With all the reports (including many from Deal Estate) about a vast inventory of unsold condos, it’s a surprise to learn that urban condos are the best-performing part of Chicago’s six-county real-estate market. In the latest release of local market information by the Illinois Association of Realtors (IAR), the median price of a home dropped in five counties and stayed flat in Cook County. The declines ranged from 1.9 percent in Lake County to 12.4 percent in McHenry County.
But that August 13th IAR report, which compares data from the second quarter of 2008 to the same period in 2007, separated condo sales from single-family home sales—and the difference was dramatic. In April, May, and June of this year, condos in Cook County sold for 9.6 percent more than they had during the same months in 2007. Single-family homes sold for 12.3 percent less. (The report does not separate Chicago condos from condos in other parts of Cook County, but by far the largest share of condos is in the city — and sales of condos in the city probably helped account for the fact that home prices in Chicago were up 5.1 percent in the second quarter.) So while there may be way too many condos for sale in the city—a report out Tuesday from Appraisal Research Counselors said that downtown Chicago neighborhoods alone had 5,867 unsold condos in the second quarter—they are, for now, the rare part of the real-estate market where the arrow points upward.
Jim Kinney, the president of Rubloff Residential, suggests that significant changes at both ends of the price ladder are making this happen. Because mortgage lending has tightened up, Kinney says, the number of first-time buyers has plummeted. “They’re not dragging down the middle of prices,” he explains. At the same time, some of the big-ticket downtown condo buildings have come online, delivering on sale contracts that were written as much as two or three years ago. That means both the lower and the upper ends of the price range are rising—leading to a higher middle.
During the second quarter, several new condo buildings had sales for $1 million or more, which exerted a strong upward pull on the median price. They included 505 McClurg Court (AKA, the Parkview); 600 North Fairbanks, a Helmut Jahn design; 310 South Michigan, the old Encyclopedia Britannica building; 600 North Lake Shore Drive; and 420 East Waterside. “Delivery of these higher-end buildings skews the [overall] price,” Kinney notes.
One building in particular—340 on the Park, which overlooks Millennium Park from the north side of Randolph Street—played a big role in lifting the area’s aggregate condo price. From April to June, there were nine sales there for $1 million or more, according to Midwest Real Estate Data. That’s down from 14 sales in the prior quarter, so the boost provided by this one building may be diminishing. (So far in the third quarter, there have been five sales over $1 million in the building.)
How long will condos maintain this upward momentum? Hard to say, but Appraisal Research Counselors’ new report provides two indicators. The report notes that 2008 will turn out to be the peak for new downtown condo deliveries, with a small drop in 2009 and very little other than the Chicago Spire set to deliver in the three years after that. But the $7,500 tax credit for first-time homebuyers in the new federal housing stimulus package may bring back a crop of first-time, low-price condo buyers. That would be a good thing, of course, because it would move some lower-priced inventory off the market. But on the negative side, it would lower the aggregate price of all area condos sales.
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