New year should bring happier housing market

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Updated: January 13, 2012 2:16PM

Year-end numbers on housing starts and sales point to at least a little happier new year ahead for home builders and their buyers.

The Commerce Department reported in late December that single-family housing starts grew nationally for the second consecutive month in November, relative to the same time in 2010. Multi-family starts continued their strength with a third consecutive double-digit increase, year-to-year.

Equally encouraging, the National Association of Home Builders/Wells Fargo index of builder confidence rose in December for the third straight month to the highest level since May 2010. The National Association of Realtors also reported that improved numbers in single-family construction are running parallel to stronger consumer demand. Buyers stating preferences for new, energy-efficient product are often finding little to choose from in the current non-speculative building/lending environment. Thus, builders with the cash and the courage are finding a fledgling market for well-priced new homes.

According to Ken Fears, Manager of Regional Economics for the National Association of Realtors, the new construction numbers reported by the Commerce Department are important, however modest.

“First, as construction moves
back to its long-term trend, more workers will be needed in this labor-intensive industry. New jobs mean more spending, better tax collection and less strain on underwater homeowners,” Fears explained in an end-of-year statement.

“Second … localized improvement in supply conditions bodes well for home prices, buyer confidence, and a move toward stabilization in the distressed market. While the December report is no panacea for housing and the economy, it is a sign of green shoots.”

Tracy Cross, President and CEO of Tracy Cross & Associates, Inc., a residential market research firm in Schaumburg, sees the tip of those green shoots in current Chicago metro housing starts and sales numbers.

“The good news is that we see a 30 to 40 percent increase in new construction sales for next year. But it’s also important to realize that we are building from a market at lowest ebb, so the uptick is less impressive than it sounds,” said Cross.

Cross explained that in 2011
there were a total of 2,900 new
construction sales in the Chicago metro area, counting both single-
family and multi-family housing. In comparison, he noted there were about 33,300 new units sold in 2005. That difference is sobering to even optimistic forecasters.

Cross noted that one area showing real strength is new rental buildings, as more people need or choose to rent.

“Rental buildings show significant speculative market growth. You see this in the number of building permits issued versus new construction sales. There were 2,500 attached housing permits issued locally in 2011, but only 1,700 sales. The difference is rental properties,” Cross explained.

He added, “Many suburbs are fairly restrictive on new rental projects, compared to the city. But given the sour times, we are seeing more suburban proposals being made and approvals granted.”

Cross said that DuPage County
leads in approved rental projects, with Kane County and a few Cook suburbs next. Lake County had no 2011 approvals, but five proposals are pending for next year.

Julie Morse is a licensed Realtor.