According to market monitor Appraisal Research, sales of newly built condominiums and townhouses in downtown Chicago plummeted 82 per cent in the third quarter of last year compared with the same period in 2007. Less than 1,000 sales were expected to have been made for the whole of last year, which would make it the worst year since the Chicago-based firm began tracking data in 1997.
The list of residential developers struggling to pay back loans is growing longer and includes Donald Trump, who is building a 92-storey tower in downtown Chicago. He has asked his backers, a syndicate led by Deutsche Bank, for more time to repay the remainder of his US$640 million loan.
Research firm Foresight Analytics shows that Chicago residential developers defaulted on 13.7 per cent of their loans in the third quarter of last year, four times higher than in the same period in 2007 and well above the national delinquency rate of 9.6 per cent. Chicago is now the tenth worst city for residential developer bad loans in the United States.
But this has not stopped the city from building the world's highest residential tower, the 150-storey Chicago Spire. Described by Chicagoans as an 'oversized drill bit', the 610-metre Chicago Spire designed by Santiago Calatrava will accommodate 1,193 apartments when completed in 2011.
Although construction work on the project had slowed because of the downturn, it would be built on time, a spokesperson for its developer Shelbourne Development said.
Sales agent Savills has sold a third of the Spire's apartments since marketing began in September 2007, about half to Americans. Chicago businessman Ty Warner, the founder of Beanie Babies soft toys, bought the building's US$40 million penthouse recently and 30 apartments have been sold to Hong Kong buyers. Prices start at US$750,000 for a studio.
Savills director Dominic Grace said with real estate prices 50 per cent lower than New York, Chicago was emerging as an international destination for investors.
Mike Golden, co-founder of Chicago estate agency @Properties, said Chicago was less damaged by the downturn than other parts of the US. 'We have not seen any across-the-board price retraction in Chicago,' he said, 'Our market never went up at the rapid pace of other overheated markets and is not falling like the others.
'There are definitely instances where people achieved pricing that was higher than the market and those buyers are not able to sell at those inflated prices now. But, in general, prices have held pretty steady and, in some cases, continued to increase throughout the Chicago marketplace.'
The top end of the city's property market - apartments and townhouses in the downtown areas of Streeterville, where the Chicago Spire is being built, and the Gold Coast - was strongest he said. A three-bedroom waterfront condo will cost about US$2 million to US$3 million in Streeterville. One-bedroom units sell for between US$250,000 and US$600,000. On the Gold Coast, the best period townhouses sell for up to US$14 million and two-bedroom condo units for US$650,000 on average.
Property is less expensive on Chicago's northern city limits. One-bedroom condo units can be bought for US$150,000 or less in East Rogers Park. At the city's southwestern edge, in blue-collar West Elsdon which has a large Latino population, three-bedroom detached homes can be bought for US$250,000.
'Every neighbourhood in Chicago is different,' Mr Golden said, 'Some are faring better than others. Some of the more fringe locations are having a hard time, but high-end buildings in the best locations such as the Chicago Spire are holding their own and doing okay.'
Investors could expect rental yields of 6 per cent to 7 per cent gross, he said. This compared well with New York, where returns were 4.4 per cent at best.
Because Chicago had weathered the storm better than the rest of the US he forecast prices would begin to rise overall in the city within 18 months.
Giving him hope was the election of Barack Obama and the possibility of Chicago hosting the 2016 Olympic Games. Obama's plans to spend his country's way out of recession has boosted stock markets around the world, and pushed up property viewings in Chicago, his home town, although sales have not risen yet.
If the city's 2016 Olympics bid succeeds, the authorities will build the Olympic Village in a run-down area of the city where it will be a catalyst for urban regeneration, like London's Olympic project in the British capital's East End.
'Obama getting into office will bring more exposure to Chicago both from business and abroad,' he said, 'We feel very confident about our chances of getting the 2016 Olympics - this would be a huge boost for Chicago, both for the infusion of jobs and money directly into our economy, and also by putting Chicago into the forefront of the national stage.'