Third Biggest Story of 2010: Excess Inventory Continues to Plague Downtown
There is still plenty of new construction condo development going on in downtown Chicago.
We’ve chattered about this story every new year for the past 2 years.
In 2009, developers introduced the auction to try and move some of the inventory at reduced prices. It seemed to work.
But there are numerous luxury buildings which still have available units even though construction was complete a year or two ago such as:
- Trump Tower
- One Museum Park
We also don’t know the status on closings in The Legacy or Aqua, both of which started closings in 2009. One Museum Park West, the sister building to One Museum Park at the south end of Grant Park, also began closings recently. The MLS is showing 102 listings for sale in the building out of 298 units.
Other new construction buildings to watch in 2010:
- 565 Quincy (which has an advertisement in the Tribune about a big announcement coming on 1/16/2010 about pricing)
- 757 N. Orleans
- The Silver at 303 W. Ohio
- The Elysian
- 10 E. Delaware (closings to begin in the spring)
- Walton on the Park
What will happen to all of this inventory in 2010?
Lots of units will mean lower prices for everyone. Living downtown will be a more affordable lifestyle choice than it currently is.
classic supply and demand curve: increase in supply cuppled with a lower demand (or ability to purchase) yields a significantly lower equilibrium price.
Obviously housing is much more complicated than simple commodities, but the basics still apply. The only sustainable solution is the slow absorbtion of the existing inventory until supply start being depleted and prices can begin to rise again.
New construction will need to cease, more inventory only fuels the fire. Unforetunately builders are in the profession of building. They will need to move to areas that can support groth (if there are any) or cease doing business- as some suburban track home builders have.
Only barack obama can save us now!
just throwing this out there may or may not happen;
in 2011 South loop=will see Sec. 8?
a friend has a deposit on a 2 bedroom in aqua. he said that they are having trouble with loans and that the developers are trying to swing a deal with national city that would provide financing and allow people to start closing. but nothing had happened and when i last spoke to him he said “basically I’m in deeeeeeep $hit”. he also owns a few townhouses in naperville and a hotel room in dubai. the dubai unit is on the 102nd floor of a high rise that is only built to the mid 40s so far.
Speaking of Aqua, has anyone heard anything on the situation with the hotel there? Is the lack of a commitment from a hotel the reason there are now problem with financing closings? Do you think there is a lot of shadow inventory in that building?
CH – Ouch.
These are nice (or at least nice looking) places listed. I recall in ’05 looking at a few and just not being able to accept the pricing levels. IIRC, Elysian was looking for 500k+ for a 1 bedroom.
At the end of the day, Chicago is not New York. We are not an island. We do not have 20,000,000 people that all would choose to live in Manhattan if possible. Most Chicagoans don’t want to be cramped into a one or two bedroom condo in the loop. Most choose to live in surrounding neighborhoods or in the suburbs. Prices in the loop should reflect these realities and yet they don’t.
2010 is going to be another long year for developers and sellers
CH- hopefully your friend has a mortgage contingency on the Aqua unit so he can get out and not loose his earnest monies. I read about the ‘special’ financing that Aqua is starting to get to go around the classification of the hotel portion as ‘commercial’ and thus killing most conventional mortgage requirements.
My worry is that the developer gets this special finaincing to close all his initial sales. But then the initial owners can’t ever resell their units due to no secondary buyerws being able to fininace the resales. Then hes really up the creak. All the developer cares about is his initial sales. With resale financing so hard to get, resale prices will drops drastically.
Best I can tell Aqua has only closed 20 units. That’s according to the MLS. The recorder’s site shows even fewer.
Whats up with Lexington Park Condos?
565 Quincy has a price guarantee don’t they? Maybe it’s expiring? I stopped in there during pre-construction and they kept telling us there promo was they would never lower the prices (very high to begin with) and if they did they would pay back previous owners the difference for their tier.
I haven’t been in town since Thanksgiving, but at that time the Silver still looked almost empty. Snow willing we will be in town in a few days so I’ll get a chance to count the lights. We also have a dead-on view of the Trump Tower. It’s a nice sight out of our window, but still very empty.
Most new construction high rise contracts don’t contain mortgage contingencies. Liquidated damages for failure to close is usually the forfeit of the earnest money. For many people that’s 10% of the purchase price – which they often obtained from a HELOC on their personal residence. For example 1600 Museum Park has filed dozens of lawsuits this year to release from escrow the earnest money because buyers can’t close … usually because they cannot obtain a mortgage.
https://w3.courtlink.lexisnexis.com/cookcounty/FindDock.asp?NCase=&SearchType=2&Database=3&case_no=&Year=&div=&caseno=&PLtype=1&sname=1600+museum&CDate=
“2011 South loop=will see Sec. 8?”
My friend who used to live in 1845 S. Michigan which was an earlier boom building (2003?) says that about half of his old place was trying to short sell, and there have already been a ton of section 8 tenants that have moved in. Shame really, since that used to be a nice building with lots of wealthy people.
Also, Don’t waste your money on Banana Shpeel, that show was fucking terrible!
good looking out on Banana Shpeel.. lol i was going to get tickets after seeing in the playbill for Addams family this weekend (which was surprisingly pretty good!)
yeah, i think he loses 10%, around 65k iirc.
I still remember going to the sales office on east wacker with him before a bulls heat playoff game (april 06). I couldnt figure why he’d buy a 2bdrm downtown that he wouldnt be able to live in for 3+ years. plus he’d only been married a couple years and had no youngins at the time. now he has 2 kids under 2.
He paid cash for the dubai place. 300k+.
CH,
“I couldnt figure why he’d buy a 2bdrm downtown that he wouldnt be able to live in for 3+ years”
that was the mindset in 2006, and at that time those things “seemed” like a good idea. and developers jumped all over the trend as we can see all over chicago.
Sonies:
“Also, Don’t waste your money on Banana Shpeel, that show was fucking terrible!”
I told Goove that right after Thanksgiving. Too bad you didn’t see my comment. It may be the worst big-time play I have ever seen. Totally wasted my money and time.
Just curious.. what do you guys think is a reasonable reserve for the home association in a 350-400 unit highrise in Chicago?
hi
Museum Park knows what they are doing.
Museum park east has the construction loan paid off so the developer is making $$$ on each sale now.
1600 museum park is a super nice building. was in it a few weeks ago
the 11 tier sold out and has two re-sales—-its got million dollar views for 520k!!
“I told Goove that right after Thanksgiving. Too bad you didn’t see my comment. It may be the worst big-time play I have ever seen. Totally wasted my money and time.”
It was free to me and still was a huge waste of money
“I told Groove that right after Thanksgiving”
i will toast to you for saving me some cash Poppa Steve. I skipped it so glad i did,
we are seeing if we can get a grandparent to babysit so we can See Adams Family Thursday the 7th
The tickets available to us for Saturday for Addams are too expensive. I might try to go to the box office to see if they have anything.
“The tickets available to us for Saturday for Addams are too expensive. I might try to go to the box office to see if they have anything.”
I miss being able to jump on tickets, having a baby we need to plan WAY ahead 🙂
could of went to tonights bears game (good seats sec 107!!!!)
but a phone call at 8am the day of is not enough time even when they are playing good.
Museum Park has fabulous views but the floorplans are just whack. Odd shaped rooms, nothing square, and long useless halls. This renders a 2700 square foot unit really about 2400 useful square foot. For 1-2 million, I want a graciously laid out floor plan, not a weird shaped orb with slightly better than standard development finishings. I would trade the fancy owners club and amenities for a well laid out home.
Why would any of you consider living in a new constrcution high rise? The developes obviously are losing money and cutting corners. There is also a high risk of short sales and foreclosures.
If it looks like an apartment and smells like and apartment, it most likely should be an apartment.
People are dumb!
has anyone visited 16OO museum park?
thoughts
considering offer on one of hte 11 units that is up for sale.
ideas???
The price guarantee at 565 Quincy expires when you close. Having closed last Summer, I’m not too happy about the price cuts. But it is what it is. I’m happy living here and hope to stay long term.
I am wondering what is up with One Museum Park – I live in the sl and the place looks EMPTY. They claim to be 95% sold, then how can all the lights be off??
They don’t seem to be budging on prices either. Is that the best strategy?
“They claim to be 95% sold, then how can all the lights be off??”
Your lyin’ eyes must be deceiving you Nicolle. I would never doubt a developer’s credibility when it comes to percent sold of their project. Real estate developers are altruistic people who would never make false claims.
I think they mean 95% pre-sold, not 95% closed.
TG, the answer depends a lot on the age of the building and how much work has been done. I would be concerned about low reserves in older buildings, particularly 70s and later high-rises. For older buildings of 350-400 units i would want to see reserves of at least 1-2M. minimum. a lot of building don’t meet this. iirc 400 Randolph (huge building) has reserved of over 10M. 900-910 lake shore drive is above 3-4M (anyone with more recent dealings in these buildings, please correct me on these amounts)
when sizing up a buildings you would want to look at the budget, board meeting minutes for the past few years, and any reserve studies or capital project plans. You should also find out how they have financed large projects in the past. Do your due diligence and decide if the building is being managed well. In larger buildings you can always find a resident coming or going to chat up and get all the poop that hasn’t made its way into the minutes.
Why is it not somehow illegal for developers to blatantly lie about the percentage of units sold in a building?
565 Quincy needs to sell the rest of the units for the building to be worth anything- so I guess that for all of those people who bought before hand its a double-edged sword. I think in the long run the building is well done and a good investment.
So, do you think that since they have a new building that this place is going to dive a bit?? They have so many new units coming in. It is a nice building but it looks like a ghost town.
http://565quincy.com/
quincy sale