Hardly a day goes by where the real estate market doesn't make headlines. However, a lot of that news is based on national data, which is really just an average of the whole country and doesn't apply to any one particular place.
Chicagoans know that the real estate market is hyper-local. So we checked in with Chicago-area builders and developers to see what the new home market is like right now: what's selling, what's available, and how prices have changed. Here's what they had to say.
Sales have slowed.
National new home sales numbers were flat this summer after a spring surge where buyers rushed to take advantage of the now-expired $8,000 federal homebuyer tax credit.
"The market is really slow," says Amy Capista of Phoenix Developers. "We had a little burst this spring where we sold about eight homes between March and June at our Clublands community in Antioch. There are 40 home sites left."
Phoenix's Whisper Glen in Plainfield has 90 home sites left after four and a half years of sales.
"Price isn't the issue, it's financing," Capista says. "We're in an affordable price range, starting at $174,900. But you still have to qualify [for a mortgage].
Developer Bill Senne, president of Property Consultants in Chicago agrees. "Here we are with historically low interest rates and it's ironic we can't get anyone approved to take advantage of it," he says.
Senne is trying to close out Emerald on Green Street, a trendy eco-friendly building in the West Loop designed for young professionals. "We're down to 40 units left, ranging from $260,000 to $400,000," he says. "There doesn't seem to be a sense of urgency, but we're eking out sales. We have averaged about two per month."
Inventory is still high.
National numbers show a lot of inventory out there in the housing market. Most Chicago developers have whittled down their pre-built home inventory over the last few years through price reductions. But plenty of spec homes, model homes and brand-new condos remain.
"Buyers are taking their time because there is so much product out there to see, both new and resale. It's human nature that they want to get more for their money," says Phil Hartz, owner of Hartz Homes, a South Side builder for 50 years. Hartz says there is at least one quick-delivery home available in each of Hartz Homes' 17 communities, which span the suburbs from Oakbrook Terrace to New Lenox.
"There is a lot of choice out there," agrees Gary Levitas of the Northfield Group. "People look and look and look, and take the best deal."
The Northfield Group is developing Millbrook Pointe, a luxury town home community in Wheeling. He says he has been able to continue to expand Millbrook Point because the town homes have the right combination of quality construction, price and location buyers are looking for.
Levitas adds that these days developers cannot move forward with projects until they sell off existing inventory, or pre-sell what they want to build. "We were able to break ground on the seventh of eight buildings in phase one because we got three new contracts," he says.
Patrick Landrosh of Landrosh Development, a custom high-end builder on the North Side, is also taking things step by step. "You have to go one step at a time right now with high end homes in the city because you don't want to hold too much inventory," he says.
Landrosh has built two large homes in Lincoln Square listed for $1,795,000 and $1,350,00, and another in Lakeview at $3.4 million. He has sold one home this year, and hopes to sell another in the fall market.
"In general, people have been reluctant to trade up," he says. "Doing so requires them to put a lot of money down." Instead, luxury buyers are renting his homes for thousands of dollars a month. "They feel safer just renting as opposed to committing to buy. It's the uncertainty around real estate values."
Prices are still dropping.
For example, developer closeouts on downtown condo buildings built several years ago may run 20-30 percent lower than when the building's sales began. The Columbian at 1140 S. Michigan Ave. is one example. It allows buyers to negotiate the list price, and even includes free parking, practically unheard of downtown.
Hartz Homes' Hibernia community in New Lenox has rolled back to 2003-04 pricing, Hartz says. There single-family homes start at $289,900 for a two-story, four-bedroom, 2.5-bath home in a community that includes amenities like a splash park and a lake with paddleboat rentals.
The town home community at Millbrook Pointe has done so well because it reduced its prices by more than $100,000 per unit. "In our market, we're competing with foreclosures and short sales," Levitas says.
Developers are helping buyers with financing.
"There's no question that financing a mortgage is different than two or four years ago," Hartz says. "We have a couple of preferred lenders that can help them out, so that can be overcome."
Capista says she often works with buyers for months to improve their credit score before they even apply for a loan. "Most of the time they don't even know what to do," she says. "Sometimes it takes six or nine months or even a year. But if you have a 550 credit score, there is nothing I can do for you right now."
Senne says his company has owner financed about 10-15 sales at Emerald on Green Street. (That means instead of getting a loan through a bank, the buyer gets it through the developer, minus the down payment.)
Because of the increasing percentage of loans now being obtained through FHA (Federal Housing Administration), it is crucial for a developer to obtain FHA approval for their building. Emerald on Green is FHA approved. So is Millbrook Pointe.
"Financing has been tough for everyone because it changed from one end of the spectrum to the other, and the FHA has helped a lot," Levitas says. "When the market comes back, it will be a great deal for someone who got something new and got a good deal on it."