Construction shows signs of life in Chicagoland, but lack of lots causes concern
Construction is at the highest annual rate in Chicagoland since Q3 of 2008, according to a MetroStudy survey of the area’s construction markets in 2015 Q3. A total of 6,143 new units, which includes single-family detached homes, townhome units and duplex units, were started in the 12-month period ending Q3 2015, up 7.6 percent over Q3 2014.
Chris Huecksteadt, regional director of MetroStudy’s Chicago market, noted the positive trend of home starts and sales in Chicago.
“The 1,943 units started in Q3 2015 represent an increase of 9.7 percent over Q3 2014 starts total,” said Huecksteadt. “This number is the most started in a third quarter since Q3 2008. The number of homes closed in the third quarter of this year declined slightly, down 5.3 percent compared to Q3 2014 total. There were 1,686 new homes closed in Q3 2015, compared to 1,780 units closed in Q3 2014, which was the most of any quarter going back to 2008.”
New Construction in Chicagoland
With builder activity increasing, and lower-than-expected buyer traffic, MetroStudy estimates that inventory levels may finally start to rise after the historic low levels that have plagued the market recently.
But although those numbers project an optimistic perspective, problems persist. Vacant developed lot inventory has fallen from a high of nearly 250 months on the market in 2011 Q3 to 91.6 months. That includes undesirable lots, which are either of poor quality or are far away from desirable locations, such as Downtown Chicago. When those lots are removed from the pool, MetroStudy reported, the inventory duration drops even more sharply.
Huecksteadt remained optimistic about the state of the market, but questioned whether or not builders will return to constructing affordable units, something that Chicago has been struggling with for some time now.
“Nearly all of the fundamentals for a strong housing market are in place, and certain aspects of the housing industry are benefiting,” said Huecksteadt. “Homes are selling, and will continue to sell. The question remains as to how big a slice of the pie will the new home market be able to cut. During peak construction years, the Chicago market reached nearly 35,000 new home starts, with 45 percent of the activity priced under $250,000. Today, just 35 percent of new home starts are priced under $250,000.”