David Hill’s plans haven’t been working out the way he’s anticipated, but he’s not exactly crying about it.
The chairman of Rolling Meadows-based Kimball Hill Homes has been forced to increase the quality of his homes– and raise their prices–because his buyers are demanding more space and greater luxury.
At one project in northwest suburban Carpentersville in Kane County, “I kept seeing pressure to move up,” said Hill. “We started at 140,000 and are selling at $180,000 to $200,000.”
And in McAllen, Texas, on the Mexican border, where the national home builder is also active, he wanted to build lower-priced homes but discovered that the market was hottest for houses costing twice what he had planned.
Now Hill, a mass-production builder who generally does large subdivisions where the emphasis is on efficiency and value, is planning a subdivision in Fox River Grove–adjacent to Barrington but not historically a high-priced area–where some homes will go for well over $600,000.
“People are seeking more home, and they’re stretching,” Hill said. “They’re affluent, highly capable people, but even so they’re stretching. What this says to me is that the Baby Boomers in this nation of affluence are doing better even than they expected.”
Hill’s observations are borne out in an annual survey by Chicago Title Insurance Co., which reports that repeat home buyers are leading a record-setting housing market and making big jumps in spending to do it.
The 23rd annual survey, released Thursday, shows repeat buyers made up 53.8 percent of all home buyers in 20 top markets studied last year, up slightly from 53.2 percent in 1997.
The average price of the home they bought was $244,300, up 10 percent from 1997; their average monthly payment bounded up 12 percent, to $1,343 in 1998 from $1,197 the year before.
In the Chicago area, the average price a move-up buyer paid in 1998 was $228,400, up 12 percent from the previous year; the median price–meaning half cost less and half cost more–was $198,800, up 5 percent. Such a spread between the average and the median means the market is heavy on the high-priced side.
In Cook County, the average price paid by repeat buyers was up 14 percent to $225,400; the median price was up 19 percent to $202,000; and the average monthly mortgage payment soared a whopping 21 percent to $1,307, despite generally lower mortgage rates.
One of the reasons monthly payments spiked was that buyers put less money down both in the Chicago area and around the country. Repeat buyers nationally put down 24.9 percent of the sales price in 1998 compared with 26.1 percent in 1997. In the Chicago area the figure went to 29.4 percent from 30.2 percent.
“People bought more house with a little less money down,” said John Pfister, head of market research for Chicago Title and chief author of the study. “The conclusion is that people are very confident about their current situation and the future.”
Down payments also declined among first-time buyers around the country, to 12.8 percent from 13.7 percent. But their monthly payments went up only about 5 percent, to $1,069.
One intriguing statistic was that in a spectacular housing market–existing-home sales reached an eye-popping annualized rate exceeding 5 million in December–buyers tended to look at fewer houses and spend less time before reaching a decision.
Nationally, buyers looked at an average of 13.4 houses in 1998, down from 14.5 in 1997; and they took 4.5 months to do it, down from 4.8 months, according to the study, titled “Who’s Buying Homes in America 1998.” Chicagoans actually took a little more time, but still looked at fewer houses.
One reason for the comparative speedup may have been the competitive market, Pfister noted. “People figure there are more buyers out there, and figure that somebody might snap up their house,” he said.
Another reason could be the increasing sophistication of the home search. Officials with the National Association of Realtors’ Web site estimate that as many as 30 percent of buyers check Internet home listings during their search, which could cut down on the number of homes they actually visit.
The Chicago area generally reflected the national home market in the survey, which is based on polls of about 1,800 home buyers in 20 metro markets: Atlanta, Boston, Chicago, Cleveland, Dallas-Ft. Worth, Denver, Detroit, Houston, Los Angeles, Memphis, Miami, Minneapolis-St. Paul, New York, Orange County, Calif., Orlando, Philadelphia, Phoenix, San Francisco, Seattle-Tacoma and Washington.
One point at which the Chicago area diverged slightly was in the increasing strength of first-time buyers, who lost a little market share nationally.
First-time buyers in the Chicago area accounted for 47.7 percent of all buyers in 1998, up from 45.5 percent. First-timers captured the largest share of the market in Cook County with 55.8 percent.
But a remarkable 28.9 percent of Cook County buyers purchased condominiums– twice the national average and way more than in the collar counties–and 26.9 percent of buyers were single.
The inescapable conclusion is that first-time buyers, many of them single, are flocking to the new condos and converted lofts in downtown Chicago. “It’s concentrated in the city,” Pfister said.
The champion for married first-time buyers was Will County, where they make up 80 percent of the entry-level market. There they found some of the collar counties’ cheapest housing, with a median price of $120,000. Only DeKalb had cheaper entry-level housing, with a median price of $108,900.
