The latest report from Appraisal Research Counselors (ARC), whose finger is always on the pulse of Chicago’s downtown condominium market, indicates that even if the shine is gone from condos as investment vehicles, the overwhelming majority of people who bought a few years ago in buildings now being finished are sticking with their contracts.

Why is that news? Well, a spike in the number of buyers opting to back out of their deals—leaving their upfront cash deposits in the hands of the developer (what Lissner calls “contract fallout”)—would suggest that everybody’s running away from downtown Chicago, and that the oversupply of downtown condos will only worsen. Instead, looking toward the future, those buyers can “see the potential for long-term growth that downtown Chicago continues to have,” says Gail Lissner, the ARC vice president on the condo beat.

In its first quarter 2008 report, released May 14th, ARC notes that the number of buyers who have opted to forfeit their upfront cash has been “minimal, generally caused by some life-changing issues (death, divorce, etc.).” The report acknowledges that altered financial circumstances caused by bankruptcy or job loss “are increasing in frequency,” but goes on to say that the developers and lenders they deal with “indicate that there has been minimal fallout.”

The lowest rate of fallout Lissner found was 2 percent, at the dazzling, well-situated 340 on the Park. That’s about the same rate most buildings experienced at the peak of the market—which shows that the market’s present sag may have little impact on a really great building in a really great location. The overall fallout rate for the downtown market, Lissner reports, is running between 5 and 10 percent.

“The segment of buyers that is most likely to fall out is investors,” she says, referring to people who buy condos expressly to resell or rent them at a profit (as opposed to people who plan to use the property themselves). “As long as we have had condos downtown, there have been some investors who didn’t show up to close, and 5 or 10 percent is not a surprising figure,” she says. The highest fallout rate she found was 15 percent, which, she wrote, “seems to be an exception.” (Lissner would not disclose which building had this rate of fallout.)

Lissner calls that 5 to 10 percent range the most telling statistic; it suggests that everything will be OK if we’re all patient. While comparison figures for other cities are hard to come by (not everybody calls it the same thing, not every city has a firm like ARC tracking the condo market so comprehensively), the stories out of hard-hit places like Miami and Las Vegas suggest that large numbers of buyers are falling out for financial reasons, not just for “life-change” reasons.

Lissner offers two reasons Chicago has been sheltered from high fallout. First, it’s a fantastic place to live, and most of the area’s buyers have been people who were buying homes or second homes for themselves, not as investments. Second, our prices haven’t fallen as much as those in some more glamorous markets, so not as much value was lost here in the two to three years since buyers put down their deposits. The investment hasn’t soured enough to warrant walking away. “I think we have a lot of people who are believers,” says Lissner. “They believe this is a blip; they believe that living in downtown Chicago is the right thing for them; they believe that long-term we’ll return to the level of appreciation” that prevailed before the downturn.

That’s the good news. The bad news is that the ARC report forecasts that the rate of fallout could be higher as the year progresses. With “record numbers of new units [to be] delivered in a market at the same time as pricing is generally flat and the rental market is showing signs of softness,” the report says, “buyers who have only five percent down may have little incentive to close on their contracts, particularly if they are investors.”