Dennis Rodkin
Crain’s Chicago Business
July 31, 2023
Credit: Re/Max Impact
This house on Prospect Drive in Beechen & Dill’s Copper Ridge development in Lemont is for sale at just under $790,000.
Chicago-area builders sold more new homes this spring than they have since 2008, thanks in large part to the paucity of existing homes for sale, according to a new report.
Builders of production homes sold 1,438 new homes in the Chicago area in the second quarter, according to the latest data from Tracy Cross & Associates, a Schaumburg-based consultancy to the homebuilding industry.
That’s an increase of nearly 38% from the same time a year ago and the largest number of second-quarter sales in any year since 2008, according to the report.
“I’m not at all surprised to see this surge,” said Erik Doersching, CEO of Tracy Cross & Associates. “Sales would have been even higher if more developments were open, but supply is constrained because there’s not enough building going on.”
The second quarter was so strong that it nearly compensated for a limp first quarter, when sales were down almost 30% from the same time in 2022. Together, one weak and one strong quarter totaled 2,643 new home sales in the region, off 2.4% from the first half of 2022.
The inventory of existing homes on the market is super low, largely because homeowners with sub-4% mortgages that predate the Federal Reserve’s recent interest-rate hikes are reluctant to sell because they’d have to buy with an over-6% mortgage.
“Low inventory is definitely driving demand,” said Matt Dill, president of Beechen & Dill Homes, a Burr Ridge company that he’s the second generation to lead.
While low inventory may turn buyers’ heads from existing homes, when they start shopping the new homes, they’re easily convinced, Dill says, “because you get everything new. New roof, brand-new mechanicals, on-trend cabinets and flooring.”
Chicago-area builders sold more new homes this spring than they have since 2008, thanks in large part to the paucity of existing homes for sale, according to a new report.
Builders of production homes sold 1,438 new homes in the Chicago area in the second quarter, according to the latest data from Tracy Cross & Associates, a Schaumburg-based consultancy to the homebuilding industry.
That’s an increase of nearly 38% from the same time a year ago and the largest number of second-quarter sales in any year since 2008, according to the report.
“I’m not at all surprised to see this surge,” said Erik Doersching, CEO of Tracy Cross & Associates. “Sales would have been even higher if more developments were open, but supply is constrained because there’s not enough building going on.”
The second quarter was so strong that it nearly compensated for a limp first quarter, when sales were down almost 30% from the same time in 2022. Together, one weak and one strong quarter totaled 2,643 new home sales in the region, off 2.4% from the first half of 2022.
The inventory of existing homes on the market is super low, largely because homeowners with sub-4% mortgages that predate the Federal Reserve’s recent interest-rate hikes are reluctant to sell because they’d have to buy with an over-6% mortgage.
“Low inventory is definitely driving demand,” said Matt Dill, president of Beechen & Dill Homes, a Burr Ridge company that he’s the second generation to lead.
While low inventory may turn buyers’ heads from existing homes, when they start shopping the new homes, they’re easily convinced, Dill says, “because you get everything new. New roof, brand-new mechanicals, on-trend cabinets and flooring.”
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In Lemont, Dill’s firm has a development called Copper Ridge, with a mix of singe-family houses and attached townhouses. When townhouse sales began in April, Dill says, he expected to sell about nine by the end of the second quarter.
Instead, “we had 15 sales,” Dill says. That’s about half the product, sold in a few months. “It’s going great,” he says.
The townhouses are single-story designs with prices starting at about $505,000. Seven of 19 single-family homes, with prices in the upper $700,000s, have sold since January.
In all, Copper Ridge is selling “almost twice as fast” as he expected, Dill says.
While building more homes could help fill this year’s gap in inventory, Dill says building faster isn’t really possible, given the time it takes to acquire lots and the requisite municipal approvals and permits.
“I’d say we’re going at a good pace and want to keep things going that way,” Dill says.
Lucy Mierop, who represents many small developers’ individually built homes, says they’re also hesitant about rushing to fill the inventory gap.
“I’m telling my guys all the time, ‘if you’ll build more, you’ll sell them,’ but they’re reluctant,” says Mierop, an agent with Re/Max Market in Willow Springs. “They don’t want to get left holding the bag if things slow down. They saw that in the last bust” in the early 2000s.
Deep-pocketed national firms have not been quite so reluctant and, as a result, Doersching says, “they’re seeing proof of what we’ve been saying, that supply is holding back sales.”
National firms were behind most of the newly opened developments, Cross explained in its report and, in turn, newly opened developments reaped about 14% of the quarter’s total sales volume.
“We’ve been saying you need to get the product on the market because there’s demand,” Doersching says. “Now there’s proof. These national builders have been aggressive in getting new developments opened, and they’re performing.”
The top five sellers of new homes in the Chicago region are all nationals, from No. 1 D.R. Horton, based in Texas, to No. 5 Ryan Homes, based in Virginia. Each of them had 230 or more sales in the second quarter. These firms routinely decline to talk to Crain’s about their sales.
Privately owned Chicago-based builders are far smaller. The two largest are Lexington Homes, with 35 sales during the quarter, and Beechen & Dill, with 32.
In the second quarter, new home sales in the suburbs were up 46% from a year ago, to 1,368 sales, according to the Tracy Cross report. In the city, sales were down about 35%, to 70.
The figures are similar for the first half of the year. Suburban sales were up 1.3% from the first half of 2022, to 2,472 sales, and city sales were down about 41%, to 139.
The Cross data only includes homes built in developments of 10 or more, which means individually built homes do not appear.