I'm a bit overdue with my annual analysis of Chicago's new construction real estate market. But before I get started on showing you where the single family homes and condos/ townhomes are being built and at what price points I thought it would be a good idea to step back a bit and give you a quick overview of how that segment of the market has been behaving over the last 10 years or so. Surprisingly, I've never done this before because I wasn't sure that I trusted the data - going back to 2008 - that was available to me. But now I've convinced myself that it's legit....or at least it's close enough.
New Construction Sales
I can't be sure what happened prior to 2008 but there was certainly a peak of sorts in condo/ townhome sales in May 2008. We've never reached that peak again in the years since - by a long shot - though sales have been steadily rising since bottoming out in 2011. In contrast, sales of detached homes hasn't really fluctuated that much over this same time period, though they have picked up a bit since their bottom in 2011 and seem to have peaked in 2016 - 2017.
New Construction Pricing
There have been some pretty striking trends in the prices of new attached and detached construction in Chicago over the last 11 years. In the graphs below I decided to show you median prices as opposed to average prices because the distribution of prices tends to be skewed high with a long tail and that raises the averages to around $1 MM each. So I thought graphing median prices - the mid point of the distribution with half of prices above the median and half below - would give you a better idea of how new construction has been priced. In addition, I used a 12 month moving average to smooth out the significant amount of noise in the data.
Keep in mind that median and average sales prices don't just tell you about price appreciation. They also tell you a lot about the mix of what is being built and sold by developers. And you can't separate out the two effects.
So, in the graph below, the median price of new condos/ townhomes has been more or less steadily rising over the last 11 years even as the Chicago real estate market was in a decline. However, it has plateaued a bit in the last 12 months - maybe even declining somewhat. In contrast, the median price of detached homes peaked above $1.2 MM in 2009 even as the sales of these homes declined (see the graph above). Then prices plummeted all the way to the mid $500s in 2013, peaked again around $900 K in the 2016 timeframe and are now on the decline again. For the last 12 months the median price at which detached homes have sold has been just below $800K. I suspect that the driver of the recent decline has been builders pushing into neighborhoods with cheaper land and building more affordable homes. That's where the demand is strongest.
The Supply Of New Construction
Just one last set of graphs that look at the supply of new homes in Chicago. Note that I'm back to looking at individual months of data.
It got real ugly during the bursting of the housing bubble, hitting a 20 month supply, but then developers sold through their inventory and by 2013 new construction was actually in short supply. But over the last few years it has fluctuated in a very healthy range of a 5 - 6 month supply for both attached and detached homes. I know some builders are skeptical about the market right now but it looks like enough are taking the risks to keep the new construction market moving along.
Oh...I should point out one thing about the new condo inventory shown here. It's usually understated. Developers don't always put their new condos on the MLS or they don't put them on all at once. For instance, none of the Tribune Tower condos are in the MLS yet. So the inventory is somewhat understated.
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Gary Lucido is the President of Lucid Realty, the Chicago area's full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider's view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.