Market Conditions: Second Quarter New Home Sales Soar Compared to Last Year
Crain’s has the numbers from Tracy Cross & Associates on the new home sales in the second quarter in Chicago and the Chicagoland area.
Given the strength in the resale market, you might have guessed that it is shaping up to be the best year for the homebuilders since the bust.
In the second quarter, 1,343 new homes sold in the Chicagoland area, up 40% from a year ago. That puts the sales on pace to be about 5,025 by the end of the year which is 46% higher than a year ago.
This is still well below the “normal” market years of 2000-2003 but is a vast improvement over the last few years.
The surge in city sales can be attributed mostly to the strong performance of two failed South Loop condo towers rebooted by a joint venture including developer Related Cos. The venture sold 154 condos in the second quarter, accounting for nearly half of the city’s new-home sales, according to Tracy Cross.
Though demand for new homes has been strong this year, supply has waned. There were 320 active housing developments in the Chicago area at the end of the second quarter, down from 394 at the same time last year and a peak of 1,285 in 2007, according to Tracy Cross.
High-rise condo development still isn’t palatable to many lenders, and though home prices are rising, prices haven’t risen to the point to justify buying large pieces of land to build from scratch.
Jeff Benach, co-principal of Chicago-based Lexington Homes, said more than 5,000 new homes would sell this year if “builders had inventory.”
Mr. Benach has sold 49 homes this year and just launched sales of two town home developments in suburban Palatine totaling 56 units, 41 of them part of a stalled project Lexington bought out of distress.
He said he is “guardedly optimistic” about housing’s momentum, but many factors, including the tepid broader economic recovery ,could impede the comeback. Mr. Benach said he is searching for raw land development sites, but not for projects larger than 50 or 60 lots.
“I don’t see a lot of jumping on major, big pieces” of land, Mr. Benach said. “Nobody’s quite comfortable yet to commit to a long-term thing, at least at this point.”
With demand growing, will 2014 be the return of significant new construction in the city?
Homebuilders on track for best year since the crash [Crain’s Chicago Business, David Lee Matthews, August 8, 2013]
I’m seeing a handful of new homes being built out near Wheaton in small subdivisions off busy roads. This is the first time I’ve seen building in years. There are spec homes replacing tear downs. Not so much in my neighborhood which is more focused on rehabs but in other areas of town with larger lots. I can’t speak for lake view, its been a while since I’ve been there
There are a lot of tear downs in Logan, Avondale, and other areas I frequent.
“I’m seeing a handful of new homes being built out near Wheaton in small subdivisions off busy roads. This is the first time I’ve seen building in years.”
I know some people who live really far west (like Yorkville and Geneva areas) and they have said that the builders are building again. A lot of it is in the developments that just stopped 6 years ago. Those lots sat empty. So it’s good that those subdivisions are finally being built out.
I also think it’s interesting that people are once again buying that far out because of “affordability.” We’ve chattered many times on this blog about how the bust and high gas prices would change people’s priorities and that the far out suburbs were doomed.
But I guess not.
I haven’t seen the new construction near me yet. The developer still has a few lots that were never developed.
“We’ve chattered many times on this blog about how the bust and high gas prices would change people’s priorities and that the far out suburbs were doomed.”
Geneva is decently convenient (in the suburban driving sense) to most of the west suburban employment centers, and ‘big’ houses are quite a bit cheaper than Glen Ellyn/Wheaton, so it’s not totally crazy. But if you work in the city, it’s nuts.
There isn’t shit going on in Yorkville, i have in laws that live in “Grande Reserve” and that place is still half built, if that… with property values still down 50% from what they paid for when new
When they say “sold” they really mean closed, right?
We closed on a 3BR condo in one of the Related buildings that is referred to in this article in the second quarter. Related is doing very well; they are actually somewhat limited by the fact that when they took over the buildings, a large percentage of the units were white boxes and it is taking them 3-4 months to finish a unit after signing a contract (they aren’t doing anything on spec).
Count on these two buildings contributing a lot to the 3Q totals given all the contracts they’ve already got, but after that they are going to slow down as they are continuously raising prices and that is going to really slow down the pace of sales.
“There are a lot of tear downs in Logan, Avondale,”
Lots of teardowns in North Center and Lincoln Square, too. One block near me is on 4 (out of ~30 lots) in the past 12 months, with more possible (old places for sale or recently sold) soon.
tipster — do you know if Related would allow you to do a custom job (large, merge two units) and do your own kitchen, floors and baths?
“I also think it’s interesting that people are once again buying that far out because of “affordability.””
Far out is still more “affordable”. Even if prices in Chicagoland dropped 50% and a $500k home in Oak Brook became a $250 home, the $250k home in Yorkville becomes a $125k home. More “affordable”.
Geneva is pretty nice. If I were to kill the dreams of my 20’s and move to a 1 hour Metra commute to the Loop, Geneva would rank higher than many of the other options. My wedding reception will be in Geneva in January.
“When they say “sold” they really mean closed, right?”
This is one of my pet peeves, but that’s what sold means. If you agree, pursuant to a written agreement, to sell me something if certain contingencies are met or waived, that’s not a sale. It’s an agreement to have a sale. If we consummate (“close”) that sale agreement, then it’s a sale.
for people who are concerned with the amount of sq feet for the money, and there’s a lot of them, Geneva, Batavia and st Charles are popular places. not many people commute downtown from out there. not all jobs are in the loop. there are plenty of people who work and make good money at office jobs in manufacturing districts and warehouses all over the burbs. plus the office corridors along 88, 90, 294 etc. it’s very chicago centric to think that downtown jobs are the only real jobs
A little off topic but something we discuss often:
http://online.wsj.com/article/SB10001424127887324136204578644080452044960.html?mod=WSJ_hps_MIDDLE_Video_second#project%3DSLIDESHOW08%26s%3DSB10001424127887323968704578652413561474682%26articleTabs%3Darticle
I thought this quote was particularly interesting:
“According to online real-estate brokerage Redfin, more than a million baby boomers moved to within 5 miles of the downtown of the 50 largest cities between 2000 and 2010, while the same number of baby boomers moved away from neighborhoods located 40 to 80 miles outside those 50 cities’ downtown areas.”
“There are a lot of tear downs in Logan, Avondale,”
“Lots of teardowns in North Center and Lincoln Square, too.”
I’m sure there are some, but was just talking the other day about how there haven’t been many teardowns in logan. And by logan, I mean basically between kennedy and square, fullerton to diversey. I haven’t walked around the whole of that area, but in my area renos (gut or otherwise) dominate teardowns. There have been a couple recent sales of cheap houses and maybe those will be torn down.
I don’t know what the market is for a close to $1MM new construction place is around where I am. I also haven’t seen one of the smart tech homes in this area, though I may well have missed some (too lazy to chekc).
urban mommy – the answer is probably “yes, but”…
The original developer sold units all over the building and Related has done the same. You are likely to find adjacent unsold units only on the higher floors (not that that is a bad thing) and because Related is doing really well selling units that they will finish themselves, you are going to need to pay enough to make it worthwhile to them, which may be more than it is worth to you.
But perhaps the largest issue is that your contractors will have trouble not getting in the way. There are 3-6 move-ins per week on top of the 3 or 4 equipment deliveries that the building gets every week (they really do build the units out as they go under contract).
It would be a great opportunity so you should stop by and ask them about, if you really are interested. Don’t let me convince you otherwise. The worst they can say is no.
Thanks tipster…I think I will do just that. I’ve done a fair number of renos…I think I could have related do all except tile and cabinets, which could be brought up in one afternoon and stored on site during the work. I had to coordinate limited freight access on my last reno so its not impossible.
” not all jobs are in the loop”
HD has a point. just look to Sears. It was cheaper to build a new complex in Hoffman Estates than maintain the tower. Of course a lot of employees without cars got screwed in that deal.
I think the pattern is: move business to suburbs, enjoy tax breaks. When tax breaks expire move back to Desolated City that is only too happy to have you and give you another great tax break. Wash, rinse, repeat.
I would love to know the percentage of workers a company loses when moving to the suburbs. I wouldn’t stay at my company if we moved to the suburbs.
East Village is on fire. When I came back from SF (let’s not start that debate again) 3 buildings on my street had disappeared. That’s in 5 days! The guy tearing down the place next door to me (a few months ago) said he had 9 jobs in the neighborhood and was booked out 2 months. I’ve heard rumor that some developer has bought 28 lots throughout the area. There has to be several homes under construction on every block here.
There’s also a ton of major rehab jobs going on. Old little houses in Logan Square are going for over $400K in one week with multiple offers to people who are invariably put in another 200K+.
DZ, I haven’t seen any teardowns either… I’m in the area you’re describing, and while griping to someone about how my frame workmen’s cottage is just rehabbed enough to make a nice starter home for someone, it’s also not quite nice enough to not be considered a tear down… So I feel stuck, and not sure if I should just sell as-is, or spruce it up. My friend wondered if there might not be a way to work a deal w a developer; sell to them, they would do a 4 unit condo, and I’d get one of them…. How would I even start to investigate something like that?
Logansquarean, I would not go down that path simply because the condo they create wouldn’t necessarily be the best condo for you. You would be better of selling and then shopping around amongst all the choices out there.
Gary, you’re right, unless I worked with someone that had the same “vision” or had done spaces I’d seen and liked before… I forgot about that!
Logansquarean keep in mind that we’re still in a “sell low and buy low” phase. Price are rising but they’ve got a long ways to go until they reach peaks – a LONG ways. So I suggest that you look for what you want, where you want. If you’re serious about moving go ahead and put your place on the market. There are LOTS of first time homebuyers out there who would love to get into your cottage (complete with yard and maybe garage?) Other than the annoyance of having your home listed for sale – what have you got to lose?
“East Village is on fire. When I came back from SF (let’s not start that debate again) 3 buildings on my street had disappeared. That’s in 5 days!”
What part of the East Village Gary? Are you talking the “real” East Village or West Town (west of Damen)? There are PLENTY of lots west of Damen. In fact, miles could be gentrified in that area. It started in the last boom and sounds like it will continue. It’s one of the few areas where there are plenty of old workers cottages that they can buy and tear down and build either a $1 million McMansion or one of those 3 flats and price all the condos at like $395k each. There are a LOT of foreclosures and whatnot in that area and the developers are buying them up.
I thought true East Village was either 1) landmarked and could not be torn down or 2) too expensive to do a teardown unless it was going to be a $1.5 million McMansion (or higher). Isn’t it pretty gentrified now?
“When they say “sold” they really mean closed, right?”
Yes. These are closed units- not simply those under contract.
Logansquarean – my wife and I have been renting in that area where you live for a while, looking at SFH’s the whole time. We want to stay in that area of Logan, but the prices have driven us away from purchases in most situations. If you’re serious about moving, we would be an interested buyer.
“What part of the East Village Gary? Are you talking the “real” East Village or West Town (west of Damen)? ….
…I thought true East Village was either 1) landmarked and could not be torn down or 2) too expensive to do a teardown unless it was going to be a $1.5 million McMansion (or higher). Isn’t it pretty gentrified now?”
Lost track of this thread until now. I’m talking the real East Village between Grand and Division and Ashland and Damen, although most of the activity I’m talking about is south of Chicago. I’m not aware of any landmarking here. Buildings are falling every day and being replaced by 850K+ homes. I’m loving it.
Gary, your latest post on Chicago housing was very interesting. Are things still moving fast? In areas I look there is really nothing on the market.
Yeah, they’re moving really fast. In my July update the last graph shows just how fast stuff is selling: http://www.chicagonow.com/getting-real/2013/08/july-chicago-home-sales-highest-level-in-seven-years/ I have a lot of frustrated buyers right now. Yet, there are some decent properties that are not selling oddly enough. I think buyers are very particular, as they have a right to be.
“Lost track of this thread until now. I’m talking the real East Village between Grand and Division and Ashland and Damen, although most of the activity I’m talking about is south of Chicago.”
Oh yeah- I forgot it extended south of Chicago. That’s the part no one wants to live in because it sucks.
Okay- thanks for clearing that up. They can teardown as many houses as they want there.
“Oh yeah- I forgot it extended south of Chicago. That’s the part no one wants to live in because it sucks. ”
That’s the part I live in. No offense taken though. They wouldn’t be doing tons of teardowns and selling them in 3 weeks for 800K+ if it really sucked and no one wanted to live here. You should drive through here some time.
“You should drive through here some time.”
I do. That’s all I will do because getting out of the car- even in the daylight- is not an option. It’s a little tiring seeing the blue lights all the time, although Chicago’s finest DO patrol these streets often so you have that.
You couldn’t pay me to live over there. I know someone for years who lived NORTH of Chicago avenue (heaven help those living SOUTH of it.) She finally got the heck out of there when there was a drive by just two blocks away. Where do you go to do anything? The check cashing stores? The dollar stores to buy clothes?
It used to be neighborhoods gentrified on the backs of singletons and the hipsters who moved in. I would say that about Wicker Park and Ukrainian Village. And THEN, when they were decent, the families moved in.
Why the hell would I want to move my children, my most precious thing in life, to an “up and coming” neighborhood when I have $800,000 to spend?
(Personally, I wouldn’t even live in gentrified East Village with kids because the schools are so bad- but at least you can walk around there during the day. I know people will pay for private schools.)
You aren’t raising kids there- right Gary?
Please tell me all the restaurants you walk to. Do you hang out at the Starbucks that is in that Dominick’s on Chicago Avenue? By the way- thank goodness for that Dominick’s because it helped the area tremendously.
“They wouldn’t be doing tons of teardowns and selling them in 3 weeks for 800K+ if it really sucked and no one wanted to live here.”
“Why the hell would I want to move my children, my most precious thing in life, to an “up and coming” neighborhood when I have $800,000 to spend?”
The reason you might is you can get a house for $800 that would cost you $1.2 elsewhere. Doesn’t mean you nec do it. I am interested. What kinds of couples/families are moving into these $800K places?
And there is hoosier mama in walking distance.
“I do. That’s all I will do because getting out of the car- even in the daylight- is not an option. It’s a little tiring seeing the blue lights all the time”
I don’t think you do because there are no blue lights (I assume you are talking about the cameras) around here. If you know otherwise tell me the locations of them.
As you might expect I have the data on crime and the murders in this area are no greater than in River North/Streeterville. And the same is true for violent crimes that don’t result in murder: http://www.chicagonow.com/getting-real/2013/07/violent-crime-in-chicago-the-most-dangerous-neighborhoods-for-assault-and-battery/
“Where do you go to do anything? The check cashing stores? The dollar stores to buy clothes?”
OK. You clearly don’t know the neighborhood. All my day to day shopping needs are within 2 – 3 blocks of where we live on Chicago. In addition, we’ve started to frequent the bars and restaurants in the area and really like them. We can even walk to the Damen/ Milwaukee intersection which has tons of options. In addition, a 10 minute bus ride down Chicago gets me to Michigan Ave and I’ve found since I live here I’m actually really a short drive to most of my business whether it’s north or south of here.
“You aren’t raising kids there- right Gary?”
No, but others are.
“Please tell me all the restaurants you walk to.”
Roots, Cleo’s, Tecalitlan but I don’t think restaurants I can walk to is my biggest criteria in choosing a place to live.
“The reason you might is you can get a house for $800 that would cost you $1.2 elsewhere. Doesn’t mean you nec do it. I am interested. What kinds of couples/families are moving into these $800K places?”
Exactly and prices are rising. It’s mostly young couples who either have young children or might start to have young children soon.
I recently did a post on some of the new housing options in the area: http://www.chicagonow.com/getting-real/2013/08/chicagos-east-village-real-estate-market-hot/
A hidden benefit is that you would get to have me as a neighbor.
“Exactly and prices are rising. It’s mostly young couples who either have young children or might start to have young children soon.”
The place below might be an indicator of recent pricing. (And yes crib!)
http://www.redfin.com/IL/Chicago/1848-W-Erie-St-60622/home/14104383
DZ, yeah that’s the property I highlight in that post I linked to above. It’s not under contract yet but there’s a ton of interest in it. Heck, who else buys a 3000 – 4000+ sq ft house other than someone like me who has a wife looking for a large footprint?
Hey loganrenter,
I really am not thinking of considering selling until next spring. Hoping to make some repairs and getting the place in order first! I’ll definitely post here if I should get real about putting my house up for sale. It’s a nice area, indeed!
loganrenter, have you seen this property?
Doesn’t look too bad, that area is pretty good, and the price seems reasonable. Worth a look-see?