Strong home sales should continue into 2004, buoyed by animproving economy and job picture, according to Chicago builders andbrokers.
The housing picture is robust enough to carry into the new year,despite predictions of small increases in the home loan interestrates, they said.
Focused in the key downtown Chicago and North Side neighborhoods,the four offices of Century 21 Sussex and Reilly did $650 million inresidential and commercial sales this year, according Sean Conlon,founding partner.
"The National Association of Realtors is forecasting sales will bedown 5 percent next year," Conlon said. "I suspect we will be up 5percent nationally."
The market for well-priced condominiums and houses is strong,Conlon said, except for an oversupply of Gold Coast luxury condos.
This month's NAR economic forecast for 2004 predicted that thehousing industry would continue to be a strong foundation for thenation's economy.
"With improvements in manufacturing and other sectors, the jobmarket is beginning to pick up steam," said David Lereah, NAR's chiefeconomist. "Next year, we're expecting 5.81 million existing-homesales [nationally] and 1.02 million new-home sales, which would bethe second-best home sales for each series."
This year's national totals are expected to be 6.07 millionexisting homes and 1.07 million new homes, he said.
Interest rate increases could keep some people from buying, Conlonsaid.
"It would slow things up a little," he said. "But rates are stillhistorically low. Even a point up is still pretty affordable."
Mortgage interest rates hovered at about 6 percent here last week.
Single-family homes, town houses and condominiums are selling wellin Lincoln Park and Lake View. Up-and-coming neighborhoods, such asRogers Park, Edgewater and Uptown, are taking off as alternatives tothe pricier neighborhoods, he added.
Popular neighborhoods such as Lake View and Old Town continue tosee new construction on infill properties and teardown sites, headded.
Lincoln Park continues to be the place for people with lots ofcash to spend, Conlon said.
"In Lincoln Park, you see those incredibly fancy, high-end single-family homes that are about $3 million," Conlon said. "We have had acouple people pay maybe a $1 million or $1.2 million and deconvertthree-flats into single-family homes that are worth $2.5 or $3million," he said.
The Gold Coast condominium market has "slowed down somewhat on thehigh end," with a lot of $1 million-plus condos available, Conlonsaid.
"A lot of projects came on board with a price point of $600 to$1,000 a square foot," he said. "But, logic will tell you there areonly so many people who will drop $2 million-plus on an apartment."
The market downtown is strong for 1- and 2-bedroom condominiums,but "the rental market has been soft because those people are buyinghomes," he said.
A recent trend he has seen has been affluent young couples who arenot "making the jump to the suburbs," Conlon explained. They aresticking with a substantial home in the city and buying a secondvacation home in places such as New Buffalo, Mich.
There also has been an increase in buyers from Europe, whoconsider Chicago "an international city," he added.
Chicago's Northwest Side and contiguous suburbs have had a goodbusiness in existing homes and condominiums, according to BarryPaoli, president of Century 21 McMullen, 6400 N. Harlem.
"We had a blip of high rates around late spring, that challengedus," Paoli said. "People pulled their horns back a bit. Then after amonth of that, they came back. If you price a building within reason,it's sold overnight."
While there isn't a lot of new construction on the market in thearea, single-family homes and condominiums are in demand, he said.
"There's a lot of shopping going on. We have plenty of first-timebuyers buying condos," Paoli said. "They can't afford a single-family."
The 1-bedroom condominiums are selling for about $150,000, hesaid, and 2 bedrooms are about $175,000 to $180,000. The house marketunder $400,000 is very strong, Paoli added.
"We are dominated by city workers, who have to live in the city,"he explained.
The average sale price for all properties has been about $300,000,he said.
Buyers will tolerate mortgage rates up to about 7 percent, hesaid.
"The rates are give-away rates," he said. "We have been veryspoiled for the last couple years. Next year will be a banner year,dictated by rates and by supply and demand. But, if you have a lot ofstuff on the market and it's not priced right, it will sit there."
Prices have increased about 3 percent in the last year, Paolisaid.
Albany Park and Portage Park both have had growing buyer interest,he added.
Beyond the city
In the suburbs, the major new-home builders continue to show theirfaith in the market with aggressive expansion plans for 2004.
Pulte Homes is predicting 80 percent growth between now and 2005,according to Brian Brunhofer, Illinois division president.
"We are very focused on taking the business to a new level," hesaid. "We are looking at about 15 new communities next year, with thebulk in the second and third quarters."
Pulte will increase its presence in the "south corridor" ofsuburbs and in Lake County, Brunhofer said.
"We are looking at Lockport," he said. "We have a number ofcommunities in the Bolingbrook/Plainfield market. And, we continue tolook at Bolingbrook, Plainfield, Oswego and Yorkville as a very high-growth corridor."
Pulte also will be "stretching out" to Huntley, Elgin andAlgonquin, Brunhofer added.
Pulte's expansion plans have already factored in interest ratesincreasing, he said. The home selection for 2004 will include entry-level $150,000 town houses and first-time single-family houses, aswell as move-up homes and active-adult developments.
Low interest rates have meant many buyers are adding upgrades andoptions to their basic homes, he said.
"We have seen, with cheap money, people being able to take thetime to build the house of their dreams and really upgrade it,"Brunhofer said. "That's exciting for us to be able to deliver a dreamhome."
Kimball Hill Homes will be adding five new single-familycommunities in 2004, plus new town houses at its Shamrock Farmsdevelopment in McHenry, according to Ray Wolford, vice president forsales and marketing.
The single-family homes are planned for Elgin, Shorewood,Montgomery, Yorkville and Bartlett.
The town houses will start at $150,000, and the single-familieswill be in the $200,000 to $400,000 range, he said.
An interest rate increase wouldn't reduce buyer interest in newhomes by much, he said. But it might deter some of the lower-end,first-time buyers, Wolford said.
"People are a lot more sophisticated and educated than they werein past years," Wolford said. "A quarter-of-a-point increase isn't somuch in dollars when you sit down and figure it out."
Instead of offering as many floor plans as they have in the pastfor their single-family homes, Kimball Hill will have fewer plans,but that can be adjusted to fit the buyer's needs, he said.
"We will have five plans that can become 10, instead of startingwith 10," he said.
Wolford predicted that growth will come to the far southwestsuburbs.
"The joke is that builders always travel in packs," he said. "Weall have decided to go to the southwest towards DeKalb."
For renters
There are even hopeful signs that the Chicago rental market willpick up in 2004, despite renters moving to condominiums.
New conversions of rental buildings downtown should help reducecompetition for the remaining apartment buildings, according to JohnJaeger, vice president for residential projects for the AppraisalResearch Counselors Ltd.
At a panel meeting by the Chicago Apartment Association, Jaegersaid another favorable sign is the rebound in corporate renting in2003.
As the business picture improves, more companies are rentingapartments for executives assigned here on a non-permanent basis, hesaid.
Jaeger said an increase in long-term mortgage rates to 7 percentcould keep some renters where they are and out of first-time condos.
Century 21 Sussex & Reilly, 1101 W. Lake, Chicago. (312) 829-4039.
Century 21 McMullen, 6400 N. Harlem, Chicago. (773) 631-8300.
Southmoor Country Club, 9517 W. 131st St., Orland Park. PulteHomes, (708) 923-9500, www.pulte homes.com.
Kimball Hill Homes, 5999 New Wilke Road, Rolling Meadows, (847)364-7300, www.kimballhill.com.
