Chicago housing sales in January dropped by nearly 11 percent from the year before, according to data released on February 27th by the Illinois Association of Realtors. This is the 10th consecutive month of falling sales, although prices edged upward by 2.2 percent.

Another report, this one from the National Association of Realtors, showed a 4.3 percent decline in year-over-year sales nationally. It also noted the sixth straight month of declines in the median price of existing homes, which dipped another 3.1 percent last month. The glut in housing inventory in some areas was beginning to scale back, according to the report. However, with new listings hitting the MLS as the “spring selling season” approaches reset January’s inventory back at December levels—a 6.6-months’ supply. The supply hit its peak at 7.4 months in October, the NAR said.

Economist Mike Larson said the inventory problem is far from resolved.

“Inventory has come down [since last year], and a lot was made of that,” said Larson, who tracks housing for Weiss Research in Jupiter, Fla. “But frankly, if you look at historical data, that happens just about every year.

“Inventories are climbing again because of what I call ‘the march of the relisters,’” Larson said. Sellers whose homes failed to sell in spring and summer took them off the market around Thanksgiving and are now relisting them, he explained.

“I expect the inventory numbers to continue rising in February, March and April, and we may very well set a new high,” Larson added.

The NAR report also showed that housing sales in the Midwest overall stayed steady, with sales rising by under 1 percent from January 2006, though the median price fell by 3.5 percent. The biggest Chicago-area decline was in Grundy County, where home sales sagged more than 15 percent. On the other end of the scale, DeKalb County sales spiked by 33 percent, though median prices fell by 11 percent, according to the Illinois Realtors.

Condo sales in the Chicago area dropped by 3.4 percent, but prices simultaneously rose by 3 percent. Cook County condo prices went up 6.4 percent year over year—the best appreciation rate in the region.

Four years ago, Trump offered about 40 insiders a sweet proposition: low, low contract prices—in some cases roughly $500 a square foot—on condos in his planned Trump International Hotel & Tower.

Right now, similar units in that Chicago New Construction condo building—which is scheduled for completion in 2009—are being offered at up to $1,343 a square foot. This would seem like a bonanza for the “friends and family” group who got the early discount . . . except for one minor hitch.

Trump is now telling them that their agreements are “null and void.”

This elite group of buyers, many of whom have business connections with the project, received letters from Trump’s attorney informing them that their deals had been canceled. They now have to pay an inflated rate, much closer to current market prices, if they want to close on their condo units.

Real estate experts are baffled at the maneuver.

Kevin Ahearn, president of a Boston-based real estate firm specializing in luxury residences, said that, “In my experience it would be very unusual for a developer to get out of a purchase-and-sale contract because prices have gone up.”

If Trump asked people involved with his project to buy units “to help [it] appear successful and achieve certain hurdles,” said Richard Peiser, a professor of real estate development at the Harvard Graduate School of Design, “it would seem the buyer should enjoy the upside.”

The “friends and family program” allowed certain people affiliated with the Trump tower project to buy one traditional condo or hotel condo unit at 10 percent below its original sales price. They were also able to put down an initial deposit of only 5 percent, rather than 15 percent deposit required of other buyers.

“As we anticipate raising prices periodically throughout the pre- and post-construction period, this opportunity would become increasingly more worthwhile with each price increase,” says a Sept. 24, 2003, letter from the Trump Organization and Koenig & Strey GMAC Real Estate, sales agent for the project. The letter instructed buyers that they could re-sell their units, or transfer their purchase agreements to any third party, whenever they chose after construction began.

Since the real-estate boom sputtered to a halt two years ago, sales of condos in the $775 million tower have slowed, with about 21 percent of them still on the market. Meanwhile, construction costs have gone through the roof.

Trump explained that he was reneging on the deal with his associates to give himself “more income to handle potentially higher construction costs.”

“This job has become a tremendous success because of me,” he added, with characteristic modesty. “Everyone knows, with a friends and family program, if a job is very successful, people have clauses whereby you renegotiate or terminate.”

“Anyone who buys preconstruction gets a financial benefit for the risk they take,” argued Judi Diamond-Falk, an architect who designed an early sales office for Trump in Chicago.

Trump gained a marketing benefit from the early sales, she said, because he “could say that a certain percentage of units are presold to get his financing and tell the public a certain percentage was presold. People didn’t know they were friends and family sales.”

In other words, he paid his friends to make his project look more viable than it actually was, and now wants to take their money back.

Technorati Tags: Trump Tower, Chicago Condos, Condo News

Today, two specific types of condo properties are showing strong sales. Both in the city and suburbs, projects that appeal to “price-point” buyers–entry-level buyers and first-time investors, looking for condos at $200 per square foot or less–are in strong demand. Meanwhile, in downtown Chicago, developments offering views of Millennium Park and Grant Park are significantly outperforming their competition.

Suburban condominium conversions exploded in 2006, with more than 4,000 suburban units converted from rental apartments to condos (compared with the one downtown Chicago high-rise that went condo). The most typical suburban units for sale are one- and two-bedroom condos priced between $125K and $175K, with two-bedrooms showing stronger demand. Even including the renovation packages developers now offer, these conversions are much more affordable than new construction in the suburbs.

In downtown Chicago, Millennium Park is a powerful magnet for buyers, and developments with East Randolph Street and South Michigan Avenue frontage are proving easy to sell. Views of Millennium and Grant Parks are popular and highly marketable.

Magellan’s Aqua development, a block north of Millennium Park, is a combination hotel/rental/condo project with condos occupying the upper floors. The panoramic views, combined with a hotel and its amenities on-site, have proven very attractive to buyers–nearly 70% of the units are under contract.

The Legacy at Millennium Park, offering sweeping views of the park as well as hotel-style amenities via its connection to the University Club, is also recording brisk sales ( 70% under contract). And the mixed-use office/residential project at 55 E. Monroe (”The Park Monroe”) is reportedly selling well in its early stages of development.

Technorati Tags: Chicago condo sales, Legacy at Millenium Park, Aqua Condos, Downtown Chicago condos

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