Posted in Chicago Market | Posted on 02-19-2015 | Written by Metrostudy News
- 4Q14 Survey Shows 5,708 New Home Starts in 2014 – up 17.3% over 2013
- We are seeing the highest annual rate of new home construction since 1Q09
- Despite 2014’s growth, shifts in the market should moderate demand in 2015.
February 2015: Metrostudy’s 4Q14 survey of the twelve county Chicagoland region shows that including single-family detached homes, townhome and duplex units, there were a total of 5,708 new units started in the twelve month period ending with 4Q14, an increase of 17.3% compared against the previous year. This is the highest annual rate of new home construction since 1Q09. The annual rate of closings also increased in the fourth quarter, to 5,265 units. This represents a 9.5% increase in the number of annual closings compared to the prior year. The double digit percentage increases represent the largest rate of growth in annual starts and closings since the early 2000’s.
“The 1,538 units started in the fourth quarter of this year represents an increase of 24.9% over the 4Q13 starts total,” said Chris Huecksteadt, Director of Metrostudy’s Chicagoland region. “This number is nearly double the first quarter tally, and the most in a fourth quarter since the mid-2000’s. With the job growth experienced over the past eighteen months, Metrostudy expects growth in both starts and closings to moderate somewhat in the coming year”
Nearly two-thirds of all new home starts in the Chicagoland market occurred in four counties: Cook, Kane, and Will in Illinois and Lake County in Indiana. Lake County, Indiana, after leading the region through the first quarter, fell to third following the third quarter. Throughout the collar counties, a significant increase in construction activity occurred in calendar year 2014 compared to the prior year 2013.
Finished and vacant inventory had steadily fallen in the overall market, which led to the need for new home construction as demand continues to grow. The supply of finished and vacant inventory rose slightly to 2.8 months for single- family detached and attached homes in the third quarter.
“With the continued increases in construction activity, and the traffic slowdown reported by builders, it is not surprising that inventory has risen over the past few quarters,” said Huecksteadt. “Metrostudy expects the rate of construction to slow in the first quarter as builders attempt to reign in inventory levels heading into 2015. In fact, don’t be surprised if incentives are offered to buyers by builders in an attempt to absorb the standing new home inventory in the market place.”
With a relatively consistent pace of new home construction, and a declining level of vacant developed lot inventory, the months of supply for lots in the Chicago market has fallen from a high of nearly 250 months in the third quarter of 2011, to a current level of 98 months (we’re below 100!!!). Increases in construction activity, even in the outlying areas of the market, have continued to drive the months of supply indicator downward. If Metrostudy excludes those lots in less desirable locations from the survey, the months of supply indicator drops even more sharply.
Much of the news that impacts the new home market continues to sound positive; job growth continues, the unemployment rate has fallen, foreclosures have moderated, and the resale market, though slowing, is still considered healthy. However, the positive news is just not positive enough to sustain the growth in construction activity that was seen over the past two years. In addition, there just does not seem to be much urgency among prospective homebuyers in the marketplace.
“The question is whether the new home market can maintain its 2014 momentum into 2015. The market is not too far off from having supply issues impact the market’s potential for growth in addition to an economy whose temperature can be described as lukewarm at best (though improving),” said Huecksteadt. “Given these factors, Metrostudy forecasts new home starts to reach the 6,000 unit threshold in 2015, modest growth but growth nonetheless.”
For information contact
Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com
About Hanley Wood
Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; high-profile executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.