Market Conditions: Sales of New Downtown Condos Fall Year Over Year in Q3
The market for new downtown condos remains grim.
Crain’s reports that sales fell in the third quarter to 229 sales from 251 a year ago. That was, however, slightly better than the 196 sales recorded in the second quarter of 2011.
Sales were also boosted by dramatic price cuts at the Parkside of Old Town development, where 26 units closed.
“There’s always the herd mentality in purchasing real estate,” said Gail Lissner, Appraisal Research vice-president. “Right now, there’s a widespread reluctance to make the purchase, and renting becomes an easier decision.
Pricing continues to be an important factor in motivating those reluctant buyers, Ms. Lissner said. Once again, developers who cut prices were among the sales leaders in the third quarter.
Parkside of Old Town, for example, a redevelopment of the former Cabrini Green public housing development on Division Street, had the highest number of closings in the third quarter — 26 units out of 161 total, according to the Appraisal Research report — after aggressively cutting prices 30% to 40% in the summer. Built by Chicago-based Holsten Real Estate Development Corp., the project includes market-rate units, affordable units, and CHA replacement housing in townhomes and two midrise buildings.
Holsten worked with its lenders and the Chicago Housing Authority to roll out a new pricing schedule with significant discounts, said Andrea Keeney, senior development manager for Holsten.
“The reduction in price, along with an aggressive marketing campaign, drove people to the site,” Ms. Keeney said.
One-bedroom units that had been priced at $259,000, for example, were reduced to $155,040 with a free parking space. Two-bedroom units that had been priced at $379,900 were reduced to $229,500 including parking.
The development has drawn many young and first-time buyers, in part because of its price point and location, as well as incentives such as a $10,000 grant from the city, Ms. Keeney said.
First-time buyers — who are able to buy without having to unload homes they currently own — likely helped sales at some other buildings that sold relatively well in the third quarter, Ms. Lissner said, including 200 N. Dearborn, Silver Tower, 757 Orleans, 235 West Van Buren and Quincy 565.
However, she said, a few higher-end buildings that wouldn’t attract first-time buyers also fared relatively well, including Trump International Tower, Legacy at Millennium Park and Aqua.
“For properties like that, we’re hearing many buyers are paying all cash,” she said.
With new rentals sporting all the same amenities as condos (without having to come up with large downpayments, pay assessments for the use of that new pool and no property taxes)- what will it take to get people to buy condos again?
Or will it take a new generation before condo owning comes back in vogue?
Condo sales stall downtown in the third quarter [Crain’s Chicago Business, Mary E. Morrison, November 15, 2011]
