The Rules of the Game

From the Chicago Tribune, we have Susan Diesenhouse reporting on Condo prices near a cliff.

Earlier this month a Chicago developer sold 150 condominiums in a two-hour lottery by discounting prices about 20 percent from what he would have asked last spring, an indication that industry observers say could signal widespread price reductions here and around the country.

For the first time in his 37 years as a developer, Nicholas S. Gouletas, chairman of Chicago-based American Invsco Corp., held a lottery to sell his condos, in this case 150 moderately priced residences in a 292-unit vintage high-rise at 182 W. Lake St. in the Loop.

Gouletas figures he still could make a 10 percent profit by cutting future carrying costs. He will avoid the expense of 2 1/2 years of mortgage interest payments, marketing, maintenance, insurance and taxes by not struggling to sell condos against the headwinds of a slowing housing market.

Now, Susan cannot be faulted for reporting the truth. But, this staff reporter has no perspective.

For the more economically challenged readers, here's how it works: the developer doesn't give a flying fuck about what price he has sold the product in the past. Only the future matters!

If he has to move inventory, he will ruthlessly slash the price (initially cutting into profits, and even taking a loss if carrying costs are involved.)

Mr. Gouletas has analyzed the situation perfectly. As for the first 142 buyers, they've just lost 20% of their value. In short, they're fucked!

(The units are fungible so we can indeed be sure that they have lost 20%.)

Wish some newspapers had the guts to tell it like it is!