New home construction in the Chicagoland area is now at its highest level in seven years, according to a new report from Metrostudy.
The firm’s analysis, though, extended far beyond that headline-grabbing statistic, and below, we’ve spotlighted the report’s seven main findings.
1. A Boost in Starts – In the 12-month period ending with Q2 2016, there were 6,250 housing starts in Chicagoland, a 5.6 percent increase over the previous year that brought starts to their highest level since 2009; furthermore, Q2 starts totaled 1,728, which is 7.8 percent over Q2 2015.
2. A Decline in Sales – Ironically, while new construction is rising, new home sales are falling. In the 12-month period, there were 5,960 sales, a 4.1 percent decline; year-over-year, quarterly sales were down 14.1 percent. Metrostudy’s report blamed a number of factors for the falling sales, including the rising price of new construction and lagging consumer confidence.
3. Bye Bye Exurbs – In comments accompanying the report, Mark Gianopulos, the regional director of Metrostudy’s Chicago office, said the exurban developments that defined the bubble-era have not returned in the present market.
“During the pre-recession years, the market expanded into the outlying counties of the Chicagoland area,” Gianopulos said. “The post-recession market has seen a consolidation of activity around Cook and the traditional collar counties. Cook, Kane and Will counties in Illinois, along with Lake County in Indiana, continue to account for the majority of activity in the Chicagoland region, with 72 percent of all new home starts in Q2 2016 occurring in these four counties.”
4. Cookin’ in Cook County – Of all the Chicagoland counties, it was Cook that showed the most new construction activity in Q2, and by a wide margin. See our chart below for a county-by-county breakdown:
|County||Q2 2015 Starts||Q2 2016 Starts||YOY Change|
5. Lots of Declines – Long gone are the days where Chicagoland’s market featured a glut of vacant developed lots. According to Metrostudy’s analysis, the supply of lots has fallen dramatically, dropping from 250-months in Q3 2011 to a current level of 86.4-months. Although lot supply is still relatively high in Chicagoland, Metrostudy did note that lots are scarce in the area’s most desirable locations, which has driven up both the price of land and the resulting new construction.
6. New Construction Concentration – Chicagoland’s top 15 subdivisions accounted for 21 percent of the area’s new home activity, likely because the majority of those areas feature properties priced under $300,000. Below, we’ve broken down 10 of those subdivisions:
|Subdivision||Housing Product||Avg Price||Annual Starts||County|
|Ashwood Pointe||Single Family||$395,000||63||Will|
|Cambridge Lakes||Single Family||$270,000||62||Kane|
|Hawthorn Hills||Single Family||$505,000||61||Lake|
|Carillon Club of Naperville||Single Family||$388,000||57||Will|
|Timbers Edge||Single Family||$454,000||52||DuPage|
7. A Positive Future – Finally, Gianopulos explained that with how limited supply is for lots in “A” locations, builders will focus on infill lots, rather than push development into exurban neighborhoods. Price, he said, will remain a key factor, though his projections for the market remain positive.
“Builders in this market will be challenged to bring new housing units to market under $300,000, as construction costs, land and lot prices and development costs continue to increase,” Gianopulos said. “Given those factors, Metrostudy forecasts new home starts in 2016 to range from 6,200 to 6,500, representing growth from 6 to 8 percent.”