Two years ago, Jim Letchinger, CEO of JDL Development, didn’t think the company could sell a condominium at its One Chicago luxury high-rise bordering River North and the Gold Coast.

“Beginning in March 2020, the condo market disappeared for four years,” Letchinger recalled. “Demand fell off a cliff. Nobody was moving to downtown Chicago.”

People fleeing the population-dense city to keep their distance from others during COVID, remote work and social unrest all caused demand for condominiums to drop and prices to fall. Fortunately, as the city recovered, demand began to return and pricing followed.

“Today’s pricing is back to pre-COVID levels,” he said. “Sales have been great the last two years. There are only three units left at One Chicago.” Units are priced from $2.1 million to $9 million.

New construction promises to be a solution to the low-inventory problem plaguing the Chicagoland real estate market. But will it be enough to overcome the myriad unforeseen obstacles — economic uncertainty, rising interest rates and the war with Iran — holding many people back from the transaction table? All signs indicate it’s helping move the needle forward. But still not far enough.

A snapshot in time

“Locally, new for-sale developments breaking ground this year are expected to provide much-needed inventory,” said Jeff Benach, CEO of Lexington Homes. Citing consulting group Tracy Cross & Associates, he noted that builders sold 1,528 new homes in the metropolitan Chicago area during the first quarter of 2026 — the fourth-highest quarterly total in the past five years. Most activity occurred in the suburbs, where 1,445 homes were sold, including 858 single-family homes and 587 attached homes, such as townhomes, duplexes and condominiums.

But it’s not a panacea. “Despite more new-construction options, overall inventory remains tight,” Benach said. In turn, housing prices are up. According to Illinois REALTORS®, the metropolitan area’s median sales price reached $379,000 at the end of May 2026, up nearly 55% from $245,000 during the same period in 2019 — the last typical year before COVID.

Indeed, Benach sees an upside to this fallout from the pandemic. “People staying put with their 3%-to-4% mortgages, causing low inventory, has been helpful for builders, as they often offer the only new or newer inventory in a particular area,” Benach noted.

Low inventory, coupled with rising single-family home prices the last couple of years, has increased buyer demand for large townhomes that live like single-family residences. “Townhomes have experienced an enormous growth in popularity in recent years, which definitely puts us in a good position,” Benach said. “Most builders have transitioned from units in the 1,500-to-1,700-square-foot range and added larger units with the top end about 2,300+ square feet.”

While buyers are willing to compromise on size to stay on budget and location, due to remote working, Benach said they’re prioritizing finishes.

Buyers are upgrading more parts of the home, such as bedrooms, with hardwood flooring and customizing kitchens with wood cabinets, upgraded backsplashes and bigger islands to meet their needs, Benach noted. Furthermore, what was considered luxury finishes 15 to 20 years ago, such as quartz and granite countertops and hard-surface flooring, are now expected at $300,000, the lowest base price point, said Rick Champine, area president of M/I Homes. There’s also an acceptance that bigger is not always better. “A great floor plan design for a 2,000-square-foot home can feel better than a 2,300- or 2,400-square-foot home,” he added. “How we design homes today is more important than minimum-square-footage requirements.”

Labor shortages, material costs up about 20% over the past six years, and rising interest rates between 6.1% and nearly 7.5% in the past three years are obstacles impacting development, Champine said. It will take more than one to three years to solve affordability issues, unless mortgage rates drop a couple hundred basis points, he noted. But there still needs to be significant policy and legislative change for true affordability to exist. It cannot be fully funded with builder and developer fees.

That said, keeping projects moving and homes affordable depends on a builder’s strategic initiative relative to affordability, Champine explained. For example, M/I Homes is building upward of 200 new townhomes in Highland Park, the largest volume of new-home construction the upscale North Shore community has seen in more than 35 years. “A townhouse in the high $700,000s is not affordable,” he said. “But it’s significantly below the average price of a 60+ year-old resale home in Highland Park — about $849,000 — that doesn’t have the energy codes, efficiency or benefits of new construction.”

Benach has seen a higher percentage across all demographics choosing new construction because of the lack of housing inventory. “The past two to three years, in particular, we’ve seen more Gen Z buyers, mainly due to the huge upsurge in rental rates,” he said.

Interestingly, Letchinger said the rental market has been on fire, because so many people have chosen to rent and not buy. “In the past, buyers purchased condominiums thinking they’ll sell it five or seven years later for 20% more than they bought it. But their mindsets have changed. They want to keep their money in the stock market, which has been doing well the past couple of years, instead of tying it up in an asset they think won’t appreciate. But nothing lasts forever, and the stock market is no different.”

Headwinds

M/I Homes’ core strategy of focusing on building both larger-volume communities in the suburbs and teardown redevelopment opportunities in the city facilitates growth for the developer, despite challenges. Though urban teardowns are difficult to get entitled, purchased and opened, which is why many builders avoid them, it’s worth the effort, Champine said.

During the last two years, the average price of a new M/I Home is up approximately 20% across the Chicago Metropolitan Statistical Area. The “best performance” is coming from move-up and luxury buyers, Champine explained, consumers more likely to be flush with cash and resilient to mortgage rate fluctuations.

They have a realistic “date the rate, marry the house” perspective, he said, and know they can refinance once rates decline.

JDL is starting a new condominium project at Foundry Park, located between Lincoln Park and Bucktown, that’s part of a mixed-use building. Finished with high-end materials, units are priced from $2.6 million up to $12 million for the penthouse.

Where today’s buyers choose to live

Letchinger said condominium buyers have changed. Pre-COVID, the typical condominium building targeted the suburban empty nester who was ready to move downtown to get rid of their work commute and be closer to their kids who lived in the city. But remote work took away their commute, so they stayed in the suburbs. Now it’s really a combination of buyers, he said: people relocating from out of state to be closer to their kids who moved here, single-family homeowners from Lincoln Park downsizing, and young families who want to own rather than rent.

While all “pockets” in the city move, Champine said the “A+ locations,”
such as walkable Lincoln Park and the Gold Coast, always do best. “Generally speaking, it’s municipality-and submarket-driven; it’s finding that
pocket where people want to be,” Champine said. “It might be school-based, proximity to transit, airports or the freeway. Each submarket has their own ‘A-pocket story.’”

Possible remedies for low inventory

Benach said municipalities could make new housing more attainable and financially feasible by creating more Tax Increment Financing (TIF) districts. “TIF districts make it possible for a developer to redevelop a site, often in areas or on sites that are less than desirable and/or that the municipality wants redeveloped,” he explained. “It could offer developers more areas to develop.”

Champine said the greatest opportunities for new development across Chicagoland exist in rezoning old, dilapidated commercial strip malls for residential properties. He cited land costs, increased regulations and affordable requirements ordinances among the biggest obstacles to new-construction projects today.

The greatest policy change at the federal level that would drive new product is if interest rates were to come down, Letchinger said. “But it’s not just the federal level. It’s inflation. It’s overall macroeconomic issues. It’s keeping treasuries higher. If treasuries come back down, nothing will do more to generate sales than interest rate reductions. People love taking advantage of low rates and building homes.”

He also noted that the only place to build a condominium building is in the top locations. “If you think you can go to a secondary location and offer something for less money and sell it, you will probably be disappointed,” he said. “If it’s a B location versus an A location, it costs the same to build. We target the very best locations because we have to command a higher sub price.”

Compared with other big cities, Chicago condominium prices are “embarrassingly low,” Letchinger added. “We’re at $1,300 to $1,400 per square foot. In New York, $2,000 per square foot is entry level. It’s the same in Miami, Boston, San Francisco and Los Angeles. We’re still a value proposition for condominiums.”

For local and state legislation to meaningfully increase housing inventory, Champine said the largest developers in the area should be in discussions with them. “The problem is fragmented policy,” he noted. “Other states have state codes, and everyone plays in the same sandbox. Every municipality in Chicagoland has its own sandbox and creates its own local set of codes. That makes it difficult for builders to gain efficiencies and benefits for the consumer.”

Permitting and zoning issues are affecting the pace of construction. For context, Chicagoland does less new-home construction than Indianapolis or Cincinnati, and the Windy City is five to six times the size, Champine noted. Benach added that higher-density zoning and reducing both entitlement timelines and onerous regulations would be helpful.

What agents need to know

When representing buyers in new construction, agents should be present for every meeting and be the “facilitating procuring cause” for the transaction rather than show up for the first time at closing, Champine said. Benach, on the other hand, advises agents to let the builder take over once the introduction is made. “Construction scheduling, purchase contracts, even the closing process is vastly different from resale,” he said. “We each are experts in our chosen field and have found the experience is better for buyers when the new-construction team guides the process.”

However, Champine noted that if the buyer is purchasing a finished unit, other than receiving a warranty, the process is not much different from a traditional resale transaction. What’s more, he advises agents during the preconstruction phase to know the reputation and track record of the developer to avoid tying up a client in a project that won’t come to fruition. Agents can build stronger relationships with builders and developers, Benach said, by getting to know them and their developments at open houses.

As inventory challenges persist, Letchinger advises agents looking to grow their business in new construction to stay informed about new developments and support sales in those buildings so they can get built.

Expert Sources

Jim Letchinger
JDL Development

Jeff Benach
Lexington Homes

Rick Champine
M/I Homes