Price Cuts on Chicago Condos Spark 'Pent-Up' Demand
Belgravia Realty Group, a Chicago-based real estate developer, sold 50 condominiums in four weeks after cutting prices by as much as 30% on a 241-unit development in the downtown area, a sign that reducing prices is boosting purchase demand. According to Appraisal Research Counselors, a commercial appraisal firm in Chicago, the FHA-approved unit accounted for 79% of new-construction sales in the downtown area and 40% of all new sales since the first of the year. Other condos, such as the multiple-owner Mod condominium project, are said to be struggling for business after switching focus to rentals from sales, with promotions such as a $350 rent credit for tenant referrals. Belgravia, chose another route and discounted sale prices by as much as $100,000 on condos in the 11-story glass tower built on a seven-story concrete loft building. Both the new price cuts and the rush toward the April 30, 2010 contract deadline for the first-time homebuyer tax credit sparked demand. “The response has been incredible. There is pent-up demand, and we’re getting traction at these price points,” said Alan Lev, president and CEO of Belgravia. “There’s also a real sense of urgency among buyers looking to take advantage of the Federal Homebuyer Tax Credit and today’s 5-percent interest rates.” The average interest for a 30-year fixed-rate mortgage (FRM) dropped to 4.93% with an average 0.7 origination point this week, according to the Freddie Mac weekly survey. Not only are condos growing in demand in Illinois, but the housing market is showing signs of resurgence. Home sales activity in Illinois increased 35.6% in Q409, according to the Illinois Association of Realtors (IAR). Belgravia's decision echoes other price declines happening across the board in the country as consumers are finding significant drops in the everyday things they buy, according to the US Labor Department. Although the Consumer Price Index rose 0.2% in January, the core index, which eliminates the up-and-down prices of food and energy, dropped 0.1%, the first decline since 1982. Write to Jon Prior.