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.

 

by Peter Thomas Ricci

Chicago Agent Magazine

May 10, 2016

 

See our chart below for the top-selling homebuilders in Chicagoland in Q1 2016 by net contract signings, according to the latest “Regional Executive Summary” report from Tracy Cross & Associates, Inc.

Click here for more perspective on new construction in Chicagoland, and click here to see where contract signings are the highest.

Top selling homebuilders table-total, sf, mf

by Peter Thomas Ricci

Chicago Agent Magazine

May 5, 2016

 

See our chart below for the top-selling new construction markets in Chicagoland in Q1 2016, according to the latest “Regional Executive Summary” report from Tracy Cross & Associates, Inc. Click here for more perspective on new construction in Chicagoland.

Top selling new construction markets table

 

 

 

by Peter Thomas Ricci

Chicago Agent Magazine

April 29, 2016

 

The “Regional Executive Summary” report from Tracy Cross & Associates, Inc. is among the most detailed analyses of Chicagoland’s new construction market.

Below, we have collected the four more important findings from the report:

1. New Home Sales are Down – Through 2016’s first quarter, new home sales in Chicagoland totaled 1,008, which is an 8.3 percent decline from a year ago. That decline was driven by a marked fall in new single-family sales, which dropped 14.2 percent to 563; new townhome/condo sales, meanwhile, were up 0.5 percent to 445.

2. Still a Suburban World – Although the city of Chicago’s new construction markets performed better than the suburban markets in the first quarter – sales rose 34.4 percent, compared to a 12.2 percent decline in the suburbs – the overall volume of new construction sales are still heavily concentrated in the suburbs. Of the 1,008 sales in the first quarter, 883 (or 87.6 percent) were in suburban areas.

3. Three Markets – Chicagoland’s new home sales were most prevalent in three markets: Northern Fox Valley, where there were 183 sales (down 4.2 percent from last year); Southwest DuPage/Aurora/Kendall, which had 185 sales (down 8.9 percent); and the Southwestern Corridor, which includes Plainfield, Joliet and New Lenox and had 182 sales (down 5.7 percent).

4. A Rising Marketplace – Despite the disappointing performance in the first quarter, Chicagoland’s new construction markets have risen considerably in the last three years. For the whole region, new homes sold for an average price of $344,220 in the first quarter, up 21 percent from Q1 2013; similarly, average square footage is up 6.12 percent to 2,653, and price per square foot is up 14.03 percent.

Although average sales price has risen more aggressively in the city – up 21.06 percent to the suburbs’ 11.49 percent – several suburban areas have still registered considerable increases in price. In the Northern Corridor, for instance, prices are up 26.13 percent to $414,902, while in the Northwest Corridor, they’re up 35.46 percent to $342,806.

By Dennis Rodkin

Crain’s Chicago Business

April 26, 2016

 

1q16 crains pic

Local new-home sales fell in the first quarter as builders continued to face stiff competition on pricing from existing homes, according to an industry consultant.

Builders sold 1,008 new homes in the Chicago area in the first quarter, down 8.2 percent from 1,099 sales in the same period in 2015, according to data from Schaumburg-based consulting firm Tracy Cross & Associates.

Full-year sales fell in 2014 and 2015 and are forecast to drop again. Homebuilders are on pace to sell 3,571 homes this year, 5.4 percent fewer than last year’s total of 3,774.

The 2016 tally is forecast to be the lowest since 2012, which ended with 3,467 sales.

“The competitive nature of the resale market is strong,” said Tracy Cross, principal of the firm.

Homebuilders typically do best when they can provide a lower-cost alternative to existing homes, but the slow recovery of prices on the resale market is “absolutely making that hard to do,” Cross said.

Local single-family prices were 1.8 percent higher in February than a year earlier, compared with an increase of 5.4 percent for a 20-city index, according to the S&P/Case-Shiller Home Price Indices released this morning. In most of the Chicago area, home values are still below where they were a full decade ago.

Ten years ago, when home prices were rising fast, Chicago-area homebuilders sold 8,094 homes in the first quarter of 2006, according to the Cross report—more than eight times the sales in the first few months of this year. The BEST first-quarter performance was 8,951 sales in 2005.

After a post-crash plunge, homebuilders’ local sales notched sizable increases in every quarter during 2012 and 2013, but since early 2015 they’ve been down seven out of nine quarters.

Cross said the two-year rally was marked by builders “putting small subdivisions on infill locations” in close-in suburbs, but “with those programs sold out, they’re not finding more infill land that’s priced where they need to be.”

Cross’ data covers only developments of 40 homes or more, so it does not capture the boom in construction of individual single-family homes in the city, he acknowledged. Nevertheless, his numbers hint at what’s going on in the city, showing an increase of nearly 35 percent in city sales, from 93 in the first quarter of 2015 to 125 in the same period this year.

Suburban sales were down more than 12 percent in the first quarter, to 883 from 1,006 in first-quarter 2015.

By John T. Slania

Daily Herald
Contributing writer

April 4, 2016

 

 

Luxury apartments were relatively new phenomena in the suburbs in 1969, the year International Village opened separate complexes in Lombard and Schaumburg.

The target tenants were “swinging singles,” young, fun-loving professionals who could rent a one-bedroom apartment for $195 a month.

A newspaper advertisement spelled out the International Village amenities: “dramatic sunken living room, formal dining room, carpeting (even in the kitchen), avocado kitchen appliances … sauna spa and full-equipped health club to keep your formidable form.”

Other apartment developers followed suit, and the 1970s became known as the era of the suburban apartment boom.

But it wasn’t long before the “swinging singles” settled down, got married, had families and bought houses. Suburban apartment development slowed to a crawl.

Now, after decades of dormancy, new luxury suburban apartments are again being built at a furious pace.

Ironically, the rebirth is being led by some of the old “swinging singles” who are now known as “empty nesters.” Their children, the Millennials, are likely interested in renting, as well.

“The two groups driving the demand for apartments are Baby Boomers and Millennials,” said G. Tracy Cross, president of Tracy Cross and Associates Inc., a Schaumburg-based real estate consulting firm.

As a result, new apartment developments are sprouting up across the suburbs.

Schaumburg village officials recently approved construction on the village’s first new apartment complex in 30 years, a 180-unit development near the Motorola Solutions campus.

The Lombard village board is considering three new apartment developments, which, if built, could bring 547 new rental units to the suburb.

Naperville is examining plans for a 39-unit apartment building near its 4th Avenue Metra train station.

Construction recently began on two apartment projects in Libertyville — a combined total of 46 units — the first new rental developments in decades.

And developers in Arlington Heights have completed the conversion of a long-standing high-rise hotel into a 214-unit luxury apartment building.

“Apartment construction in the suburbs has been dormant forever,” Cross said. “Now the construction is there because the demand is there.”

New apartment construction is being driven by a number of social and economic factors, according to Cross, whose firm is often hired by suburbs to conduct a market analysis:

• Baby Boomers are aging and are selling their single-family homes and downsizing into apartments.

• Millennials are deferring the “American dream” of owning a home.

• Homeownership is lower than pre-recession levels: 63.8 percent in 2015 compared with 69 percent in 2005, according to the U.S. Census Bureau.

• There are significant “employment corridors” creating jobs in the suburbs: along I-88 between Oak Brook and Naperville; I-94 near Glenview, Deerfield and Northbrook; and I-90 from Schaumburg to Elgin.

• Developer financing is cheap, and investors are more receptive these days to rental developments than home construction.

These new apartment projects are designed to attract upscale tenants. The wall-to-wall carpeting and avocado refrigerators have been replaced with hardwood floors, stainless steel appliances, granite kitchen countertops and large walk-in closets. The fitness centers and swimming pools remain, but they’ve been supplemented with amenities such as cyber cafes and outdoor sky decks with fire pits.

These are among the selling points at One Arlington, the new 12-story luxury apartment building near Arlington International Racecourse. Besides all the typical upgrades in the studio and one-bedroom apartments, One Arlington features a roof top sky deck that overlooks the racetrack, a music recording studio, a golf simulator, a bicycle storage and repair facility, and a dog wash and grooming room.

“We took an urban solution and put it in a suburban location,” said Rick Cavenaugh, president of Stoneleigh Companies LLC in Barrington, which renovated the old Arlington Sheraton Hotel into the luxury complex.

“What people want today is not what they wanted 20 years ago,” Cavenaugh said. “When you create a new apartment development, it needs to be a luxury product.”

Existing apartment complexes have upgraded to address the luxury trend these days at International Village as well.

For example, the old appliances are now stainless steel, the kitchens feature mahogany cabinets and granite countertops, and residents still recreate in a renovated clubhouse with the latest fitness equipment and free aerobics classes.

Monthly rents at One Arlington range from $1,250 for a studio to $4,000 for a two-bedroom penthouse, Cavenaugh said.

Similar attention to detail is being made by Chicago-based Cedar Creek Companies as it begins work on the 34-unit Manchester Square development in downtown Libertyville.

Manchester Square hopes to attract young professionals because of its luxury amenities and its close proximity to downtown Libertyville’s shopping, restaurants and Metra train station.

“A lot of people are attracted to a downtown — the ability to walk to retail and restaurants. And people are attracted to transit. We think that location offers it all,” said Mark Heffron, a partner with Cedar Street Companies.

When completed later this year, monthly rents at Manchester Square will range from $1,400 for a studio to $3,300 for a three-bedroom unit.

Shodeen Group, a Geneva-based commercial and residential developer, has experienced the complete evolution of the suburban apartment market over the company’s 55-year history, said President David Patzelt.

Shodeen began building and managing apartments in the 1970s, and over the years assembled a portfolio that totaled 900 units, Patzelt said.

Over the past three years, Shodeen has sold off nearly 800 of the older units and is now building luxury apartments, he said.

“When the home building market was hot, it was on fire. People were leaving apartments to buy homes. When the recession hit, there was a big demand for people to go back to apartments,” Patzelt said.

Shodeen now has four luxury apartment projects in Geneva, with monthly rents ranging from $890 for studios to $2,775 for a three-bedroom unit.

Offerings include the cozy Dodson Place in downtown Geneva, located on historic Third Street and within walking distance of the Metra rail station, and the larger Residence of Mill Creek project, located near wetlands, parks and recreational trails.

Shodeen recently launched an expansion of Residence of Mill Creek, with plans to add two 33-unit buildings.

“We believe the trend toward people moving to apartments will continue,” Patzelt said.

“People want an urban lifestyle in a suburban setting.”

By Dennis Rodkin

Crain’s Chicago Business

January 28, 2016

 

New-home sales slipped in the Chicago area slipped last year, even as homebuilders nationally savored a sizable upswing.

Developers sold 3,765 houses, condos and townhouses in the 10-county Chicago metropolitan area last year, down 1 percent from 2014, according to a report from Tracy Cross & Associates, a real estate consulting firm based in Schaumburg. It was the second straight year of falling sales in the Chicago area.

Chicago is a soft spot in the national homebuilding industry, which posted a 14.5 percent jump in new single-family home sales last year, with volume hitting an eight-year high, according to the National Association of Home Builders.

“Look where they’re going all around the country: up, up, up,” said Tracy Cross, the firm’s president. “Meanwhile, here we’re not moving at all.”

The stagnation is yet another sign of the Chicago housing market’s stubborn refusal to perk up along with other cities more than nine years after the housing crash.

Though Chicago-area new home sales rose 3.1 percent in the fourth quarter from the year-earlier period, it wasn’t enough to pull the full-year total into positive territory.

The market is stronger in the city, where sales rose 10 percent in 2015, than it is in the suburbs, where sales fell 2.3 percent, according to the report. But the city accounted for just 450 the region’s 3,765 sales.

Builders in the city have benefited from the dwindling stockpile of boom-era condos and a lack of new construction for several years following the bust, said Alan Lev, president of Belgravia Group, a Chicago-based builder focused on city projects. Demand for new homes has heated up near job centers in downtown neighborhoods like the West Loop and River West, where Belgravia has developments.

“But you can’t find land to build on; it’s been gobbled up,” Lev said.

Cross’ report covers only developments of about 40 units or more, he said. It does not reflect the numerous North Side homes sold during the year by builders who do one or a few at a time.

A few suburban homebuilders reported gains last year. The region’s top seller, Fort Worth, Texas-based D.R. Horton/Cambridge Homes, sold 573 homes at its nine projects scattered from Volo to New Lenox, up 11 percent from 2014.

The primary reason for the Chicago area’s divergence from the nationwide numbers is jobs, Cross said.

“The markets where they’re doing best on sales are the places with job growth of 3 percent or more,” Cross said. They include Orlando, Dallas, Atlanta and San Antonio.

In the Chicago area, jobs grew 1.02 percent in 2015 through December, according to a report from the Regional Economics Applications Laboratory at the University of Illinois at Urbana-Champaign.

“Our employment side of the equation is not moving as fast as the rest of the country,” Cross said. For every household that moves to a job-growth city from the Chicago area, he said, “that’s one more existing house in the supply here, for shrinking demand.” A guiding principle in homebuilding says one new home is needed for every two new jobs.

Earlier this month, an economist from Zillow, an online real estate marketplace, said slow job growth also was the main factor in hampering home price gains in metro Chicago.

By Dennis Rodkin

Crain’s Chicago Business

January 28, 2016

2017.01.28 crains article-chicago new home sales slip picNew-home sales slipped in the Chicago area slipped last year, even as homebuilders nationally savored a sizable upswing.

Developers sold 3,765 houses, condos and townhouses in the 10-county Chicago metropolitan area last year, down 1 percent from 2014, according to a report from Tracy Cross & Associates, a real estate consulting firm based in Schaumburg. It was the second straight year of falling sales in the Chicago area.

Chicago is a soft spot in the national homebuilding industry, which posted a 14.5 percent jump in new single-family home sales last year, with volume hitting an eight-year high, according to the National Association of Home Builders.

“Look where they’re going all around the country: up, up, up,” said Tracy Cross, the firm’s president. “Meanwhile, here we’re not moving at all.”

The stagnation is yet another sign of the Chicago housing market’s stubborn refusal to perk up along with other cities more than nine years after the housing crash.

Though Chicago-area new home sales rose 3.1 percent in the fourth quarter from the year-earlier period, it wasn’t enough to pull the full-year total into positive territory.

The market is stronger in the city, where sales rose 10 percent in 2015, than it is in the suburbs, where sales fell 2.3 percent, according to the report. But the city accounted for just 450 the region’s 3,765 sales.

Builders in the city have benefited from the dwindling stockpile of boom-era condos and a lack of new construction for several years following the bust, said Alan Lev, president of Belgravia Group, a Chicago-based builder focused on city projects. Demand for new homes has heated up near job centers in downtown neighborhoods like the West Loop and River West, where Belgravia has developments.

“But you can’t find land to build on; it’s been gobbled up,” Lev said.

Cross’ report covers only developments of about 40 units or more, he said. It does not reflect the numerous North Side homes sold during the year by builders who do one or a few at a time.

A few suburban homebuilders reported gains last year. The region’s top seller, Fort Worth, Texas-based D.R. Horton/Cambridge Homes, sold 573 homes at its nine projects scattered from Volo to New Lenox, up 11 percent from 2014.

The primary reason for the Chicago area’s divergence from the nationwide numbers is jobs, Cross said.

“The markets where they’re doing best on sales are the places with job growth of 3 percent or more,” Cross said. They include Orlando, Dallas, Atlanta and San Antonio.

In the Chicago area, jobs grew 1.02 percent in 2015 through December, according to a report from the Regional Economics Applications Laboratory at the University of Illinois at Urbana-Champaign.

“Our employment side of the equation is not moving as fast as the rest of the country,” Cross said. For every household that moves to a job-growth city from the Chicago area, he said, “that’s one more existing house in the supply here, for shrinking demand.” A guiding principle in homebuilding says one new home is needed for every two new jobs.

Earlier this month, an economist from Zillow, an online real estate marketplace, said slow job growth also was the main factor in hampering home price gains in metro Chicago.

 

By Jason Porterfield

Chicago Agent Magazine

January 11, 2016

 

The improving employment picture, a recent interest rate hike and less rigorous loan standards are fueling a dynamic Chicagoland real estate market. Inventory is tight, prices are up and single-family homes are in demand. A relatively warm and snow-free Q4 2015 and an improving economy are also bringing prospective homebuyers into the neighborhoods.

Realtor.com’s housing forecast for 2016 predicts that gains in existing-home sales and an increase in new home construction in the new year will take home sales upward to their highest gains since 2006. Forecasts include moderate but steady growth at 3 percent for both existing-home sales and prices, with higher mortgage rates and continued tight credit playing dampening roles. New housing starts are expected to jump 12 percent year-over-year, while sales of new homes will increase 16 percent. That growth will be spurred by a 2.5 percent increase in gross domestic product and a strengthening job market, while rising prices and difficulty in securing loans will keep the expansion in check.

“I see a good level of activity, and that has to do with the weather,” says veteran broker Mábel Guzmán. “In the last couple years it was pretty horrible. I remember having cancellations, and I also remember having my true grit buyers out there who brought shovels to showings so we could make it up the path. When we look at it, there’s very little product. It’s down 25 percent year-over-year. Heading into the end of the year with the holidays, people don’t want to sell and you start seeing that decline in supply. Thank goodness for new construction. Without it, we wouldn’t really have much going on.”

New construction starts are expected to rise in Chicago: Dodge Data & Analytics recently forecasted a 7 percent increase in construction starts for 2016, higher than 2015’s 2 percent increase over the previous year. Residential starts in particular saw an 11 percent increase over 2014, and are projected to increase by 9 percent in 2016. The current multifamily boom reflects the dominance of apartment building in Chicago, but suburban development has kept pace: 65 percent of new home starts in the first three quarters of 2015 were in Cook, Kane, Will and Lake counties, according to Metrostudy.

Kenneth D. Simonson, chief economist for the Associated General Contractors of America, said that rising construction spending could indicate a need for even more workers. In a market where the construction sector is already leading in jobs added in many states, meeting that demand with qualified workers could be a challenge.

Loretta Alonzo, managing broker at Century 21 Affiliated, sees the market growing at a steady rate. “I think it’s healthy growth, as compared to what we got into about eight or nine years ago,” Alonzo said. “We’re seeing steady growth, which is good. Home prices are a little bit better than they were last year. They’ve increased about 5 percent over last year.”

– See more at: https://chicagoagentmagazine.com/2016-market-outlook/#sthash.ZeIEAAoX.dpuf

 

The 2016 Market Outlook

by Jason Porterfield January 11, 2016

Pricing Give and Take

Housing prices in the Chicago area fluctuated in 2015, according to the Standard & Poor’s Case-Shiller Chicago Home Price Index. The index’s most recent data shows that prices in Chicago fell 0.39 percent from August to September but increased 4.5 percent for the year. Year-over-year, prices rose only 1.1 percent from Sept. 2014. Prices also grew slowly in other parts of the country, but Case-Shiller’s data shows Chicago home prices growing at a slower pace than any of the 20 major metropolitan areas measured by the index. Nationally, the index rose 4.9 percent year-over-year.

As supply fell, median prices in the Chicago area rose 8.1 percent year-over-year in 2015. The Regional Economics Applications Laboratory at the Institute of Government and Public Affairs at the University of Illinois’ (REAL) expectation for 2016 median price gains in the Chicago Primary Metropolitan Statistical Area (PMSA) comprising Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry, and Will counties falls in the 3.5-percent-to-9.5-percent range, with the median price of homes in the area clocking in at $212,304 by December 2016. REAL forecasts a median price increase of 3.1 percent to 7.4 percent for Illinois, rising to $173,546 by December 2016.

“Our inventory is down more than 13 percent over last year,” Alonzo said. “We just don’t have enough homes to sell. I could see that continuing into 2016. We don’t have enough inventory for the buyers coming into the market. They turn into renters when they can’t find something to buy, so the rental market is tight as well.”

Rosier Employment

Unemployment held at 5.0 percent nationally in November (unchanged from the previous month), according to the U.S. Department of Labor Bureau of Labor Statistics, though it rose slightly to 5.4 percent in the Chicago-Naperville-Elgin Metropolitan Statistical Area. The numbers reflect a general downward trend in the region, where unemployment was at 6.1 percent during the same period last year. The high for 2015 was 6.8 percent, a number the area hit in January.

The state’s unemployment rate rose to an estimated 5.7 percent in November, but still reflects a year-over-year improvement compared to Nov. 2014’s 6.2 percent. Twelve-month-ahead job recovery forecasts have future recovery rates climbing in every sector in Illinois except manufacturing, trade, transportation and utilities, and information in 2016, according to REAL’s Nov. 2015 Illinois Economic Review. The same report forecasts the total non-farm jobs growth rate for Illinois in 2016 falling somewhere between 0.44 percent and 0.84 percent.

– See more at: https://chicagoagentmagazine.com/2016-market-outlook/2/#sthash.46HFHcRj.dpuf

 

The 2016 Market Outlook

by Jason Porterfield January 11, 2016

Financially Stretched

Despite gains in employment, the Conference Board Consumer Confidence Index indicates that consumer confidence has fallen in the fourth quarter, as the index dropped from 99.1 in October to 90.4 in November. The Conference Board cited less favorable views of the job market and declining positivity regarding business conditions as reasons for the fall.

“It comes down to personal economy,” Guzmán said. “If folks feel like they have the sustainability in their personal economy to move forward with this major purchase, they’re going to do it regardless of what’s happening outside. Seventy percent or 75 percent of the public believes that buying a home is still part of their American dream and a goal that they want to achieve.”

Many Americans continue to suffer from the aftershocks of the 2007-2009 recession. The Pew Charitable Trust recently surveyed nearly 8,000 people and found that earnings have remained mostly stagnant, while the rate of savings is very low. Pew found that 1 out of 3 families reports having no savings at all, including one in 10 individuals with annual incomes of more than $100,000.

According to the Confidence Board’s Nov. 2015 Consumer Confidence Survey, consumers aren’t particularly optimistic heading into 2016: the number of respondents expecting business conditions to improve in the next six months fell from 18.1 percent the previous month to 14.8 percent, and the number of respondents expecting fewer jobs to be available over the next six months increased from 16.6 percent to 18.7 percent.

Introducing TRID

More than three months have passed since the TILA-RESPA Integrated Disclosure (TRID) guidelines were implemented, and so far fallout appears to be minimal. Mortgage applications have held fairly steady through December, with slight increases and decreases from week to week, according to the Mortgage Bankers Association. Applications decreased 1.1 percent in the week ending Dec. 11, after gaining 1.4 percent for the week ending Dec. 4.

“The good thing about TRID is we had such good information before it went into effect, that I haven’t experienced any delays or repercussions from it yet in the market,” Alonzo said. “I don’t know what’s going to happen in the spring market, when it gets a little busier, but right now most lenders were prepared for the change and had the systems in place for it. The agents were educated on how it would work, so they understand the time factors now.”

Lenders have eased credit standards in the fourth quarter, continuing a trend from earlier in the year and with the expectation that easing will carry over into 2016, according to Fannie Mae’s fourth quarter Mortgage Lender Sentiment Survey. Conducted in November, the survey found that 14 percent of lending partners expect to ease credit standards for government-sponsored enterprise loans and 9 percent think standards will ease for government loans over the next three months. The percentage of lenders reporting higher purchase demand expectations has fallen since the beginning of the fourth quarter, while remaining higher than at the end of 2014. They had also decreased by 3.2 percent for the week ending Nov. 20 after increasing 6.2 percent the previous week.

The 0.25 percent bump in the federal funds rate announced Dec. 16, 2015 may spur more activity on the market as the long period of nearly 0 percent interest on borrowing that began in Dec. 2008 comes to an end. While rate increases could keep some marginal buyers out of the market, it should have a positive effect by making people realize that 0 percent interest rates won’t last forever, as Guzmán pointed out.

“Generally, what happens historically is it goes up and people realize they need to make a decision and get into the market,” Guzmán said. “People start losing purchasing power, anywhere between 7.5 to 10 percent for every 1 percent increase in the rate.”
Geoff Smith, executive director of the Institute for Housing Studies at DePaul, agreed, though he cautioned that rapid rate hikes could damage the market.

“If you have interest rates for new purchases go up too quickly, the people who have these really great interest rates and really low mortgage payments – if they sell and buy a new home and they have to get a mortgage for that new home – are looking at having to get a higher interest mortgage and having a higher payment,” Smith said. “If interest rates go up quickly, you might see people delaying the decision to buy a new home because they don’t want to take on those new housing costs.”

– See more at: https://chicagoagentmagazine.com/2016-market-outlook/3/#sthash.ixNKa8w7.dpuf

 

The 2016 Market Outlook

by Jason Porterfield January 11, 2016

The Tighter Market

Tracy Cross, president of the real estate consulting and market research firm Tracy Cross and Associates, sees the rising prices and tight inventory as balancing each other out.

“There is some tightness in the existing-home market,” Cross said. “However, that tightness is reflected in price increases that have occurred over the past year, so the tightness in the existing-home market is really reflected in prices moving up, which then moderates the demand side of the equation. We have to say that now existing supply is balanced because prices have moved up to offset an undersupply situation.”

As 2015 draws to a close, realtor.com expects home prices to appreciate by 6 percent for the year and for existing-home sales to finish at about 5.26 million, for an increase of 6 percent. Housing starts are expected to close out the year with a 10 percent jump in overall starts. Single-family starts are expected to have grown by 7 percent.

Building on Construction

Last year proved to be big for Chicago-area builders and developers. New construction has soared as residential construction spending rose to $735 million in October, an increase of 32 percent over the same period last year, according to Dodge Data & Analytics. For the year, about $4 billion has been spent on new construction in the city through October. Year-over-year, construction spending in Oct. 2015 outpaced the Oct. 2014 number by 36 percent.

Statistics released by the U.S. Census Bureau and the Department of Housing and Urban Development show that there were a seasonally-adjusted annual rate 1,289,000 building permits issued for privately-owned homes in November. That number represents an 11 percent increase over the revised October rate of 1,161,000 and a 19.5 percent gain over the 1,079,000 estimated for Nov. 2014. Permits for single-family homes increased by 1.1 percent over October, totaling 723,000. For buildings with five units or more, the November total was 539,000.

Housing starts showed strong growth as well in the middle of the fourth quarter, at a seasonally adjusted annual rate of 1,173,000 in November for a 10.5 percent gain over the revised October rate, and a 16.5 percent improvement over the Nov. 2014 rate of 1,007,000. For single-family housing starts, November showed a 7.6 percent seasonally adjusted gain over the October figures to 768,000.
However, Cross sees limited growth in the new construction sector of the market, as many of the permits issued in the city are for rental properties and niche developments such as senior housing.

“The existing-home market will have a supply level that would be adequate going forward because of the movement out of existing domestic householders,” Cross said. “The new home market’s orientation is principally to infill locations. The supply side also has to increase, but nobody’s putting the shovel in the ground for new development of scale. The number of active developments in the region right now in the new home sector is only 335. There are 335 active subdivisions in the new home sector in the region. In 2005, there were more than 1,400.”

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The 2016 Market Outlook

by Jason Porterfield January 11, 2016

A Younger Buyer’s Market

Millennials helped shape the market in 2015, and will continue to play a substantial role as the economy continues to improve. Millennials age 25 to 34 make up slightly more than 13 percent of the U.S. population, and rising rents are putting pressure on the renters among them to buy.

Realtor.com pegs the oldest group of Millennials – those aged 25 to 34 – as constituting 30 percent of purchasers of existing homes. Millennials are expected to continue as the largest demographic of homebuyers in 2016, prioritizing neighborhood safety and home quality. City centers and “closer-in” suburbs will be their preference as they look for older homes and shorter commutes.

Younger members of Generation X – age 35 to 44 – are expected to make up the second-largest portion of homebuyers after accounting for 20 percent of home purchases in 2015, according to realtor.com. The third largest group of homebuyers in 2016 is expected to be older individuals or couples, age 65 to 74, who are looking to relocate or retire. This group made up 14 percent of homebuyers in 2015.

Millennials still face significant hurdles in terms of getting financing, even as their job situations improve and their wages increase. Even if they are paying down their debts, lenders may look at how much they still owe and take a pass or require a bigger down payment than they can cover with their savings.

“The biggest hindrance for Millennials is student loan debt and being unable to qualify for a loan,” Alonzo said. “Until we can get some changes through the government on interest rates for student loans and how they qualify for loans, I think we’re going to see those problems with them being able to get into the real estate market.”

The 2016 presidential election promises to have a major impact on the industry, even if the campaign fails to register in the market. Guzmán referenced mortgage interest deductions as one area that could come under fire by a new administration seeking to cut the deficit.

“If they’re not friendly to housing, we could be at risk of losing a couple of things, especially policies that actually help homeowners,” Guzmán said. “If they’re looking at cutting the deficit, they could be cutting mortgage interest deductions. If they do it across the board, in Illinois that translates into $3,000 in tax relief as an aggregate. That money’s nice at the end of the year, especially if you’re seeing stagnant wages or whatever the case may be in your personal economy.”

“Obviously, there are a lot of major policy decisions that have to be made about the housing market,” Smith said. “Income tax, interest rate reductions, Fannie and Freddie. Those are big policy issues that any new administration will likely meet and make decisions on.”

 

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By Dennis Rodkin

October 29, 2015

www.chicagobusiness.com

 

right  back down to basement-graphThe long funk for new-home sales in the Chicago area makes a veteran homebuilding consultant want to take a breath.

A deep cleansing breath.

“I need to meditate or take yoga to deal with it,” said Tracy Cross, whose firm says local new-home sales fell 15.9 percent in the third quarter compared with the same quarter last year.

After sales rose in the second quarter for the first time since late 2013, this year’s third quarter “took it right back down to the basement,” said Cross, principal of Tracy Cross & Associates.

By the end of September, builders were on pace to sell about 3,790 homes this year, virtually even with 2014’s total of 3,798.

Developers sold 802 homes in the Chicago area during the third quarter, compared to 954 in the same period a year ago. Year-to-date sales for the first three quarters totaled 3,025, down 1.3 percent from a year earlier.

Meanwhile, third-quarter new-home sales rose almost 14 percent nationwide, according to federal data released this week.

PRICES AND DEPARTURES

Some of the drag in Chicago’s market comes from still-low prices on existing homes that make them more competitive with new homes, and from people bailing out of Illinois, thus reducing demand for homes.

Slow recovery of prices in the region’s existing-home market means “prices there are more competitive against new construction than you used to see,” said John Carroll, Chicago region vice president of CalAtlantic Homes, the company formed by the Oct. 1 merger of Standard Pacific and the Ryland Group, his old employer.

Many builders have followed buyers’ appetite for new homes in suburban infill locations, which results in smaller clusters of houses being built and sold. They’re also more expensive than the old model of tract houses built on former cornfields at the inexpensive fringe of the suburban area.

And then there’s the anywhere-but-Illinois factor.

“Illinois sucks,” Cross said, “and you’re seeing significant out-migration.” Illinois lost 95,000 people to other states in 2014—the most since 1991—and nothing about the state’s budget crisis this year suggests a bounceback is coming.

The result is decreased demand for homes, whether new or existing.

Carroll said his firm’s sales up almost 9 percent this year, largely because of expansion into northwest Indiana. The firm launched two developments this year in Crown Point, its first in northwest Indiana.

“There’s a better tax structure in Indiana, and job growth,” Carroll said. “There’s been an exodus of people from Chicago to Northwest Indiana. That’s why we’re there.”

CITY SALES UP

For the moment, builders are resigned to the diminished state of the industry. The years-long crawl in the market “is visible,” Carroll said, “but I’m not reaching for a sharp knife yet.”

City homes have been the bright spot this year. In the first nine months of the year builders sold 377 new Chicago homes, both single-family houses and attached housing types (condos and townhouses), an increase of 5 percent from the previous year’s 359. But because city sales are about one-eighth of all the region’s sales, the overall trend was downward.

Suburban sales totaled 2,648 in the first three quarters, down 2.1 percent from 2014.

New homes’ role in the larger Chicago real estate market has dwindled. In the most recent quarter, new homes were just one of 37 homes sold locally, the lowest Cross has seen. For a long stretch of years, new homes accounted for about one in six of the Chicago-area homes sold, Cross said. They moved closer to one in four during the early 2000s housing boom.

Across the country, new homes account for about one in 10 sales, according to the National Association of Realtors.