Home Builders Pessimistic and Vacancies on the Rise in Chicago

June 16, 2009

Residential

Two reports yesterday seem to cast a shadow over recent good news in closings.

Home Builders Not Predicting Increased Business

Hanging on

Hanging on

The National Association of Home Builders (NAHB) reported yesterday that it’s nation-wide monthly sentiment index dropped by a point to 15. This is down from a score of 18 one year ago and an all-time high posted four years ago of 72. NAHB doesn’t slice its data very thinly, so the only numbers we have for Chicago are the Midwest area, which actually increased from 14 to 15.

It’s important to note exactly what this survey is. According to NAHB’s web site, the survey is,

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as ?good,? ?fair? or ?poor.? The survey also asks builders to rate traffic of prospective buyers as ?high to very high,? ?average? or ?low to very low.? Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Chicago’s Vacancy Rates at Historic Highs

The Census Bureau is reporting that vacancies are on the rise in Chicago and are actually the highest ever since they began collecting this data in 1996. In the quarterly analysis released yesterday, the vacancy rate in Chicago is now at 3.8%, which is a 41% increase over a year ago, when the rate was 2.7%. It is also up 3% from 3.7% in the fourth quarter of 2008.

Crain’s is reporting that Neighborhood Housing Services of Chicago (NHS) has data that shows South Side neighborhoods are being hit the hardest. Examples cited are Englewood has the highest vacancy rate in Chicago of 16.1% and North Lawndale is standing at 11.8% vacant.

There are many factors leading to this increase, among them are all the foreclosures due to people using sub-prime loans they could not afford, foreclosures due to more and more people losing their jobs as unemployment continues to rise throughout the country, and the huge numbers of newly developed homes that have come on the market in the past two years not selling.

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About Rod Holmes

Rod has been a broker working in Chicago since 2004. He has worked with developers, buyers, sellers, and as well as managing offices. He is currently a partner in Chicago Style SEO working primarily with real estate firms to improve their Internet marketing. Rod lived for nearly ten years in Japan where he owned a corporate training and executive coaching firm with clients including Hitachi and 3M Japan.

He lives in Lakeview with his wife and two children. He enjoys coaching and watching his kids participate in sports, cycling, camping, and traveling in general.

You can find Rod online on Twitter at @roddesu, Facebook and LinkedIn.

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