Market Conditions: Downtown Condo Sales Sink in the Second Quarter
Appraisal Research is out with the numbers for new construction downtown condo and townhouse sales in the second quarter.
Sales have fallen 52% compared to a year ago but have also declined sharply compared to the first quarter of 2010.
- Second quarter 2010: 150 sales
- Second quarter 2009: 313 sales
- First quarter 2010: 256 sales
From Crain’s:
“We’re just continuing to plod along,” says Appraisal Research Vice-president Gail Lissner.
A recovery could be years away, but developers, with 406 sales in the first six months of the year, are still ahead of their pace in 2009, when they sold just 572 units during the whole year.
That’s still a fraction of the 8,162 units downtown developers sold in 2005, before the housing bubble burst and the economy plunged into its deepest recession since the 1930s.
“With the tax credit expired, continued concerns about the economy and job market, worries about the stability of housing prices, and the difficulty in selling an existing residence and securing financing, many buyers continue to remain on the sidelines for the near term,” the Appraisal Research report says.
Belgravia Group’s President and CEO Alan Lev echoed what many have chattered about here: it’s going to be a LONG time before any new condo towers are constructed.
Mr. Lev expects that it will be five to 10 years before a developer breaks ground on a major downtown condo tower. In the meantime, Belgravia is scouting for distressed uncompleted condo projects that it can buy at a discount and finish itself.
The developer, for instance, is acquiring 18 out of 34 unsold units in a vintage condominium conversion in Lakeview and plans to offer them for about $300,000 to $500,000 apiece, down from the original developer’s $500,000 to $700,000.
“That’s the kind of stuff we’re going to be doing for a couple years,” Mr. Lev says. “You won’t have us developers to kick around.”
Downtown condo sales lag as tax credits end [Crain’s Chicago Business, Alby Gallun, August 16, 2010]
It’s great news that no new condo developments will be undertaken in the foreseeable future – duh, who would even consider such a project at this time. However, this means that if you want to buy “new construction” in the city, NOW is the time to snatch up whatever remaining units are available at some of the recently constructed buildings (ie, Ritz residences, elysian, etc.).
They’ll eventually sell units below cost to clear inventory. That’ll discourage any new large buildings for years to come. Just wait and see. 152 condo unit sales is just a sign of things to come.
Not many can afford to “snatch up” units in the Ritz and Elysian.
The premium on new construction will grow as there are fewer and fewer units delivered. However, market forces are in an extreme downward trend, and things aren’t looking good for resales at all. Things aren’t looking so hot in south loop and downtown right now.
I am looking forward to new projects merely being ‘considered’ as it would be an indication that there is still a pulse left in this industry.
Major lessons were learned from the burst, but to say the industry is totally dead is a bit of a stretch. It might take some time to recover even slightly, but even then the industry will never return to the 2005 way of doing business.
clio, making such ridiculous statements such as this (along with your other stories) proves you are definately not involved, in any sense of the word, in RE.
I gave you the benefit of the doubt until recent comments (having the grave injustice perpetrated upon you by other pedestrians who were not giving you and your dogs room on the sidewalk in front of your imaginary condo..the horror of having a water bottle thrown at you!!!) of the past few days and went along with your claims of being uber wealthy from RE investing.
Sorry but you game is over!
“…if you want to buy “new construction” in the city, NOW is the time to snatch up whatever remaining units are available at some of the recently constructed buildings…..”
clio, not to doubt you or your ‘stories’, but statements such as this proves you are not involved in this industry to the extent you claim to be, if at all. No one is ‘snatching up’ or even thinking of it now or for years to come.
As involved as I was personally (it was more than a career, it was my life) and to a greater extent, the way my entire family has conducted their business is forever changed and it will never again be the same.
What is that overused cliche jokingly used here…”buy now or forever be priced out….” Use of this statement by anyone is a clear indication that you have no idea what you are talking about.
ooppss we need an edit button!!
Clio, if you really are the guy who owns that place on Ponderosa in St. Charles, more Googling would indicate you own in Oak Brook, Chicago, maybe once in Hinsdale, too. Why don’t you just pick one area and stick with it? Same with your many cars, your many dogs, your many interests, apparently. How do you find time to manage multiple properties, drive multiple cars, walk multiple dogs and also work for a living?
You’re coming across as a bit of a dilettante DB at times.
“clio, not to doubt you or your ’stories’, but statements such as this proves you are not involved in this industry to the extent you claim to be, if at all. No one is ’snatching up’ or even thinking of it now or for years to come.”
sorry to burst YOUR bubble, but everything I have posted is 100% absolutely true. If you were invovled in real estate in the 90s and 2000s you realize that a ridiculous amount of money was made by many people (who didn’t have to be smart to make a killing)- see below for explanation. I was one of those people. I DO have several investment properties (predominantly in the suburbs) and AM heavily invested in real estate. True, I am bleeding money every month, but I am not underwater and have enough reserves (and a high paying job) that I can hold on until the market improves. There are a LOT of people out there like me which also adds to the confusion of the market.
In Boston’s South end neighborhood, I bought several buildings (in the early 90s for 400-500k). These were 5 unit brownstones (each unit 650-1000sq feet). I put in about 50k/unit and 150k for overall structural/mechanical improvements and sold each unit for between 300 and 350k. You do the math. It was a win-win situation because the buyers I sold to didn’t want to do the rehabs, etc.
As for my imaginary condo in the city, I would be more than happy for you to pay my imaginary mortgage, assessments and taxes on it. Actually, next time you are in town, why don’t you stop by – you may like the building and may even catch a glimpse of someone famous….
“maybe once in Hinsdale, too?”
I own several homes in Hinsdale – please do your research more carefully next time.
What do others think of Belgravia coming in to finish off other projects — that is good, no? I’ve always thought of Belgravia having a good reputation. 565 Quincy was a strategic mistake by them, but not poor execution.
“If you were invovled in real estate in the 90s and 2000s you realize that a ridiculous amount of money was made by many people (who didn’t have to be smart to make a killing)- see below for explanation. I was one of those people.”
Isn’t this going to be the problem going forward? Everyone is backward looking. They think the market today and tomorrow will be what it was 10 years or 20 years ago.
If you bought in the early 1990s anywhere- you were well ahead of the game as investing in real estate with 10% mortgage rates wasn’t exactly “in vogue” at the time. THAT is good investing.
Today, however, everyone but my grandmother STILL wants to buy real estate and still believes it will lead to great riches. The trade is too crowded.
I have really enjoyed reading everyones opinions of various properties over the past few months, but lately Clio is really getting to me. To the point I have to stop reading his comments. Please leave your supposed wealth out of your comments. Frankly, no one wants to hear nor cares about your multiple houses/high paying job. Everyone is on here to read about real estate, not about your personal finances.
Jackie,
Once you realize that clio is likely an underutilized jr realtor/troll things become a little bit more humorous. Nothing he/she says is true, and by that I mean nothing.
Amen Jackie.
People that have money don’t talk about their money. If, in fact, you are who you say you are Clio, then too bad for you. All that money and nothing better to do than anonymously brag about it to a bunch of people that can’t stand you and don’t even know you. Get a hobby. One that doesn’t involve us. Or a girlfriend or a boyfriend or a puppy.
” Nothing he/she says is true, and by that I mean nothing.”
well he did say he was single… i can believe that…
shame condo’s aren’t selling, but like this entire recession it is going to take a long time, half a decade or longer for pricing to get to where it needs to be to support even average volume of sales. fringe hoods and marginal properties are screwed, but good properties at good prices will move super fast.
I bought at 565 Quincy and have to say I am very happy- I haven’t had one problem with my unit- haven’t really heard my neighbors- all with dogs (all of the units surrounding me are occupied), the electric bills have been low despite all of the windows… It may not have been what they envisioned in terms of sales price, but they did a nice job with the units. I think they are a good canidate to finish off some other buildings. The place is also at around 80% sold- pretty amazing in this market. (and given what some people think of the location) Of course, I am really loving the location too… I almost never miss the northside.
If these numbers are that bad imagine what Q3 is gonna look like without the benefit of one of its months being the last month of the tax credit like Q2.
Alan Lev isnt stating anything that everyone doesnt already know –
“Mr. Lev expects that it will be five to 10 years before a developer breaks ground on a major downtown condo tower.”
CLEARLY! It’ll take at least 3 years for the market to recover, but by then Mr. Lev will surely have 3 or 4 new construction deals tied up and will be looking for financing… 2 years later, he’ll be out of the ground with new construction. I doubt there will be a huge gap in new construction, leading to “pricing premiums” for newer units.
“What do others think of Belgravia coming in to finish off other projects — that is good, no? I’ve always thought of Belgravia having a good reputation. 565 Quincy was a strategic mistake by them, but not poor execution.”
Of the larger condo/th developers, Belgravia would be at the top of my list for someplace to live–new or older. They do consistently nice job on their projects, no matter what one may think about their media quotes and people they pay to monitor the intertubez for them.
(disclosure–I know several Belgravia employees somewhere b/t met-them-once and reasonably-well, but I’m not on their holiday card list)
“It’s great news that no new condo developments will be undertaken in the foreseeable future – duh, who would even consider such a project at this time.”
HA! LP2520 just got financing. Sumitomo lead the deal and got it done. Goes to show that banks are hungy to book assets. 50% LTV w/ GEPT gty’ing the loan. It has nothing to do w/ real estate and everything to do with yield and sponsorship.
its good to see some money flowing w/r/t 2520 but there aren’t many other local developers that can or be willing to put up that much equity.
Regardless of which projects have been granted funding, people still need to be willing to pay the asking price for said properities. Incorrectly priced and the units will sit, just like any other condo…
PS no new construction is great for current condo owners…
Clio hang in there…..
I could care less about your fancy cars, multiple homes, and uber wealth comments but I have to agree with the gang on advice that “snatching up new construction condos now” seems odd. There will continue to be units in the market that are brand new, recently updated, as well as others that receive full gut rehabs offered in the marketplace in the years to come. There is no rush on finding a UNIT that has never experienced a flushed toilet!
It will be a long time before someone is putting down cash on a unit that will not be completed for two or three years!
form our own perspetives – is there something special about buying new construction? Maybe I am a unique buyer in that I am looking for something I can mold to how I want things and can’t stand looking at a kitchen and seeing ugly granite or oddly place appliances and knowing that by buuying this place I’m paying for upgrades and if I change them there is no return (I know we’re not searching for return here but this is especially dumb).
“form our own perspetives – is there something special about buying new construction?”
From my observations there is a subset of buyers who prefer new and are willing to pay a premium for it. Not sure why but I liken them to the same kind of people willing to pay for that “new car” smell..
It goes far beyond simply wanting that ‘new car smell’ in regards to why people want to buy and live in newly constructed buildings. For one thing, IF the developer is a reputable one, you will be assured there will be little to no maintenance issues for the first 3-7 years and common areas will remain in good to excellent condition without dipping into reserves to repair or to update them.
If you are fortunate to have enough $$$ prior to closing, you usually will be granted permission to rearrange the floorplan to fit your needs and of course, you can upgrade the crap out of the unit…even going outside the scope of what the developer can furnish. It is all about cash with new buildings and if you are looking for a long term place to live why not go out and customize your home for maximum enjoyment/livability?
This coming from a person who has made a career out of renovating homes! I have worked with some clients who took control of our work and ended up having a better than new place.
Again…it’s all about the cash.
I went with new construction as a first-time homebuyer and can’t wait to do it again now that I know what I like and want. I wish I knew then what I know now… So maybe new construction isn’t best for the first-timer (or someone young whose taste level will evolve).
sometimes I feel like I’m getting ripped off but the add ons and upgrades, although I am very much a do it yourself-er. Thanks for the insight I wasn’t sure sbout the appeal.
Word of advice when buying new-at least make sure you have an occupancy permit…….
http://www.scribd.com/doc/33451644/Bryton-Development-4525-N-Western-Chicago-3021-3023-N-Southport-Kevin-Bryar-Tom-Staunton-Michael-J-Coleman-Construction
I don’t know that I absolutely need new construction but I am hopeful I can afford a full, architect designed gut rehab or soup to nuts new build – either condo or SFH for my next place.
Both the homes I have bought have been “gut rehabs” and were bought directly from the developer. We prefer recently rehabbed or new buildings because as two busy professionals, my wife and I don’t have time or the skills to DIY. It is hard enough for me to find time to cut the grass, let alone take on any project larger than installing a California closet. I gladly paid a premium to not have to do any work whatsoever to my places. The nice thing was that found our places early in the processes so we were able to customize to our likings.
From talking with my clients who didn’t buy new, many are kicking themselves as they didn’t realize how much time and work it takes.
There will continue to be small rehabs, but I think it is going to be awhile before we see larger new construction projects like in the past.
“gut rehab”, although sharing a lot of similarities, is not synonymous with new construction, at least in my view. One of the people who I know who bought new recently wasn’t looking at gut rehabs. Only new construction.
@Bob:
We would have bought new construction had any developers actually built something that looked remotely nice architecturally. We hated the standard new construction 3 & 6 flats architecturally and they are also rare in A’ville. New contruction homes are also rare in Oak Park. Gut rehab/95% new was the best we could do. Basically bought places with new plumbing, electrical, windows, etc. Pretty much stripped down to the framing.
When talking high rises, I think people like newer buildings because a lot of the high rises do not age well architecturally and unit owners often do not keep their unit decorating/finishes current.
new allows you to customize- in our case came with a warranty — the finishes that you pick from are “up to date” so to speak… and your appliances, HVAC system, windows, electric, etc. etc. are all up to date, and thus use less energy/don’t need to be replaced any time soon.
I totally agree, as two busy professionals, we would rather pay to walk in and have it done the way we want it and with a warranty!
Plus, there is something to be said for our building being full of people who had to qualify for mortgages after it got more difficult to get one.
westlooplo: quick question for the builders/rehabbers, or anyone who knows. When you hear the phrase “don’t build a crap building”, what does this really mean? Who is to blame the architect who does the drawings/engineering drawings & specs, or the builder/developer?
When corners are cut, who is really cutting them, the architect or the GC? and when do they actually get cut, in design & drawings or later on in the field?
I think there’s also a generational aspect to buying new. Both my parents and my in-laws refuse to live in anything old – they associate it with the urban blight and poverty that they fled to the suburbs to escape. And the generation that grew up in the suburbs is now sick of the shoddy, generic construction. I think there’s a definite movement among Gen X & younger towards the vintage, handcrafted and unique in housing and furnishing. Apartment Therapy vs. Martha Stewart, if you know what I mean.
Dan: I doubt corners are cut by architects, specifiers, or engineers. Usually costs are cut by developers during a redrawing phase and by substitution during building.
“When corners are cut, who is really cutting them, the architect or the GC? and when do they actually get cut, in design & drawings or later on in the field?”
The architects I know do not, in any sense of the word, cut corners as it is not their money being used to construct these buildings. They recommend (strongly) what should be used and how the materials should be installed and there part of the job is complete.
When the plans get to the developer, there are usually many ‘cut corners’…substituting cheaper products that are mass produced when perhaps the architect specified a specific material for it’s quality and longetivity.
After the plans are passed on to the builders, they too will substitute lesser grade materials in an effort to futher cut costs which allows for them to receive a higher % rate from the developer for their labor costs.
If there is no direct communication between these three parties or poor communication and a ‘I’m not going to be living there, why should I care’ attitude, you end up with ‘crap buildings’. When the building is complete, the inspector will come through (or in many states there are legally required inspections all during the construction at the end of each phase) to do his job and if he is sharp enough to realize the cost cutting measures that were employed, he will force the work to be re-done using the materials that were specified by the architectual firm.
Kick backs or bribes are…were common during these inspections that allowed inspectors to turn a blind eye to the deficiencies they would find and the low grade poor quality end product would be passed along to the end buyer. A few months or years down the road, usually after the warranty has expired, the developers mistakes and short cuts will appear leaving the new homeowner on his own to correct the mistakes.
Over the past year, I have noticed and have heard many conversations about how many of those who were found guilty of cutting corners to receive larger profits were forced out of the game. The quality of work and materials have definately improved in a big way since the crash of the market. But due to the lack of new construction in many areas of the country, most of these high grade projects will go uncompleted or will not be constructed at all. Hopefully once construction resumes thanks to a better economy, these same high quality companies will still be in business and we will not be seeing any more, or less, crappy developments.
westloopelo, its called value engineering. It sends shutters down the back of architects.
“It sends shutters down the back of architects.”
Are they a particular brand of Italian shutters, or just Home Depot specials? I need a gag gift for an architect friend.