Mild weather and low mortgage rates have pushed construction of new homes to a fast start to the year, but experts warn that January figures released Tuesday do not mean it’s going to be another record year for home building in the Chicago area.
“Starts are up mainly because of the mild weather,” said Steve Hovany, president of Strategy Planning Associates in Schaumburg, whose firm tracks 220 projects in Chicago’s suburbs.
Hovany expects sales to be down about 10 percent this year if the present trend continues. “But that is compared to last year’s superheated pace,” he said. “This year will be healthy, but not a record.”
Nationally, housing starts jumped a bigger-than-expected 6.3 percent in January, to a seasonally adjusted annual rate of 1.68 million units, the highest level in almost two years, according to the Commerce Department. The last time the pace of new starts was faster was in February 2000, when builders broke ground at a 1.7 million rate.
But housing starts are notoriously volatile, and Hovany noted that weekly new-home sales in Chicago’s suburbs so far this year have been weaker than last year. “Maybe we are finally feeling the impact of the economy,” he said.
Hovany also said it is possible that slower sales now can be attributed to the brisk sales in November and December. Traditionally, the strongest home buying time of the year is between the third week of January and mid-April, Hovany said.
Real estate analyst Tracy Cross expects starts in Chicago’s suburbs to hold close to last year’s pace. “Entry-level housing will lead the way, but high-end homes should show a modest dip,” said Cross, president of Schaumburg-based Tracy Cross and Associates.
He attributed the continued strength of the market to “favorable interest rates and the incredible weather.”
Expressing caution about the 2002 outlook for residential construction in downtown Chicago, Garry Benson of Garrison Partners, a real estate marketing firm, said the market is still feeling the effects of Sept. 11.
“A lot of people got nervous and projects that would have started this spring will be delayed until fall,” Benson said.
Gail Lissner, vice president at Appraisal Research Counselors in Chicago, said a lot depends on recovery from the recession.
“We’ll have a good year if jobs are added to the economy and interest rates remain low,” she said.
“Downtown projects with a total of 1,350 units are scheduled to begin marketing this month and next,” Lissner said. “The pipeline is very full this year, with 8,000 units planned for downtown.”
