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.

 

 

TCAI Logo-Squished for Insertion in Excel Header

Tracy Cross & Associates, Inc.

2nd Quarter 2017

The new production home market stumbled during the 2nd Quarter 2017 as builders in the ten-county metropolitan area recorded only 983 sales representing a drop of 19.2 percent from the same time period a year ago.  Homes sold during the most recent quarter translated to a seasonally adjusted annualized rate of 3,681 marking a decrease of 19.9 percent from the first quarter’s annualized pace of 4,596 and a drop of 9.7 percent from 2016’s aggregate volume of 4,075.

In the city of Chicago, new home contract signings during the April-June 2017 period totaled 122, a year-over-year decline of 40.2 percent.  This rather sizable decrease was attributable, in part, to the limited number of moderately priced townhome/condominium developments active in the city during the most recent quarter compared to last year.  For example, the larger-scale 1345 Wabash community in the Near South Side neighborhood, which was a sales leader in 2016 with an average base sales price below $400,000, reached final sellout last year and was not replaced in kind.    Currently, 60 percent of all active attached sector developments in the city support average base prices at or above the $1 million mark.  These developments averaged less than three (3) sales during the most recent quarter on a per project basis.

For the 1st Half 2017, sales in the city of Chicago totaled 249 units, down 24.1 percent from the 328 contracts recorded during the same time period in 2016.  Sales leaders through the first six months included Magellan Development’s Vista-River and Park Residences in the Loop with 26 sales, followed by Illume (LF Development) in the Near West Side with 19 sales; Enclave (2501 Homer LLC) in Logan Square with 16 contracts; and Ritz Carlton Residences (Prism Development) in the Near North Side with 13 sales.

New home sales in the suburban area totaled 861 during the second quarter representing a year-over-year decline of 14.9 percent compared to the 1,012 contracts taken during the 2nd Quarter 2016.  In the single family sector, sales during the most recent quarter equaled 555, a drop of 14.5 percent year-over-year.  In the attached sector, suburban sales during April-June 2017 period totaled 306 representing a decrease of 15.7 percent from last year.

Geographically, the most notable decline in suburban activity occurred in the Northwestern Corridor where contract activity fell from a level of 364 units during the 2nd Quarter 2016 to just 254 units during the most recent quarter.  This 30.2 percent drop resulted, in part, from the sellout or near sellout of several larger-scale developments that were not replaced in the market with similar type developments.  These included three communities by CalAtlantic Homes, i.e. Gilberts Town Center in Gilberts, Tuscany Woods in Hampshire and Talamore in Huntley.

The only broad geographic area posting a net increase in year-over-year sales was the Northern Corridor which improved its overall volume by 35.2 percent during the 2nd Quarter 2017.  This rise in activity resulted from several new community openings including Ryan Homes’ Midlane Club single family development in Wadsworth; Taylor Morrison’s Colfax Crossing townhome project in Des Plaines; and Lexington Homes’ Lexington Pointe townhome community, also in Des Plaines.

While overall suburban home sales during the 2nd Quarter 2017 were down year-over-year, first half totals marked an increase of 5.5 percent bolstered by a stronger first quarter.  For instance, the suburban marketplace recorded a total of 2,031 contract signings during the January-June 2017 period compared to 1,926 sales during the same timeframe in 2016.   In the single family detached sector, sales through the first six months of 2017 totaled 1,319, up 6.8 percent year-over-year.  Among attached sector developments, sales totaled 712 units representing an increase of 3.0 percent compared to last year.

Suburban single family sales leaders during the 1st Half 2017 included six developments with 25 or more contracts led by D.R. Horton’s Carillon at Cambridge Lakes-Resort/Freedom active adult development in Pingree Grove, Pulte’s Timbers Edge community in Woodridge, and D.R. Horton’s Cambridge Lakes-Horizon in Pingree Grove.  Respective sales volumes in these three communities of 36, 29 and 29 were followed by Kettering Estates-75s and 90s (MI Homes) in Lemont with 28 sales, Greywall Club (CalAtlantic) in Joliet with 26 sales, and Deerbrook (Pulte) in Aurora with 25 sales.

In the townhome/duplex/condominium sector, three developments posted 25 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 48 sales, along with two developments by MI Homes in Naperville, i.e. Sedgwick-Georgetown and Mayfair-Uptown, at 35 and 30 sales, respectively.  Following these communities was another MI Homes development, Sagebrook in Lockport, with 23 sales.

Through the full January-June 2017 period individual single family developments in the city of Chicago were selling at a seasonally adjusted, annual average rate of 11.38 units per project while those in the suburbs were moving at a yearly volume of 13.38 per development.  In the townhome/duplex/condominium sector, developments in Chicago proper were selling at a pace of 13.15 per project, while in the suburban area, per project sales during the January-June 2017 period averaged 13.51 on a seasonally adjusted, annualized basis.

The top home building companies in the region during the first half of this year included three that posted 300 or more sales.  D.R. Horton was the market leader with 327, followed closely by CalAtlantic at 321 and MI Homes at 309.  Rounding out the top ten, in rank order, were PulteGroup (236), K. Hovnanian (127), Taylor Morrison (70), William Ryan Homes (62), Ryan Homes (58), Lexington Homes (51), and Toll Brothers (46).

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.

By Michelle Jarboe

The Plain Dealer

June 10, 2017

CLEVELAND, Ohio – After years of behind-the-scenes planning, Playhouse Square Foundation is getting ready to stage its biggest real estate act: Building a 34-story apartment tower at the edge of downtown Cleveland’s theater district.

The nonprofit organization will own the project, a $135 million investment comprised of a 319-unit rental building and an adjacent, 550-space parking garage at East 17th Street and Euclid Avenue. Hines, a global real estate firm, will serve as the development manager, shepherding the project without holding a stake in it.

Playhouse Square’s decision to push forward on a long-held development dream comes during a rental renaissance for Cleveland, which is seeing proposals for new construction pick up as the supply of potential conversion projects – older buildings primed for residential makeovers – thins.

An apartment tower called One University Circle is being built on the city’s east side, and a high-rise called the Beacon is earmarked to rise above a parking garage at 515 Euclid Ave. A handful of developers are trying to stretch Cleveland’s skyline, while others are tying up neighborhood sites for smaller rental deals.

Yet economists across the country are asking how long the rental boom will last. Some markets are showing signs of slowing. And lenders are tempering their approach to apartments, making financing tougher to find.

Playhouse Square executives aren’t worried. They aim to start construction on their tower by the end of the year and open the building by early 2020.

“We have vetted this pretty well,” said Art Falco, chief executive officer for the performing arts district, which owns more than 1 million square feet of real estate and manages a comparable amount of space for other property owners.

“We have a database of about 800,000 people that come to Playhouse Square,” Falco said. “So we have great comfort that a small percentage of those will want to live here.”

Plans for the building show a slim, glassy tower at the southwest corner of East 17th and Euclid, with a parking garage just to the west, next to the Hanna Building.

The site, slightly over an acre, is a parking lot. Playhouse Square has owned most of the property since 1999 and acquired the last piece in 2015.

The nonprofit is putting that land into the apartment deal as equity, along with a little more than $10 million — a gift from the Richard J. Fasenmyer Foundation to Playhouse Square’s ongoing $100 million capital campaign. The district also received $1 million from the last state capital budget to help with construction of a garage.

The garage, with two floors underground and four levels above, will replace 140 surface parking spaces. An amenity deck, with a pool, heated gathering areas and a dog run for the apartment residents, will span the garage roof.

At 378 feet tall, including mechanical floors, the apartment building will be comparable in height to the Hilton Cleveland Downtown. The average apartment will be 880 square feet, though the units will range from one to three bedrooms.

Falco won’t discuss potential rents, though they’re likely to be among the loftiest in the market. Early this year, the average monthly rent in the downtown area was $1,400, according to Reis, Inc., a research firm that tracks market-rate, multifamily properties of at least 40 units. Vacancy was a mere 3.1 percent.

Due to modest job growth and a fairly stagnant number of people living in the region, rents in Cleveland aren’t high enough to make new construction an easy sell. That’s why Playhouse Square is shouldering its tower project in-house, rather than selling it to a developer.

Two local developers – the NRP Group, first, and then Hemingway Development – seriously considered the deal but ultimately passed when they couldn’t make the numbers work.

Hines, which entered the talks late last year, reached a similar conclusion: The project wouldn’t generate enough cash to satisfy an owner-developer. But it still could make sense for Playhouse Square, which views the buildings as a working endowment and will accept more moderate returns.

“For a developer who has a certain cost of capital, it just wasn’t penciling out,” said Brad Soderwall, a managing director at Hines. “But we felt strongly that the product itself would be very well received in Cleveland and could compete well and capture the highest possible rents that could be achieved in Cleveland.”

Playhouse Square derives a third of its revenues from real estate and the rest from theater operations.

“We have the benefit of having a long-term perspective, a very different perspective than most investors,” said Allen Wiant of Playhouse Square Real Estate Services. “We also have a perspective of having a broader portfolio where we can evaluate this return as raising the bar on the rest of our portfolio.”

The nonprofit’s holdings, other than the theaters, generate property taxes.

But the foundation does plan to seek property-tax breaks on the apartment tower and garage. Other major downtown developments have tapped a city residential tax- abatement program and have used tax-increment financing, which shifts part of the new tax revenues created by development to paying off project debt.

HollyAnn Eageny, a Chicago-area consultant who worked on a market study for Playhouse Square, acknowledged that it’s getting harder to finance and build apartments in some cities. And she noted that there are thousands of new units on the drawing board in Cleveland – though not all of them will get built, and the ones that do won’t all open at once.

Her firm, Tracy Cross & Associates, Inc., estimates that this metropolitan area can accommodate at least 500 new apartments each year for the next five years, without pushing the overall vacancy rate above 5 percent.

And, she added, there’s a diverse group of renters, ranging from Millennials to slightly older professionals to downsizing suburbanites, who want to live in a new, efficiently designed building with lots of amenities and easy access to dining and entertainment on foot, by bicycle or via public transportation.

Those are the people that Playhouse Square plans to court.

“Everything in apartments is cyclical,” Eageny said, “and there will come a period of accelerated construction followed by a lull. That’s just the way it has always been. You have not overbuilt and, in fact, you’re kind of catching up because there’s been so little construction for so many years.”

By Dennis Rodkin

Crain’s Chicago Business

May 09, 2017

2017.05.09 crains-pic 1

Photo by Dennis Rodkin Townhouses at Weekley’s Easton Station development in Buffalo Grove.

A couple of years after bringing its Texas-sized ambitions to Chicago’s lackluster suburban real estate market, a national homebuilding firm is scaling back its expectations here.

Since mid-2015, Houston-based David Weekley Homes has sold about 46 homes in Buffalo Grove, Naperville and other suburbs. That’s less than one-third the goal of 150 homes that a Weekley sales executive told Crain’s about in mid-2015.

“Chicago has been a hard-to-predict market,” said Rich Bridges, Chicago division sales manager for the publicly owned builder. “We’ve been disappointed.” At least 30 of the sales, or about three-quarters of them, came in late 2016 and early 2017, he said.

Bridges now says he hopes to sell 75 to 100 homes in the next 18 months.

The retrenchment will take another form too: Bridges said Weekley may try more townhouses, which have done well at its Easton Station project in Buffalo Grove but aren’t usually a big part of the builder’s offerings.

The challenges slowing Weekley down aren’t unique to this firm, they’re built into Chicago’s weak suburban homebuilding market, people outside the firm say.

“They came into this market banking on an upturn that never happened,” said Erik Doersching, executive vice president of Tracy Cross, a Schaumburg-based consultancy for the homebuilding industry. “They’re not the only ones who’ve been disappointed that this market didn’t pick up.” Earlier this month, Cross released a report on the first quarter of 2017 showing that even with several consecutive quarters of improvement, suburban new-home sales remained around one fourth the norm that prevailed between 1994 and 2007, when the housing market crashed.

New-home sales in the suburbs have lagged because of a litany of factors, including lopsided job growth that favors the city’s housing market, two years of population declines, and low prices on existing homes that reduce buyers’ demand for new construction.

Those factors “pose a challenge for everybody” in the industry, said Jerry James, president of Edward R. James, a privately owned builder based in Glenview. While declining to comment directly on Weekley’s situation, he said “it’s gotten tougher here” in the period since the Texas firm arrived in the Chicago suburbs. Along with the other factors, James cited the elephant in the room in any discussion of Chicago’s economy: uncertainty about the financial health of the region and state in the next several years.

Publicly traded national homebuilders generally shoot for about 2.5 sales a month in each of their developments, Doersching said. By his firm’s count, Weekley is getting an average of one to 1.5 sales a month in each of its four developments, in Naperville, Barrington, Glenview and Buffalo Grove. That’s about or slightly below the average for Chicago builders, Doersching said.

“If you’re from Chicago, you think we’re moving at a good pace,” said Bridges, who’s been in the homebuilding industry here since 1988. “But if you’re from Houston, you say, ‘my goodness, that is slower than it is down here in Texas.'”

Weekley has a double-barreled sales strategy in Chicago: it builds subdivisions in infill locations but also builds on single lots or small clusters of lots. It’s unclear how many of the latter Weekley has sold. Bridges suggested the total is between eight and a dozen, though he declined to give specifics, and Cross’ tally does not include small sites.

Chicago’s slow housing recovery may be affecting that side of Weekley, too. On Fort Sheridan Avenue in Highland Park, Weekley cut its asking price by about 23 percent, from almost $1.1 million to below $850,000, before a home went under contract in March, according to listings on Redfin. The sale hasn’t closed yet, and listing agent Jodi Taub of Coldwell Banker did not respond to a request for comment.

Buffalo Grove has been a particular bright spot for Weekley’s subdivision sales, Bridges said. At the firm’s Easton Station development of 15 townhomes that broke ground in April 2016, 12 are sold and the first three owners moved in recently, he said.

Easton Station, where townhomes are priced from $450,000 to $490,000, has done well, Bridges said, because of Buffalo Grove’s strong schools, easy access to a Metra station, expressways and a Mariano’s grocery store, and “a scarcity of new home development.” Also turning Buffalo Grove buyers’ attention to new homes: a lack of existing homes to buy. For about two years, Buffalo Grove has had an especially low inventory of existing homes for sale. For most of the past two years, Buffalo Grove has had enough homes for sale to feed about 2.5 months’ of sales, while a balanced market has four to six months.

Bridges said Easton would be a model for Weekley’s plans in the Chicago area. Townhouses, which Weekley builds mostly in subdivisions targeted to seniors, “is something we’ll do more of here” but in all-ages developments, he said.

By Dennis Rodkin

Crain’s Chicago Business

April 13, 2017

 

Photo by 5a7 LLC A conceptual rendering for houses grouped around common green space at Plum Farms.

Photo by 5a7 LLC A conceptual rendering for houses grouped around common green space at Plum Farms.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A 186-acre tract of northwest suburban farmland could become a series of walkable neighborhoods with city-style three-flats and other housing options that aren’t the suburban norm. It would also include a “tranquility center” with a stream flowing through it.

“It will look like something between the suburbs and the city,” said Anthony Iatarola, who will present the plan, called Plum Farms, to the Hoffman Estates village board April 17 in an effort to get most of the land annexed to that suburb, where about 40 acres already lies.

“This should be a model for the way we want to live now,” Iatarola said. Walking trails would thread through the neighborhoods and around wetlands to the shops, school, platform tennis courts and other amenities that would be constructed over the course of what he estimates as an eight-year buildout.

Photo by 5a7 LLC A conceptual rendering of the development's 'tranquility center.

Photo by 5a7 LLC A conceptual rendering of the development’s ‘tranquility center.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Iatarola, a partner in the Plum Farms development partnership called 5a7, said his father bought the land in 1959, when he saw suburban development headed northwest. Iatarola, formerly an attorney and head of the Wirtz family’s real estate operation, now runs a small industrial company and said the Plum Farms land is owned by his family members along with a few other people.

His firm’s proposal, which calls for more than 1,000 homes and at least 155,000 square feet of shops and offices surrounding 70 acres of wetlands, would occupy a site at the northwest corner of state routes 72 and 59. The other three corners are developed or underway, and just southwest is Prairie Stone, the corporate park around the Sears headquarters.

That leaves the Plum Farms site as “the hole in the donut, and you’ve got to do something special,” said John McLinden, whose Skokie-based development firm, StreetScape, consulted on the land plan, which includes houses that face common green spaces, a community greenhouse and a shops building with an outdoor ice rink out front. Streetscape developed the new urbanist-style projects School Street in Libertyville and Floral Avenue in Skokie along similar lines, though they were far smaller.

Plum Farms “will be School Street on steroids,” Iatarola said. It includes a commercial first phase of shops, offices and an outdoor ice rink, which his firm would build at the parcel’s southeast corner near the major intersection, and multiple residential phases to be built by other firms.

LARGEST HOFFMAN PROJECT SINCE 1990s

With plans for 1,035 housing units, the residential part of Plum Farms would be the largest project proposed in Hoffman Estates since the late 1990s, said village manager James H. Norris. The 1999 proposal for University Place contained 850 houses and single-family homes as well as commercial and educational facilities on 325 acres, and another 193 residential units were added in a separate annexation in 2005.

In plans that Iatarola showed Crain’s but would not allow to be published, the land has housing around three sides, built in various configurations including three-flats (where, in traditional Chicago settings, the building’s owner lives in one and rents out the other two units), houses grouped around common courtyards and three-story townhouses for rent.

In presentation documents, Iatarola refers to these and others as “the missing middle” types of housing in the Hoffman Estates and Barrington-area market, where houses and mid-rise apartment buildings predominate. Iatarola said an apartment developer is ready to roll with seven buildings containing 253 rental units on the project’s southwest corner “as soon as we have all the approvals from the village,” but he would not identify the firm.

Photo by 5a7 LLC A conceptual rendering of the commercial property to be built at Plum Farms' southeast corner.

Photo by 5a7 LLC A conceptual rendering of the commercial property to be built at Plum Farms’ southeast corner.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The vision of a mix of housing types “is a strategy that can keep you alive out there,” said Tracy Cross, principal of suburban development consulting firm Tracy Cross & Associates. His firm is not connected to the Plum Farms plan.

Sales of high-end homes have been slow in the northwest suburbs for more than a year, and construction of new homes even slower. “With those different types of housing, you’re not sitting waiting to sell one or two houses a month on your 180 acres,” Cross said. “That could take you 500 months, which is infinity.”

Cross said a residential use for the land might be a good plan, considering that the former AT&T campus, also in Hoffman Estates, has 1.6 million square feet of commercial space standing empty. The long, slow death spiral of Sears Holdings also could end with that firm’s behemoth facility next door becoming available.

The types of housing are all only concepts for now, Iatarola said. Because each phase of development will require separate approval from the village, “I presume that what eventually gets built will be dictated by the market and what is selling on that site,” Norris said.

The Iatarola family sold some of its Hoffman Estates land off in the early 2000s, including 42 acres south of Higgins Road, where the 400,000-square-foot Poplar Creek Crossing shopping center was completed in 2006. Of the larger remaining chunk north of Higgins, he said, “I’ve been dreaming of what I could build here since I was a kid.”

For nearly six decades, the family has rented most of the land to farmers and other users, he said. The family long ago sold off his father’s other postwar real estate investment, tracts of land northwest of Tucson.

 

By Dennis Rodkin

Crain’s Chicago Business

January 26, 2017

2017.01.26 crains article-new home sales up in 2016 after two years of declinesNew-home sales rose in the Chicago area for the first time in three years, although the total was “unimpressive,” according to a longtime analyst.

Developers sold 4,124 houses, condos and townhouses in the 10-county Chicago metropolitan area last year, up 10.2 percent from 2015, according to a report from Tracy Cross & Associates, a real estate consulting firm in Schaumburg.

Despite the increase, 2016 sales were almost 7 percent below 2013’s tally, which was followed by two years of dips. In all, for 2008 to 2016, builders have sold an average of 3,942 new homes a year, Cross reported, or about one-sixth the average for the previous dozen years. Between 1995 and 2007, Chicago-area builders sold an average of over 24,300 new homes a year.

“It’s good to see the number go up again, but it’s unimpressive,” said Tracy Cross, the head of the firm.

Nationwide, sales of new homes rose 12.2 percent in 2016 over the year before, the U.S. Census Bureau and the Department of Housing & Urban Development reported this morning. An estimated 563,000 new homes were sold in the U.S. last year, up from 501,000 in 2015.

Cross’ reports cover only developments with 40 homes or more, so they don’t include homes on scattered single lots in city neighborhoods. A year-end total for that category of new construction is not yet available.

For the city homes covered in Cross’ report, the increase in sales was far larger than the suburbs’ uptick. The year-end total in the city, 577, was up 26.3 percent from 2015’s 457.

In the suburbs, the increase was 8 percent, from 3,284 sales in 2015 to 3,547 in 2016.

More suburban homes aren’t being built for several reasons, Cross said. One is the allure of living in the city for younger buyers, who in past years were inclined to head for relatively inexpensive new construction on suburban sites. Another, he said, is people who leave Illinois because of its financial situation.

The houses they leave behind “add to the competition” that new houses would face, he said.

There’s a silver lining in the low sales figure, Cross said. For the first time in several years, four homebuilding firms had more than 350 local sales each last year.

“It’s a far cry from when they were doing over 1,000 sales a year,” Cross said, “but 350 is a strong, sustaining number that means some of the national builders will keep their presence in Chicago and not bail.”

The four firms were CalAtlantic Homes, which sold 658 homes locally during the year, D.R. Horton/Cambridge Homes (595 sales), Pulte Group (434) and MI Homes (387).

By Dennis Rodkin

Crain’s Chicago Business

October 24, 2016

 

rise-in-local-new-home-sales-picturePhoto by D.R. Horton This newly built house on Chesapeake Lane in Naperville sold recently for just under $415,000.

Local new-home sales rose more than 27 percent in the third quarter, putting builders on track for their second-best year of the post-bust era, according to new data.

For the first three quarters of 2016, new-home sales are up 9.2 percent in the Chicago area compared with the same period last year, according to Tracy Cross & Associates.

“There’s a ray of hope in the numbers,” said Tracy Cross, head of the Schaumburg-based consulting firm, which compiled the data.

While the figures are still “so low” compared to the homebuilding heyday of decade ago, Cross said, “at least we’ve got our feet in the starting blocks.”

Homebuilders made 1,033 sales during the third quarter, up from 812 in the same period in 2015, according to data from Cross’ firm. The data reflect construction by “production builders” in developments larger than 20 homes; it overlooks individual homes on scattered sites, such as those being built in many Chicago neighborhoods.

For the first three quarters, the local sales total is 3,299, compared with 3,021 in the same period last year.

At the current pace of sales, builders are on track to sell about 4,136 homes in the region in 2016, which would be the best year-end total since 4,415 in 2013. From 1998 through 2006, sales totals were above 20,000 every year. Since 2010, the year-end total has been above 4,000 only once, in 2013.

This year’s third-quarter increase followed the second quarter’s year-over-year increase of 12 percent. That uptick was almost entirely the result of sales at the 92-story Vista Tower, designed by architect Jeanne Gang.

The third quarter’s strength was suburban sales, Cross said. “You had strong activity in Naperville, New Lenox, Joliet,” he said. “That’s a more traditional concentration for our region.”

Suburban new-home sales totaled 912 during the quarter, up almost 38 percent from 662 in third-quarter 2015. In the city there were 121 sales, down 19.3 percent from 150 in the same period last year.

 

By Dennis Rodkin

Crain’s Chicago Business

October 10, 2016

 

Naperville once seemed a rich opportunity for homebuilders eager to sell a four-bedroom, quarter-acre slice of the American Dream for $700,000 and up. Then, in 2006, the bottom fell out, and Ashwood Park—only one-third built—ground to a near-halt. Ten years after the crash, it’s still a monument to the limits of suburban sprawl.

In the summer of 2006, there were few, if any, clouds hanging over the plan to build Ashwood Park on about 210 acres west of 248th Street in Naperville.

The western suburb was in the midst of a growth spurt that was forecast to bring more than 83,000 new jobs to the town by 2030, generating demand for homes. The Ashwood Park site lay in the southwesterly path of growth in Naperville, which since the middle of the 20th century had been expanding, seemingly inexorably, one subdivision at a time. And Money magazine had recently dubbed Naperville the third-best place to live in America.

“Naperville was bulletproof,” Steve Dano recalls. Dano heads sales at Crestview Builders, which was poised to develop the northern half of Ashwood Park while Macom did the southern half, for a total of 504 homes with prices that were expected to start in the $700,000s and go past $1.5 million. The two companies had decades-long track records building homes and neighborhoods in Naperville through good times and recessions.

Then, starting in September 2006, the housing crash hit.

A decade later, at least 150 of the lots at Ashwood Park are empty, homes built since the crash come in at price points as much as 40 percent below those built in the heady days of 2006, and the handsome $7 million Ashwood Park clubhouse, built to provide recreational facilities to the occupants of several hundred high-end homes, is staffed only eight hours a week.

“Naperville was bulletproof,” recalls Steve Dano of Crestview Builders, developer of the northern half of Ashwood Park.

“I never would have expected this in 2006,” Dano says. He’s not the only one. What first appeared to be a nationwide tap on the brakes after a few years of dizzying growth in home prices turned out to be a steep downslope that took with it the home equity of millions of homeowners, and the sunny futures of many homebuilding companies.

The Chicago area has been one of the slowest regions nationwide to recover from the downturn, and 10 years after prices peaked in September 2006, the S&P Case-Shiller Index reports that across the region, single-family home prices here were about 18 percent below the peak as of July, the latest data available. And since the downturn, the region has struggled with one of the nation’s heftiest foreclosure burdens—at the depth of the crisis, in 2010, nearly 139,000 Chicago-area homes were in some stage of foreclosure.

Around that time, Ashwood Park looked like a modern ghost town, with one-third of its planned 500 homes built and vast stretches of weedy empty lots lining most of its paved streets. “It was sad to see,” says Terri Christian, a Coldwell Banker agent in Naperville. Ashwood Park “was supposed to be a stunning place, but it was deserted.”

The recovery here was impeded by the Chicago area’s high general unemployment rate during the down years and the low rate of job creation since, as well as its slow processing of the wave of foreclosures because Illinois requires a judge’s involvement in resolving them. Rising property taxes and a huge public pension debt have also played roles in holding back demand. The fastest-recovering cities have largely been tech hubs and warm-weather places—or both.

The Chicago area’s recovery has accelerated a bit this year, but the gap between where the market was at its pre-crash high and where it stands now yawns like a chasm. “The fall that came after that peak changed the landscape for housing and what we expect from it,” says Geoff Smith, executive director of DePaul University’s Institute for Housing Studies.

The players whose expectations have gone through perhaps the most painful adjustment are those who bought homes at the peak and have to sell at well below that level.

That’s been a decade-long story all over the region, and Ashwood Park is not exempt. A home on Corktree Road that sold for slightly over $1 million during the peak-price month, September 2006, sold last May at 32 percent off.

The crash changed the prospects for Ashwood Park, and for the firms building it.

The south-half partner, Macom, is gone, collapsed under a series of foreclosures of its projects in Oswego, Naperville and elsewhere. Macom had been in business since 1949 (although under that name only since 1960) and built more than 30 Naperville subdivisions before closing down sometime around 2010, according to Bill Novack, director of transportation, engineering and development for the city.

Much of Macom’s share of Ashwood Park is now in the hands of Ryan Homes, with prices starting at under $510,000—about 30 percent below the starting price Macom announced for the site in late 2005.

At the height of the building boom, Novack estimates, there were 88 homebuilders working in Naperville. “Everyone was building homes then,” he says. “It was the best business to be in.” The bust took that figure down to “maybe a dozen,” Novack says, though in recent years it’s grown back to around 30. Homebuilding has been in a trough throughout the region, not only in Naperville. Builders sold 25,105 new homes in the Chicago area in 2006, according to Schaumburg-based industry tracker Tracy Cross & Associates, and in 2015 sold less than 15 percent of that.

Ashwood Park’s north-half partner, Crestview, in 2006 expected to be done with the project by 2011 or so. It’s now about 90 percent finished, says Dano, Crestview’s sales chief. “We should be out of there in the next two years,” he says. That would mean what was once slated to be a five-year project wraps up in 12 years.

“You would have expected those guys to be sold out in a few years,” Novack says. “That’s how it had been for a long time in Naperville. You’d build something, sell it out easily, and go build something else.”

Crestview dialed back its expectations for Ashwood Park in at least two other ways: It sold off half the 251 lots it owned in the development, Dano says, and is selling what it builds at prices well below the original goals. A decade ago, Crestview’s homes in the neighborhood were mostly selling for more than $800,000 and up past $1.2 million, he says, “but now the norm is between $600,000 and the $800,000s.” Crestview advertises that it can sell homebuyers a lot and the house on it “in the upper $400,000s.”

Several builders bought lots from Crestview and are now building homes there, though the price points are lower than what was envisioned 10 years ago.

Early-years buyers at Ashwood Park took a hit when it came time to sell. Among the biggest: the sellers of an 11,000-square-foot house on Teak Circle. They bought it in 2007 for $2.46 million and sold it five years later for less than half that, $1.05 million. The home sold again this summer for just under $1.2 million. Another Ashwood Park home from 2007, a 4,600-square-footer on Chinaberry Lane that went for $924,000 that year, resold in July for $750,000.

The Chinaberry sellers “were very disappointed,” says Rosemary West, the Re/Max Professionals Select agent who represented them. (They decline to comment.) “We did everything but stand on our heads to sell at a better price, but it’s not happening at Ashwood Park.”

There were 61 homes for sale in Ashwood Park at the start of October, 11 of them existing homes and the rest either under construction or proposed. The existing homes were priced from the $800,000s to over $1 million, while the new and proposed houses were mostly from the low $500,000s to the $800,000s.

West says the latter-years shift toward less expensive homes in the neighborhood “definitely makes it feel like a different place than people were buying in” when Ashwood Park opened in 2006. “The exclusivity isn’t there.”

Of course, buyers benefit from the lower prices. Christian, the Coldwell Banker agent, last year represented buyers who got a newly built five-bedroom, 4,300-square-foot home on Shumard Lane in Ashwood Park for $638,500.

“Ten years ago, that would have been a million-dollar home,” Christian says. “It’s still hard to believe they got all that home for that kind of money.”