CHICAGO HOUSING 4Q17: Consumers Remain Positive on this Market – Closings at Highest Level Post Recession
- For 4Q17, New Home Starts are up 29% YoY – Annual Starts were up 7.5% for all of 2017
- Annual closings were up a solid 11.7% YoY in 2017, the highest level post-recession.
- As the market continues to grow, new home activity in the outlying counties will continue to experience more growth, as costs for land and development continue to rise in the core counties, pushing economically minded homebuyers farther out.
Metrostudy’s 4Q17 survey of the Chicagoland housing market shows that despite lackluster job growth, new home construction starts continued to climb through 4Q17 with 7,265 annual new home starts, rising 7.5% through 2017. This annual starts number includes all for sale units including single-family detached, townhomes, duplex units and condominiums in the twelve-county region. Annual closings were up a solid 11.7% y-o-y to 6,678 units annually as of the end of December. This continues to be the highest post-recession closings activity.
Quarterly starts in 4Q17 rose significantly, up 29% y-o-y with 2,026 new units last quarter. New home quarterly closings were up 6.8% yo-y to 1,795 closings at the end of the fourth quarter. Excluding 3Q16 (due to condos), starts and closings continue to trend close through the last four years, reflecting a healthy and efficient market as we climb out from the recession.
“The significant growth in wages seen in the first half of the year continues to offset the sluggish growth in jobs, pushing demand for housing stock modestly higher through 2017,” said Mark Gianopulos, Regional Director of Metrostudy’s Chicago market. “The double-digit housing growth from the first two quarters of the year has fallen in line with more modest growth the second half of 2017 as households are facing higher real estate taxes, now reaching above 4% of value in some suburban areas. However, consumer confidence continues to rise in this MSA as business growth is strong and the new federal income tax rates are looking more positive for the employed. Consumers remain positive on buying new homes in this market.”
Housing activity throughout the 12-county Chicagoland market continues to break into three activity levels. However, the annual activity in the top four counties declined to 69% in market compared to 72.5% in 4Q16. Housing activity in the lowest active counties grew 52% y-o-y. This confirms the trend first observed in 3Q17 with housing activity pushing out to the collar counties and beyond. Three of the four top counties started over 1,000 units annually for the fifth straight quarter with the highest annual growth in Lake County (IN), gaining 266 additional units through 4Q17. As the market continues to grow, new home activity in the outlying counties will continue to experience more growth, as costs for land and development continue to rise in the core counties, pushing economically minded homebuyers farther out.
Annual lot deliveries hit a post-recession high in 4Q17 as builders and developers brought 4,948 new lots to market through 2017. Cook County was the largest recipient with just over 1,500 lots entering the county followed by 1,105 lots entering Lake County, IN. The volume of lots decreased in 11 of the 13 Chicagoland counties in the fourth quarter with the largest drop in Will County, down 642 lots in 4Q17. Modest increases were observed in DuPage and Cook counties, growing by 32 and 17 lots respectively through 4Q17.
Within the more active counties, two of the four counties in the Chicago region continue to exhibit a month’s supply of lots at or below equilibrium (24 to 30 months). DuPage County has the lowest supply of lots at 21.2-months, well under equilibrium. Generally, the lower activity counties have the high month’s supply of lots, with over 199-months of supply in McHenry, DeKalb, Boone and Winnebago counties.
2017 saw the beginning of builder activity migrating to collar counties after the recession with double-digit annual growth in Boone, DeKalb, Grundy and Winnebago counties this past quarter. However, dormant subdivisions continue to comprise a significant percentage of development in those counties. Infill locations continue to have priority as homebuyers are willing to spend a premium to live closer in. Even with the tepid job growth in 2017, Metrostudy expects a reasonably healthy market growth of 9% through 2018.
For information contact
Mark Gianopulos – firstname.lastname@example.org
About Metrostudy 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
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