Market Conditions: New Home Sales at Big Developments Plunge in Chicago in 2020
Apparently, developers didn’t sell many new homes in Chicago in 2020.
New homes are defined by Tracy Cross & Associates as a development with 10 or more units. It doesn’t include the single family home custom built in Southport.
From Crain’s:
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.
And while the suburban sales were the highest since the housing bubble, they remain well below those built in the early 2000s when the article says 20,000 to 30,000 homes were being constructed.
These 219 homes were both detached, condos and townhouse.
Three of the best-selling 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).
Is there a huge, pent-up demand for new construction in the city under $1 million?
There’s a new condo building that is opening a sales center in the Printers Row development called Southbank.
The Reed will be 41-stories with condos starting at $390,000.
With no competition for “new” product at this price point, will these sell quickly?
You can see pictures of The Reed here.
New home sales plummet in the city, surge in the suburbs [Crain’s Chicago Business, by Dennis Rodkin, February 2, 2021]
“ Apparently, developers didn’t sell many new homes in Chicago in 2020.”
Unpossible as everyone wants new, everyone wants to live in the city, there’s no supply and the market is HAWT ™
“ Three of the best-selling new-home developments in the city had an average sale price below $1 million, according to Doersching’s calculations.”
This is absolutely meaningless, like embarrassing bad meaningless. Whomever wrote this should be flogged.
The Reed will be 41-stories with condos starting at $390,000.
With no competition for “new” product at this price point, will these sell quickly?“
You’re comparing sub 30 unit developments to a 400+ unit development (apt + condos)? I think even your alter ego JoeZ would say that’s dumb.
Additional dumb comps
CA6 is 3 & 4 Br smallest is 2100sf going up to 3100sf
Lex village looks to be 3 Br 2409sf min
Hermitage 1690 to 1970sf
Based on the studio sf price, the property is at $619/sf. At let’s say 1750sf to make it somewhat in the ball park that’s over a Mil. The reality is these are probably going to be lower sf/unit
Also at that price point, I don’t want to live above apartments (may change as the sister apartment complex is at About 75% occupied.)
“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.”
So, how much of the new product in the city is missed? Half? Versus probably more like 10% or less in the burbs? We all know that it had been hard to get financing for a larger condo projects in Chicago, based on trends.
“We all know that it had been hard to get financing for a larger condo projects in Chicago, based on trends.”
Hm…not sure this is true.
Developers haven’t had a hard time getting condo loans. There are condos going up all over the place including in big buildings like the Tribune Tower, St Regis, One Chicago Place, One Bennett Park, all of those mid-rise buildings in River North and those in the West Loop.
All of those are over 10 units.
Haven’t heard that The Reed is having a hard time getting financing but we’ll see how many they sell and if they meet that requirement.
The only one who couldn’t get financing was 1000 S Michigan which is now a hole in the ground and is, apparently, going to try for apartments now.
Many of the developments HAVE done an apartment/condo mix because the banks are willing to give out the loan knowing that the apartments will be filled. Although, right now, that’s not a sure thing like it was 18 months ago.
Also, as for how much is missed since they don’t count the single home being built or developments under 10 units- it’s a decent amount as there are plenty of those 4-flat new construction buildings in LP and Lakeview.
But it’s probably, in the grand scheme of things, less than 200 units.
That’s still incredibly low for a city of a million people.
“You’re comparing sub 30 unit developments to a 400+ unit development (apt + condos)? I think even your alter ego JoeZ would say that’s dumb.”
Um…no.
I’m comparing a 400+ unit development with another 400+ development. That’s my whole point. No one else is building a condo building with several hundred units priced mostly under $1 million anywhere downtown, that I know of. If you know differently, please let me know.
Oh, wait, I DO know of one. That new Lakeshore East building. It’s selling really well – at least for the product under $1 million. Building is going up already so they got the bank loans.
It seems if The Reed sells well too that other developers may go down this path later this year as the economy begins to reopen post pandemic.
We could be in the early stages of the change over from apartments to condos that has happened in other real estate cycles.
The low inventory and few developments would indicate that we are but we’ll see.
But can they build them cheaply enough to put an “affordable” product downtown? Might have to think about building some larger towers up in Lakeview or Uptown. Or maybe we’ll see some conversions of the new apartment buildings into condos too.
“I’m comparing a 400+ unit development with another 400+ development. That’s my whole point. No one else is building a condo building with several hundred units priced mostly under $1 million anywhere downtown, that I know of. If you know differently, please let me know.“
No you wern’t. You were using the pricing and occupancy of sub 40 unit developments and tried to extrapolate that to demand for the Reed. You missed on both measures.
Maybe there’s not a lot of 400 unit developments because developers see the headwinds they’re facing in the condo market. (No appreciation, lack of demand, competition with <5 yo condos that haven’t appreciated or have depreciated
“Oh, wait, I DO know of one. That new Lakeshore East building. It’s selling really well – at least for the product under $1 million. Building is going up already so they got the bank loans.“
Do you mean Cirrus? Just because there’s one shitty 1200sf condo sitting at $800k, and the majority of 2 Br are over $1MM for 1250-1350, doesnt make it “product under $1MM”.
“ But can they build them cheaply enough to put an “affordable” product downtown? Might have to think about building some larger towers up in Lakeview or Uptown. Or maybe we’ll see some conversions of the new apartment buildings into condos too.”
Give your head a shake. They don’t need to. There’s tons of existing options for a 2br/1200sf/$500-700k. Most have finally woken up to the fact that a starter condo is a poor financial decision (Especially with increased rental options) and there’s plenty of inventory for boomers that want to move to the city from the burbs.
IMO, the only larger scale condo developments will be akin to 9 Walton
Honestly you are a shill completely unhinged from reality.
“IMO, the only larger scale condo developments will be akin to 9 Walton”
Again, you’re obviously wrong already because the Reed and the Lakeshore East building BOTH have 1-bedroom condos.
We’ve seen a 5 to 7 year cycle of building big, family condos that are 3 to 4 bedrooms. The pandemic has finished that trend. People with kids want the single family home again.
Developers will switch over to focus on GenZers who are starting to graduate from college and will be moving to Chicago in droves to start careers. There’s absolutely NO indication they want to live in the suburbs. Many grew up in cities. They will want to stay urban.
With interest rates this low, GenZ could be the generation that decides it wants to buy a condo in their 20s. Like GenX did. Could be cheaper than renting with those low rates.
There’s talk the Biden Administration may do another first time home buyers credit type incentive program like what was done after the Great Recession.
I covered the boost in sales on this site when they last did that incentive.
JohnnyU, you have to move on from the older generations as being buyers. There are definitely some, like Dan #2, who want to retire in the city (why wouldn’t you? Would be fantastic.) But a healthy market, and city, has a mix.
GenZ is a bigger generation than the Millennials. Big pipeline coming for those that want to enjoy the riverwalk, the new food halls, the new Morton Salt music venue along with everything else in the city.
Sorry bears. The housing market is red hot. It means the developers WILL start building again to meet the demand.
“ Again, you’re obviously wrong already because the Reed and the Lakeshore East building BOTH have 1-bedroom condos.”
The Reed is not built and is approx 50/50 condo/apt.
Again if you’re calling the Cirrus “Lakeshore East building”, yes it has 1br. 650sf glorified studios that they are. Have you looked at the floor plans? If you have they aren’t geared to GenZ.
‘ With interest rates this low, GenZ could be the generation that decides it wants to buy a condo in their 20s. Like GenX did. Could be cheaper than renting with those low rates.”
Need a couple of more “could”s in this. As a genXer, condos were bought because there wasn’t a lot of options if you wanted to live in the Greenzone. GenZ isnt faced with this dilemma.
“ Sorry bears. The housing market is red hot. It means the developers WILL start building again to meet the demand.”
Developers will start building because money is cheap & investors are chasing yield.
Why don’t you show us your vast Real Estate portfolio, since it’s a slam dunk?
“Developers will start building because money is cheap & investors are chasing yield.
Why don’t you show us your vast Real Estate portfolio, since it’s a slam dunk?”
Thank you JohnnyU for making my point about how this is a bull market, not a bubble.
Where are the “investors”? Where’s the speculation?
GenZ and Millennials are buying to LIVE there. They aren’t “investors.” They are LIVING.
This is a bull market. Almost right on time with the demographic trend, as well, which predicted strong housing demand from 2020-2024 due to the age of the largest group of Millennials for marriage and household formation. Throw in the lowest mortgage rate in history, and you’re off to the races.
With inventory this low, no way to get a bubble in 2021. Could get overheating, but that will cool the market, which would be needed.
I’m assuming mortgage rates will rise at least a half a percent by the summer as the economic recovery takes hold and that will cool the market as well.
It is SIZZLING hot right now. In Chicago and nationwide.
Sabrina, I applaud your patience with the trolls, even if I sometimes enjoy their comments out of dark humor.
But I don’t know what you’re talking about red hot.
We live in a lakeview townhouse and the riots in the summer and the carjackings now have us VERY eager to flee to north shore.
Our neighbors townhouse sold for 10% less than what we thought was pre COVID fair value, while primo north shore places are flying off the shelves.
An agent we met in highland park who also does downtown says he can’t even bring people into open houses in Gold Coast or downtown, much less SELL, especially when there’s cops everything still treating the loop like a third world warzone.
“We live in a lakeview townhouse and the riots in the summer and the carjackings now have us VERY eager to flee to north shore. ”
So you care more about carjackings and riots than correcting centuries of systemic racism perpetuated by your racist ancestors?
That’s awfully Karen of you.
(ps I’m just trolling you, your comment practically begged for it)