Tracy Cross & Associates, Inc.

11/25/2024

Sales remain strong; supply low

Tracy Cross & Associates, Inc.
3rd Quarter 2024

During the first three quarters of 2024, a total of 4,147 new homes were sold throughout the Chicago metropolitan region, an increase of 4.1 percent compared to the 3,984 sales registered during same period in 2023.

Volumes during the 3rd Quarter 2024, however, were down slightly year-over-year (5.8 percent) with single family homes showing a decline of just 1.3 percent, with the attached sector experiencing a more substantial 14.8 percent decrease.

Despite the modest dip during the most recent three-month period, production homebuilders are on pace to reach 5,200 sales in 2024, one of the highest yearly volumes in the last 10+ years, second only to the post-pandemic surge in 2021 when 5,536 sales were recorded. Moreover, the level of activity being realized in 2024 has occurred among the lowest number of active subdivisions. In other words, while inventory is at its lowest level in more than 25 years, and prices are up more than 7.0 percent during the last 12 months, sales remain strong, especially on a per-project basis.

Geographically, the Northwestern Corridor continued to experience the highest volume of transactions with 1,411 year-to-date sales, largely driven by competitive price points in areas such as Hampshire and Pingree Grove. Following the Northwestern Corridor were the Western and Southwestern Corridors with 1,115 and 819 sales, respectively.

D.R. Horton led all homebuilders during the first nine months of 2024 with 862 total sales, followed closely by Lennar with 853 sales. Rounding out the top five were Pulte (675 sales), M/I Homes (615) and Ryan Homes (374). Collectively, these top five homebuilders captured more than 80 percent of all sales in the Chicagoland marketplace.

08/09/2023

Sales surge during the quarter

Tracy Cross & Associates, Inc.
2nd Quarter 2023

Production home builders in the Chicagoland region recorded 1,438 new construction sales during the 2nd Quarter 2023, the highest quarterly volume posted during this specific three-month period (April-June) since 2008. Compared to the 1,045 sales registered during the 2nd Quarter 2022, the 1,438 sales noted during the last three months reflected an increase of 38 percent.

Despite a rather sluggish first quarter of 2023, the second quarter surge brought sales for the first half of year in line with volumes posted during the same period in 2022. Specifically, area builders posted 2,643 net sales during the January-June 2023 timeframe, which compares with the 2,708 sales registered during the same six-month period last year.

By product sector, single family detached sales during the first six months of 2023 increased by 7.2 percent year-over-year, while townhome/condominium activity dropped by 14.5 percent, largely due to a more severe drop in high-end condominium sales in the city of Chicago.

Contributing to the region’s overall uptick in production home sales during 2nd Quarter 2023 were 201 contracts (or 14 percent of total sales) among 17 new suburban developments introduced during the last three months. Most of these new market entrants represent developments by the region’s largest home building companies, which include D.R. Horton, Lennar, Pulte, M/I Homes and Ryan Homes.

These same national homebuilders continue to dominate the region, accounting for nearly 80 percent of all new construction home sales during the first six months of 2023. D.R. Horton led with 599 transactions, followed closely by Lennar with 551 contracts. Rounding out the top five were Pulte with 398, M/I Homes (317) and Ryan (230).

Tracy Cross & Associates, Inc. 2nd Quarter 2023 Production home builders in the Chicagoland region recorded 1,438 new construction sales during the 2nd Quarter 2023, the highest quarterly volume posted during this specific three-month period (April-June) since 2008.  Compared to the 1,045 sales reg...

08/09/2023

Chicago-area new home sales had their biggest spring since 2008

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.

https://tcrossinc.com/2023/07/chicago-area-new-home-sales-had-their-biggest-spring-since-2008/

02/27/2023

A pastor's retirement plans: Fill dozens of long-vacant Roseland lots with new homes

Dennis Rodkin
Crain’s Chicago Business
February 22, 2023

John R. Boehm
The Rev. James Meeks

When he announced his retirement from the pulpit of his 10,000-seat church on 114th Street in January, the Rev. James Meeks told the congregation how he plans to spend his retirement years: building homes in the neighborhood.
A few weeks later, as Meeks stood on the corner of 118th Street and Indiana Avenue in Chicago's Roseland neighborhood, where he expects to break ground on the first 20 homes this spring, he said it’s not so much a retirement project as an extension of the work he's been doing for four decades.
“I’ve always thought that a church that didn’t come outside its four walls to build its community isn’t worth its salt,” said Meeks, the 66-year-old pastor emeritus of Salem Baptist Church and a former Illinois state senator.
In a long-disinvested neighborhood, revitalization is an uphill battle, fraught with obstacles like financing, high crime, the stability of homeowners who convert from renting and, according to Meeks, “skepticism.” Looking around the blocks on his project map, many of them gap-toothed with vacant lots, it’s difficult to picture the change he foresees.
If Meeks can fill dozens of long-vacant lots with new houses and homeowners, “that will have a substantial, positive impact on the area,” said Erik Doersching, CEO of Tracy Cross & Associates, a Schaumburg-based consultancy to the homebuilding business.
Roseland could begin to revitalize with clusters of new homes attracting people who “will speak up about crime (and) won’t put up with it,” says Vernon Lilly, who’s been selling real estate in the area for four decades. “If they’re living in clusters of new homes, they’re going to say they want police protection, they want the neighborhood going their way.”
Meeks’ primary adviser in the project, David Doig, president of Chicago Neighborhood Initiatives, sees the proposed new homes as coming at the right time, ahead of the Chicago Transit Authority’s planned Red Line extension to 130th Street. One proposed stop is at 115th Street and Michigan Avenue, a few blocks from the first round of new homes. A direct transit line to neighborhoods north of Roseland and to the Loop could enhance the neighborhood’s appeal to homebuyers.
“One of the big demand drivers here is going to be the new Red Line,” Doig said.
Best known for its multi-pronged, $350 million Pullman revitalization effort, CNI is partnering with Meeks’ three-year-old Hope Center Foundation. Doig said construction costs for the Meeks initiative will be covered through a revolving fund Doig’s group has raised with contributions from BMO Harris, Chase Bank and others.
“We’re trying to build the fund to $25 million,” Doig says, “but right now, we have $12 million.” The fund is for both the Meeks program on the South Side and a similar homebuilding effiort by Lawndale Christian Development Corporation and United Power for Action & Justice on the West Side.
New homes for Roseland
The first houses to be built by the Rev. James Meeks' Hope Center Foundation and its partner, Chicago Neighborhood Initiatives, will be on vacant lots that Salem Baptist Church owns on the blocks near its former sanctuary at 118th Street and Indiana Avenue. The congregation now worships at House of Hope, seen in the inset and built in 2005.
The funding is more than sufficient to build the first 20 homes, Doig said, and when they’re sold, the money replenishes for additional construction. Shenita Muse, executive director of the Hope Center Foundation, said she has buyers lined up for at least four homes, and expects to have more as the foundation’s homeownership training classes progress.
The three-bedroom, two-bath houses will be priced from $200,000 to $210,000, Muse says, but buyers will pay about $30,000 less because of down payment incentives and other grants the foundation has lined up from housing agencies and donors.
Buyers will be primarily former renters who’ve been through the foundation’s classes and learned how to maintain and pay for a house. Training and financial guidance continue after the family moves in, and some financial incentives only kick in when the buyers have been in the home for five years.
“This whole thing would be a failure if people are rotating in and out of these houses,” Meeks says.
Housing has long been part of Meeks’ community-building agenda. A dozen years ago, when running for mayor, he pushed for programs that would convert foreclosed buildings into low-income housing. It's only now in retirement, he said, that “I have time to take this on” at the scale he’s got in mind.
In his retirement address from the pulpit in early January, Meeks said his goal was to build 1,000 homes. In a later interview, he suggested that’s more of an ideal, a shiny target to aim for.
Ald. Anthony Beale, whose 9th Ward encompasses the Meeks project area, said the stated goal of “1,000 houses is extremely aggressive and ambitious, but we definitely have enough vacant lots to do it.”

John R. Boehm
If Meeks can fill dozens of long-vacant lots with new houses and homeowners, “that will have a substantial, positive impact on the area,” said Erik Doersching, CEO of Tracy Cross & Associates, a Schaumburg-based consultancy to the homebuilding business.
On a map of about 12 square blocks between 116th and 119th streets, between Michigan and Prairie avenues, the project map shows dozens of targeted lots. They’re in various hands now, owned by Salem Baptist, the city, the Cook County Land Bank Authority or private owners. On the block where the spring groundbreaking will be held, 10 of 22 lots are targets for new houses.
Doersching's firm, Tracy Cross, is not connected to Meeks’ project. But when evaluating a comparable neighborhood in another Midwestern city, which he declined to name, for a client looking to build low-cost homes, Doersching says, “we found there was significant demand for homes (built by) a local organization that has been there in the neighborhood.”
Building houses in clusters is fundamental, Doig says. “Filling up those vacant lots with families who take ownership of the block is the best crime-fighting strategy,” he says, citing a significant drop in crime around a previous project of dozens of homes built near St. Bernard Hospital in Englewood.
Meeks grew up in Englewood, the fourth child of parents who came up from Mississippi in the Great Migration. After a few years in Bronzeville, his parents bought a two-flat at 64th and Laflin streets.
At age 24, Meeks became pastor of Beth Eden Baptist Church in Morgan Park, and at 29, he founded Salem Baptist. With his wife, Jamell Meeks, he raised four children. The couple live in Roseland.
Building homes is not Meeks’ only retirement plan. He says he also wants to golf and mentor younger pastors, but that the housing program is “my focus, the best thing to get up for every morning.”

https://tcrossinc.com/2023/02/a-pastors-retirement-plans-fill-dozens-of-long-vacant-roseland-lots-with-new-homes/

02/27/2023

New-home sales drop to lowest level in 12 years

Dennis Rodkin
Crain’s Chicago Business
January 30, 2023

Anita Olson
This house in Ivanhoe, a DR Horton development in Manhattan, Illinois, sold for $434,990 in November.
Sales of new homes in the Chicago area dropped to their lowest total in 12 years in the fourth quarter of 2022, according to a new report.
Builders sold 677 homes in the 10-county Chicago metropolitan area in the last three months of the year, reports Tracy Cross & Associates, a Schaumburg-based consultancy for homebuilders. That’s the lowest sales figure for any quarter since fourth-quarter 2010, when the same number of homes sold.
In 2022, Chicago-area builders sold 4,275 homes, according to Cross, down 22.8% from the year before.
The cause is “mostly the interest rate environment,” said Erik Doersching, CEO of Tracy Cross, but another big factor is “our lack of supply of new homes.”
The Federal Reserve’s effort to stifle inflation by increasing its lending rates led to the interest rate on a 30-year mortgage crossing above 5% in May for the first time in a dozen years.
Along with steep increases in monthly costs that the rate hikes cause, another factor is the region’s years-long problem of short supply of new homes, which quickly became depleted during the housing boom.
Illinois built fewer new homes per capita in 2022 than nearly every other state, according to a report out earlier this month from an Oregon real estate firm. Only Connecticut and Rhode Island had a lower rate of new construction. It’s the result of flat or declining population, Doersching says. The metro area’s biggest population increase in recent years was 0.27%, in 2022. Compare that to Austin, Texas, where annual population growth consistently runs over 2% a year.
Seeing minimal population growth in the Chicago area, “builders will put their money on other places,” Doersching said.
In 2022, the number of active new-construction developments in the region was the lowest it’s been in the entire 21st century. There were 259 active developments, down from 297 the year before and far below the average of 1,173 developments operating in the years 2004 to 2008, during a housing boom.
When a development is sold out, “we’re not getting new ones to replace them,” Doersching said.
The year-end tally of home sales was below both 2021 and 2020, the recent boom years, but was well above the average sales in the five relatively normal years before COVID. The average number of sales in 2015-2019 was 3,978. The year-end figure for 2022 was 7.5% above that.
The decline in sales began in the first quarter of 2022 and accelerated throughout the year. It shows up as a progressively widening gap between 2022 quarterly sales and the corresponding figures in 2021. First-quarter sales were down by 13%, second quarter by 22%, third quarter by 19%, and fourth quarter by 45%.
Although interest rates have dipped a bit since their peak in the fourth quarter, Doersching said he does not expect new-home sales to rise this year, largely because of the lack of new inventory.
There have been reports nationwide of an increasing number of buyers canceling their contracts to buy new homes, but Doersching does not believe that problem has hit Chicago-area builders just yet. He said only one of the 259 developments reported negative sales, an indication of canceled contracts, but he declined to identify that development.
An apparently low rate of cancellations, Doersching said, is largely attributable to Chicago prices “not going up as much as they did in other places.” The average price of a new home sold in the Chicago area in fourth-quarter 2022 was $444,628, up about 25% from the same time in pre-COVID 2019. That’s far smaller than the 43% increase nationwide during the same period.

https://tcrossinc.com/2023/01/new-home-sales-drop-to-lowest-level-in-12-years/

10/19/2022

The housing boom was more like a blip for local homebuilders
Most of the local industry got caught flat-footed in 2020, with little product in the pipeline because sales had been dismal for a decade.

Dennis Rodkin
Crain’s Chicago Business
October 19, 2022

https://tcrossinc.com/2022/10/the-housing-boom-was-more-like-a-blip-for-local-homebuilders/

John R. Boehm
Erik Doersching is CEO of Tracy Cross Associates, a consultant to the homebuilding industry.
A couple of years ago, a national homebuilder exited the long-sluggish Chicago market, selling its 232 suburban lots to another firm and telling Crain’s it wasn’t coming back.
For the buyer of those lots, M/I Homes, it was like kismet. Mere weeks later, COVID supercharged homebuilding around Chicago and nationwide as homebound Americans sought more living space.
Of course “we didn’t see the pandemic coming,” says Rick Champine, Chicago-area president of Ohio-based M/I Homes, but with all those newly acquired lots, “we were ready to grow” with the housing boom that COVID and low interest rates delivered.
Business shot up about 60% as M/I sold 668 Chicago-area homes in 2021, according to Tracy Cross Associates, a consultant to the homebuilding industry based in Schaumburg. Compared with 2019 sales, that’s an increase of 251—or more than all the inventory M/I took off Arizona-based Taylor Morrison’s hands in February 2020, on the eve of the boom.
While that timely acquisition juiced up M/I, most of the local homebuilding industry got caught flat-footed in 2020, with little product in the pipeline because sales had been dismal for a decade. And then the boom subsided this summer, as the Federal Reserve hiked interest rates to slow inflation. The boom lasted about two years, which is less time than it takes builders to roll out new product.
In other words, the boom was too short and shallow to lift Chicago’s homebuilding industry out of the trough it’s been in since the housing bust of the 2000s. New-home permits in metropolitan Chicago rose 20% between 2020 and 2022, according to the St. Louis Fed, lagging a 36% national surge and well behind increases in fast-growing cities around the country.

Before the pandemic, new-home sales “were 90% below the peak” of the early 2000s says Erik Doersching, CEO of Tracy Cross. “We’re still 70% below the peak. It was more like a blip than a boom. But it was a nice blip.”
In 2021, homebuilders sold more newly built homes than in any year since 2008, at prices that were up about 19% from 2020. But by 2022, inventory dwindled and so did sales, dropping nearly 16% in the first half of the year. Doersching expects third-quarter figures due later this month to show that the blip is well and truly over.
The takeaway is sobering for Chicago-area homebuilders and the regional economy. Local builders and their subcontractors and suppliers have largely failed to benefit from their industry's first significant upturn in more than a decade. And residential construction, a major contributor to the local economy for generations, isn't the growth engine and job creator it once was.
At bottom, the long-term weakness of Chicago-area homebuilding reflects the area’s slow population growth and related loss of luster among major U.S. job markets—and in itself constricts one particular type of job, skilled construction labor.
The good news for builders: There’s not likely to be a big overhang of unsold homes.
“We didn’t have time to get out over our skis,” says Charlie Murphy, president and CEO of Icon Building Group, based in Vernon Hills. “We got out over the first few buckles on our boots.”
As demand rose, Murphy took on new hires, growing from 13 employees at the start of the pandemic to 27 now. “There was a time when I was adding them two at a time,” he says.
While rising interest rates slowed foot traffic at some of his developments, Murphy says he doesn’t foresee job cuts at the moment. That’s because Icon specializes in semi-custom homes that sell in the over-$700,000 range, where move-up buyers aren’t as sensitive to rising interest rates as first-time and under-$400,000 buyers.
Neither M/I nor Icon has started cutting prices, their principals say. But the trimming has started at Lennar, based in Miami and the biggest-volume builder in Chicago, with 593 homes sold in the second quarter. In a late-September earnings call, CEO Rick Beckwitt included Chicago in a list of 22 markets nationwide where, he said, “we’ve had to offer more aggressive financing (programs), base price reductions and increased incentives to regain sales momentum.”
Builders Murphy and Champine both said a key factor that restrained them from overbuilding is that they’re clear-eyed veterans of Chicago’s new-home market. “I’ve been in this business for 31 years and Chicago for 20,” Champine said. “You’re dealing with a metro of 9.5 million people that is selling (less than) 6,000 homes a year, where in other cities they’re selling triple that. That holds (supply) down.”
One reason we’ve been building below capacity for years is that Chicago has had some of the slowest-rising home values among big US cities. While the comparative affordability of homes is an economic plus for Chicago, it also eliminates the incentive of builders to create cheaper alternatives to existing housing stock.
Another negative behind the lower prices: flat or declining population figures that suppress demand. “Growth creates demand for new housing units,” says Robert Dietz, chief economist for the National Association of Home Builders. “Illinois has one of the lowest (numbers of) single-family homes built per capita in the country.”
Dietz says higher labor costs and heavier regulation also help slow building here. “A highly regulated market like Chicago was challenged. It takes longer to develop land there, the taxes and fees are higher, and population growth isn’t there pushing demand. It created a vicious cycle where it’s hard to build, so not much had been building,” which meant the voracious appetite for homes spurred by COVID-19 was funneled to the existing-home market.
Champine cites another factor in Chicago builders’ slower response time. Because of the long building drought, the pool of skilled laborers has shrunk. On top of that, supply chain issues slowed all markets.
Meanwhile, Dietz says, “there were plenty of smaller markets where building accelerated with demand.” For example, data from the Federal Reserve Bank of St. Louis shows permits for new private housing grew 115% in Indianapolis between March 2020 and March 2022, and 177% in Wilmington, N.C., dwarfing Chicago’s 20% increase.

Most of the local industry got caught flat-footed in 2020, with little product in the pipeline because sales had been dismal for a decade. Dennis RodkinCrain’s Chicago BusinessOctober 19, 2022 A couple of years ago, a national homebuilder exited the long-sluggish Chicago market, selling its 232 su...

08/02/2022

Dwindling supply, strong demand push new-home prices to record
Buyers are paying more per square foot than ever.

Dennis Rodkin
Crain’s Chicago Business
July 28, 2022

Buyers paid a little over $508,000 for this newly built four-bedroom house on Ivy Lane in the Tall Oaks subdivision in Elgin.

The price of new Chicago-area homes reached a record in the second quarter, pushed up by short supply and hungry demand.

New houses sold at an average of a little over $188 per square foot, while new townhouses and condos went for an average of nearly $327 a square foot, according to a new report from Tracy Cross & Associates, a Schaumburg-based consultant to the homebuilding industry.

In both cases, the figure was the highest in the 20-plus years of data Cross has compiled, according to Erik Doersching, the firm’s president.

The total price buyers paid, $438,307 on average for houses and $590,283 for condos or townhouses, were not records, as both types of housing have been selling at smaller square footages in recent quarters.

While the rising prices of materials and general inflation certainly contributed to higher new-home prices, Doersching said, “the biggest factor is the continuing lack of supply being brought onto the market.”

In the second quarter, 272 new-home developments were underway in the Chicago area, Cross reported, down from 300 at the same time last year and 351 two years ago. When the COVID-19 pandemic dawned, the region’s new-home industry had been in a trough for several years, and there has not yet been time enough to get sufficient new projects into the pipeline to meet demand.

“It takes two or three years to get these things moving,” Doersching said. In the meantime, available inventory was getting sold off in the pandemic-era housing boom.

In the first half of 2022, builders sold 2,682 new homes in the Chicago area, Cross reported, a decline of nearly 16% from a year ago. Of those sales, 205 were in the city, almost 20% below the volume in the first half of 2021.

Buyers shopping for new-construction homes were “eager” in the first half of the year, said Neeraja Yara, a Greatways Realty agent. “They saw prices increasing drastically and interest rates going up too.”

The available inventory has been so low, Yara said, that “a builder can say: ‘This is the house, this is the price. Do you want it? If not, I have other buyers.’ ” Yara represented buyers who paid a little more than $508,000 for a new four-bedroom house on Ivy Lane in Elgin, in the Tall Oaks subdivision by Florida-based homebuilder Lennar.

Lennar initially listed the house at $502,510 in November, and two months later tacked $1,000 onto the price. Yara’s clients put it under contract in January. Their final price for the 2,833-square-foot house, including upgrades, works out to $179 a square foot.

Suburban areas southwest of the city are the most popular selling areas for new homes. Nearly 42% of the 2,682 new homes sold in the first half of the year were there, in Plainfield, Yorkville, Joliet and other towns.

In Plainfield, “everybody was very busy and paying premiums” for the available new homes in the first half of the year, said Maria Bochenek, a Baird & Warner agent. She said clients who closed in June on their purchase of a five-bedroom, $550,000 house on Rustic Wood Lane in a Pulte homes development in Plainfield were “lucky and smart” because they put it under contact in November, “before everything went up even more.”