Construction expect to pick up in 2017

Housing starts for single-family homes, townhouses and other units for sale in the Chicago area last year rose a surprising 13.4 percent compared to 2015, said Mark Gianopoulos, regional director for Metrostudy, a housing market research firm based in Rosemont.

"Things went much better than we had predicted," he admitted. "We expected an increase of about 9 percent in housing starts but did much better than that."

Single-family home starts actually increased less than expected - only by 8 percent - while multifamily (attached) housing starts rose more than 15 percent. Gianopoulos said several large condominium buildings were started in Chicago and, to some extent, that skewed the data for the year. Consequently, he expects the imbalance between those two housing sectors to disappear over the next several years.

Prices on new-construction homes also rose, according to figures Metrostudy obtained through closings. Year-over-year the prices on single-family homes throughout the region rose just 1 percent while the cost of multifamily units rose 6 percent.

"As the older existing (new home) communities become built out and new ones are started, those prices will rise faster," Gianopoulos said.

The fact that many of the townhouses and condominiums now being built are located on smaller, "infill" locations accounts for some of the increased pricing, as does the high demand for such units among baby boomers seeking to downsize and find a home where they can age in place.

During 2017, Gianopoulos said he expects growth of between 9 percent and 11 percent in housing starts regionally, which he called "a reasonable pace."

"Small business growth in Illinois is seeing an uptick and consumer confidence is higher, so everything seems to be positive. But no one ever really knows for sure," he said.

"But there is always that shadow factor out there. People are leaving Illinois because of high real estate taxes, the lack of pension reform and other political issues. If they could solve those problems, the exit would slow down and our housing starts would be growing far more," Gianopoulos said.

"Today's new-home buyer is totally different from earlier generations. They no longer see the purchase of a home as an investment," a place they will sell in a few years, he said. "They are buying a home because they want to live there and for no other reason. That is a total paradigm shift - a whole new way of thinking about real estate," he continued.

K. Hovnanian Homes

K. Hovnanian Homes is marketing homes in 13 communities around Chicago, ranging from Lake Forest to Plainfield and from Chicago to South Elgin. Prices start as low as $250,995 for a duplex in Sugar Grove and go as high as $1 million for a luxury single-family home in Lake Forest. Of course, there are plenty of homes in between.

Andy Konovodoff, Chicago Division president, says it also plans to open a 48-townhouse community called Parkside in Libertyville in early March and will finish off a duplex community in Naperville called Tramore. It was begun about a decade ago but put into hibernation during the recession. K. Hovnanian will begin building the last 28 duplexes there this summer.

In 2018, he expects the company to begin work on a parcel in Lindenhurst and also on large parcel in Buffalo Grove.

"December and January were very healthy for us. The traffic improved each week and was much better than we had expected. In fact, sales picked up after the election. People are feeling more confident and optimistic, based on home sales," Konovodoff said.

"I expect 2017 to be somewhat of a breakout year for homebuilding. The people who have been sitting on the bench for a couple of years but still want to live in Illinois, despite our tax and pension problems, are starting to shop for houses."

Shodeen Homes

Shodeen Homes has also reported increasing traffic and sales in recent months.

It expects Mill Creek, Shodeen's long-term, master-planned community in Geneva, to sell out in 2017. So the builder is testing the waters in other markets and with new products.

For instance, "We opened a new community in Maple Park last year, Heritage Hill Estates, and sales have been good. It is a semi-custom community where base prices range from $225,000 to $268,000 and with extras, the homes sell, on average, for between $350,000 and $400,000," said Anna Harmon, director of marketing.

Shodeen is also testing new designs at Blackberry Creek in Elburn, Merry Oaks in Streamwood and at Reston Ponds and Heron Creek in Sycamore - all in advance of the rollout of two more master-planned communities it expects to spend years developing. Elburn Station, as that community will be called because it is located close to the Elburn train station, will consist of single-family homes on smaller lots, as well as rowhomes. Pingree Creek in Elgin is the other community expected to open this year.

Unlike Mill Creek, Elburn Station will not include any golf courses, but similar to Mill Creek, it will feature parks, ponds, bike trails and sports fields available for rental by local sports teams, Harmon said. Shodeen is now working on the community's infrastructure and expects to start building houses there later this year. Incidentally, all homes in Elburn will be connected to AT&T fiber optic lines because that municipality has been designated as an AT&T gigabyte community, she added.

Shodeen is also embarking on the second phase of a rowhome community in Fontana, Wisconsin, near Lake Geneva, and is also committed to building at least 10 single-family homes at Prairie View in Williams Bay, Wisconsin.

David Weekley Homes

David Weekley Homes saw "really strong" year-over-year growth in traffic in December and January at its communities, so Rich Bridges, Chicago Division sales manager, is optimistic about 2017.

"The market was pretty slow prior to the election, but lately, it has been beyond our expectations. We are very pleased," he said.

David Weekley came to the Chicago area in early 2015 and now, two years later, buyers are in their homes, happy and referring the builder to others, so momentum is building here, Bridges said.

It expects to close out the Timber Grove townhouse project in Naperville very soon and has already sold half its Easton Station townhouses in Buffalo Grove, even though it just finished the model home.

The Enclave at the Grove, a prestigious, multigenerational gated community in Glenview, gets its first resident this month. It will eventually feature 48 single-family homes and sales there are very hot with both local down-sizers and young couples moving out from the city, Bridges said.

Sales have also been brisk at The Reserves at Barrington, which offers "an alternative to living in an old home or a townhouse while remaining within the village of Barrington," he said. Located off Barrington Road at Dundee Road, the 43 houses at The Reserves start in the upper $400,000s and feature Craftsman-style detailing.

David Weekley Homes also builds unique custom homes in well-established communities like Highland Park, Palatine, Hinsdale, Western Springs, Arlington Heights, Wilmette and Northbrook. In fact, Bridges said these homes are the backbone of its business at the current time. Designed for discerning tastes on lots where an older home has been torn down, houses generally range in price from the $700,000s to $1.3 million and are located close to transportation hubs and within highly regarded school districts.

Meritus Homes

Meritus Homes of Deerfield is also seeing great weekend traffic, said Jay Dulla, executive vice president.

It is building subdivisions in St. Charles, Lake Villa and Addison. Another small community in Lake Forest is expected to open this summer.

In addition, Meritus is purchasing older homes in select communities such as Winnetka, Wilmette, Glencoe and Northbrook, tearing them down and building new, modern homes for those who want to live in those enviable communities, but also want a new house.

Meritus' current subdivisions are The Reserves of St. Charles, which has 60 lots remaining; Lake Vista in Lake Villa, where 21 lots remain; and an age-targeted, maintenance-free, 87-lot community at the intersection of Army Trail and Mill roads in Addison.

The Reserves offers one-third acre lots and is offering three ranch plans and five two-story plans. Base prices range from $504,900 to $568,900.

Lake Vista is a legacy development, begun by another builder. It had been 75 percent complete and sitting dormant since the Great Recession but is now ready to proceed. Base prices range from $315,000 to the $340,000s and there are also several ranch plans offered there.

The community in Addison will be targeted at empty-nesters, but not restricted. The ranch plans there range from 1,500 to 2,250 square feet but there are opportunities for pop-up second floors, which can bring a home up to 3,100 square feet.

"Those whose children often visit or who have other guests may want to opt for that second floor," Dulla said.

The community opening in Lake Forest this summer features nine single-family lots for upscale empty-nesters. It features 2,600- to 3,000-square-foot ranches with pop-up options similar to those in Addison. These homes will range in price from $1.2 million to $1.4 million.

William Ryan Homes

William Ryan Homes has seven active single-family home communities in the Chicago area and Chris Coleman, Chicago Division president, is optimistic about their prospects for 2017.

"Our traffic has been so good we are launching a new set of floor plans across our communities that incorporate design elements that have been popular for William Ryan Homes in other parts of the country," Coleman said. "For instance, we are offering lofts in several plans since those have been popular elsewhere."

William Ryan Homes opened a model last July at Renwick Place in Romeoville. Homes there start in the $240,000s. The builder expects to open a model at Stonebridge in Hawthorn Woods in May. Homes there start in the mid-$400,000s.

Later this month, Bartlett Ridge in Bartlett will begin sales. Homes there will start in the $340,000s.

Other ongoing communities include Walnut Glen in Island Lake (starting in the $240,000s), Hampshire Highlands in Hampshire (starting in the $250,000s), The Coves in Algonquin (starting in the $260,000s) and White Ash Farm in Plainfield (starting in the mid-$300,000s).

"We offer a portfolio of 13 home plans that range from a 1,600-square-foot ranch to an almost 4,000-square-foot two-story home," Coleman said. "Based on the neighborhood, the size of the homesites and the buyer profile in each community, we decide which home plans we will offer in each community.

"We understand empty-nesters are an important demographic within our market, so two of our two-story plans offer first-floor master suites and we also offer ranch models," he added.