourn Galleria has performed well for the most part. Net cash flow from the property was about $3.4 million last year, more than clearing annual debt service costs of $2.8 million, according to a Bloomberg L.P. loan report.”
Now, I ask you again what would happen to this CRE property, and most American homeowners if interest rates went back to a “normalized” 6%-7%? The debt service would come close to doubling for every mortgagee in America, commercial or residential. The whole RE complex would teeter on bankruptcy if not be thrown directly into it. There is nothing the Fed can do BUT KEEP RATES LOW indefinitely. Same issue above happens to the Fed Gvt.’s debt service payments.
Raising taxes is a drop in the bucket on these titanic-sized numbers, it won’t do a thing. “We’re already over the fiscal cliff, the question is how we’re going to land” – Ron Paul said that, yes. The Fed is just delaying the inevitable reckoning day, and making the debt & negative numbers bigger in size. “Raise taxes”, LOL just a drop in the bucket on the numbers we’re talking about.
PS raising taxes on the rich isn’t going to put a dent in the problem either. I read that the Gvt. could confiscate the entire net worths of the richest Americans…..yes, take everything they have (not just tax them some puny incremental amount)…they could take all of it and it wouldn’t come close to solving our multi-trillion $ math problem.
I heard somewhere if we raised marginal tax rates on the rich (defined as 250k+/yr) it would cut our deficit in half. Okay: huge labor market distortions and we cut our deficit in half. What about the other half, and what about the _16 trillion_ in accumulated debt?
The middle class is going to have to pay for this spending orgy, too. JJJ and the rest might be in denial about it, but its coming.
off topic, but this macroeconomic article is very interesting to read: http://www.atimes.com/atimes/Global_Economy/NK27Dj02.html
I agree that raising taxes alone won’t fix things. We need a plan that also cuts spending on entitlements. Both parties have had good ideas on fair ways to do this. Time to get in a room together and agree on which ones.
Also, we need to get defense spending back down to a more appropriate level. Spending on the military is still at the peaks it reached during the height of the Iraq war and roughly triple its level back in the early 2000s before 9/11. Both parties need to stop the corporate welfare program that gives billions to defense contractors to build equipment the military doesn’t even want. And it isn’t just me saying this. So have top military leaders.
We don’t have an entitlements problem; we have a cost-of-healthcare problem.
Our federal government is an insurance company with a very large army.
The greater part of our accumulated national debt is explained by two things: the Bush tax cuts and the Bush wars. Most of the balance is explained by revenue lost to the recession. Sorry, Paultards. Electorate gets it.
Getting the relevant congresscritters “in a room together” is what produced this fiscal cliff farce to begin with. Buh-bye Bush tax cuts. Hello sequesters. Dem base rejects grand bargain; let’s hope Barry and Harry figure that out.
“The greater part of our accumulated national debt is explained by two things: the Bush tax cuts and the Bush wars. Most of the balance is explained by revenue lost to the recession. Sorry, Paultards. Electorate gets it. ”
You’re a fool incapable of seeing past your favorite cable newschannel,in your case, MSNBC.
The “Paultards” are also to blame for the impending fiscal problems in leftist utopia states, such as Illinois and California.
Paultards have never caused anything, for which we may all give thanks.
Nonchatterer is such a confused tool & fool even his moniker is conflicted.