(Chicago, IL– April 29, 2013) The housing market in Chicago continues to show steady signs of improvement.  Although the growth has not been robust, and construction levels are well below historical norms, the rate of new home contruction grew by 37% compared to the first quarter of the previous year.

With 811 housing starts tallied through the first quarter of this year, new home builders continue to see improvement in the level of demand for their product.   In the first quarter of 2012 there were 592 housing starts.  The annual rate of new home starts reached 4,013 units in the first quarter, the first time housing starts have reached the 4,000 unit plateau since mid-2009.

There still are several concerns in the near term that could negatively impact the new home market, however.  The number of foreclsoures, both in terms of new filings and the actual number of units foreclosed on, continues to rise.  The local economy is also still a concern.  This in light of the fact that there does seem to be some job growth occurring in the local market.  There was a net increase of over 55,400 jobs reported in the Chicago metropolitan area during the most recent twelve-month period.  However, unemployment levels remain elevated at 10.4%.

Inventory is still a concern as well.  Not necessarily the amount of new home inventory sitting on the market, but the amount of lot inventory that is out there.  “There are still over 50,000 fully improved home sites out there ready to build on,” says Chris Huecksteadt, Metrostudy’s Director of Midwest Markets.  “Many of these lots are in far flung areas that may not see significant construction activity for several years,” he added.

Given where the market has come from there is still reason for optimism among those active in the local new home market.  “Most production builders here are seeing more traffic serious about buying a new home, and willing to pay what builder’s are asking, than they’ve seen in a long time,” Huecksteadt said.

For information contact:
chris huecksteadt @ 847.241.6570
email chueck@metrostudy.com

About Metrostudy

Metrostudy, a Hanley Wood company, is the largest provider of comprehensive research and insight for the real estate industry. Builders, developers, banks, manufacturers, retailers and many other industries all rely on Metrostudy’s data and analytics to support strategic business decisions at the local, regional and national market level. www.Metrostudy.com

About Hanley Wood

Hanley Wood, LLC is the premier media, information and marketing services company serving the residential, commercial design and construction industries. Through its operating platforms, the company produces award-winning digital and print publications, e-Newsletters, websites, marquee trade shows and events, market intelligence data and custom marketing solutions. The company also is North America’s leading publisher of home plans.

Metrostudy’s new study of housing in markets across the country puts hard numbers to the housing recovery, and provides a detailed look at differences in the trajectory among regions.  The data (collected at the end of calendar year 2012, and newly analyzed) indicate extreme variance among markets and submarkets, with some markets’ single-family production up 90% or more versus a year ago.

Starts of detached homes rose by an impressive 46.9% from year-end 2011 to year-end 2012, and the rebound is starting a virtuous cycle, providing a much-needed boost to personal incomes, which in turn translate into still-higher demand for homes.

It is important to understand the forces that are driving construction activity higher as well as those that are restraining gains in some areas.  In some markets, there are land constraints that work to the advantage of the builders who have lot positions and ongoing projects in those submarkets, keeping the number of head-on competitors low.  Additionally, the builders that have lot positions in lot-constrained submarkets are able to push prices up much more easily, and they have a strong incentive to do so, because:  (1) they can make more profit by selling the homes at higher prices, and, (2) they don’t want to run out of lots too quickly.

Read the rest of this entry »

Please join us for our 4Q12 Chicago Client Briefing…

When: Friday, February 8, 2013

Times: 8 a.m. (Registration)

Presentation begins 8:45 a.m.

Where: The Grotto of Oak Brook

3011 Butterfield Road Oak Brook, IL 60523

Note: This meeting is limited to Subscriber Clients and their employees only.

Please contact Chris Huecksteadt @ chueck@metrostudy.com for more details.

Whew… The election is finally over. Whether Republican or Democrat we can now get back to the business of our lives, the day to day running of our business and the building of homes. Sure, some are upset and some are elated. Some will call this the end of America as we know it, while others will call it the dawn of a new era. For myself, I’m not one to make grand pronouncements in either direction. The sun still rose this morning (though I didn’t get to see it due to overcast skies), and I drove to the office ready for business. Now we can get back to selling and building homes. In my humble opinion, we don’t need the government to set policy in our favor or worry about the government screwing things up in our industry. There are buyers out there. They need shelter. Owning a home is still the American dream (that has not changed, nor will it). The economy is slowly getting better. People are still having babies. There are literally millions of potential home buyers out there in the marketplace, so instead of complaining about the economy, or the government, or the debt crisis in Europe, or any other obstacles that may stand in our way, I’m going to figure out what I can do today to make my business better. It seems to me that’s what Americans do.

We have been spending a lot of time at Metrostudy recently trying to assess the quality of all of the vacant developed lots across the country.  There have been many internal conversations about what attributes make an A, B or C lot.  This analysis leads to a bigger question.  What is the thought process that a typical homebuyer goes through when selecting a location for their family?  The answers seem obvious.  Most family buyers seek locations close to their place of employment, within good school districts and near shopping, services and entertainment.  They also want their new home to be located in a “prestigious” town or neighborhood.

So the answer seems pretty simple for a builder looking for lots, seek out all of the characteristics outlined above and buy every available lot in those locations.  Of course, this is unrealistic for most, if not all builders, as lots in these locations are very scarce, and those that are available are priced beyond the reach of 95 percent of the consumers in any housing market.  So which criteria are the most critical to builders when selecting lots to purchase?  Our research suggests that if you evaluate high school districts in relationship to other nearby districts, most other criteria will fall into place.  Homebuyers generally begin searching in a region that is relatively close to their place of employment.  The amount of time that consumers are willing to commute to their place of employment varies from market-to-market.  These same buyers then consider the strength of the high schools within their selected region.  In most suburban locations, it is very important to be located within a high school district that is “perceived” to be better than surrounding districts.  For example, a “C” high school will look really good if surrounded by “D” high schools.

Our research shows that high school districts that are perceived to be superior to those surrounding them have higher lot prices, higher unit prices and greater appreciation than the other districts.  These high schools might even be in the same town and the same school district.  The actual, quantifiable numbers might be slight, but the perception is great.

A great example of how the perception of a high school attendance zone is much more important than the consolidated district is Plainfield, Illinois.  Plainfield is a suburb of Chicago which saw tremendous housing growth during the past decade.  So much growth, in fact, that three new high schools were added to the existing district from 2002 through 2008.  Of course, not all high schools (even if they are in the same district) are created equal.  According to greatschools.org, one of the schools, Plainfield North High School, achieved a rating of 9, while the other high schools in the district had ratings of 5 or 6.  As would be expected, the median new home price was greater in the Plainfield North zone and less value was lost during the recession within this high school district.  The other high school attendance zones also contain a greater number of vacant developed lots and lower lot prices.  None of this is surprising.  It shows that it is important to dig a little deeper than the overall school district when evaluating lots and land.

So what did we learn from looking at the high school attendance zone data?  First, to get into an attractive high school attendance zone and close to employment center, be prepared to pay.  If you don’t want to pay top dollar for lots, strongly consider top high school zones as they relate to nearby zones.

Second, don’t be tempted to buy simply in a “strong” school district.  Dig a little deeper and find out what the perception and reality of each high school is in the region.  This extra evaluation will help achieve optimum pricing levels, increase absorption and somewhat insulate the builder if the housing market suddenly weakens.

It is important to pay attention to all criteria when acquiring lots and land during this transitional time, but pay special attention to the local high school because your buyers certainly are.

(Chicago, IL– October 19, 2012) The housing market in Chicago continues to show steady signs of improvement. Although the growth has not been robust, and construction levels are well below historical norms, the rate of new home construction has grown by just over 25% compared to the previous year.

With 2,628 housing starts tallied through the first nine months of this year, new home builders continue to see improvement in the level of demand for their product. In the first nine months of 2011 there were 2,093 housing starts. The 535 unit improvement over the prior year to date total is the largest such increase (both nominally and percentage-wise) in over ten years. Metrostudy expects the number of housing starts to reach 3,400 housing units by year’s end.

There still are several concerns in the near term that could negatively impact the new home market, however. The number of foreclosures, both in terms of new filings and the actual number of units foreclosed on, continues to rise. The local economy is also still a concern. This in light of the fact that there does seem to be some job growth occurring in the local market. There was a net increase of over 38,000 jobs reported in the Chicago metropolitan area during the most recent twelve-month period. However, unemployment levels remain elevated at 8.8%.

Inventory is still a concern as well. Not necessarily the amount of new home inventory sitting on the market, but the amount of lot inventory that is out there. “There are still over 55,000 fully improved home sites out there ready to build on,” says Chris Huecksteadt, Metrostudy’s Director of Midwest Markets. “Many of these lots are in far flung areas that may not see significant construction activity for several years,” he added.

Given where the market has come from there is still reason for optimism among those active in the local new home market. “Most production builders here are seeing more traffic serious about buying a new home, and willing to pay what builder’s are asking, than they’ve seen in a long time,” Huecksteadt said.

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com

Please join us for an update on the Chicago Housing Market

WHEN: Friday, October 26, 2012
8:00 am Registration & Networking
8:30 am Presentation
9:30 am Adjourn

WHERE: The Grotto of Oak Brook
3011 Butterfield Road, Oak Brook, IL 60523

This event is limited to subscribers to Metrostudy’s Quarterly Advisory Services. If you are not a current subscriber and you wish to attend the event, please contact Chris Huecksteadt at chueck@metrostudy.com

(Chicago, IL– August 6, 2012) The new home market in Chicago has shown surprising strength throught the first six months of this year. With steady job growth, increased demand in the resale market, and low levels of housing inventory, the market for new residential construction has seen back to back gains for the first time in over five years.

In the most recent twelve-month period, the Chicagoland area saw a net positive change of 34,300 jobs. “Continued job growth will be crucial to growth in the housing market, both in terms of absorbing the excess inventory (foreclosed, REO, and traditional resale homes) and creating potential demand for new homes,” said Chris Huecksteadt, director of Metrostudy’s Chicago division.

Chicagoland started 3,200 new units in the 12-month period ending in 2Q12, an increase of 8.6% compared to the previous quarter. The 1,017 units started in the second quarter of this year represent an increase of 33.3% over the 2Q11 total starts. Through the first six months of 2012, new home starts are up over 27% when compared to the same six month period in 2011. “There are multiple causes of the dramatic increase in new home starts. Most notably, a slight uptick in demand combined with low inventory levels, require builders to start new homes,” said Huecksteadt.

“There seem to be some strong positive signs that the local economy is beginning to improve in earnest. Unemplyment has again begun to fall, from peaks of over 10% to a current level of 8.6%, while the net change in jobs is at it’s highest rate of growth in over three years,” said Huecksteadt.

For information contact:
chris huecksteadt @ 847.241.6570
email chueck@metrostudy.com

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.

One of the most asked questions in the last couple of years that I have heard is, “How are we ever going to work through all of these vacant developed lots in the Chicago market?”  The short answer is:….YEARS.  However, if you really examine the location and condition of the existing vacant lot supply, we may be facing an entirely different reality.

As of the First Quarter of 2012, there were 42,743 vacant, developed lots in the 7-County Chicago MSA.  Based on current housing start levels, there is an 18 year supply of lots in this market.

In order to really understand the desirability of these lots, we examined each of them based on a number of “home buying” criteria.  The most important factor that we took into account was the desirability of the high school district.  As with many housing markets across the county, high school attendance boundaries in Chicago are one of the most important factosr when choosing a location to purchase your new home.  The high school rankings that we used were devised by The Chicago Tribune and were based on percentage of students meeting or exceeding state standardized test scores. Read the rest of this entry »

(Chicago, IL– May 4, 2012) In the past two months, the Chicago market has seen some of the strongest job growth reported in over five years, according to a recent report by Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.

In the most recent twelve-month period, the Chicagoland area saw a net positive change of 42,100 jobs. This is a positive new following the lackluster job growth in 2010 and 2011, with just over 20,000 net jobs added in each of those years. “Continued job growth will be crucial to growth in the housing market, both in terms of absorbing the excess inventory (foreclosed, REO, and traditional resale homes) and creating potential demand for new homes,” said Chris Huecksteadt, director of Metrostudy’s Chicago division.

Chicagoland started 2,945 new units in the 12-month period ending in 1Q12, an increase of 2.7% compared to the previous quarter. The 571 units started in the first quarter of this year represent an increase of 15.6% over the 1Q11 total starts. Closings, however, continued to decline. There were 3,538 closings during the 12 month period ending 1Q12. “There are multiple causes of the dramatic decline and continued low level of housing in today’s market. Homes that are too high-priced or locations too far from job centers and other infrastructures continue to be an issue in the new home market,” said Huecksteadt.

Housing inventory has steadily declined since 2007 in the Chicagoland market. Overall, new home inventory in the Chicagoland market is down 151 units compared to one year ago. There still exists a 13.7 month supply of new home inventory (6.0 to 9.0 months is considered normal) based on the current pace of closings.

“There seem to be some strong positive signs that the local economy is beginning to improve in earnest. Unemployment has again begun to fall from peaks of over 10% to a current level of 8.9%, while the net change in jobs is at it’s highest rate of growth in over three years,” said Huecksteadt.

For information contact:
chris huecksteadt @ 847.214.5291
email chueck@metrostudy.com

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.