The number of new construction units sold in downtown Chicago has jumped from a paltry 55 in the first quarter of 2009 to 313 units in second quarter. While this may sound very encouraging, it is still a far cry from the numbers of the second quarter of 2008. Last year 484 new units sold in the second quarter, which is 35% more than this year.

It is obvious that things are starting to very slowly rebound from the bottom of the market. However, prices are likely going to continue to go downward. Developers that are selling most readily are the ones that are offering the biggest incentives. Prices are being cut across the board and buyers are the big winners. Many developments have cut their prices between 25 percent and 35 percent. Some have auctioned off units and others have given up and are renting out the units in the building.

Huge Inventory Downtown

In addition to prices, inventory levels are through the roof. There are currently 3,527 units that are unsold that were recently completed or will soon be completed. This is down just 8% from a level of over 3,800 in the first quarter. The only way sales will continue to be strong is if prices continue to drop to help the market absorb all of these units. The competition is at record levels. Not to mention that many contracts that are written never close?

Closing Contracts is a Struggle

Up to 25% of contracts do not close due to the variety of reasons; many people simply cannot buy in our current recession. This is a dramatic increase over the 10-15% of units that were not closing this time last year. Bank loans are coming due for many developers and it is important to meet these dates or try to get an extension on their loan. Now is a good time for buyers, as long as they buy in a building with good resale in the future. Better get out the crystal ball.

We would like to thank Mike Willis for sharing today’s photo via the Creative Common’s License.