By Dennis Rodkin

Crain’s Chicago Business

May 19, 2016

city-new-home-sales-jump-picture

Photo by Dennis Rodkin

Each of these newly built homes on Race Street sold for $870,000 this spring, one (right) in February and the other (left) in March.

When she went house-hunting earlier this year in Ukrainian Village and other nearby neighborhoods, Hilary Cerbin looked at a mix of existing and newly built homes before zeroing in on new construction.

With a newly built house, she said, “I could move in to a clean slate,” while among the existing homes, “I didn’t look at a single home where I wouldn’t have to fix something, change something.”

Cerbin, who ultimately bought a new four-bedroom house on Race Street in Ukrainian Village in mid-February, was among many Chicagoans buying newly built homes this year.

In the first four months of 2016, builders sold 449 new houses, townhouses and condominiums in the city, the records of Midwest Real Estate Data show. That’s an increase of more than 34 percent from the 334 sales in the corresponding period in 2015, and10 times the increase in sales of all types of homes—new and old. By the end of April, city home sales totaled 7,707, according to MRED’s data, or about 3.4 percent ahead of last year’s 7,453.

“New construction is the hottest thing right now,” said Nick Gasic, the Fulton Grace Realty agent who represented Cerbin. “Everybody’s looking for a house with all-new appliances and warranties, and a contemporary style.”

That doesn’t necessarily mean angular or minimalistic contemporary architecture—although the look is popular in new city homes—but “the layout, with the open living and dining room upfront and the family room off the kitchen, that you can’t find in an older house,” Cerbin said.

New construction has filled an inventory gap in the city. With a large proportion of households still underwater on their mortgages, owners of existing homes have been reluctant to put them on the market. The city’s inventory of homes for sale began the year epochally tight and, in the case of single-family homes, has grown ever tighter in the months since.

Meanwhile, many builders are in the opposite position: They bought land at depressed prices during and after the recession “and stockpiled it until the market was ready for them to build,” said Steve Jurgens, managing broker at 312 Estates. Jurgens has represented several new-construction homes that sold this spring, including a pair by Mangan Builders on Hoyne Avenue in North Center. The two five-bedroom homes sold for $1.2 million and $1.21 million in April.

The share of city sales that were new construction rose to 5.8 percent this year, from 4.4 percent last year. It’s a small slice of the total, but that’s new construction’s share of all homes sold all over the city. New houses and condos are densely concentrated in booming North Side neighborhoods like Logan Square, Avondale and West Town; their share of sales in those areas is clearly larger, although difficult to calculate using MRED’s data.

Because some builders don’t list their products on the multiple-listing service or don’t list all of them, the actual number of sales may be larger than the total of 449 homes given above.

CONTRAST TO SUBURBS

The increase is counter to what’s going on in the suburbs, the traditional center of new-home-building. Sales of new homes dropped by more than 12 percent in the first quarter of the year, according to Tracy Cross & Associates.

“There’s much stronger employment growth concentrated in the city than we’re seeing in the suburban marketplace,” said Tracy Cross, principal of the firm. On top of that, “you’re seeing a transitional shift of what we could call the older millennials, who are seeking an urban environment.”

Builders and agents both say land and construction prices have been rising as a result of the boom in sales.

Jurgens said that the asking prices of buildable lots in desirable places like Bucktown and the Southport Corridor have risen by about $200,000 in the past few years.

Mike Skoulsky, a partner at KMS Builders, said that three years ago, wood flooring “cost $4.50 a square foot, for the wood and the install. Now we’re paying up to $7 a square foot.”

KMS has built and sold nine condos and three single-family homes in the city in the past year, including a pair of contemporary twins on Honore Street in Bucktown. One, featured in Crain’s in December, sold for $1.6 million in March, and the other sold at the same price last week.

 

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