More new homes sold in the first three quarters of 2020 than any comparable period in a dozen years. The sales growth is entirely suburban.
Crain’s Chicago Business
November 02, 2020
This newly built house on Bristle Cone Drive in the Woodlore subdivision in Crystal Lake sold in August for just under $388,000 in August.
Sales of new-construction homes in the Chicago area have been stronger this year than any time since 2008, according to a new report from an industry analyst.
In the first three quarters of 2020, builders sold 3,729 newly built homes in the Chicago area, according to the report from Tracy Cross & Associates, a building industry consulting firm based in Schaumburg. The last time more new homes sold was the first nine months of 2008.
“We knew [sales volume] was going to go up because of low interest rates and the across the board improvement in the suburban marketplace in a movement out of the city,” said Erik Doersching, executive vice president at Tracy Cross. “But it ticked up much higher than we expected.”
At the end of the third quarter, sales of new homes were up 15 percent from the same time last year, according to Cross’s data.
The surge in sales began in the second quarter of the year, but accelerated in the third, like the housing market overall. In the third quarter, homebuilders sold 1,448 homes, the most in any individual quarter since the second quarter of 2008, when there were 2,092 sales.
In 2008, sales were crashing down from the heyday of the early 2000s, when quarterly sales regularly topped 5,000.
After more than a decade of reports of shallow sales, the increase in 2020 “emphasizes what’s going on in the world with the desire some people are showing to move to the suburbs.”
The increase is entirely suburban. New home sales in the city were down 39 percent in the third quarter from the same time a year ago, to 51 sales, and for the year to date at the end of the third quarter, they were down 28 percent, to 189. Suburban sales were up nearly 49 percent in the third quarter, to 1,397 sales, and 19 percent year-to-date, to 3,540 sales.
“The opportunity to work from home has opened up the suburbs to these younger buyers again,” said Jerry James, president of Edward R. James, a longtime homebuilding firm based in Glenview.
James said another spark for the suburban increase is recent spasms of unrest in the city turning off suburban empty-nesters from moving into Chicago.
“It has unnerved a lot of people who would otherwise be looking at condos downtown when they sell their family home,” James said.
One result: sales are up at Hinsdale Meadows, an Edward R. James development of duplexes and single-family homes priced from the $700,000s to over $1 million. The development sold 10 homes in the first three quarters of 2020, James said, compared to 11 in all of 2019.
Super-low interest rates are the primary fuel of the sales increase, Doersching said. That’s evidenced by the fact that most new home sales were in parts of the far southwest suburbs, like Joliet, Plainfield and Oswego, where prices are the lowest. The buyers who are most sensitive to the difference low interest rates make in their purchasing power tend to be those at the lower end of the price range.
Yet Doersching said that COVID-19 concerns are also playing a role in buyers choosing new homes. “Knowing you’re the first in this house, that everything is clean and safe, makes a difference this year,” he said.
The 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, a popular model in the city, do not get counted.