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.

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