Saturday, September 23, 2006

The End of the Condo Boom

This building, 182 W Lake Street, went condo a few years back (sorry for the picture, it is a bit hazy out my window today). The building is featured in an article in the September 23, 2006 Chicago Tribune article titled "Condo Prices Near A Cliff". According to the article, the developer held a 2 hour sale and sold 150 condos at an average discount of about 20%.

From this article they say that in high season a condo developer might make 50% on their money; in average time that is 20% and maybe as low as 10% in a market like this.

There is a lot of other inventory (units) on the market right now, and many, many more buildings still being built. The article also cites that some of the buildings targeted to "go condo" are being converted back to apartment buildings because of the changing market. This happened to a friend of mine who lived over on Ohio Street in the early 90's - some of the building went condo but then the rest of the units went back to apartments when the developer couldn't get the prices that he wanted.

Many times on this blog I have mentioned that Chicago's light (non-existent)regulatory environment has allowed this enormous infusion of cash to come in and add buildings and spruce up existing buildings. Regardless of whether or not the developers end up making money, the city is immensely better off with all of these new and rebuilt condos anchoring a vibrant downtown (even though our representative in the US Representatives is totally unrepresentative of this success). Probably once this batch is built there won't be much else built for another 10 years or so.

The most interesting quote in the article was this one:

"Equity residential...is moving our investments to high-barrier (areas) like New York, Boston, South Florida and California"...meaning places where the development approval process is stringent, long and costly"

In a nutshell this explains why Chicago, even though our government (along with the county and state of Illinois is mired in cronyism and scandal) has been able to prosper. Our ineffective and not physically present employees are failing to stifle capitalism with useless regulations that don't accomplish anything, anyways. Do you think that New York and Boston are better off dragging developers through the mud and raising their prices to sky-high levels as a result, ensuring that there is no low priced units, anywhere? They must think so, because that is the result of their managed scarcity. Get government out of the way, whether it is through corruption or incompetence, and things get better quickly. Posted by Picasa

2 comments:

Spottswoode's Blog said...

Blog spillover, how bout them Dawgs! BTW, Astro has finally pointed me in the direction of my own Blog. Sk8

Spottswoode's Blog said...

Dont even get me started with your 'progressive' cities vendeta against Foie Gras. That stuff taistes good! Welcome to Lib-tardia.