Analyst: Renewed demand will be for smaller homes
By Jo Ann Hustis
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jhustis@morrisdailyherald.com
Big homes on big lots may not be the wave of the future, believes Chicago housing industry analyst Chris Huecksteadt.
“There won’t be so much demand for big homes in the future as there was four to five years ago,” Huecksteadt noted during the fourth annual Grundy County Growth Conference on forecasting and green development in the area.
Demand for new housing has all but disappeared in the current economic climate. This has created some problems, plus some of the large and stable home builders have disappeared.
Job growth is scarce. New home inventory continues to fall as builders have ceased construction.
“Building lots – there are too many of them, and too many of them are too big,” he told a roomful of people attending the conference Friday at First Christian Church. “There were up to 3,200 housing starts this year (in the 15-county Chicagoland area), but the number could grow by 30 to 50 percent next year.”
There were 15 housing starts in all of Grundy County the first nine months of this year. During the peak of construction prior to the economic downturn in 2007, there were 1,044 housing starts per year in the county.
“A 90 percent drop,” Huecksteadt said.
Developers in Will County were building up to 11,000 homes annually prior to 2007. This year, 400 to 500 new homes have been built in the county.
“There aren’t many pockets where some housing activity is going on,” he said, speaking of the 15-county area.
“Three to four years ago, new home builders were doing an average 48 contracts per year. Now, they’re doing an average 24 contracts a year. Only four to six people per week visit a model home on average. There’s not many people shopping for new homes.”
In three years’ time, the 15-county area has gone from construction of 95,000 new homes to 3,000 new homes per year.
“The inventory of new houses is relatively low,” Huecksteadt said. “We just need buyers.”
Builders are scrambling, trying to find homebuyers. Both home prices and the actual number of buyers is plummeting. The upturn in the housing market the past two to three months is due to the $8,000 tax credit available to first-time homebuyers.
Within the 15-county region, a 12 to 15 months supply of homes is on the market.
The drop in the housing market is directly attributable to the decline in the job market. Altogether, 1.3 million jobs have been lost in the Midwest during the recession.
“People who are out of work are not buying homes,” he said. “If they have a job, they’re not making any money – no pay raises, no bonuses, high health insurance – consumer confidence is at an all- time low level.”
Huecksteadt was not aware of what influence the $8,000 tax credit is having on the housing market. He believes it is short-lived, however.
The tax credit is available for qualified first-time homebuyers purchasing their principal residence – the home they will live in – before Tuesday, Dec. 1 of this year.
On the other hand, the population is growing, and this will create a need in the market for housing. The housing inventory is very low. The state of Texas is No. 1 in the nation in new home purchases this year.
The city of Chicago is No. 9 in new housing starts this year, and will not fall in the top 10 by year’s end. New housing starts in the Windy City are off 55 percent from one year ago. When the economy recovers, the nation is going to need to build new homes.
“Interest rates on new home loans have been below 8 percent the past decade,” Huecksteadt said. “They’re not an issue – the economy is.”
The annual conference was sponsored by the Community Foundation of Grundy County. Foundation Director Julie Buck was in charge of the program and led introductions.
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