Tracy Cross & Associates, Inc.

2nd Quarter 2021

Homebuilding companies sold 3,185 new construction units in the Chicago region during the first six months of 2021, an increase of nearly 40 percent compared to the first half of 2020 when 2,314 contracts were recorded. Transactions were split between 1,853 in the detached sector, representing a 32.6 year-over-year increase, and 1,332 among multi-family product lines, translating to a 45.3 percent uptick.  That said, the significant increase in sales can be attributed to a stellar 1st Quarter when contracts were up 80 percent year-over-year. In contrast, activity during the 2nd Quarter 2021 was up only 3 percent compared to the same three-month period in 2020 – a time when Covid-19 lockdowns were at their peak.  More importantly, volumes posted during the 2nd Quarter 2021 were down nearly 30 percent when cast against the 1st Quarter 2021 on a seasonally adjusted, annualized basis.    

The drop in sales activity during the 2nd Quarter 2021 was due, in part, to significant price increases across the region as homebuilders raised prices to keep pace with rising costs.  For example, among the region’s top five homebuilders (Lennar, D.R. Horton, M/I, Pulte and Ryan), the average price of a production home offered during the 2nd Quarter 2021 was roughly $45,000 higher than that seen among “same store” communities a year ago.

Rising prices were also responsible for a notable product shift in the market.  Specifically, for certain consumers who may have been seeking a single family detached home in the suburbs, many of them elected a townhome or duplex offering instead.  Overall, attached sector sales in suburban Chicago during the 2nd Quarter 2021 were up 16.2 percent year-over-year, while single family detached sales dropped by almost 11.0 percent.

The major shift to townhome/duplex product forms in the suburban area was also observed among the region’s top three builders. For example, during the 2nd Quarter of 2020, Lennar’s ratio between single family and attached sector sales stood at 68 percent and 32 percent, respectively.  During the most recent quarter, however, this ratio shifted dramatically to 49/51.  D.R. Horton realized a similar shift from a ratio of 62/38 a year ago to 56/44 during the 2nd Quarter 2021, while M/I Homes ratio changed from 53/47 to 49/51.

Also contributing to the overall drop in sales activity during the 2nd Quarter 2021 was diminishing supply.  For example, there were 296 production home communities actively marketing new product at the end of June 2021, a 16.4 percent decrease compared to the 354 communities marketing new homes at the end of June a year ago.

It is important to note that while suburban sales were off during the 2nd Quarter 2021, primarily on the basis of price and supply, the city of Chicago witnessed an increase in volume.  As a sign that buyers have started returning to Chicago, 126 units were sold during the April-June 2021 timeframe, an increase of 88.1 percent over the 67 sales realized during the same timeframe in 2020.  

Lennar was the region’s leading homebuilder during the first six months of 2021 with 601 units contracted, followed by D.R. Horton with 376 sales, M/I Homes with 366, Pulte Homes (345) and Ryan Homes (241).

During the first half of 2021, Lennar’s Prairie Commons townhome community in Batavia, as well as its multiple product lines at Raintree Village in Yorkville led the market with 80 sales each.  D.R. Horton’s Cambridge Lakes master-planned community in Pingree Grove registered 76 contracts among its various offerings, followed by Woodlore Estates by Lennar in Crystal Lake with 69 transactions and Pulte Home’s Wagner Farms community in Naperville with 68 contracts.