Spending and Demand

According to Naatz, D.R. Horton had one of its strongest Decembers ever, and its strongest January in quite some time. D.R.Horton’s ability to have a high-quality home completed in 60 days is a strong selling point for many of the first-time homebuyers who form its client base. Naatz believes the firm’s consistent supply of quick delivery homes sets it apart and drives business from clients who are looking for a home that can be delivered in less than six months.

“I think consumer confidence seems to be trending in the right direction, and I think, generally speaking based on what we’ve seen in the last few months, that 2015 will be a great year for us,” Naatz, said.

Spending on new construction rose slightly in December, ticking up about 0.4 percent, according to the U.S. Department of Commerce. The seasonally adjusted annual rate of spending reached $982.1 billion, or 1.2 percent, with private construction representing $698.2 billion of that total. Year-over-year, December new construction spending increased by 11 percent over Dec. 2013. Builders reported 218,000 homes as being under construction or finished in December, according to the Commerce Department.

“We had a lull in the fall, but December saw things pick up,” said Lexington Homes Co-Principal Jeff Benach. “People who make these predictions are calling for a pretty strong year in Chicago, and we’re expecting it to pick up from last year. This is the first year that some national people have seen Chicago’s market as picking up, more in line with other parts of the country that have already seen things pick up.”

Pent-up demand is taking William Ryan Homes into five new communities in 2015, with developments going up online in Bartlett, Addison, Romeoville, Auburn Hills and Lakemoor, according to Beaver. Of the 11 markets the company currently sells in, interest is once again picking up in the western suburbs, including Elgin. William Ryan focuses on building homes in the 2,800- to 3,200-square-foot range, catering largely to the first-time homebuyer or move-up buyer. Much of the company’s growth is in response to tight inventory in the city and the consequence of many first-time buyers looking to the outlying suburbs.

“It makes buying a new home a directive again,” Beaver said of the short supply. “You get to decide what finishes you want in it, and you can make it your color. It’s fresh, it’s clean, it’s energy efficient – which is a huge plus over buying a resale home. It’s clean and it comes with a warranty.”

Lev sees a continued shortage of new homes on the market. While the trend used to be one new home for every six resales, he’s now seeing a figure closer to one new home out of every 10 sold.

“On the for-sale side, we’re still seeing a lot of higher-end, bigger units happening,” Lev said. “We’ve been doing a lot of three-bedroom units. I still see that happening, but I think we’re not too far off from seeing a return to some entry-level, one and two bedrooms. I don’t think we’re quite there yet, but we may see some of that later in the year.”

David Wolf, senior vice president of construction at Related Midwest, isn’t seeing that much new construction going on the market, but his firm is working on several projects that are slated for completion in 2016 or 2017. He’s seen a trend toward more efficient units and more opulent finishes, and a shift toward people wanting to remain in the city.

“The majority of high-price sales are in very large units, because we’re seeing more people who are staying in the city and living an urbanite lifestyle as infrastructure has improved in Chicago, as schools have improved,” Wolf said. “Those people are buying larger units and larger homes because the picture is to stay in the city as opposed to flight to the suburbs.”