Because condominium buildings were so profitable for developers during the recent real estate boom, many major cities are rife with inventory of shiny new condos without any buyers to call them home. Chicago is no exception.
Peak to trough prices on new constructions here are comparable to other cities, the lower median prices mean than New York or Los Angeles mean that least net worth has been lost in dollar terms. But of all major cities with condo gluts, Chicago may represent the best investment opportunity if you subscribe to the inflation thesis that is driving a lot of today’s real estate buying. This thinking runs roughly as follows.
The quantitative easing and fiscal stimulus enacted by the government in response to the recent financial crisis will, eventually precipitate inflation. This inflation will in part be caused by a weaker dollar – a dollar weakened by a greater supply of printed currency the government will use to pay its debt – and also cause a weaker dollar, as assets priced in dollars will become cheaper to foreigners who will therefore demand them in greater quantity.
This inflation thesis, along with significant declines in housing prices that have created high rent yields and a good risk-reward profile for investors, has driven some of the logic behind smart money real estate buying recently. And elsewhere in this blog we discuss why this trend will be strongest in cities and why investors in urban real estate stand to make the greatest return.
But buyers of condos at Chicago real estate auctions may stand to do better than investors in other urban areas – even in Miami, where the market has seen a ~60% decline – because one of Chicago’s biggest industries is inflation-driven: commodities.
An inflationary environment, combined with new demand for food and energy from emerging markets along with dwindling global water resources set the stage for what many are whispering about as another asset boom connected to inflation.
As a driver of much of the premium real estate buying in Chicago, a big expansion in the commodities trade in the form of a larger work force and higher salaries could put significant upward price pressure on prices that will already be rising because of inflation.
How appropriate then, that one of the best ways to get a good deal on a Chicago condo is by buying one at any of the many Chicago real estate auctions – just like any good commodity trader would want it.
Tags: auctions, Chicago real estate auctions, Condo Auctions, real estate auctions