Brighter Future for Downtown Chicago Condos

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Looking for a condo in the Windy City? You'll pay, on average, 9 percent less today for a condo in downtown Chicago than you would have in 2007. But the deals won't last forever, according to local experts.For the last two years, condos buyers in Chicago have had their pick of thousands of unsold homes. But today the number of unsold units is falling as builders clean out their inventory. That takes pressure off developers, even though the rate of sales remains relatively slow. There are now 4,306 unsold condominiums on the market downtown - roughly a third less than the year before, when 6,189 unsold condos crowded the market, according to a third quarter report from local market analyst Appraisal Research Counselors.

The number of condos for sale should keep dropping. Developers finished more than 4,000 condos a year from 2006 to 2009. But only 900 new condos are under construction for 2010 and only 86 condos are in the works for 2011. Developers may be desperate now to earn some money from finished condos that they can't seem to sell. But with fewer condos being built, that desperation to make a deal won't last.

Compared to condo markets in the rest of the country, this Midwestern city is fairly middle-of-the-road. Condos are much stronger here than in boom and bust towns like Miami or Las Vegas, and they are weaker than in markets where condos are relatively hard to built, like Boston or New York City.

Chicago condos have also held their value better in the boom and bust than Chicago's overall housing market, according to Standard & Poor's Case-Shiller Home Price Indices.

The index starts at 100 in January 2000 for both condos and the general housing market. The indices rose steadily throughout the boom, peaking at around 160 for both condos and the broader housing marker in October 2006. Then came the crash. As of September, Chicago's condo index was at 138, up slightly from its low this spring and ahead of Chicago's broader housing index, which was at 132, according to Case-Shiller.

That means that, despite the condo boom and bust that followed, $100,000 invested in an average Chicago condominium in 2000 would now be worth thousands more than the same investment in a typical home.
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