[Un]sure Confidence


The Census Bureau reported this week that housing starts, which measures new home construction, rose nearly 28% between February 2012 and February 2013.

Many national builders have also reported been reported increases in buyer demand. Lennar for example, has reported more than a 33% increase in sales of homes.

Even the jobs report stated that the US economy added 236,000 jobs last month. With so many indicators looking to be promising, is it the right time?

Location and price are still the big factors. There are many areas that are in high demand but due to tightened inventory, along with higher buyer demand, prices have not only stabilized but increased recently. It’s like the old adage “Location, location, location.” Many previous high demand areas are once again becoming very active. Chicago’s Lincoln Park, for example, which has been traditionally been in strong demand due to its proximity to the lake front, Chicago’s downtown area, premiere shopping districts and accessibility to other points of interest has seen residential real estate inventory decline by 37%. However, sales for Lincoln Park are up more than 8% while properties under contract are up by more than 45%1.

Price is still a concern for many in the industry, and not necessarily the listed price of a home. Builders have watched the cost of materials increase in the past few months. With home prices not rising on the same pace, it has been difficult to keep the cost of new homes competitively priced on the market. Additionally, the availability for vacant lots have decreased. Availability of vacant lots have decreased by more than 20% throughout Chicago. To follow our previous example, Lincoln Park has seen a decline of 40% of available vacant lots for sale.

So what should home buyers and investors feel confident about? There are many areas and market segments that can still perform strongly for many. As of now, however, that may not necessarily be in a newly built home; buyers may be faced with a premium price, offsetting the cost of materials and land. Add in potential costs for Class A and several Class B neighborhoods in high density metropolitan areas, is where much of the activity has been, costs could start to escalate.

With the increase in demand, rental demand and lower overall inventory, buyers have several options as for holding and investing. But with different areas, factors, property types and market conditions to consider, there is never, nor should ever be a one size fits all strategy.

“When buying real estate, consider first if you are purchasing as a homeowner or as an investor to formulate your buying strategy.”

Sherwin L. Sucaldito, REALTOR®, GREEN, ABR, CRPM
The Institute of Luxury Home Marketing
Green REsource Council, GREEN
Accredited Buyer’s Representative , ABR
Certified Residential Property Manager, CRPM
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1 Statistics retrieved from MRED.