Which Chicago Submarkets Will Be The Last To Recover?

I recently read an article on Builder Online (www.builderonline.com) which asked five "experts" which 5 housing markets would recover first.  The responses were all over the map, but several markets seemed the keep popping up:  San Diego because of its lack of competition and dwindling inventory; Sacramento because of its relative affordability in unaffordable California and Washington, D.C. because it was one of the first markets to have a significant price correction and because the federal government is bound to add thousands of jobs to the local region.

The article got me thinking, what submarkets in the Chicago region are most likely to recover last?  Obviously, the City of Chicago condo market is greatly oversupplied and it could take several years to work through the existing and under construction inventory.  However, it is likely that we will accelerate the absorption of city condo units price reductions and auctions.  

The Southwest suburbs (Oswego, Plainfield and Yorkville) are so tremendously over-supplied with vacant lots (both attached and detached) that it could take 5 to 7 years to work through the inventory that is already in the ground (not counting the units that are in the entitlement process).  At the present time, there are 2,913 attached vacant lots/units and 7,103 detached vacant lots ready to build on in Oswego, Plainfield and Yorkville.  This totals over 10,000 vacant lots in these three municipalities!  Using 2006 permit figures, this equates to 3 1/2 years of supply, and we don't think we will see 2006 absorption levels anytime soon.

Other markets are also stressed with oversupply of existing lots including Elgin/Pingree Grove, Joliet and Woodstock.

It is going to take price reductions, product adjustments and time to work through this inventory.  The good news is that there are some submarkets that will improve much sooner than those listed above.  We will discuss those in our next blog.