Increasing risk in the real estate market is scaring banks and lenders away from giving loans for new projects.
Banks are tightening requirements for any new loan for a major development in Chicago. In an interview with the Trib, Robert Horowitz, a partner at the major real estate lending firm Cooper Horowitz, Inc,
“To finance a supertall luxury condo project today, you need to have be an experienced developer with at least 30 percent cash equity, 50 percent presales and the ability to pay 9 to 10 percent interest.” Source: www.chicagotribune.com
Developers are suffering from a drop in demand due to problems in the mortgage market. Banks and lenders are also tightening requirements for individual mortgages. As a result, fewer buyers are looking for a new condominium in Chicago.
According to the Chicago Association of Realtors, the number of condos sold during the second quarter of this year dropped by 5 percent.
Condominiums are also sitting on the market longer. Developers and individual condo owners are now waiting an average of 100 days to find a buyer, 10 percent higher than last year.
Developers such as Shelbourne Development LLC are facing increasing pressure for major projects. Sales of the Chicago Spire were pushed back to early next year.
The firm must now wait longer for financing until preconstruction sales meet new requirements from banks.
Technorati Tags: Mortgage Problems, Chicago Foreclosures, Chicago Credit Crunch, Chicago Real Estate News
