IN DOWNTOWN CHICAGO, Developers of New Condo Units Struggle with Incentives, Deep Discounts!
AS MANY AS 9,000 CONDO UNITS ADDED TO LOOP, SOUTH LOOP HOUSING MARKET BY END OF 2009 - MANY NOT SELLING!
It's a dilemma faced by the builders and developers of many new and converted condos in the Chicago Loop and South Loop. Faced by an inventory glut, and lackluster sales, some have resorted to heavy discounts, price incentives, and even auctioning off some unsold units.
But the decision to discount is not an easy one for many developers!
As discussed in Mary Ellen Podmolik's column in today's Chicago Tribune, one builder, marketing the Vero Condominium Project in the South Loop, subsequently reduced the asking price on many of his remaining units to come closer to the sold-at-auction prices.
Builders often resist slashing their prices on their unsold inventory. Their lenders may not approve, as it reduces the collateralization of their new construction loans, even in a slow, buyers market.
And earlier buyers are often furious that they paid more, earlier. The value of their units is immediately depreciated. According to George Schultz, Sales Manager for the R+D 659 Condo Project in the West Loop in Downtown Chicago, quoted in the Podmolik article, pricing at the fire-sale level can squelch earlier-buyer enthusiasm for referring the project. He considers current owners one of a building's best marketing tool.
Today's buyers, however, still balk, despite price reductions at many Downtown Chicago Condominium Projects. Many look for more price cuts and incentives in days to come! The proliferation of short sales and bank foreclosures do have a massive, chilling impact on housing prices market-wide.
And the glut of condos in some parts of Chicago Downtown is likely to negatively impact the market for some time to come, even if the overall Chicago Condo Market begins to rebound somewhat this year and into 2010.
DEAN MOSS & DEAN'S TEAM CHICAGO
