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Thursday, May 15, 2008


the chicago condo market

i'm a former condo owner in chicago, having left in late 2005 to rent in the suburbs. we're currently in a four-bedroom heavily-renovated SFR with a nice yard and a stunning kitchen, paying about 25% less than the aggregate expense of ownership of our (comparatively) compromising 3-br duplex of yesteryear. in previous discussion of positive carry highlighting the logic behind renting at this juncture. it's almost stupid not to.

but i carry fond memories of the city, and look forward to the day -- after the kids are gone -- when we might own a condo downtown. one could view such a purchase as an investment only if the price came in at rock bottom, in my view. the notorious history of volatility in downtown real estate should make buyers wary.

calculated risk offers today two postings on condos highlighting the associated risks -- the negative externalities of one of the biggest condo gluts in the history of the town.

Those sales numbers are quarterly, so 1,200 sales in Q1 2007 was reasonable compared to the 4,794 new condos added last year. But with close to 6,000 units being added this year, and sales of only 201 units in Q1, there is a serious oversupply - with more units coming in 2009.

downtown chicago -- already bloated with oversupply -- is seeing well over 5,000 more unoccupied units come onto the market. more will emerge in 2009. looking out our office windows, construction cranes have been the marker of the real estate boom for years now. new towers have been rising from mccormick place to lincoln park.

the time is coming when one will be able to purchase condominiums in the loop and nearby neighborhoods for half of their current prices, i expect, probably out of foreclosure.

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