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Tracy Cross & Associates, Inc.

1st Quarter 2019

 

There were 1,144 new production home sales in the Chicago metropolitan area during the 1st Quarter of 2019, representing a 6.2 percent increase from the same time period a year ago. When seasonally adjusted at an annual rate (SAAR), production builders reached a volume of 4,054 units during the January-March 2019 period, a 5.4 percent increase from the 3,847 seasonal rate seen last quarter. Sales were distributed between 705 single family homes and 439 in the attached sector, showing modest increases in year-over-year volumes of 9.5 and 1.4 percent, respectively.

The city of Chicago recorded 127 sales, in developments with 10 units or more, reflecting an uptick of 18.7 percent over the 107 sales seen during 1st quarter of 2018. The city’s increase in contract activity can be partly attributed to a number of newly launched developments located outside of the immediate city core, at price points under $1 million.

Sales leaders in the city of Chicago included AAA Residences, a new development in Bridgeport that wrote 23 contracts during the first three months of 2019, distributed between 13 single family homes and ten townhomes.  Prices at this community range from roughly $400,000 to $650,000.  Following AAA Residences was 1000M, which sold 20 units during the quarter, while recently introduced condominium developments in Logan Square, The Palmer (nine sales) and Triangle Square (seven sales), as well as Grace Pointe (seven sales) located in North Center, rounded out the best sellers.

The suburban area recorded 1,017 sales during the first three months of 2019, witnessing a slight increase of 4.8 percent over the 970 sales recorded a year ago. Sales were distributed between 691 single family homes and 326 duplexes, townhomes and condominiums.

Suburban sales leaders included D.R. Horton’s multiple product lines at Cambridge Lakes in Pingree Grove with 33 total contracts, followed by Lennar’s Indian Ridge community in Minooka with 28 sales. Pulte Home’s two remaining series at Atwater in Naperville combined for 21 sales and the company’s new active adult community in Bolingbrook, Liberty Green, recorded 20 contracts during the first three months of 2019.

Despite relatively flat year-over-year sales in suburban Chicago as a whole, a notable geographic has been taking place. For example, the number of active new construction developments continues to decrease in the Northwestern Corridor as communities sell out and are not replaced in kind.  Specifically, there were 61 developments marketing new housing units in the northwestern suburbs during 1st Quarter of 2019, 14 less than during the same time period last year when 75 communities were active.  As a result, the Northwestern Corridor’s regional share has shrunk. The 214 contracts recorded during 1st Quarter 2019 represented a 21.0 percent market share of suburban sales activity, which compares with a 29.1 market capture rate seen during the 1st Quarter 2018.

During the same time period, the once robust Southwestern Corridor has been moving back into a more prominent position.  For instance, active developments in southwest suburban Chicago recorded a relatively impressive 299 sales during the first three months of 2019, capturing 29.4 percent of the suburban market. This compares with a 20.8 percent market share during 1st Quarter 2018 and a 17.7 percent share during the same period in 2017.  Driving sales in the Southwestern Corridor is price.  During the 1st Quarter 2019, nearly 70 percent of all production home sales occurred at price points below $350,000.

Four individual home building companies registered 125 or more sales during the quarter.  Lennar/CalAtlantic reported the highest volume at 209 followed by D.R. Horton/Cambridge and Pulte Group with 168 and 151 sales, respectively.  Rounding out the top four was MI Homes with 126 total sales.

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.

 

 

Dennis Rodkin

Crain’s Chicago Business

August 13, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

Dennis Rodkin

Crain’s Chicago Business

August 08, 2018

 

 

 

 

 

 

 

 

 

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

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

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

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

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

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

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

Earlier:

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

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

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

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

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

Earlier:

New-home sales fall in 2017

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

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

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

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

Read more:

Where homes are selling fastest

By Dennis Rodkin

Crain’s Chicago Business

April 25, 2018

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

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

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

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

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

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

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

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

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

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

 

By Dennis Rodkin

Crain’s Chicago Business

February 01, 2018

Photo by Thinkstock

Photo by Thinkstock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

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

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

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

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

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

More:

Chicago’s surprising strengths in the Amazon HQ2 race

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

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

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

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

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

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

SPACE, INFRASTRUCTURE

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

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

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

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

CTA, METRA

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

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

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

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

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

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

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

By Dennis Rodkin

Crain’s Chicago Business

January 31, 2018

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

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

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

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

2018.01.31 New home sales fall in 2017-pic 2

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

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

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

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

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

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

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

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

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

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

By Dennis Rodkin

Crain’s Chicago Business

October 24, 2017

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

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

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

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

“The main problem is supply,” Cross said.

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

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

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

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

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

 

By Dennis Rodkin

Crain’s Chicago Business

August 17, 2017

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

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

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

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

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

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

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

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

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

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