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Tracy Cross & Associates, Inc.

4th Quarter 2018

 

Production home builders in the Chicago metropolitan area generated 3,985 new home sales in 2018, representing a 3.1 percent increase over the 3,865 sales recorded in 2017.

This modest increase occurred despite continued weakness in the city of Chicago, where sales dropped for the third consecutive year. Specifically, developers in Chicago sold 308 units in 2018, down 30.3 percent compared to the 442 total sales recorded in 2017, and 43.4 percent below volumes posted in 2016 when 544 contracts were signed.  The 308 sales in 2018 also represented the lowest level of activity in the city of Chicago since 1994 when Tracy Cross & Associates Inc. first began tracking sales region-wide among new construction developments with ten units or more. The previous low was recorded in 2014, when 409 sales were recorded during the year.  Contributing to city’s downward spiral is the absence of moderately priced new construction townhome/condominium product.  For example, among the 31 multi-family for sale developments active in the city during the 4th Quarter 2018, 70 percent supported average offering prices above the $1 million mark, with the average standing at $2.37 million across the group.

Builders in the suburban area, however, registered 3,677 net contracts in 2018, representing a 7.4 percent uptick from the 3,423 sales recorded in 2017. Sales were split between 2,412 in the single family sector and 1,265 among multi-family forms, which reflected increases of 4.5 and 13.5 percent, respectively, over 2017 volumes.

D.R. Horton’s multiple product lines at Cambridge Lakes in Pingree Grove led the suburban market with 196 sales in 2018, followed by the two product lines at Carillon at Cambridge Lakes, also in Pingree Grove, combining for 122 total contracts. Lennar’s Andare collection at Glenloch in Algonquin came in a distant third with 64 sales in 2018, followed by D.R. Horton’s Fall Creek in Joliet (62 sales), Ryan Homes’ Buckingham Place in Des Plaines (58) and Pulte Group’s Uptown at Seven Bridges in Woodridge (55).

In the city of Chicago, the 1000M condominium tower led all new construction communities in 2018 with 37 sales.  This was achieved, in part, by the developer’s reconfiguration of seven floors in the building to include micro units in lieu of traditional condominium layouts. The new portfolio of micro plans, with starting prices at $295,000 for a 309 square foot residence, created a whole dollar price position $275,000 lower than the previous lowest priced unit in the building, a 926 square foot one bedroom offering at $570,000.  The Hampdens and Illume were the only two other developments in the city of Chicago to record more than 20 sales in 2018.

Publicly held home building companies continued to dominate the Chicagoland marketplace with the top five capturing a 62.3 percent market share with 2,483 sales. D.R. Horton/Cambridge led with 745 contracts in 2018, followed by Lennar/CalAtlantic with 618, Pulte Group with 457, M/I Homes at 422 and Ryan Homes with 241.

Geographically, the Southwestern DuPage County/Aurora/Kendall County submarket continued to see the most new construction home building activity with 837 sales in 2018, or 21 percent of the market. This area was followed by the Southwestern Corridor with 734 sales (an 18.4 percent market share) and Northern Fox Valley with 632 sales (a 15.9 percent market share).  Two individual municipalities recorded 300 or more sales for the year including Pingree Grove at 318, followed by Naperville with 302 signed contracts. Rounding out the top five municipalities were Joliet at 202 sales, Yorkville at 159, and Des Plaines with 130.

The city of Des Plaines is a notable addition to this list. The community’s 130 sales in 2018 represented a 271 percent increase over the 35 sales registered in 2017.  The reason – three moderately priced townhome developments were introduced last year, each of which performed extremely well.

Since 2012, the number of active new home developments in any given year has hovered around the 300 level region-wide ranging from a low of 287 in 2013 to a high of 331 in 2016 – well off the peak of 1,285 active developments in 2007.   However, while supply-side constraints have been clearly evident for six years in a row, the top builders have been much more aggressive relative to new community openings.  For example, during the 4th Quarter 2018, D.R. Horton/Cambridge, Lennar/CalAtlantic, Pulte Group, M/I Homes and Ryan Homes were actively selling new product in a combined 116 developments, up 45 percent compared to their 80 active developments six years ago.  In other words, while the market continues to show no significant increase in supply overall, the top builders are expanding their geographic representation.