While home prices have been soaring, Chicago-area builders sold more new homes last year than any year since the peak of the Great Recession in 2008.
Low interest rates and buyers willing to spend more for bigger spaces are fueling the market, according to Crain’s. The same trend is true in the market for mansions and other sectors.
The increase in prices led to more interest in townhouses and condos, which were up almost 30 percent in 2021. Single-family homes were down by 2 percent. Prices are rising partly due to demand outpacing supply as well as the increase in construction costs.
“A year ago, the typical new single-family home was in the mid-$350,000s,” Erik Doersching, executive vice president of Tracy Cross & Associates, told Crain’s. “Now it’s approaching $425,000, and incomes did not increase proportionately.”
The trend in Chicago is slightly different from what’s happening across the rest of the country. Home sales slowed nationally while affordability fell. The share of families’ incomes spent on mortgage payments jumped from 14.7 percent to 16.9 percent year-over-year. The problem is only likely to grow, as Freddie Mac announced on Thursday the average mortgage rate hit 3.69 percent, its highest level since January 2020.
In and around Chicago, nearly 5,500 new homes, townhouses and condos were sold last year, according to data from Cross cited by Crain’s. It’s the second year in a row new home sales have increased.
Inventory was low at the start of the pandemic due to a decade of low sales, so builders opened 55 new subdivisions last year, as low interest rates and the pandemic renewed buyers’ interest in new homes. That also added 40 percent more new units to the pipeline last year than the year before, Crain’s reported, based on Cross data.
Cross data only tracks homes sold in developments of 10 or more. It does not count homes built on individual lots, a popular model in Chicago.
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[Crain’s] — Harrison Connery