ALGONQUIN – It’s hard to say when the condo market will improve to support new, owner-occupied units in what one real estate professional calls “a tale of two markets.”
Matt Farrell, a managing partner for Urban Real Estate in Chicago, said properties that are well-established and have condos that are being resold by tenants are doing well. But new properties in which developers are adding to the supply of condominiums are not.
A slowly recovering housing market is behind a proposal to switch the residential portion of the Riverside Plaza project in downtown Algonquin to renter-occupied apartments from owner-occupied condominiums.
Developer John Breugelmans of Lakeland Asset Management has said he has not been able to get financing for a condo development with 54 luxury units and he wants to switch to 69 high-end rental apartments.
The village Planning and Zoning Commission supported such a move in August, but Village Board members, in an informal vote Tuesday, said they prefer to see fewer, more spacious apartments that could be converted to condos when the real estate market improves.
Village officials have said that when the Riverside Plaza development was approved a handful of years ago, they hoped to attract higher-income people who could afford downtown condos priced from $150,000 to $400,000.
The board instructed Breugelmans and village staff to keep working on the plan for Riverside Plaza at Routes 31 and 62.
There are only two projects now in Chicago where new condos are being sold, and both have million-dollar condos, Farrell said. “Everyone who is doing anything has switched to rentals.”
The key for buyers is to find a bank for a condo mortgage, Farrell said. Banks are more likely to lend if buyers are looking to live in properties that are well-established and have a good fiscal position, with condo associations that are in a good position, he said.
“Lending is much more restrictive and cautious of taking on the risk of a building before it’s been established,” he said.
He said getting a loan in a building that is 80 percent owner-occupied is easier. And buyers are looking for good-quality properties and not where someone is trying to sell the last half of a building.
“The really good inventory, the good stuff, there’s not much of it out there,” Farrell said. He said he’s not sure when the market will improve for new developments.
The key will be lenders having confidence to put programs in place for buyers who want to move to new places or apartment-to-condo conversions, he said.
“All the activity right now is people taking advantage of good interest rates ... and hedging their investments by going into stable situations,” Farrell said.
Switching to apartments from condos is something McHenry County has seen before. The River Place development in McHenry did it, and property owners there hope to switch back to condos when the market can support luxury condos.
Breugelmans has said he wants to convert Riverside Plaza back to condos when the market improves, as well.
Condo sales in McHenry County are up this year. In July, there were 62 condo sales in the county and 352 in the first seven months of the year. In July 2011, there were 46 condo sales and 245 in the first seven months of that year.
Prices are lower, however. The average price in July of this year was $104,881. In July 2011, it was $116,091, according to the Illinois Association of Realtors.
Sales are up in the Chicago area, but median and average prices remain down, said Jon Broadbooks, director of Communications for the Illinois Association of Realtors.
Condos are attractive to people who are reaching retirement age and don’t want the upkeep of house, “especially if they travel or have health concerns,” he said. “There are a lot of people who want to buy condos.”
But foreclosures also have led to a large inventory of housing.
“There’s a lot of property on the market right now,” Broadbooks said. “It affects the condo market just as much as it affects single-family.”