Tracy Cross & Associates, Inc.

4th Quarter 2020

Despite an uncertain beginning to 2020 with the onset of the Covid-19 pandemic, production builders in the Chicago metropolitan region ended the year with a total of 4,895 new home sales, translating to an impressive 17.1 percent year-over-year increase from the 4,179 units sold in 2019. By product type, 3,126 sales occurred in the single family sector and 1,769 in the form of townhomes, duplexes and condominiums.

Over 95 percent of all sales activity was concentrated in the suburbs, with many buyers looking to relocate to a lower density setting as most of Chicago was under strict lockdowns throughout the year. With 4,676 new homes sold outside of the city of Chicago, the suburban market was up 22.3 percent compared to 3,823 sales recorded in 2019. The city, on the other hand, posted its slowest year on record since Tracy Cross & Associates Inc. began tracking production sales 25 years ago, recording only 219 total contracts during the 12-month period, a near 40 percent year-over-year drop from 356 sales registered in 2019. For perspective, the average pace over the last decade in Chicago stood at 504 sales annually.

The last two quarters of 2020 became the first six-month period to boast a seasonally adjusted, annualized sales volume above the 5,000 mark in 12 years.  In fact, the 5,796 annualized sales generated during the most recent six months, reflected a volume some 26.3 percent higher than any other six-month period (seasonally adjusted) since 2008.

With consecutive quarters of improving sales activity in the region’s production home market, primarily in the suburbs, together with tighter inventory levels in both the resale and new construction sectors, the average sales price of a new production home sold in suburban Chicago during the October-December 2020 period increased 6.2 percent year-over-year including a 7.1 percent jump in the single family sector and a 2.9 percent rise among townhome, condominium and duplex units. This trend is likely to continue in 2021 as the rollout of Covid-19 vaccines should serve to bolster the economy; mortgage interest rates remain low throughout the year; and new construction housing inventory is suppressed.

In reference to inventory levels, supply-side constraints continue to plague the region as new home communities reaching sell-out in 2020 were not replaced “in kind” on a one-to-one basis.  For example, at the close of 2020, only 328 production developments (i.e., those containing 10 or more total units) were actively marketing new homes, a level 6.3 percent lower than the 350 active communities in 2019.  Moreover, the number of new subdivisions throughout the Chicago region in 2020 was 74.5 percent lower than the 1,285 communities actively marketing at peak in 2008.

With overall sales volumes up and inventory levels down, per-project sales rates during 2020 were the strongest on record in more than a decade.

Geographically, the Southwestern Corridor led the market in terms of 2020 sales with 25.7 percent of all activity occurring within its boundaries (1,259 production units), followed by the adjoining Southwestern DuPage County/Aurora/Kendall County area with 1,082 sales, or 22.1 percent of the market. The Northern Fox Valley and McHenry County submarkets in the Northwestern Corridor combined for a total of 1,043 sales, or 21.3 percent of all regional activity.

Large national homebuilding companies continued to dominate the market with Lennar selling 918 housing units in 2020, followed by D.R. Horton with 832 contracts, M/I Homes with 690, Pulte Homes at 471, Ryan Homes (395) and K. Hovnanian Homes (287). These six national homebuilders combined for a total of 3,593 sales, translating to a 73.4 market share across the entire Chicago region.   

D.R. Horton’s large-scale Cambridge Lakes community in Pingree Grove continued to lead the market in 2020 with 215 total sales recorded among a variety of product lines. Lennar’s Stonegate development in Manhattan and its Raintree Village community in Yorkville recorded 130 and 99 transactions, respectively, followed by Wagner Farms (92 sales) – a Pulte community in Naperville.  Rounding out the top five was Lennar’s Woodlore Estates community in Crystal Lake with 91 total sales.       

Sales in Chicago dropped to their lowest in 25 years in 2020 while climbing to a 12-year high in the suburbs.

Dennis Rodkin

Crain’s Chicago Business

February 02, 2021

Daynae Gaudio

This new four-bedroom house on Cedarwood Lane in the Cambridge Lakes development in Pingree Grove sold for just under $324,000 in December. 

Sales of new-construction homes in Chicago dropped to their lowest in 25 years in 2020, according to a new report. At the same time, new-home sales in the suburbs surged to a 12-year high. 

It’s more evidence of the tilt toward the suburbs that many people predicted when COVID made density a bad word, and that has been proving out in year-end reports on all segments of the housing market. But housing industry sources say the tilt is happening not only because of COVID

In Chicago, 219 newly built homes were sold during the year, according to a 2020 year-end report released this week by Tracy Cross & Associates, a consultant to the homebuilding industry based in Schaumburg. That’s down 38.5 percent from 2019 sales, and the lowest figure in Cross’s records, which date back to 1995. 

In the suburban area, 4,676 new homes sold in 2020, an increase of 23.3 percent from 2019. It’s the highest figure since 2008.

Combined, city and suburban sales totaled 4,895 in 2020, an increase of 17.1 percent over 2019. It’s the highest number of new-home sales in the region since 2008.

The 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, a popular model in the city, do not get counted. 

In the past several years, builders in the city “had moved into the luxury realm. Most of what was happening was million-dollar-plus homes,” said Erik Doersching, executive vice president at Tracy Cross. “They’ve gotten away from any mainstream type of $300,000-to-$800,000 condo development.” 

COVID made many households need more space, and at the $1 million-and-up level, people increasingly looked to the suburbs to find it. Crain’s reported in January that $1 million-plus home sales rose by 40 percent in the suburbs in 2020, and fell by almost 7 percent in the city. 

Three of the bestselling new-home developments in the city had an average sale price below $1 million, according to Doersching’s calculations. They were CA6 in the West Loop, where 29 condos sold at an average of $830,000 each; Lexington Village in Avondale (16 townhouses at an average of $586,000); and 5748 N. Hermitage (26 condos at an average of $741,000). 

Alan Candea, a partner with his brother in Candea Development, which built the Edgewater condos, said he’s not surprised that most builders’ product delivers at over $1 million. 

Fast-rising land costs and the city’s tight regulations on construction “make it hard to build anything you can sell for less than $1 million,” Candea said. His firm bought the Hermitage land in 2014, he said, and “warehoused it while we did five other projects.”

Had they bought the land five or six years later, he said, “we would have paid 35 to 40 percent more,” which would have been passed along to buyers in the form of higher unit prices. 

Another reason for the big drop in city sales was that “the empty nester, or more broadly the buyer that’s moving from the suburbs to the city, hit the pause button during COVID,” said Jon McCulloch, co-CEO of Belgravia Group, the developer of CA6 in the West Loop. 

McCulloch said that while the average price Doersching cited for his project is accurate, it conceals the fact that CA6 sold several condos priced at more than $1.6 million. They were all sold to existing city households desiring more space, he said. 

The biggest-selling suburban new-home development in 2020 was Cambridge Lakes, a Pingree Grove subdivision by D.R. Horton, a national firm based in Texas. D.R. Horton sold 215 houses there, nearly as many as the total new-construction sales in all of Chicago during the year. A D.R. Horton press representative did not respond to a request for comment. 

Doersching said the strengthened suburban new-home market, if it continues, could “lead to a bigger sense of urgency among those builders to go look for more opportunities” for development. 

At just under 5,000 sales for the year, it’s a long way back to the heyday of Chicago-area homebuilding in the early 2000s, when annual sales were over 20,000 and sometimes over 30,000.

Private homebuilders dominated the local market almost up until the housing crash of 2008-09; publicly traded companies have had the upper hand since then. But the dynamics are now shifting.

H. Lee Murphy

Crain’s Chicago Business

February 01, 2021

Bloomberg

Homebuilders around Chicago are enjoying the best sales they’ve had in more than a decade. The cheers you hear are coming mostly from Wall Street. 

Why Wall Street? Today, the half-dozen largest-volume homebuilders in the metro Chicago market are publicly-traded companies. The market is led by Texas-based mega-builder D.R. Horton, which recorded 665 sales here in the first nine months of 2020, followed by such names as Pulte Homes and Ryan and K. Hovnanian. Together the public builders account for 75 percent of all local new-home construction. 

But now the private builders that have been able to hang on in the face of this onslaught are poised for a comeback as new-home sales around Chicago’s suburbs are suddenly surging. At the end of December the inventory of homes on the market amounted to a mere 1.8 months of supply, a record low since statistics gathering started in 2008. An inventory of closer to six months is considered average. 

In the third quarter last year, homebuyers were clearly turning to new construction, with sales of homes coming to the metro market for the first time up more than 41 percent to 1,448 contracts. Final statistics, due to be released this week, are expected to show new-home sales at or above 5,000 units for all of 2020,  the highest total since 2008. 

“The Chicago market finds itself substantially undersupplied with new homes,” says Erik Doersching, managing partner of Tracy Cross & Associates in Schaumburg, which compiles home construction data. “We’re concerned about the supply issue. We might see sales of 7,000 to 9,000 new homes this year if the supply becomes available. In some suburbs we could see new-home sales double if homebuilders could keep up with demand.”

That’s a sweet turn of events for private builders, who dominated the local market almost up until the housing crash of 2008-09, when banks stopped lending and demand for new homes fell by nearly 90 percent overnight. Within months, mainstay names such as Lakewood, Neumann and Kimball Hill began to crash and burn.

In 2000, when some 25,000 new homes a year were being delivered in Chicago, private builders accounted for roughly 75 percent of all sales. In fact, earlier in the 1990s nine out of every 10 houses built here were erected by a private firm.

In the past decade, with overall sales limping along at a pace of 4,000 home sales a year and even less, it’s been the public companies that have squeezed private firms into a minority position.    

With the market now stirring, surviving private builders are all laying plans to boost their activity. One of the largest, Lexington Homes, which sold 90 homes last year from its headquarters in Lincoln Park, is laying plans to “get to a yearly volume of 200,” says Jeff Benach, Lexington’s principal. “We think we can get to that level in the next couple of years. If we do, it would be our best year since 2005.” 

In Geneva, the Shodeen Group sold 103 homes last year, up nearly 25 percent from 80 the year before. David Patzelt, Shodeen’s president, is projecting a further 20 percent rise this year to 125 units, a far cry from the 20 or so homes the firm sold at its low point around 2010. 

Some years ago, the better-capitalized public companies could often be counted on to take down large tracts of land, frequently hundreds of acres and more, and sit on them waiting for the right time to start building. More recently, Wall Street investor patience has waned, and public companies have retreated from some of their positions on raw land.

Instead, private companies have emerged to acquire choice parcels. Shodeen, for instance, has 900 acres west of Elgin slated for 2,700 homes eventually, plus another 700 acres in exurban Elburn with 100 homes already sold. “We’ve been sitting on that land west of Elgin for over 20 years. We can afford to be patient,” says Patzelt, noting that his company is just finishing up work on its Mill Creek subdivision west of Geneva, featuring 2,000 homes on 2,000 acres as part of a 25-year project. 

While production builders typically aim for budget-priced construction, often at prices below $300,000, private firms are increasingly offering shoppers custom and semi-custom choices. Lexington has a six-acre development in Glenview with each of the planned 29 units expected to be priced at $850,000 and up. “We’ve got to offer more trendy options than the national builders do,” says Benach. 

Still, the private builders face plenty of obstacles. Big national firms negotiate for cheaper prices on everything from appliances to windows, then work on thinner margins, in many cases, than the 20 percent gross mark-ups that private firms count on.

Meantime, the cost of lumber has been soaring, from $450 per thousand board feet in June 2020 to $929 a week ago, with much of that jump blamed on Trump tariffs. Also, there are spot shortages of labor that have prevented some builders from proceeding even when they have sales in hand.

The other challenge is that the Chicago area continues to hemorrhage population overall while employment centers like Schaumburg and Naperville that popped up in the 1980s and 1990s have in most cases been losing jobs. “Satellite employment centers spawn nearby homebuilding,” observes Tracy Cross’s Doersching. “But employment and office development in the suburbs haven’t been growing.”

Jody Kahn, senior vice-president of research at John Burns Real Estate Consulting in Irvine, Calif., says that other metros such as Indianapolis have seen homebuilding flourishing as population streams away from Illinois for lower-tax alternatives. “The great recession of 2008 was particularly difficult for Chicago,” Kahn says. “The city hasn’t been able to spring back from the bottom like other cities have. There has been such a protracted period of minimal new-home construction that the private and local family builders have found they couldn’t make a go of it any longer.” 

Kahn is cautious in predicting a comeback for the local market. Exurban development trends that once pushed building into farming towns like Huntley and Oswego have cooled in recent years. Restrictive zoning laws delay entitlements. “At the moment demand is very intense and supply is super-constrained,” Kahn says. “It remains to be seen how long that remains the case around Chicago.” 

More new homes sold in the first three quarters of 2020 than any comparable period in a dozen years. The sales growth is entirely suburban.

Dennis Rodkin

Crain’s Chicago Business

November 02, 2020

Baird & Warner

This newly built house on Bristle Cone Drive in the Woodlore subdivision in Crystal Lake sold in August for just under $388,000 in August.

Sales of new-construction homes in the Chicago area have been stronger this year than any time since 2008, according to a new report from an industry analyst.

In the first three quarters of 2020, builders sold 3,729 newly built homes in the Chicago area, according to the report from Tracy Cross & Associates, a building industry consulting firm based in Schaumburg. The last time more new homes sold was the first nine months of 2008.

“We knew [sales volume] was going to go up because of low interest rates and the across the board improvement in the suburban marketplace in a movement out of the city,” said Erik Doersching, executive vice president at Tracy Cross. “But it ticked up much higher than we expected.”

At the end of the third quarter, sales of new homes were up 15 percent from the same time last year, according to Cross’s data.

The surge in sales began in the second quarter of the year, but accelerated in the third, like the housing market overall. In the third quarter, homebuilders sold 1,448 homes, the most in any individual quarter since the second quarter of 2008, when there were 2,092 sales.

In 2008, sales were crashing down from the heyday of the early 2000s, when quarterly sales  regularly topped 5,000.

After more than a decade of reports of shallow sales, the increase in 2020 “emphasizes what’s going on in the world with the desire some people are showing to move to the suburbs.”

The increase is entirely suburban. New home sales in the city were down 39 percent in the third quarter from the same time a year ago, to 51 sales, and for the year to date at the end of the third quarter, they were down 28 percent, to 189. Suburban sales were up nearly 49 percent in the third quarter, to 1,397 sales, and 19 percent year-to-date, to 3,540 sales.

“The opportunity to work from home has opened up the suburbs to these younger buyers again,” said Jerry James, president of Edward R. James, a longtime homebuilding firm based in Glenview.

James said another spark for the suburban increase is recent spasms of unrest in the city turning off suburban empty-nesters from moving into Chicago.

“It has unnerved a lot of people who would otherwise be looking at condos downtown when they sell their family home,” James said.

One result: sales are up at Hinsdale Meadows, an Edward R. James development of duplexes and single-family homes priced from the $700,000s to over $1 million. The development sold 10 homes in the first three quarters of 2020, James said, compared to 11 in all of 2019.

Super-low interest rates are the primary fuel of the sales increase, Doersching said. That’s evidenced by the fact that most new home sales were in parts of the far southwest suburbs, like Joliet, Plainfield and Oswego, where prices are the lowest. The buyers who are most sensitive to the difference low interest rates make in their purchasing power tend to be those at the lower end of the price range.

Yet Doersching said that COVID-19 concerns are also playing a role in buyers choosing new homes. “Knowing you’re the first in this house, that everything is clean and safe, makes a difference this year,” he said.

The 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, a popular model in the city, do not get counted.

Homebuilders had one of their best quarters locally in a dozen years. 

 

Dennis Rodkin

Crain’s Chicago Business

August 04, 2020

Daynae Gaudio
These new townhouses on Timber Wolf Drive in Wheeling sold in the low $300,000s, the range where new home sales were strongest in the second quarter.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales of new homes soared in the second quarter in suburban Chicago, a new report shows, due in large part to epochally low mortgage interest rates and COVID-19 prodding some households to get out of dense areas, an industry analyst said.

“In this environment of very low interest rates, we saw people who might have moved out of their apartment building in a few years saying, ‘Let’s make this move now,’” said Erik Doersching, executive vice president of Tracy Cross & Associates, a Schaumburg-based consultant to the homebuilding industry.

Mortgage rates have been falling throughout the COVID crisis and in July dropped below 3 percent for the first time since at least 1971, when the federal government began tracking them.

Builders sold 1,235 new homes locally in the second quarter, up nearly 15 percent from the same period a year ago, according to the Cross report. It was the third-highest quarterly local total going back about 12 years, to when new-home sales collapsed in the wake of the national financial meltdown, Doersching said.

The increase came from suburban sales, which were up nearly 17 percent during the quarter, to 1,166. Sales in the city dropped by about 11.5 percent, to 69 homes.

Because Cross does not have access to data on where buyers come from, it’s not possible to say whether the boom in suburban sales is part of the much-predicted flight from the city because of the virus.

Doersching said it’s clear that first-time homebuyers led the suburban surge, because two-thirds of the sales there were new homes priced at $350,000 or less, typically the range where first-timers buy. First-time buyers are among the most sensitive to interest rates dropping, as they try to maximize the amount they can spend on a house.

“They may have been getting out of their apartments or their parents’ house,” Doersching said.

The second-quarter jump followed a drop of about 12 percent the previous quarter. The dawn of the virus crisis “stopped people in their tracks,” Doersching said. Like other industries, homebuilding scrambled to put new safety procedures in place, opening the door to a sales boom in the second quarter.

Some of the second-quarter homebuying may have been purchases that would have been made in the first quarter if the crisis hadn’t interrupted.

For the first half of the year, combining the steep dive of the first quarter and the steeper increase in the second, local new-home sales are up 1.3 percent from the first half of 2019. Nationwide, according to U.S. Census Bureau figures, sales of new homes were flat at mid-year compared with 2019.

Tracy Cross’ data covers houses, condominiums and townhouses. It captures only homes sold in developments of 10 or more. Homes built on individual lots, a more common model in the city, do not get counted.

“People stopped in their tracks” in March, typically the strongest month of the year.

Dennis Rodkin

Crain’s Chicago Business

May 05, 2020

Coldwell Banker
This newly built house on Stillwater Court in Romeoville sold for a little more than $322,000 in March.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales of newly built homes fell locally in the first quarter, according to a report, pushed down by the arrival of the COVID-19 crisis in March, typically the strongest month of the year.

In the first three months of 2020, builders sold 994 new homes locally, down more than 12 percent from the first quarter of 2019, according to a data compiled by Tracy Cross & Associates. It was the lowest first-quarter sales tally since 2012.

Two key reasons are the COVID-19 crisis and the final sellout of some popular suburban developments, according to Erik Doersching, executive vice president at Schaumburg-based Tracy Cross.

“March is usually about 15 percent of the year’s sales,” Doersching said.

“But this year, March was when everything was shutting down and people stopped in their tracks,” he said.

Doersching said a few developments that had planned to launch sales or ramp up marketing efforts in March pulled back, some as early as February when they saw what was on the horizon.

By April, he said, some builders “had rebooted with a new way of doing sales” and might show improved sales in the second quarter. Construction and real estate sales qualify as essential businesses in Illinois’ stay-home order.

Because Cross’ data sources all report by the quarter, Doersching said, the firm can’t break out the months and determine whether January and February were setting up for a stronger spring than ultimately transpired. That’s what happened in the Chicago area’s overall housing market.

Tracy 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, a more common model in the city, do not get counted.

Nationwide, new-home sales dropped in March by 15.4 percent from the same time a year earlier, the Commerce Department reported in late April.

The first-quarter sales decline was more pronounced in Chicago than in the suburban area. In the city, builders sold 66 new homes during the quarter, a drop of almost 39 percent from the same time a year ago. The suburbs had 928 first-quarter sales, down about 10 percent from 2019.

The drop in the first quarter followed 2019’s increase in new-home sales of 3.6 percent, the second consecutive year of increases at 3 percent or more.

Doersching said a second component of the first-quarter drop was the end of sales at some southwest suburban developments that had been sales leaders in 2019. Among them were developments by MI Homes in Plainfield, Lennar in Shorewood and Ryan Homes in Joliet, which combined sold an average of 25 homes a quarter in 2019.

 

 

Builders can’t beat the resale prices of existing homes in Chicago’s slow-rising real estate market, says an executive with a homebuilding consultancy.

Dennis Rodkin

Crain’s Chicago Business

July 31, 2019

 

 

 

 

 

 

 

 

LIttle Realty
A row of townhouses under construction in Naperville. They’re priced at about $270,000. 

The number of new homes sold in the Chicago area dipped in the second quarter after ticking upward in the first three months of the year, part of a long series of essentially flat business, according to a consultant to homebuilders.

In the 10-county metropolitan area, 1,080 new homes sold in the second quarter, according to data released July 30 by Tracy Cross & Associates. That’s down 2.5 percent from the same period in 2018 and follows first-quarter sales that were up more than six percent from the corresponding period a year ago.

“They go up a little and down a little, but if you look at the long-term line, it’s hasn’t changed in a long time,” said Erik Doersching, executive vice president of the Schaumburg-based firm. “We’ve been seeing long-term flatness, and this is more of the same.”

When reported as percentages, the vacillations are exaggerated somewhat by the small number of sales in either period, Doersching noted, which tends to mask the stasis in the market.

Second-quarter sales have consistently been in the 1,000 to 1,300 range for the past six years, less than one-quarter the norm during the suburban homebuilding heyday of the 1990s and early 2000s. From 1994 through 2006, Chicago-area new home sales were consistently above 4,000 in the second quarter, and at the peak in 2005 surpassed 9,400, according to Cross’ data.

Combining the first two quarters, local sales at mid-year 2019 were up about 1.3 percent from the same period last year. Nationally, sales of new homes increased by 2.2 percent in the first half.

Several factors are holding down local new-home sales, Doersching said. Chief among them is that “builders can’t deliver a new product at a price that competes with existing homes” whose values have grown slowly since the housing bust. The S&P CoreLogic Case-Shiller Indices released yesterday showed Chicago-area homes remain at about 15 percent below their peak value in 2007, while nationwide, home values are 13.5 percent above their highest 2007 level.

With the cost of labor and materials rising and some municipalities pushing for development of only higher-priced homes, Doersching said, homebuilders “can’t make it work against the resale market that doesn’t have a lot of upward movement on price.”

Combined with population loss and the shift in buyers’ tastes from outer suburbs toward the city and inner-ring suburbs, the difficulty in competing with existing-home prices has dramatically reduced the local homebuilding industry. In the northern half of Lake County, one townhouse development and six single-family developments are underway, Doersching said. In the early years of the 21st century, before the housing bust, the corresponding numbers were 35 and 50, Doersching said.

The firm’s 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, a popular model in the city, do not get counted.

In the city, Cross counted 77 sales in the second quarter, up from 59 in the same period last year. In the suburbs, there were 1,003 sales, down from 1,049 in the second quarter of 2018.

The increase in the first quarter follows a full-year uptick in 2018, but a Tracy Cross exec notes that the numbers look good in large part because “you’re coming up from a low base,” an extended drought in new-home sales in the Chicago area. 

Dennis Rodkin

Crain’s Chicago Business

May 2, 2019

 

 

 

 

 

 

 

 

Landmark & Property Group

Newly built houses in Bridgeport, along 33rd Place, several of which have sold in the past few months. The house at far left sold for $528,000 in April.

Sales of newly built homes in the Chicago area rose in the first quarter, according to an industry consultant’s data. The increase comes on the heels of a full year when new-home sales also rose.

In the first three months of 2019, builders sold 1,144 new homes locally, up more than 6 percent from the first quarter of 2018, according to the report from Tracy Cross & Associates.

The increase follows a year-end sales tally for 2018 that was up 3.1 percent from 2017.

The first-quarter growth in the Chicago area was stronger than the national figure. Sales of new homes nationwide were up about 4.3 percent in the first quarter from the same period in 2018.

“These numbers look good because you’re coming up from a low base,” said Erik Doersching, executive vice president at Tracy Cross. New-home sales have been meager for a decade, since the housing bust, and early 2018 was particularly weak. At this time last year, the Schaumburg-based firm reported sales were down 17 percent from the first quarter of 2017.

Even so, “we’re glad to see the activity,” Doersching said.

The firm’s 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 the city of Chicago, the report shows 127 sales in the first quarter, up nearly 19 percent from the first quarter of 2018. Leading the increase, Doersching said, was a run of 23 sales in a single Bridgeport subdivision of houses and townhomes.

Called AAA Residences, the homes are around Hillock and Throop streets in an isolated section of Bridgeport tucked between the South Branch of the Chicago River on the north and the Stevenson Expressway on the south. Their prices run from about $400,000 to $650,000. “You can’t get a house at that price anywhere closer to downtown Chicago,” Doersching said. (The houses in the image at the top of this story are in another part of Bridgeport.)

In the suburbs, there were 1,017 first-quarter sales, up almost 5 percent from a year earlier.

The first-quarter sales figure continues what the firm’s chief, Tracy Cross, has referred to in the past as a “low plateau.”

Local new-home sales have been below 4,000 annually for more than a decade, with first-quarter sales in the range of 800 to 1,000 for much of that time. That long, flat line came after the housing bust. In the early years of the 21st century, Chicago-area home sales were generally above 20,000 per year and 3,000 in the first quarter.

Last year’s increase followed a decline the previous year and prolonged the trend of “hovering at below 5,000 sales, where we’ve been for 10 years,” a consultant says. Sales nationally have climbed about 50 percent in that time.

Dennis Rodkin

Crain’s Chicago Business

February 6, 2019

Compass
This newly built home on Grant Street in west suburban Westmont sold for $545,000 in December.

Local sales of new homes rose a bit in 2018 but continued a decade-long trend that an analyst called “our low plateau.”

Developers sold 3,985 new houses, condos and townhouses in the 10-county Chicago area last year, up 3.1 percent from 2017, according to Tracy Cross & Associates, a real estate consulting firm that tracks new-home sales.

The increase followed a decline the previous year and prolonged the trend of “hovering at below 5,000 sales, where we’ve been for 10 years,” said Erik Doersching, executive vice president at Schaumburg-based Cross, which consults for homebuilders. “We haven’t come up off our low plateau.”

In the years before the mid-2000s housing bust, new-home sales in the region were usually more than 25,000 a year, as the chart below shows, or more than five times the annual sales of the past decade.

In a decade when new-home sales locally have been relatively flat, they have grown by about 50 percent nationwide, although they have not yet regained all the ground lost in the housing bust.

Many of the factors holding down Chicago-area sales have stayed in place, and in some cases worsened, over the past decade, Doersching said. They include slow increases in the prices of existing homes,  preventing new construction from being the lower-priced alternative; a shift in homebuyers’ interest away from outlying suburbs where new-home construction has traditionally been strongest; and population losses in the metropolitan area that reduce demand for housing overall.

Another factor is on the supply side, Doersching said. “Builders tend to go with the luxury-priced product” as a way to justify paying the high land prices that prevail in city neighborhoods and close-in suburbs, Doersching said, “but we see a lot of demand at prices below that, for product priced in the $350,000 to $750,000 range.” The mismatch between supply and demand creates “a void,” he said, and if builders could find a way to deliver new homes at those prices in desirable locations, “we could see sales go up to 8,000” per year.

The developers of 1000M, a high-rise condo development designed by architect Helmut Jahn and planned for South Michigan Avenue, rejiggered the plans on seven floors in 2018 to create smaller, lower-priced units, the Cross report notes, and became one of the city’s biggest sellers of new construction.

When pricing at 1000M was first announced in fall 2017, the lowest prices in the building were above $550,000. In 2018 the developers quietly rolled out a new arrangement: The units on floors 41 to 47 of the 74-story tower will be 325 to 850 square feet, and those prices start at $313,000. The result: The developers announced this week that 20 of the lower-priced units have sold. In all, 37 units have sold in 1000M, according to Cross.

“There’s a lack of supply like that” both in the city and suburbs, Doersching said, “but we see that there’s demand.”

The Cross reports track sales at developments of 10 or more units. 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 firm’s study.

In the city, 308 new homes were sold last year in the developments Cross tracks. That’s a decrease of more than 30 percent from 2017. Suburban sales totaled 3,677, last year, an increase of 7.4 percent from 2017.