The good news: Chicago area housing starts are up. The bad news: housing starts had slowed so much in recent years that this is nowhere near “normal.”
Housing starts in the first quarter in the Chicago area rose 37 percent, which puts the local housing market on track to build 4,000 homes this year, the best performance in three years, according to Metrostudy, a housing research and consulting firm.
Still, a normal number for new-home starts in the Chicago area is 18,000 to 20,000. “We’re one-fifth of that. We’re a long way from being normal,” said Chris Huecksteadt, director of Metrostudy’s Midwest markets…
A lack of quality inventory and bidding wars among resale homes have caused some consumers to change their focus and consider buying newly constructed homes. Several local builders report that they’ve started homes as spec or model homes and the properties have gone under contract before the drywall is up…
Because of that kind of demand, as well as a recent spike in lumber prices, some local firms are raising prices by $5,000 to $20,000 per home to help offset the cost of materials and to maintain or improve their profit margins. No one is getting too aggressive with price hikes, though, because it might lead to problems with appraisals and mortgage financing.
This may be the new normal for quite a while. As the end of the article notes, it may be difficult to generate consistent demand until there are more jobs.
When I see figures like this, I always think about the existing housing stock. Does this automatically mean that the available number of houses is really low? Or, is there a growing interest in recent years among buyers to forgo the problems existing houses may have and instead pay a little more to get a spot-free home? If some of the existing housing stock is going unpurchased, what then happens to those homes? Some people may not be able to move while other houses, particularly those in more disrepair and neglect, could become a drag on some neighborhoods.
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