Tracy Cross & Associates, Inc.

2nd Quarter 2018

 

The production home market inched forward during the 2nd Quarter 2018 as builders in the ten-county metropolitan area recorded 1,090 sales representing an increase of 5.3 percent from the same time period a year ago.  Homes sold during the most recent quarter translated to a seasonally adjusted annualized rate of 4,078, up 7.4 percent from the 1st Quarter 2018’s annualized pace of 3,798  and an increase of 5.0 percent from 2017’s aggregate volume of 3,884.

New home sales in the suburban area totaled 1,028 during the second quarter representing a year-over-year increase of 13.8 percent compared to the 903 contracts taken during the 2nd Quarter 2017.  In the single family sector, sales during the most recent quarter equaled 653, an increase of 11.4 percent year-over-year.  In the attached sector, suburban sales during April-June 2018 period totaled 375, a jump of 18.3 percent compared to volumes registered during the same time period last year.

In the city of Chicago, however, new home contract signings during the April-June 2018 period totaled just 62, a year-over-year decline of 53.0 percent.  This rather sizable decrease was attributable, in part, to the limited number of moderately priced condominium developments active in the city during the most recent quarter compared to previous time periods.  Currently, over 80 percent of all active attached sector developments in the city support average base prices at or above the $1 million mark.  These communities averaged less than two (2) sales during the most recent quarter on a per project basis.  As a point of reference, just a year ago when developments such as Belgravia Group’s Sedgewick at Locust, CMK Development’s 1345 Wabash, and Sandz Development’s Webster Square were offering new construction condominium residences priced well below $1,000,000, sales were much stronger.

Despite improvement in the overall market during the second quarter, there was not enough sales activity to offset a rather dismal first quarter and continued sluggishness in the city.  In fact, for the 1st Half 2018, net contracts in the region totaled 2,161 units, down 7.0 percent from the 2,323 contracts written during the same time period in 2017.  During this six-month period, both suburban and city sales volumes were lower year-over-year, primarily in the city.

While production home sales in suburban Chicago dropped during the January-June 2018 period year-over-year, a number of developments recorded notable volumes.  For example, a total of 18 separate single family communities registered 20 or more sales during the most recent six-month period led by CalAtlantic’s Apple Creek development in Woodstock with 34 net contracts.  Other suburban single family sales leaders included D.R. Horton’s active adult (55 and older) Carillon at Cambridge Lakes-Resort/Freedom in Pingree Grove with 31 sales; CalAtlantic’s Glenloch-Andare in Algonquin with 31 sales and D.R. Horton’s Fall Creek in Joliet with 30 written contracts.  The common denominator among these top performing developments was an average base sales price position below $275,000.

In the townhome/duplex/condominium sector, four suburban developments posted 30 or more sales during the January-June period of this year including D.R. Horton’s value-oriented Cambridge Lakes-Seaboard series in Pingree Grove with 55 sales, along with two developments in Des Plaines, i.e. Buckingham Place by Ryan Homes and Colfax Crossing by Taylor Morrison, at 38 and 33 sales, respectively.  Rounding out the top four was D.R. Horton’s Bayside series at its active adult community, Carillon at Cambridge Lakes in Pingree Grove, with 36 sales.  Another seven developments registered at least 18 sales for the six-month period, which translates to a very respectable three (3) sales or more monthly per project.  These included Pulte Group’s Uptown at Seven Bridges in Woodridge (27); K. Hovnanian’s Tramore in Naperville (26); MI Homes’ Segebrook in Lockport (20); Plote’s Lakes at Boulder Ridge in Lake in the Hills (19); CalAtlantic’s Country Club Hills in Fox Lake (18);  D.R. Horton’s Lake Ridge in Mundelein (18); and MI Homes’ Emerson Park in Naperville (18).

Sales leaders in the city of Chicago through the first six months included just four developments with 10 or more contract signings.   These included 2751 Hampden Court LLC’s The Hampdens in Lincoln Park with 19 sales; Belgravia Group’s Renelle on the River in the Near North Side neighborhood (12); Domain Group’s Caden James in West Town (12) and JK Equities’ 1000M (10).

The Chicago region’s suburban housing market continues to be affected by severe supply-side constraints.   For example, during the 1st Half 2018, only 272 developments were actively marketing new construction units in suburban Chicago, the region’s lowest level in more than 20 years. In the single family sector, just 184 developments were active, while in the attached sector, only 88 communities were marketing new units throughout the entirety of the suburban area.  On a more positive note, however, average per project sales rates among both single family and attached sector developments were at their highest levels in 10+ years.  Among single family subdivisions in the suburbs, the average per project rate registered during the January-June 2018 period stood at 13.63 on a seasonally adjusted and annualized basis, while among townhome, condominium and duplex forms, an average seasonally adjusted, annualized pace of 16.25 was recorded.

The top home building companies in the region during the first half of this year included two that posted 300 or more sales.  D.R. Horton was the market leader with 398, followed by CalAtlantic/Lennar at 334.  Rounding out the top ten, in rank order, were MI Homes (259), PulteGroup (251), K. Hovnanian (121), Ryan Homes (113), Taylor Morrison (67), Toll Brothers (48), Lexington Homes (47), and Hartz Construction (40).

 

 

 

Dennis Rodkin

Crain’s Chicago Business

August 13, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Little Realty
 A newly built house on Dublin Lane in Plainfield.

Building activity came to a near-standstill when the housing market collapsed, and now, a decade later, years of underbuilding have left a big gap of homes missing from housing stock.

Thanks to a decade-long slowdown in homebuilding, the Chicago area is lacking almost a quarter of a million new homes, according to a new report.

If builders’ pace since the downturn had stayed the same as it was in the relatively healthy years 1985 to 2000, the Chicago area would have about 227,300 more new houses than it has, according to a study released this morning by Zillow.

Nationwide, the past decade’s cumulative new-home construction gap is about 6.3 million. That helps explain the super-tight inventory that has been plaguing the real estate market for a few years, according to Aaron Terrazas, senior economist at Zillow.

“Building activity came to a near-standstill when the housing market collapsed,” Terrazas said in a statement, “and now a decade later, years of underbuilding have left a gap of millions of homes missing from the American housing stock.”

On a national level, builders of single-family homes took out, on average, 3.9 new-home permits per 1,000 residents in the years 1985 through 2000, compared to 1.9 permits per 1,000 residents from 2008 through the present. (The years between 2000 and 2008 are excluded because they include the rapidly rising figures of the boom years.)

Chicago was not far behind the national average in 1985 through 2000, with 3.1 permits per 1,000 residents, but in the years since the boom, Chicago builders have trailed the national average, taking out 0.7 permits per 1,000 residents, according to Zillow.

At 0.7 permits per 1,000 residents, Chicago is building new homes at a slower pace than nearly any other major U.S. city. Only Los Angeles and New York have a slower pace, both at 0.5 permits per 1,000, but much of those regions’ new housing is built in neighboring metro areas, including Riverside, Calif., to the east of Los Angeles, and outlying parts of New York and New Jersey.

Being off-pace isn’t necessarily a negative, given Chicago’s other struggles, such as population loss and low employment growth, said Erik Doersching, executive vice president at Schaumburg-based Tracy Cross Associates, a consultant to homebuilders.

“If we had built that quarter of a million homes, we wouldn’t have been able to absorb them,” Doersching said. Employment in the Chicago area is about 133,000 jobs ahead of its pre-crash peak, and typically two jobs equals demand for one new home. On top of that, employment and people’s preferences have shifted back toward downtown Chicago, which would reduce the demand for new single-family houses further, Doersching said.

“Certainly we could be, and we should be, building more new homes,” he said, “but a quarter of a million more in 10 years wouldn’t be sustainable.”

Last week, Cross issued a midyear report on Chicago-area sales of new homes, in which Doersching noted that there are few subdivisions or developments of 10 homes or more underway this year than at any time since 1999, when the firm began counting. In the years before the boom, there were typically about 700 subdivisions being built at any given time. This year there are 272.

In Plainfield, a far southwest suburb that was a beneficiary of the early-2000s boom in new homes, “building permit activity is about one-eighth or one-tenth what it was in our peak years,” said Jonathan Proulx, Plainfield’s director of planning. At the peak in 2006 and 2007, Proulx said, builders took out permits to build about 1,500 single-family homes a year, “and now we’re in the 150 to 200 range.”

Like Doersching, Proulx said that a return to the peak pace isn’t a desirable goal. Services such as schools, police and road maintenance “struggled to keep up with that explosive pace of growth,” he said. Most new-home projects now are in in-fill locations within Plainfield’s existing footprint, he said, “not on green fields or leapfrogging out,” which makes the growth of services “more efficient.”

Zillow found that only one major U.S. city has been building new homes faster after the bust than in the stable late 20th century: Houston. Between 1985 and 2000, builders took out an average of 3.6 new-home permits per 1,000 residents each year, and between 2008 and the present, they’ve increased that to 4.9 per 1,000.

Chicago’s slowdown of 2.1 percentage points from pre-boom to post-boom is not the steepest drop. Las Vegas’s pace is off by more than 11 percentage points, and several other cities—Atlanta, Orlando, Phoenix, Riverside and Sacramento—are off by more than 5 percentage points.

In the raw number of homes that haven’t been built, Chicago is sixth. Atlanta’s change of pace has resulted in about 407,000 single-family homes going unbuilt in the years since 2008.

 

A second-quarter bump in the 10-county region wasn’t enough to counteract the market’s plunge in sales early in the year.

Dennis Rodkin

Crain’s Chicago Business

August 08, 2018

 

 

 

 

 

 

 

 

 

Southwestern Real Estate
These townhomes, on Colfax Avenue in Des Plaines, are one bright spot on the suburban homebuilding landscape.

One result of the prolonged lull: Fewer subdivisions are under construction in the Chicago area than at any time since at least 1999.

Sales of newly built homes in the Chicago area rose in the second quarter of the year, but not enough to counteract a steep plunge in the first quarter. The result: Sales overall were down in the first half of the year from the same period in 2017, according to a new report by an industry analyst.

Builders sold 1,090 new homes in the 10-county metropolitan area in the second quarter, according to a report from Tracy Cross & Associates, which tracks city and suburban sales in developments of 10 units or more. That’s an increase of 5.3 percent from 1,035 sales during the comparable period last year.

But the increase followed a 17 percent drop in the first three months of the year. Thus, the sales total for the first six months of the year, 2,161 homes, was down 7 percent from the mid-year sales figure for 2017, 2,323 sales.

A key reason, according to Erik Doersching, executive vice president of Schaumburg-based Tracy Cross, is the lack of a big run-up in prices of existing homes in the suburban regions where homebuilders are most active.

In a typical market, a homebuilder can expect a healthy sales pace if the product is priced at about 15 percent to 20 percent above the prices of existing homes, Doersching said. But with Chicago-area builders’ costs for land acquisition and construction both rising while the value of existing homes ticks up slowly in the post-crash market, he said, builders “come in at a bigger differential above existing-home prices than what (buyers) consider a reasonable premium to pay for new construction.”

Earlier:

Why aren’t there many houses to buy in the city?

Land acquisition costs have gone up in large part because there are few deals to be had on boom-years parcels that went bust and sold at bargain prices, Doersching said. Builders now more often see parcels offered at current market prices.

The brightest spot on the suburban homebuilding landscape this year is Des Plaines, where townhome projects by three separate developers sold a total of 87 units in the first half of the year. The projects, by Lexington Homes, Ryan Homes and Taylor Morrison, are close to city and suburban employment centers, O’Hare and expressways, Doersching said.

Perhaps more important, he said, is that all three projects are priced between $300,000 and $400,000.  “They’re competitive on price with the existing homes,” Doersching said, “and they’re not  50-year-old house” that may need updating.

Jeff Benach, co-principal of Chicago-based Lexington Homes, said, “Even though everybody said after the recession that townhouses were dead, now they’re the it product.” In part that’s because they fit onto suburban infill parcels, like the three-acre piece on Lee Street in Des Plaines where his firm’s Lexington Pointe is building.

Earlier:

New-home sales fall in 2017

The other reason, Benach said, is that for a buyer, “it’s a cheaper way to get a new home.”

Suburban homebuilding has slowed to the point that there are fewer subdivision developments underway in 2018 than at any time since at least 1999, the report notes.

There are 272 this year, the least of any time in the 19 years Cross has been counting. The next-lowest year was 2014, with 276 projects. In the peak years, 2006 and 2007, there were more than 1,000 developments building, Cross reports. (Some of this figure is multiple developments––townhouses in one and houses in another, for example–within a larger subdivision.)

Even compared to the years well before the boom of the mid-2000s, the current year shows scant subdivision building: In each of the years 1999 through 2003, there were more than 700 subdivisions in progress.

Read more:

Where homes are selling fastest

By Dennis Rodkin

Crain’s Chicago Business

April 25, 2018

Photo by Little Realty This new house on Thomas Court in Wheaton sold for just less than $600,000 in March.

Sales of newly built homes in the Chicago area dropped in the first quarter, according to an industry consultant’s data.

In the first three months of 2018, builders sold 1,069 new homes locally, down more than 17 percent from the first quarter of 2017, according to the report from Tracy Cross & Associates.

The first quarter of 2017 was the last of four quarters when builders made big gains in sales. In most quarters since, Cross’ report has shown double-digit drops from the year before. The exception is the fourth quarter of 2017, when sales were essentially flat.

The latest data is more of the same for this “yawn of a homebuilding market,” said the Schaumburg firm’s principal, Tracy Cross. “Chicago simply isn’t recovering as other markets in the country are.”

On a seasonally adjusted basis, the quarter’s sales figure suggests builders would finish 2018 with about 3,790 home sales for the 10th year in a row. From 2000 through 2006, year-end totals ran above 20,000, and in the two peak years above 30,000.

Cross’ data captures only homes sold in developments of 10 or more, and covers both detached houses and attached condominiums and townhouses. Homes built on individual lots do not get counted.

In Chicago, the report shows 107 sales in the first quarter, down almost 18 percent from a year earlier. The suburbs had 962 sales, down more than 17 percent.

Among the reasons sales have stayed low: Prices on existing homes are growing slowly enough that buyers aren’t forced to look at lower-priced new construction, and the Chicago area’s population shrinkage over the past three years has reduced demand.

Those and other factors make builders reluctant to start new subdivisions, which usually require a multiyear buildout. This year 281 suburban subdivisions are underway, about one-fourth as many as in 2006, Cross said.

 

By Dennis Rodkin

Crain’s Chicago Business

February 01, 2018

Photo by Thinkstock

Photo by Thinkstock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The upside of being one of the nation’s slowest-recovering housing markets might just be that it makes Chicago look good to Amazon, the online retail giant that plans to plant a second headquarters somewhere that isn’t as overcooked as Seattle.

It’s not only low prices, although Chicago has those. Large swaths of the region are ready for the makeover they didn’t get during a decadelong lukewarm real estate market, meaning they’re ready to help absorb what would be tens of thousands of future Amazon households with new or rehabbed homes.

Amazon’s search committee “may find Chicago refreshing, coming from the West Coast, where Seattle and Silicon Valley are infamous for housing crunches, steep housing cost appreciation and excruciatingly long commutes,” said MarySue Barrett, president of the Metropolitan Planning Council, a Chicago nonprofit that focuses on equitable development of the region.

Chicago, one of 20 finalists for “HQ2,” has weaknesses that could ding its chance to win. Among them are cold weather, taxes and a political deadlock that undermines the state’s financial future.

At the same time, Chicago has considerable strength in the realm of housing and lifestyle: an extensive rail network that fans out to desirable neighborhoods and suburbs both close in and far out, a plentiful stock of homes for all tastes from historical to contemporary, and other key components of home life—good schools, parks and cultural attractions—sprinkled all over the map.

“Chicago’s well-positioned to compete with the other (19) on housing,” said Geoff Smith, executive director of the Institute for Housing Studies at DePaul University.

More:

Chicago’s surprising strengths in the Amazon HQ2 race

Rauner and Emanuel, bury the hatchet and get to work for HQ2

Google eyes Chicago for up to 5,000-job office

Several of the finalists have housing markets that look nearly as intimidating as Seattle’s, where the median price of a house was more than $718,000 last year. In finalists Boston and Washington, D.C., the median was over $540,000, and in Los Angeles it was over $650,000, according to online real estate marketplace Zillow.

In Chicago, the 2017 median price was $221,000, putting it in the bottom half of the locations on Amazon’s list. Of course many of Amazon’s employees would be able to spend much more than the median on housing, but the low figure for Chicago indicates that they’d get more home for their dollar, or their millions of dollars, than they would in more than half the other contenders.

Renting tricked-out luxury apartments is cheaper here, too. “The Amazon techies who are making $100,000 a year while they’re still single are going to find the new downtown apartments affordable,” said Tracy Cross, a homebuilding industry analyst who heads Schaumburg-based Tracy Cross & Associates. “They’re going to pay $3, $3.25 a square foot in Chicago, versus $5.50 a foot in Boston and $8 in New York.”

Beyond price, there’s the question of where to put as many as 50,000 new households. Simple math says that Chicago, the nation’s third-largest metro area, is better equipped to swallow that number than contenders like Pittsburgh, Indianapolis and Columbus, Ohio, each of which is less than one-third the size of Chicago. The nation’s two biggest metros, New York and Los Angeles, would be even more capable, but housing is more expensive and their sprawl more extensive than Chicago’s.

SPACE, INFRASTRUCTURE

More than just numbers, Chicago has the space, the housing and the transportation infrastructure to grow by 50,000 households.

In the South Loop alone, a pair of mega-developments covering a combined 76 acres along the South Branch of the Chicago River offer the promise of several thousand homes, and farther afield is the 430-acre former U.S. Steel South Works site on the lakefront around 87th Street, which first one and now another owner have tried to turn residential. Any of these and others could get the spark they need from an Amazon influx.

The point here is not that Amazon should come to Chicago in order to give these projects a boost, but that “there’s room to put a lot of new housing that isn’t out in the cornfields,” Cross said.

It’s far too soon to know where in Chicago an Amazon HQ2 would land if the city emerges as the chosen destination later this year, but the general consensus among observers in Chicago and elsewhere is that an urban-core location is likely, given the modern trend in downtown headquartering.

CTA, METRA

That looks good for Chicago because “we have the benefit of a legacy infrastructure system,” also known as the CTA and Metra, said Jonathan Burch, principal planner at the Chicago Metropolitan Agency for Planning. “Our downtown core has a lot of density built around that asset,” but one of its unheralded strengths is how far out into Illinois, Wisconsin and Indiana it reaches. A recent turn away from car-centric living has led to “a lot of these places reinventing themselves around the train stations,” Barrett said. Among them are Arlington Heights, Orland Park and Skokie.

It may not be the Amazon workers who rediscover these locations, but the extant Chicagoans who are inevitably priced out of the hot zones by the arrival of Amazon money.

“There’s going to be gentrification no matter what city Amazon goes to,” Smith said. It happened in Seattle. Chicago has already been dealing with gentrification issues, but “you’ll see existing patterns accelerate” if Amazon arrives, he said. “What you saw happen in Logan Square in 10 years, you’d see happen to other places much faster.”

Increased heat in places like Logan Square would inevitably ripple outward. Change could gradually roll into areas that have resisted gentrification, such as the West Side.

More: Call an Amazon truce, top economists tell cities vying for HQ2

A lot would depend on which transit lines HQ2 landed near. “We have several transit lines that are already at or near capacity at rush hour,” said Liz Schuh, principal policy analyst at CMAP. An influx of new riders on the CTA’s Red Line might prove crippling, but Schuh said a location near the Green Line would be “useful.” Together, the new Morgan Street station that opened in 2012 and a Damen Avenue station that CTA hopes to complete by 2020 prime that line to become a portal into the West Side for West Loop workers.

If so, block after block of deteriorating greystones and empty lots might quickly redevelop into whole new areas of hotness, and not far from the downtown core.

By Dennis Rodkin

Crain’s Chicago Business

January 31, 2018

Photo by Little Realty This house in Naperville sold in May for $570,000. It's one of 14 homes in a subdivision built by M/I Homes.

Photo by Little Realty This house in Naperville sold in May for $570,000. It’s one of 14 homes in a subdivision built by M/I Homes.

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales of new homes fell last year in the Chicago area, the third down year out of the past four.

Developers sold 3,911 new houses, condos and townhouses in the 10-county Chicago area last year, down 4.4 percent from 2016, according to Tracy Cross & Associates, a Schaumburg-based real estate consulting firm that tracks new-home sales.

“It was another yawn of a year,” said Tracy Cross, head of the firm.

2018.01.31 New home sales fall in 2017-pic 2

The prior year’s increase of 9.4 percent came after two years in a row when the total was down.

Cross tracks sales at offerings of 10 homes or more. Builders in the city and many inner-ring suburbs often build on single lots or a small number of lots; those projects do not show up in the Cross study.

In the city, Cross shows a decline of nearly 15 percent, to 464 units. That’s largely because of a 2016 sales bulge created by a pack of early buyers in the Vista Residences, the condo portion of the 93-story Vista Tower under construction in Lakeshore East. No other development of Vista’s size came online in 2017 to carry the ball for the year, Cross said.

Suburban sales were down 2.9 percent last year, to 3,447 homes. Of those, more than 2,000 were sold by four large national builders (CalAtlantic, DR Horton/Cambridge, M/I Homes and Pulte Group), each with at least 400 sales during the year.

For those companies, all based outside Chicago, “400 or 500 sales is a number they’re going to be pleased with,” Cross said.

The post-recession high-water mark for local new-home sales remains 2013, with 4,415. Builders have sold fewer than 5,000 new Chicago-area homes in each of the past nine years. In the first seven years of the 21st century, builders sold more than 20,000 new homes each year and sometimes more than 30,000.

“It’s clear that nothing spectacular has been happening for builders in this market,” Cross said.

One clear reason for the slowdown is that jobs have been shifting back toward the city. McDonald’s, Kraft-Heinz, Beam Suntory and Archer Daniels Midland are among the corporations that have recently opened or are about to open new downtown headquarters.

“Building homes 30 miles out isn’t going to work when the jobs centers in the suburbs aren’t growing the way they were” in previous decades, Cross said.

While builders have been rushing to provide new homes in and near the city, they are unlikely to find land parcels big enough to sell at the scale of those halcyon years of the early 2000s, except when building high-rise residential buildings.

By Dennis Rodkin

Crain’s Chicago Business

October 24, 2017

2017.10.24 Crains-New-home sales plunge in third quarter-PICTUREPhoto by Pulte Homes and Del Webb Communities of Illinois This newly built house on Silverleaf Street in Naperville sold in August for about $474,000.

A sharp drop in new-home sales in the third quarter puts the Chicago area on pace to finish the year down 5.5 percent, according to a report.

Builders sold 756 new homes in the 10-county area in the third quarter, according to a report from Tracy Cross & Associates, which tracks sales in developments of 12 units or more. That’s about 26 percent below the sales volume in the third quarter last year and the lowest number of third-quarter sales since 2011, according to the report.

Builders are on track to sell 3,849 new homes in the region this year, said Tracy Cross, principal of the Schaumburg firm. They sold 4,075 last year.

“The main problem is supply,” Cross said.

During the third quarter of 2005, he said, there were 1,199 active developments selling homes in the region, while there were 313 at the same time this year, and the typical project is considerably smaller now.

Sales fell in both the city and suburbs in the third quarter. There were 679 suburban sales, off more than 25 percent from a year earlier. There were 77 in the city, down 33 percent.

Cross’ reports do not capture homes that builders put up singly or in groups of fewer than 12 on infill lots, such as replacements for teardowns in the city and suburbs.

Chicago-area new home sales also declined in the second quarter from the year-earlier period after four consecutive quarters that showed increases.

New-home sales also have been down nationwide recently. August sales were down 1.2 percent from a year earlier, the U.S. Census Bureau and the Department of Housing and Urban Development reported last month. September data will be released tomorrow.

 

By Dennis Rodkin

Crain’s Chicago Business

August 17, 2017

2017.08.17 Chicago lags in homebuilding rebound-PICTUREChicago lags behind most major US cities on construction of new housing, and a key culprit may be the region’s population loss.

In the Chicago area, building permits for all types of housing, for sale and for rent, will end the year 20 percent below the region’s historical average, according to a report released Wednesday by Trulia, an online real estate resource. Only three of the nation’s 20 largest metro areas will end the year farther below their averages: San Diego (29.2 percent off), St. Louis (33 percent) and Cleveland (35 percent).

Although Chicago is doing fairly well on three key factors that drive growth in homebuilding—employment, income and home prices—”we see an important problem in Chicago,” said Ralph McLaughlin, Trulia’s chief economist. “Chicago is losing population. That’s not a good prospect for people who are building homes.”

In the simplest sense, the two-year net loss of 30,894 people adds thousands of existing residential units to the supply, dampening demand for new units.

“With the outmigration, you’re seeing the demand for new homes diminish,” said Tracy Cross, head of the Schaumburg-based firm Tracy Cross & Associates, which tracks homebuilding in the region. He was not involved in Trulia’s study.

Trulia calculated a historical average for each metropolitan area using census data on building permits each year from 1980 through 2016 (a stretch that contains both boom and bust years), as well as its own projected total for this year. The Chicago area’s longterm average was about 20,600 permits, and Trulia forecasts builders taking out about 16,480 permits by the end of this year.

While Chicago is 20 percent below its average this year, Trulia expects three cities to take out at least 60 percent more permits than the longterm average. They are Philadelphia (62.3 percent) and Boston and Dallas (both 61 percent).

Because the Trulia analysis looks at construction of all types of housing, it masks the extreme weakness in construction of new houses in the Chicago area. While permits for that type of housing are off the historical average by more than 60 percent, he noted, because of the downtown apartment-building boom, permits for multifamily housing are up by a similar amount.

The net is a decrease in permits overall, but McLaughlin called the big increase in multifamily construction “the silver lining for Chicago.” It’s a response to increased demand for high-rise rentals, a sign of a thriving job market for younger adults, he said. San Francisco, New York and Austin have also seen large increases in the construction of multifamily units near the city center, he said. Builders “have followed the demand downtown,” Cross said.

He’s not surprised that the new construction in Chicago tilts heavily toward rentals. Savvy millennials, he said, “aren’t going to buy yet, because they need their mobility. They may have to move again,” and slow price growth in the Chicago area’s for-sale housing market could limit their ability to sell the property in a few years without taking a loss.

 

 

By John Handley

Chicago Tribune

August 2, 2017

2017.08.02 In Wheeling-pic 1

 

 

 

 

 

 

 

 

 

 

 

The Wheeling town center’s 100,000-square-foot retail area, seen in this rendering, will be anchored by a 10-screen CMX movie theater with reclining seats and dining and cocktail options. City Works Eatery and Pour House will be located across from the theater, and other restaurants and shops will be a short walk from the apartments. (The Lynmark Group)

This northern suburb has long lured diners to its popular 3-mile-long Restaurant Row along Milwaukee Avenue. But despite its gastronomic prominence, the village of Wheeling has no real downtown, even though it was founded in 1894.

That is about to change.

After years of planning and overcoming obstacles, the construction of a downtown is finally underway in the village 30 miles northwest of Chicago.

What does a new downtown cost? The tab here is $110 million.

A town center will rise on a 16.2-acre vacant site created by the demolition of the bankrupt Wickes Furniture property on Dundee Road at Northgate Parkway. The site is surounded by existing structures that set the stage for a downtown area, such as the village hall, police and fire stations, park district recreational building, aquatic center, ball fields, a lake and a commuter rail station on Metra’s North Central Service line.

Presently, crews are laying foundations for the town center. Here’s what to expect at the opening, slated for late 2018: A five-story, 300-unit apartment building will wrap around a 25,000-square-foot plaza with a pool, putting green, bocce court, fire pit, barbecue grills and a gazebo. The courtyard will serve as a central gathering place for residents and the surrounding community.

Nearby, the center’s 100,000-square-foot retail area will be anchored by a 10-screen CMX movie theater with reclining seats and dining and cocktail options. City Works Eatery and Pour House — of the Chicago-based Bottleneck Management restaurant group — will be across from the theater, and other restaurants and shops will be a short walk from the apartments.

The town center is expected to provide a considerable boost to Wheeling’s population, which now stands at more than 38,000.

“The town center will revitalize the community and become a destination for the area,” said Patrick Horcher, Wheeling village president. He said it is the most upscale development in town.

“It has been a long time in coming,” he said, alluding to the project’sups and downs. “After the village bought the Wickes property in 2008, it was a challenge to find a developer to do the town center. The site stood vacant for a while and was costing the village in lost property tax revenue.”

The long planning process required the village to reach agreements with many stakeholders in the complex public and private project. These included the U.S Postal Service, a fuel pipeline company, Metra, the Wheeling park district and an existing Burger King near the entrance to the town center that was concerned about access and signage, according to John Melaniphy III, Wheeling’s director of economic development.

Once the project was designed, some residents were concerned about whether the space would attract enough tenants, both residential and commercial. But after the groundbreaking in late July, Horcher concluded: “We’re now on target for the town center we wanted years ago.”

“I can’t wait for the opening. It will be a huge new focal point in the village,” said Neal Katz, a 30-year resident of Wheeling. He believes that ” People will be moving back.”

“The town center will enhance property values and be a catalyst for future development,” Melaniphy said. “It will change Wheeling’s image, which has previously been known as blue collar because of our industry.”

He suggested that the town center will benefit existing retail and restaurants rather than rankle them as a source of competition. “Because (the town center) is projected to be a regional attraction, it will draw out-of-town customers to the village’s other retail and restaurants,” he said.

Melaniphy estimated the town center could generate $1 million a year in sales tax revenue.

“The town center will keep more shopping dollars here and will add a more cosmopolitan character to the village,” commented Neena Pottoore, executive director of the Wheeling/Prospect Heights Chamber of Commerce.

 

2017.08.02 In Wheeling-pic 2

 

 

 

 

 

 

 

 

 

 

 

A five-story, 300-unit apartment building will wrap around a 25,000-square-foot plaza with a pool, putting green, bocce court, fire pit, barbecue grills and a gazebo. This rendering depicts the courtyard pool. (The Lynmark Group)

That citylike feel is expected to woo renters — Melaniphy said most of the apartments will be one- and two-bedrooms targeted at young professionals and empty nesters. Residents will have 500 parking spaces, while 800 slots will be dedicated to retail and dine-in movie theater consumers.

Along with shopping and cinema, a smattering of other entertainment options are in the works.

“The town center will host community events like fairs, festivals, art shows and farmer’s markets,” said Bradley Friedman, director of Midwest operations for the Lynmark Group of Suffern, N.Y., the project’s developer.

New town centers are riding a national trend, according to Ed McMahon, an authority on sustainable development at the Urban Land Institute in Washington, D.C.

“Downtowns are the heart and soul of any community, and the future belongs to town centers. New suburban town centers are replacing failed regional malls in many parts of the country,” he said.

“Wheeling’s new town center will create a new place for housing, shopping, playing, eating and hanging out. The demand today is for town centers that are gathering places that attract young people as well as retirees.”

Real estate experts certainly see the appeal.

“We’re finally going to get a downtown. It will definitely be a big plus,” said Gary Aver, broker and owner of Re/Max United in Wheeling. “It will make house values more stable and could increase them in the long run.”

According to Tracy Cross, president of Schaumburg real estate consulting and market research firm Tracy Cross & Associates, the town center “should do well despite its relatively small size compared to other town center projects, such as the Glen in Glenview.” The 1,121-acre Glen, built on the site of the former Glenview Naval Air Station, opened in 2003.

Cross said the Wheeling town center may create a real estate ripple effect if renters at the new apartment building later decide to buy a house in the suburb. He added that one impact of the town center could be to establish a premium in housing values.

Construction projects this large sometimes generate complaints from nearby residents. However, that is not a factor here because the town center is not in a residential neighborhood. It is bounded on the west by railroad tracks, on the east by village buildings, on the south by an 85-acre park and on the north by vacant land.

The town center was designed by the Chicago office of CallisonRTKL and will be built by William A. Randolph of Gurnee.

 

 

By Dennis Rodkin

Crain’s Chicago Business

July 17, 2017

2017.07.17 Crains-picture

 

 

 

 

 

 

 

 

Photo by David Weekley Homes
This new house on Ironwood Court in Glenview sold for almost $742,000 in May.

Sales of new homes in the Chicago area dropped sharply in the second quarter after increasing in four consecutive quarters, according to a new report.

Builders sold 983 new homes in the 10-county metropolitan area in the second quarter, according to a report from Tracy Cross & Associates, which tracks city and suburban sales in developments of 10 units or more. That’s a decline of more than 19 percent from 1,216 sales in the second quarter of 2016.

The figures do not include sales of homes built and sold singly, such as houses replacing older homes on city lots. Sales of single new houses in the city have been strong, but “there’s not enough of that type of building to make up for the lost volume overall,” said Erik Doersching, executive vice president of Schaumburg-based Tracy Cross.

The sales figure was the lowest for the second quarter since 2012, when builders sold 969 new homes.

For the first half of this year, sales were up slightly, to 2,280 from 2,254 sales in first-half 2016, with the increase all due to a strong first quarter. In the first three months of the year homebuilders made 20 percent more Chicago-area sales than they did in the same period in 2016. That was the biggest increase in almost four years.

The first quarter was fourth straight that showed improvement over the corresponding period in the previous year. “It looked like there was some momentum,” Doersching said, “but then there was this quarter.”

Tracy Cross forecasts that total 2017 sales in the region “will be flat or down from last year,” Doersching said. Builders ended last year with 4,075 local sales.

Three factors were key in the second-quarter decline, Doersching said. One common to the city and suburbs is the economic climate in Illinois. Although employment is up, he noted, “there are more reasons to leave the state,” including a big income tax increase approved in Springfield earlier this month. Outmigration decreases the demand for homes.

In December, census figures showed that Illinois lost more residents in the previous 12 months than any other state in the U.S.

Two other factors are specific to one or the other: city or suburbs.

In the city, large-volume builders have increasingly focused on the upper price range, resulting in fewer but higher-priced sales.

In the suburbs, no large-scale master-planned developments are being unveiled to replace the ones on pre-bust land that are selling out.

“Nobody’s replacing them, and that’s where we’d get a lot of sales volume,” Doersching said. Building activity has been slow in what he called “the value corridor” in the northwest suburbs around Pingree Grove or Huntley.

Together, the three factors “are holding us back,” Doersching said.

In the modern heyday of suburban homebuilding, the years 1994 through 2007, second-quarter sales were always above 4,000, according to Cross’ historical data. This year’s second-quarter figure is less than one-quarter of that.