What do you get when you combine a pandemic, low housing inventory, generational shifts and available land? The answer is one of the hottest spots for homebuilding in Illinois.
Looking at the Elgin area, it’s hard to tell Illinois lost population last decade. Things here are booming.
In fact, they’re growing so much that Elgin added nearly 6,600 new residents in last year’s Census, and it’s now Illinois’ sixth-largest community.
Where do all of those people live? Fan out from the busy city center, away from Interstate 90 and its growing industrial parks, and take a closer look at Elgin’s west side, where new homes have been rising steadily for a decade.
In just the past year, the city has issued some 270 permits for single-family homes – a 65% jump over 2020 and 125% more than were issued in 2019, says community development director Marc Mylott.
While Elgin fills out, its neighbors are benefitting, too. It’s hard to ignore in places like Pingree Grove and South Elgin, where national builders like Lennar, Pulte Homes and Ryan Homes are staking new developments.
The frenzy is so hot that Elgin has one of Illinois’ highest rates for building permits. In fact, its numbers top most major metro areas in the state, according to the National Association of Homebuilders.
Mylott isn’t at all surprised. In his 11 years with the City, he’s seen a steady march forward as national builders and major corporations expand their influence in this western suburb.
“We have a very high quality of life that makes it attractive for people to want to live here,” Mylott says. “We’re on the right side of O’Hare, so people can get a lot of great house and a big yard in a welcoming and diverse community, all for a comparatively affordable price.”
Though it may be a community of choice for many, finding the right house is not as easy as it once was.
Miguel Fernandez, an attorney and the 2021-22 President of Realtor Association of the Fox Valley, has seen some clients struggle in a housing market where supply is at historic lows and the arrival of new buyers has amped up demand.
The result is rapidly rising prices and ferocious competition for a limited number of properties.
Naturally, then, homebuilding becomes a more attractive alternative – except that supply chain issues have brought their own complications. Add in generational changes, a pandemic and Chicagoland’s steady march westward, and you have a recipe for growth in Chicago’s collar counties.
Hotspots for Growth
Elburn still feels like the end of the trail, in many ways. This is the last Metra stop out of Chicago. It’s a community with plenty of small-town charm, amplified by a quaint downtown. For many years, this community on Illinois Route 47 has attracted those who wanted to feel connected with Chicago while still enjoying a quiet and spacious setting.
“We’re in beautiful south-central Kane County, so you leave town and you’re in cornfields,” says John Nevenhoven, the village administrator and a local resident for nearly 20 years. “It’s not just one cookie-cutter town to the next, where you can’t tell if you’ve left one town and gone to the next. There’s a sense of community.”
But how long this village of 6,200 people remains small and quaint is only a question of time. As Nevenhoven sees it, Elburn’s small-town charm, fiber optic internet, and new subdivisions make this an attractive alternative to many communities. And, given its location – less than 20 miles from Elgin, between two interstates and minutes from the Tri-Cities – it’s perfectly positioned.
In fact, the shovels are already at work. Shodeen Homes is closing out one development and filling in another. A new neighborhood is rising on the city’s far north end. Last year, the village added at least 55 new single-family units, says Nevenhoven.
“According to the Census, we grew about 10 percent last decade,” he says. “We grew by about 600 people. It’s not real huge compared to some towns, but for us it’s still a pretty good leap.”
By far, Elgin has taken the biggest leap in Kane and McHenry counties, not just last year but consistently over the past decade. That’s no accident, says Mylott.
“One of the reasons we were able to rebound faster and stronger from the Great Recession than perhaps other communities did is because of our size and the number of subdivisions we had going,” he adds. “We had a good number of developments that had lots ready for builders to simply come in and pull permits. We didn’t have all of our proverbial eggs in one or two subdivisions.”
Since 2008, about 150 to 300 new, single-family detached homes have been built each year, Mylott says. And that number doesn’t include the 575 townhouses built since the recession.
Just to the west, Pingree Grove added more than 1,000 new homes between 2011 and 2016, according to village data.
The village had another 200 annual housing starts during the four quarters ending September 2021, according to data from Zonda, a housing industry data platform. That amounted to a 39% jump year-over-year.
In the same time period, there were 142 starts in Huntley (up 54% year-over-year), 111 starts in South Elgin (up 136% year-over-year), 59 annual starts in Hampshire (up 40% year-over-year) and 34 annual starts in Algonquin (up 26% year-over-year), according to Zonda.
“Based on our proprietary observation data, we have seen a 35% year-over-year growth in annual starts in the greater Chicago market,” says Danielle Leach, vice president consulting for Zonda. “Builders acknowledge the post-pandemic housing frenzy and are working hard to satisfy customer demand. It’s natural to want to compare today’s housing frenzy to the boom experienced just before the Great Recession (2007-2009), but any such comparison is incorrect given today’s wildly different economic and housing fundamentals. We currently have tighter lending practices as well as a lack of housing supply – coupled with low interest rates and genuine, pent-up demand.”
Only three Illinois communities have seen more annual starts than Elgin since September 2020: Yorkville (413), Joliet (355), and Plainfield (341). In those cases, construction is concentrated in a high inventory of vacant developed lots (VDL) – plats that were abandoned when the market crashed.
Like those communities, McHenry County’s homebuilding is heavily concentrated around VDLs this year.
According to data from Zonda, the city of McHenry’s VDL inventory dropped by 160 from April 2020 through September 2021, while Crystal Lake filled in 100 and Woodstock shed 63.
“It’s great for the builders because the infrastructure – the water and sewer lines, the electric, most of the roads – is already in place and just needs to be tapped into,” says Jim Haisler, CEO of Heartland Realtor Organization, a regional association serving McHenry County. “Now, the developer comes in and finishes it off. So, what you’re seeing is the cities coming in and working with those developers.”
Across the northwest suburbs, access and amenities are big selling points. Brian Hogan and his team at Hogan Design & Construction, based in Geneva, hear that theme frequently among their high-end remodeling and homebuilding clients.
“It’s desirable. People want to be here,” Hogan says. “Geneva and the Tri-Cities have that small-town charm, really good schools and an intimate hometown feel.”
In its 20 years of business, Hogan Design & Construction has built 35 new homes – 25 of them in just the past four years. Five went up last year alone. Mostly move-down buyers over 55 years old, these clients craved open space and outdoors amenities even more than the big bedrooms, closets, smart technology and luxurious kitchens that were selling points in earlier years.
“What’s getting more custom lately is the outside stuff,” says Hogan. “When you’re building a house, people don’t typically spend a lot on the outside right away. They like to do that after they’ve lived there a bit. But we’re seeing more and more of that outdoor work being attached to the new construction now.”
For the Village of South Elgin, access is a major selling point for new residents and the national homebuilders setting up in two new neighborhoods, both concentrated on the village’s east side. Another two new subdivisions are expected to start this year, says Nancy Hill, the village’s community development director.
What’s the difference-maker? Proximity to shopping, schools and recreation trails in town and in nearby Elgin and St. Charles. “Proximity to parks, we’ve found, is just huge,” Hill adds.
On average, about 70 new single-family homes and 25 to 30 attached units were added each of the past eight years, says Hill. Then, in 2021, the village added nearly 65 townhomes and 55 single-family units.
Much of the activity is focused at Lennar’s SouthPointe, with 133 single-family homes starting around $400,000, and the ParkPointe townhomes, starting around $300,500.
“The location is good, and I think the product that’s being offered by developers in this market has been appealing to people who are first-time homebuyers or people who are looking to downsize into something a bit more manageable for their needs,” Hill says. “We’re finding that people don’t want to make the investments to renovate a kitchen, renovate a bathroom or put an addition on their house. They would rather just move up and buy a new house.”
Shodeen Homes attracts all variety of buyers to its semicustom homes in 11 master-planned communities. While buying has been hot everywhere, Jaynelle Then, director of sales, has seen the most activity among two groups: young families buying up and older couples moving down.
The trend holds across Shodeen’s 11 developments, from Elburn, Sycamore and Maple Park on up to Lake Geneva and Delavan, Wis.
“Oddly, you’d think because we’re in a pandemic things would slow down, but I would say this was a very busy year and a very strong sales year,” says Then. “Our first quarter was incredible. Our sales managers had a tough time keeping up. Our January through March sales were impressive.”
In Maple Park’s Squires Crossing, first-time buyers were attracted to semicustom homes that generally started under $400,000. Shodeen’s newest development, Edgewood Vistas, targets move-down buyers who like the Stone Ridge community (average price around $500,000-$750,000) but desire a smaller footprint at a lower price point.
To some extent, there’s been a “rush” of buyers escaping the city, but that crowd has mostly leveled off, Then says. The more enduring incentive, she believes, is Shodeen’s diversity of product, coupled with record-low mortgage interest rates.
“Our preferred lender offers some amazing mortgage programs,” Then adds. “They’re doing extended rate locks, which are unprecedented. They’re doing up to nine months extended rate locks, and that’s helping to drive sales.”
Supply and Demand
This past year has been an unpredictable and unprecedented time for local Realtors. Fernandez and Haisler believe it’s all a problem of inventory: More buyers are clamoring for fewer homes.
As of October 2021, McHenry County had just 1.2 months of available inventory – roughly 5 weeks of supply. Homes sat on the market an average of just 32 days, and many properties received multiple offers – for one property, 75 offers came in two days, says Haisler.
In the same time period, Kane County’s inventory was down 30% from the year before, and homes sat an average of 19 days, says Fernandez.
With the low inventory has come ferocious competition among buyers, which has driven up the median sale price in McHenry County by 12.5% to $270,000 last year. In Kane County, it’s risen 10% to $286,000. Consistently, sellers walk away with more than their asking price.
“I would never have guessed that we would have over 100% list price as an average, and yet four months this past year we were over 100% as a county,” says Haisler. “The other months weren’t far behind.”
At the same time, there’s a paradox at work. “People want to get a premium for their house, but then they’re also going to pay a premium for their next house,” Fernandez says. “So, people are reluctant to put their home up for sale until they think they’ve found a place they can afford.”
Haisler believes the root of the problem lies in the housing crash of the mid-2000s. In the decade leading up to it, homebuilding was hot across the northwest suburbs. Then, it abruptly stopped. For 15 years, some neighborhoods sat half-developed.
“The National Association of Realtors has a stat sheet that shows the average number of homes the U.S. has not built over the past 15 years, and it’s something like 5 million homes,” says Haisler. “That means there are millions of homes that would have been built and could be on the marketplace today.”
Exacerbating the inventory problem is the arrival of millennial buyers, whose interests aren’t the same as their predecessors.
“As this huge generation looks to find housing, there isn’t the same supply of homes available,” says Haisler. “And they’re looking for different types of houses. They move a little more frequently, so they’re looking for short-term housing, maybe around three to five years, versus previous generations that were looking at five years, seven years, 10 years. And they’re not looking for the larger homes they grew up in.”
The single biggest growth area in Kane County is condos, Fernandez says. They come with a lower price point and less square footage than a typical home, thus making them more approachable to first-time buyers, Fernandes says. What those buyers most want is space – larger lot sizes, outdoors space, and floor plans that accommodate home offices.
“Condos and townhomes are the first step out of renting, so the demand is high there,” says Fernandez. “Plus, you’ve got people moving from urban areas into suburban areas as a result of COVID’s new dynamic.”
And then there’s the question of buyers in their 50s and 60s. Some have taken an early retirement.
“They are looking to make a move and downsize, possibly, but a lot of people have enough wealth built up that they are looking for a second home instead of downsizing,” says Haisler. “It’ll probably be a smaller home, but they’ll still hold onto their primary home. In so doing, that also adds pressure because now there’s one less house on the market.”
At Shodeen’s master-planned Elburn Station, it’s inventory homes and low-maintenance units that are driving the most interest. The community is located just south of the Metra station, so it’s an easy choice for people who need access to Chicago. Among the 2,000 planned units are single-family homes of 2,000 to 3,000 square feet and Village Homes that occupy less square footage and smaller lots. Those Village Homes are fully owned, yet they’re also maintenance-free with no snow removal, no landscaping and no age restrictions.
Shodeen produces as many as three to seven pre-built inventory, or spec, homes, in each community at any given time. So, while it does offer semicustom designs it also has the ability to offer move-in ready products – another major attraction to buyers, especially in today’s ultra-competitive homebuying market.
“I just had one client who’s going to close 32 days from signing her contract,” says Then. “She’s moving from Tennessee to be closer to family. She found us online, found the perfect home, and when I showed it to her she signed the contract. It was the perfect scenario.”
It’s been a banner year for homebuilders, but that doesn’t mean it’s easy. COVID-related supply chain issues have hit all areas of the economy, but it’s been especially challenging for the building trades.
Lumber prices skyrocketed last summer. Lead times on appliances and cabinets doubled or tripled. Availability on other materials, like tile and flooring, changed in an instant. The unpredictability has been especially hard on the high-end market, says Hogan, who specializes in remodeling and custom builds.
“We had some projects, while we were bidding them, where lumber as much as tripled,” he says. “When you’re looking at a bigger home like we do, that’s $80,000 to $200,000 in four months, and that’s a big difference on a high-end home.”
In most cases, Hogan and his team have had to adjust how they execute their rigorous upfront design and planning process.
“Part of our process is going through, room by room, and picking plumbing and electrical, lighting and tile,” says Hogan. “The process can typically take two to three months, but selections are only good for two or three days now. You pick a tile and you have to keep checking availability. Or, you have to get your client to sign off on the tile before they’re done with the design.”
Jaynelle Then, of Shodeen, has had to adjust how – and how soon – she prepares customers.
“These are conversations we do have with our consumers, prior to contracting,” she says. “But the reality is, if you know this is it and you think this is right, don’t wait for another month or two because none of this will look the same.”
And even when materials are ready, there’s no guaranteed supply of labor.
“Sometimes, there’s the lack of labor because someone is sick and has COVID,” says Then. “On one of our projects, the lead gentleman was diagnosed with COVID, so one of our superintendents who used to be an electrician stepped in to help get the work done. We’re doing what we can as far as our team’s experience in getting the job done so these homeowners can move in.”
Municipalities are doing their part, too. Mylott, of Elgin, attributes some of his city’s success to a pro-development mindset. He says he and his team work closely with developers to turn around permits, applications, paperwork and inspections as quickly as possible.
“We all bring the same mindset that development is a partnership,” he says. “So, we are always actively asking ourselves, ‘How do we get to yes when we work with people who come through with development proposals?’”
For builders who have multiple models, Mylott offers a preapproval process that almost guarantees a permit in five days. For custom builders, he promises a review in 10 business days or less.
“There are sometimes just some things that we can’t get past, but if we don’t have to have you jump through a hoop, you’re not jumping through a hoop,” he says.
South Elgin’s Hill is finding a wholly unexpected challenge. Growth in the industrial sector is putting pressure on the village’s comprehensive plan and areas once earmarked for residential development.
“We never thought that some of the criteria that was good for a residential development might also be good criteria for an industrial development,” says Hill. “Close access, proximity to O’Hare, easy access to different areas, large acreage are all important. We have single-family developers looking for 80 acres and we have industrial developers looking for 80 acres.”
Communities of Choice
Hammers are flying in Kane County, and local builders say they see this pace continuing for at least a few more years.
Nevenhoven sees families and young children moving to his Elburn neighborhood in search of spacious yards and cozy amenities. A balance of major retailers and mom-and-pop businesses fuel the local economy. Things are growing, but it’s still a welcoming, small-town environment that doesn’t feel like suburbia.
“It’s got a great downtown, it’s got great potential for the future, and I look forward to being here and watching it grow,” Nevenhoven says.
Looking for Work
Behind our region’s newest homes you’ll find a wide array of skilled tradesmen at work. Carpenters, plumbers and electricians play an important role – and there’s no shortage of skilled workers available, says Vince Sticca, director/coordinator of the Mid-America Carpenters Regional Council of Carpenters Training Center in Elk Grove Village.
All of the local union’s 22,000 members begin their training with hands-on classes, coupled with on-the-job training. Classes focus on areas such as framing buildings; constructing cabinets; using modern building technologies; and installing everything from studs, drywall and flooring to insulation and siding.
Best of all, it comes at no cost to union members.
“You’re not going to find anything like this anywhere else,” says Sticca, a member for over 45 years. “No matter if it’s a carpenter school, a plumber school or college, there is nothing like this.”
Anyone can join, so long as they live in Illinois, have a diploma or GED, show a valid driver’s license and pass a drug test. New members begin as apprentices, a process that lasts about four years.
The work involves lots of math and physical stamina, but there’s plenty of advancement opportunity, says Sticca.
To apply for an apprenticeship, contact the council or visit chicap.org.