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Tracy Cross & Associates, Inc.

3rd Quarter 2020

 

Continuing the upward trend that began during the 2nd Quarter 2020 when new home sales in the Chicago region were up nearly 15 percent year-over-year, builders during 3rd Quarter 2020 wrote 1,448 contracts, translating to an impressive 41.4 percent increase compared to the 1,024 sales recorded during the same period in 2019. And, despite a lackluster first quarter, sales during the first nine months of 2020 reached 3,729, an increase of 15.1 percent when cast against the 3,240 contracts written during the same timeframe in 2019.

Through the first three quarters of the year, the region is on pace to record an annual volume approaching 4,900 units, a level not seen since 2008 when builders sold 6,361 homes before the economic downturn that followed.

The suburban marketplace was fully responsible for gains recorded during the 3rd Quarter 2020 with its 1,397 sales reflecting a year-over-year increase of 48.6 percent.  In the city of Chicago, just 51 sales were recorded during the July-September 2020 period, a drop of nearly 40 percent compared to the same three-month period in 2019.

As the Covid-19 pandemic persisted through the 3rd Quarter 2020, and lifestyle restrictions wore heavily upon urban dwellers in the city, buyers continued their shift from Chicago’s high density neighborhood areas to the suburbs.  Also contributing to the significant uptick in suburban sales was an extremely favorable interest rate environment, coupled with the realization that property tax increases in Cook County were on the horizon.

While the southwestern and western suburbs continued to post strong sales performances during the 3rd Quarter 2020, each rising more than 30 percent year-over-year, the Northwestern and Northern Corridors recorded even more impressive increases.   For example, the northwestern suburban area registered 393 sales during the recent quarter, doubling its sales volume from a year ago.  In the Northern Corridor, sales jumped 51.5 percent on a year-over-year basis.

Throughout the entire suburban marketplace, price was a driving force as most single family homes sold at price points below $350,000, while the majority of townhome activity occurred at price levels below $300,000.

D.R. Horton led all production home builders with 665 sales during the first nine months of 2020, followed closely by Lennar with 661 sales and M/I Homes with 535 net contracts.  Rounding out the top six were Pulte Homes with 361 sales, Ryan Homes at 298, and K. Hovnanian Homes at 210.  These six national homebuilding companies accounted for nearly 75 percent of all new construction home sales in the region during the January-September 2020 period.

Leading developments in the suburbs included D.R. Horton’s four collections of homes at Cambridge Lakes in Pingree Grove with a combined 204 year-to-date sales, followed by Lennar’s Stonegate community in Manhattan with 96 total contracts.  Pulte’s Wagner Farms development in Naperville and Lennar’s Woodlore Estates neighborhood in Crystal Lake both recorded 71 sales through the close of the 3rd Quarter 2020, with Raintree Village in Yorkville giving Lennar another 68 sales during the nine-month period.

Sales leaders in the city of Chicago through the 3rd Quarter included Belgravia’s CA6 condominiums with 24 contracts, followed by 5748 Hermitage with 22 sales, Lexington Village at Avondale (15), Tribune Tower Residences (13) and Peoria Green (10).

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.