New home building sign of real estate recovery
CRYSTAL LAKE – After a long hibernation, new homes are starting to spring up in McHenry County in another sign of the real estate market's recovery.
After the housing bust, new home purchases dropped significantly as buyers found irresistible deals on foreclosures and short sales of existing homes. But the county's dwindling supply of existing homes, combined with low interest rates and pent up demand, have buyers once again considering new homes.
“Today’s home buyer is looking for quality construction, lower maintenance costs, better floor plans and energy savings," said Rebekka Koehl, vice president of marketing for Ryland Homes Chicago. "These desires bring them to new construction."
Ryland Homes has two new sales centers in McHenry County. The company is selling new homes in five communities in McHenry County, including Ashton Pointe and Bryn Mawr in Crystal Lake and Talamore in Huntley.
The city of Crystal Lake expects to see revenue from building permits jump 18.5 percent in the next year, according to its lastest budget. The city has already seen an uptick in new home construction, though it remains modest compared to the building boom of early 1990s.
In 2012, the city approved 18 permits for new single-family homes. Seven permits were issued in the first quarter of 2013, putting the city on pace to surpass last year's total, said Erik Morimoto, director of engineering and building for Crystal Lake.
Soaring rental rates are also pushing some to buy, said John Carroll, division president of Ryland Homes Chicago.
“Rental costs in the Chicago market are high," he said. "According to Trulia, after only three years, a homeowner would pay 33 percent less in housing costs than a renter and 50 percent less after seven years.”
Buyers can still find deals and incentives on new homes.
KLM Builders Inc., a custom builder in Spring Grove, is offering buyers a $10,000 kitchen upgrade that includes gourmet appliances and granite countertops. The incentive also can be used elsewhere in the home or to help with a down payment. Last year, the company offered a free 2012 Toyota Prius to new home buyers.
"Inquiries have doubled or tripled from this time last year," KLM President Kim Meier said. "A lot more people are thinking of new homes because they see some light at the end of the tunnel."
He pointed specifically to low interest rates and lower prices.
"They know that the longer they wait, the more the house will cost and the more they will have to pay in interest," Meier said. "The train is starting to leave the station."
The cost of building materials and labor has already started to rise, he added.
Many new homes feature modern, open-space floor plans that can't be found in older homes. Others are pre-wired so everything from lighting, thermostat, and security systems can be controlled remotely by smartphone.
"When you land at the airport, you can turn up the heat at home," Meier said, adding that the lights also turn on when the owner pulls up.
Signs of a real estate recovery aren't limited to new housing.
A report from the Illinois Association of Realtors showed the median price in McHenry County hit $136,800 in February, up 7.8 percent from the same time last year. A year-over-year increase is one indicator that prices may have bottomed out.
Figures from the Heartland Realtor Organization were less rosy. The nonprofit organization, which serves McHenry County and some surrounding areas, put the median price at $135,500 in February, up 2.9 percent from $131,650 in the same month in 2012.
But prices in the residential market still remain far below the pre-recession peak and have been decreasing for several years.
In March, the median home price for McHenry County was $135,111, down 13.4 percent from $156,000 in March 2011, according to a market report prepared for the Northwest Herald by Rob Schaid, managing broker and owner of Re/Max Plaza in McHenry.
However, the number of homes on the market has dropped significantly, a sign prices may start to increase. A balanced housing market usually has about six months of inventory, Schaid said. In March, the county's supply fell to three months, down 74 percent from 11.6 months of supply in March 2011.
"There's no inventory left, we've sold it all," he said. "Now we don't have enough homes for buyers."
Investors appear to be buying up a large portion of what is available. Of the 4,218 homes sold in McHenry County from April 2012 to April 2013, 1,478 were bought with cash, according to figures from Midwest Real Estate Data. Investors typically pay in cash, while other buyers get mortgages.
"There's a massive amount of investors," said Jim Haisler, CEO of Heartland Realtor Organization. "They buy, rent, and eventually flip."
But consumer confidence remains subdued despite a slowly growing economy.
"The move-up buyers still haven't come back," Schaid said.
That may help explain, in part, why prices remain relatively soft here while the national real estate market has turned sharply up.
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Highest and lowest priced homes on the market in McHenry County
Lowest: A one-bedroom home at 5221 West Lane in McCullom Lake is for sale for $18,540. The house, as seen listed on www.realtor.com, has 588 square-feet and four rooms, including one bedroom and one bathroom. It was built in 1935.
Highest: A 5-bedroom luxury home at 799 Plum Tree Road in Barrington Hills is for sale for just under $5.2 million. The house, located on 11.5 acres, has five full bathrooms and two half baths, as seen listed on www.coldwellbankerpreviews.com. The listing said the house is "one of Barrington Hills' most significant estates" and describes it as a "nobly secluded ... brick masterpiece" with "an atmosphere of incomparable elegance."
Source: Midwest Real Estate Data, www.coldwellbankerpreviews.com, www.realtor.com; as of April 8.