Sales in Chicago dropped to their lowest in 25 years in 2020 while climbing to a 12-year high in the suburbs.
Crain’s Chicago Business
February 02, 2021
This new four-bedroom house on Cedarwood Lane in the Cambridge Lakes development in Pingree Grove sold for just under $324,000 in December.
Sales of new-construction homes in Chicago dropped to their lowest in 25 years in 2020, according to a new report. At the same time, new-home sales in the suburbs surged to a 12-year high.
It’s more evidence of the tilt toward the suburbs that many people predicted when COVID made density a bad word, and that has been proving out in year-end reports on all segments of the housing market. But housing industry sources say the tilt is happening not only because of COVID
In Chicago, 219 newly built homes were sold during the year, according to a 2020 year-end report released this week by Tracy Cross & Associates, a consultant to the homebuilding industry based in Schaumburg. That’s down 38.5 percent from 2019 sales, and the lowest figure in Cross’s records, which date back to 1995.
In the suburban area, 4,676 new homes sold in 2020, an increase of 23.3 percent from 2019. It’s the highest figure since 2008.
Combined, city and suburban sales totaled 4,895 in 2020, an increase of 17.1 percent over 2019. It’s the highest number of new-home sales in the region since 2008.
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.
In the past several years, builders in the city “had moved into the luxury realm. Most of what was happening was million-dollar-plus homes,” said Erik Doersching, executive vice president at Tracy Cross. “They’ve gotten away from any mainstream type of $300,000-to-$800,000 condo development.”
COVID made many households need more space, and at the $1 million-and-up level, people increasingly looked to the suburbs to find it. Crain’s reported in January that $1 million-plus home sales rose by 40 percent in the suburbs in 2020, and fell by almost 7 percent in the city.
Three of the bestselling new-home developments in the city had an average sale price below $1 million, according to Doersching’s calculations. They were CA6 in the West Loop, where 29 condos sold at an average of $830,000 each; Lexington Village in Avondale (16 townhouses at an average of $586,000); and 5748 N. Hermitage (26 condos at an average of $741,000).
Alan Candea, a partner with his brother in Candea Development, which built the Edgewater condos, said he’s not surprised that most builders’ product delivers at over $1 million.
Fast-rising land costs and the city’s tight regulations on construction “make it hard to build anything you can sell for less than $1 million,” Candea said. His firm bought the Hermitage land in 2014, he said, and “warehoused it while we did five other projects.”
Had they bought the land five or six years later, he said, “we would have paid 35 to 40 percent more,” which would have been passed along to buyers in the form of higher unit prices.
Another reason for the big drop in city sales was that “the empty nester, or more broadly the buyer that’s moving from the suburbs to the city, hit the pause button during COVID,” said Jon McCulloch, co-CEO of Belgravia Group, the developer of CA6 in the West Loop.
McCulloch said that while the average price Doersching cited for his project is accurate, it conceals the fact that CA6 sold several condos priced at more than $1.6 million. They were all sold to existing city households desiring more space, he said.
The biggest-selling suburban new-home development in 2020 was Cambridge Lakes, a Pingree Grove subdivision by D.R. Horton, a national firm based in Texas. D.R. Horton sold 215 houses there, nearly as many as the total new-construction sales in all of Chicago during the year. A D.R. Horton press representative did not respond to a request for comment.
Doersching said the strengthened suburban new-home market, if it continues, could “lead to a bigger sense of urgency among those builders to go look for more opportunities” for development.
At just under 5,000 sales for the year, it’s a long way back to the heyday of Chicago-area homebuilding in the early 2000s, when annual sales were over 20,000 and sometimes over 30,000.