Monday, July 23, 2007

Plunging residential sales and raw land prices

Because it is new construction it is really development, and thus within this blog's bailiwick. New home sales last quarter were at lows not seen since the early 90s. And there's no end in sight.

In the city, you have a "glut" of new buildings online or under construction. I use glut in quotes because we've all been talking about this for, oh, seven years, and things bounce back. If it isn't and prices plummet then I guess I'll have that pied-a-terre I've always wanted sooner than later.

The suburbs actually scare me far more. There sales are down to levels last seen in the recession of the early 90s. Most firms have laid people off and some companies are going under or on the brink. And there are rumors that new developments, even some with models, are just being shut down, sold off and left as farms for the foreseeable future.

This can bring down land prices, which may be good from my perspective as a developer's counsel. I spoke to a source of mine who was looking at two properties. One was on a corner in Bourbonnais, near my home, on a corner but with some development issues because of the grade and possibly obtaining a curb cut from IDOT, and the other was on Weber Road in Crest Hill, near where I grew up.

Amazingly, the asking price down here for raw developable land was far higher than that than on Weber Road, and the latter property was fully entitled. What does this mean? Either I know nothing about land values or some land down here is way overpriced. Call me an egomaniac, but I'm betting the latter.