The Chicago Tribune talked to local Chicago area developers and real estate experts about what is in store for the new construction market in 2010.
“Owning costs less than renting. Today is an ideal world of affordability because of low mortgage rates and reduced home prices in the last two years,” said Chris Naatz, Midwest director of marketing for Pulte Homes in Schaumburg.
“Pricing has stabilized, and there are opportunities in the housing market that were not affordable before,” he added.
“The government’s $8,000 tax credit for first-time buyers last fall created a momentum that helped significantly to get people with limited funds into houses,” said David Smith, vice president of sales and marketing for Cambridge Homes, Libertyville.
The high-end market is hurting as well as other price ranges. “There are a lot of multimillion-dollar homes for sale. But jumbo loans may be hard to get, even if the buyer is qualified,” Samuels said.
Housing may be edging upward, but by how much?
“In 2010, less than 5,000 housing units will be built in the Chicago area,” predicted real estate analyst Tracy Cross. “That’s down from 33,000 in 2005 and up from 4,000 in 2009.
“I hope we can turn the corner this year. It will depend on the economy and consumer confidence,” said Cross, president of Tracy Cross and Associates in Schaumburg.
New building will be non-existent in downtown Chicago. That shouldn’t be surprising given the amount of inventory. It would also follow the pattern after other Chicago condo booms when there was little new construction for years afterward.
Meanwhile, in downtown Chicago, the condo building boom is history. This no longer is the “crane city” that produced 18,000 units in four years.
“There are no new high-rise residential buildings in the pipeline for 2010,” said Gail Lissner, vice president of Appraisal Research Counselors in Chicago.
She estimates that 2,800 unsold condos will be on the market this year, with the bulk of them in the South Loop.
One downtown builder agrees that no new condo towers are on the horizon. “No lenders are willing to finance new buildings,” said Richard Gammonley, president of the Gammonley Group.
“We’re wrapping up sales at our 757 N. Orleans high-rise condo with 198 units,” said Gammonley. He noted that the slow market has resulted in price cuts of $65,000 to $95,000.
Going forward, he believes market conditions are favorable. “It’s just psychological. People have to feel comfortable to buy. They never again will see today’s bargains,” Gammonley said.
As we have seen, many buyers still believe in real estate as an investment. In another Chicago Tribune article discussing the “lost decade” in stocks the last 10 years, people are turning their backs on stocks and investing in real estate.
For some investors, the one-two punch of the financial-system meltdown of 2008 and the severe damage it did to the stock market — the Dow lost a stunning 54 percent from its all-time high in 2007 to its low in March — has far exceeded the shock of the dot-com era losses.
“There’s been a paradigm shift. People are wondering, ‘How could this happen?’ ” said Sunil Gupta, a software developer and trainer.
Although he has held on to the stock mutual funds in his retirement accounts, Gupta, 46, said he is plowing savings into condos that he plans to rent, instead of looking for more opportunities in equities.
“I think this is a once-in-a-lifetime opportunity” in housing, Gupta said.
Local builders see light at the end of the tunnel [Chicago Tribune, John Handley, January 1, 2010]
For stocks, an end to a ‘lost decade’ [Chicago Tribune, Tom Petruno, January 1, 2010]
