Dennis Rodkin
Crain’s Chicago Business
February 8, 2024

Credit: Re/Max Ultimate Professionals
Buyers paid a little under $570,000 in October for this five-bedroom house on Amarillo Boulevard at Lennar’s Elgin development called the Ponds of Stony Creek, one of the region’s biggest sellers of new construction homes in 2023.

The super-low inventory of resale homes helped turn buyers toward newly built homes, pushing Chicago-area builders’ sales to their second best year of the past 15, according to a new report.

Builders sold 5,046 new-construction homes in the Chicago area in 2023, according to year-end data released Feb. 8 by Tracy Cross & Associates, a consultant to the homebuilding industry based in Schaumburg.

It was only the second time since 2008 that builders sold more than 5,000 homes. The first time was 2021, when the sales tally was 5,477.

“Despite the interest rate climate, the inventory of resale homes was so tight that people were looking for new homes,” said Erik Doersching, Cross’ president and CEO.

Throughout 2023, mortgage interest rates were above 6% and briefly crossed above 7%. That’s twice the rate buyers were getting in 2021, during the COVID-era housing boom.

Doersching said one of the lures of new construction last year was that, according to his firm’s research, the big national homebuilders that dominate this region’s market were all offering rate buydowns.

Crain’s can’t confirm this independently, because those national firms — Lennar, DR Horton and Pulte among them — and their local sales agents all make it a practice to decline to comment on this data.

The available inventory of resale homes hit a record low in 2023, and then went even lower.

The year-end sales total for 2023 is up 16.3% from 2022, when 4,275 new homes sold in the region.

In the early 2000s, builders were selling as many as 25,000 new homes in the Chicago area each year. In 2008, the last time before recent years when they sold over 5,000, it was on the downslope from those heady days in suburban homebuilding.

Seeing sales pop up over the 5,000 line could encourage more builders to start projects, seeing that there’s demand. “We keep saying we could see 9,000 sales if there was supply,” Doersching said. “We keep saying it and saying it,” but the pipeline continues to trickle.

In December, Crain’s reported that Illinois is tied with two other states for building the least new housing. Among the causes are slim population growth, the high cost of building and what builders perceive as overly strict guidelines from suburban Chicago municipalities.

Even with a few vigorous years of sales, builders have not taken the hint, Cross’ tally of active developments shows. In 2019, the last year before COVID shook up the housing market, there were 347 different developments underway in the region. The number has dropped every year since, and in 2023 was 251, a decline of nearly 28%.

“We need more supply,” Doersching said.

Nationwide, according to the U.S. Census Bureau, new home sales were up 4.2% in 2023 compared to 2022, but Doersching points out that it’s really only a mathematical warp that makes it appear the Chicago area did far better.

Because the base in Chicago, 2022’s roughly 4,300 sales, is so much smaller than the 2022 total nationwide, 640,000, the percentage growth in those two pools doesn’t compare.

The Cross reports track sales at developments with 10 or more units. In the city and inner-ring suburbs, builders often build in ones or twos. Their sales do not show up in a Cross count.