Big bucks help in hunt for new house or townhome, but bargains still exist
As a devoted White Sox fan, Dawn Melchiorre is excited that her family is selling its Edgewater home and moving to a new house in Bridgeport Village, a development situated on the home turf of her beloved team.
But the location of Bridgeport Village, on the banks of the Chicago River at 33rd Street and Racine Avenue, isn’t the only thing that makes it a winner in Melchiorre’s eyes.
Her new masonry five-bedroom house cost $875,000 at the Near South project – reasonable, she says, when you consider Chicago’s prohibitively expensive single-family home market.
After finding that most new houses on the North lakefront were priced on the wrong side of $1 million, the Melchiorres headed south of the Loop, where land and housing are less expensive. Their new home is one of 116 single-families built on former industrial land the city sold to the original developer at a discounted rate.
“We’ll be living in a cul de sac, so it’s kind of a suburban feel, and the kids can ride their bikes and do river walks without me worrying about traffic,” Dawn says. But she’s perhaps most excited about the view of the Chicago skyline from the deck off her new bedroom.
The Melchiorres say they have found the best of both worlds – a spacious home with plenty of privacy in a community that feels safe but not bland, minutes from the Loop.
Condos are king
Many Chicagoans want what the Melchiorres have, but the city’s stock of newly constructed single-family houses and townhouses is comparatively small and pricey. More are available outside the city, but the distance to affordable suburban house and townhouse developments grows farther each year. Southern Wisconsin, in effect, has become a Chicago suburb.
During the real estate boom of the last decade, increased demand for housing pushed land prices ever higher. In this market, developers face bigger profits and fewer risks building condos, which are within reach for a larger percentage of homebuyers than detached houses or townhomes. Why build one new home on a lot when you can build four? Why build six if you can build 60?
The same trend has taken root to a lesser extent in inner-ring suburbs such as Des Plaines, where at press time, New Homes counted half a dozen condo developments, three townhouse projects and no major single-family projects. Near suburbs ranging from Skokie to Palatine to Park Ridge have a variety of teardowns and condo projects but no significant developments of single-family homes.
In Chicago, new houses also are being built mostly on individual lots. The economics of building have led to the rise of the $1 million new-construction home in neighborhoods like Ravenswood, Edgewater and Irving Park. In pricier lakefront neighborhoods, $1 million sounds like a real bargain these days. New detached houses in Lincoln Park are more commonly priced from $2 million to $4 million.
New townhomes offer more privacy than condos – with less maintenance and lower prices than single-families. But they’re showing the effects of higher pricing too, and for the same reasons that detached houses have become so expensive.
Townhouses and single-families generally are considered the most family-friendly options in new construction because they offer more privacy and space than condos. But the growing cost of these developments makes it difficult for families to afford new homes in the city and proximate suburbs.
$1M-plus options
Though condos rule the city market for new housing, buyers who can afford homes of $1 million or more have plenty of options, especially as market times grow. Even in Lincoln Park, where sites for development are scarce and coveted, there are a surprising number of new homes to choose from for buyers with deep pockets.
“There are a jillion homes available in Lincoln Park,” says James Kinney, president of Rubloff Residential Properties. Homes are staying on the market for up to a year in the neighborhood, where in early ’05, houses typically sold in three months, Kinney says.
In this softening market, buyers can finagle all kinds of perks from builders in neighborhoods like Lincoln Park and Lake View, says Rubloff sales agent Danny Glick.
Fancy a free three-year lease on a Porsche or a $40,000 home-entertainment system with a 10-foot screen? Those are two incentives builders have recently put on the table or are seriously considering, Glick says.
But don’t expect major price reductions, Kinney says. Over the last few months, sellers have started to lower home prices slightly, but in Lincoln Park, the average sales price for a detached house in the first half of 2006 was $1.54 million, up from $1.37 million for the same period in 2005, according to statistics Kinney compiled from the Multiple Listing Service of Northern Illinois.
Developments of more than one or two single-families are scarce in these parts because the land isn’t available. Geneva Terrace Estates, 646 W. Drummond Place, is a rare exception. The project offers detached houses priced from $2.3 million to $4 million. The homes range from 5,200 to 7,800 square feet and include custom millwork, radiant heat, private backyards and heated two- and three-car garages.
Rising prices
If it sounds like you have to be a millionaire to buy a new home in Chicago, take heart. It’s possible to find new homes under $1 million, but it isn’t easy.
The price of a new single-family home is rising about 10 percent a year, according to Paul Bertsche, founder of CA Development, which builds detached houses in the city. Bertsche says that his company sold homes priced from the $300s to the upper $500s in 2001.
“Five years ago, if you had said a house in the $500,000 to $900,000 range was reasonably priced, I would have said you were crazy, but in today’s market, it really is,” he says.
Demand is high for homes priced under $1 million in the city because availability is low. “There is huge demand for [new single-family] homes in the $600s to $800s,” says Charles Huzenis, of Jameson Realty Group. “But they’re hard to find.”
Suburban deals
Prices have risen in the suburbs too, but buyers can find much lower prices if they’re willing to leave the city. Kirk Homes is selling single-families with three or four bedrooms and 2.5 to 3.5 baths priced from the $390s at Beacon Pointe, in Hoffman Estates. Go farther, to Round Lake Beach, and Lennar has a 1,472-square-foot single-family model with two bedrooms and one bath from the $240s at its Madrona Ridge development.
Land tends to be cheaper in the more distant suburbs, but the building strategy in this fiercely competitive terrain also sets the projects apart from those in the city, where even small condos often are loaded with luxuries.
Many suburban developers put the premium on space. They are building larger homes and providing practical floor plans with features such as large island kitchens, but they’re keeping costs down by offering fewer design flourishes, says housing analyst Tracy Cross, of Tracy Cross & Associates.
“They’ll put in a pantry rather than a Palladian window,” Cross says. “To do a pantry only costs you a door and maybe some wire shelving.”
Encouraged by municipalities throughout Chicagoland, suburban builders are echoing city developers in one regard. Increasingly, they are building in or near town centers and close to public transportation.
InterCapital Partners is one of several developers building new homes close to the Metra station in Palatine. The builder’s Palatine Commons project is a community of 76 three-story townhouses with two-car attached garages, just off of Northwest Highway at Fairview Way. At press time, homes, which have 2,000 to 2,400 square feet, eat-in kitchens, two-car attached garages and decks, were priced from the $360s to the $440s.
“We are only three blocks from everything – Metra, the freeway, bars, a steakhouse, an Italian restaurant – the list goes on,” says Liz Hickey, a sales associate at Palatine Commons. “We’re 30 minutes from the Loop, and you avoid the huge home expenditure you have in Chicago.”
West of Western
But deals on houses and townhomes, at least by city standards, are available in Chicago too, especially if buyers are prepared to scout less fashionable neighborhoods west, northwest and south of the Loop. Pushed out of downtown by high prices, developers of single-family homes have bought vacant industrial land in neighborhoods ranging from Bridgeport, on the South Side, to Irving Park, on the North Side.
One of the biggest players in the small city market for single-family homes under $1 million is CA Development, which is currently marketing three projects totaling 97 homes on the Northwest Side.
CA’s latest project is Mayfair Crossing, a collection of 26 houses on a former industrial parcel at Berteau and Kilpatrick avenues in Irving Park. The three- and-four bedroom detached homes range from 2,400 to 3,100 square feet and include granite countertops and hardwood floors. At press time, homes were priced from the $500s to the $700s.
Comparatively affordable townhomes also can be found on redeveloped industrial sites in Chicago. Anchor General Contractors’ Cornelia Court development sits on the site of a former sausage factory at 3001 W. Cornelia Ave. At press time, two- to four-bedroom townhomes there were priced from the $490s to the $630s.
Price is what drew Chris and Heather Hammer to Cornelia Court. The couple recently decided to start a family and wanted to sell their Lake View condo and buy a townhome or single-family on the Northwest Side. Bucktown and Roscoe Village were too pricey, so the pair looked at Cornelia Court. Initially, Chris was concerned that the neighborhood would be unsafe and too far from the couple’s favorite haunts in Bucktown and Roscoe Village. “At first it was, wow, western of Western; I don’t know if I’m comfortable with that,” he says.
But after visiting Cornelia Court and the surrounding neighborhood, Hammer liked what he saw, and the couple bought a 2,300-square-foot townhome.
Affordable enclave
Buyers prepared to venture to the far western fringes of the city will find some of Chicago’s most affordable new-construction homes and townhomes in Galewood, a neighborhood that abuts suburban Oak Park.
Red Seal Homes is redeveloping the old Galewood Yards railway site into The Enclave at Galewood Crossings, a residential community designed around a series of landscaped parks. The developer is offering 76 townhomes priced from the $290s to the $330s and 57 two-story single-families modeled on the classic Chicago bungalow priced from the $420s to the $500s.
“How many people do you know that have $500,000 or $600,000 to spend on housing, or enough income to support that kind of mortgage?” says Brian Hoffman, vice president of Red Seal Homes.
Clearly, there’s demand for Red Seal’s comparatively affordable product. Hoffman has sold 110 units since sales opened in the middle of May. “A lot of buyers came from the area, and we got a ton of people who are firefighters, school teachers and city employees who, until that point, had been priced out of new homes,” Hoffman says.
Mixed-income sites
The mixed-income communities created by the Chicago Housing Authority’s redevelopment of public housing sites also offer comparatively affordable houses and townhouses. Such developments often are located near downtown, on the fringe of neighborhoods with established retail and amenities.
East Lake Management Development Group’s Jackson Square at West End is located on a site bounded by Madison, Van Buren and Rockwell streets and Western Avenue, on the Near West Side, a neighborhood that is seeing spillover development and appreciation from the gentrified West Loop. At press time, townhomes were priced from the $220s to the $380s. Features include hardwood floors in living areas, stainless appliances, 42-inch maple cabinets, designer lighting and multimedia pre-wiring.
“We have city and suburban empty nesters, young professionals, and just plain smart people who see the upside of their investment,” says Phil McCall, sales director of AMS Realty, which is marketing the development. “Our price points are as much as 20 percent lower than you’ll find in some other areas for equivalent property, and people are quick to recognize that.”