Monday, January 5, 2009

Interesting Discussion at YoChicago about SL

For those of you who don't know, YoChicago is a website devoted to covering the real estate market in Chicago. And as you can imagine, the South Loop is one neighborhood that is often covered due to its recent growth.

About two days ago YoChicago posted a conversation starter comparing the South Loop in its current state to Edgewater a couple of decades ago (According to the website real estate in the Edgewater neighborhood lost approximately 60% of it's value from 1972 to 1992). Although this has garnered a fare share of comments, most of them seem to think that the South Loop is nothing like Edgewater. In my opinion here was an insightful post comparing the two:

I don't think that there is much of a historical parallel (between the South Loop and Edgewater). Yes, the supply of condos in both neighborhoods skyrocketed, and skyrocketed over the a period of 5 years or so, before the market collapsed, but that's probably where the similarities end.

As John succinctly put it, the South Loop location is downtown and attractive, unlike Edgewater. Yes, the South Loop currently has a large inventory of unsold units, however, the South Loop is a very attractive place to live unlike Edgewater was/is - and while it will take quite some time to absorb this inventory, it will be absorbed much more quickly than Edgewater, due to it being so attractive to live in the South Loop.

Also, while I agree with most of what Abuyer had to say, I disagree with his comment that the inventory in the South Loop is overpriced. There may be a couple buildings with units that are overpriced, but most of unsold units in the South Loop are such a bargain compared to other neighborhoods that are close to the Loop such as Lakeshore East, the Loop, Streeterville, River North, Gold Coast, or even the West Loop and River West neighborhoods. When the overall market begins to pick up again, the South Loop's inventory will be absorbed a lot more quickly than the inventory of these other neighborhoods, given that the South Loop is a better bargain.

Will the South Loop's condo prices takea a little bit of a hit, due to the overall market's problems? Of course. But I don't see anything even close to the 60% loss Edgewater suffered between 1979-1992, happening to the South Loop from 2008-2021.

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