New Construction

The construction boom that helped drive the housing market in the years before the 2007 crash doesn’t appear to be coming back to the Chicago area any time soon. The annual rate of single-family housing starts improved to 635,000 in October, up slightly from 626,000 in September, based on permitting reported by the Federal Reserve Bank of St. Louis. The growth in new home construction has remained very slow since housing starts bottomed out at 234,000 in Jan. 2011.

The U.S. Census Bureau places the number for October at a somewhat higher level, tallying 840,000 single units. Multi-unit buildings were almost as numerous, with 18,000 two-unit, 42,000 three- or four-unit and 671,000 buildings of five or more units started in the last year.

“We’re now seeing the first signs of additional construction taking place, but at the same time, the number of households seeking rental has continued to increase,” Hewings says. “Even though mortgage rates are low, a lot of people are much more risk averse about entering the housing market than they were five or six years ago.”

Michael Neal is confident that the market for new homes will improve soon.

“I think we’ll see new home sales begin to pick up the slack and their rate of growth should exceed existing homes,” he says. “Again, that reflects the healthy housing market that you’re getting as people move out of their parents’ basement to renting to ultimately buying their first home – which is typically an existing home – and over time, moving into a new home space as they move up in wealth.”