New Release today on New Homes from Crains

(Crain’s) — Local new-home sales inched higher in the fourth quarter, but homebuilders will remain stuck in their slump until the economy recovers.

Chicago-area builders sold 584 homes in the fourth quarter, up 3.9% from 562 in the year-earlier period, according to a recent report by Tracy Cross & Associates Inc. It was a positive end to an otherwise awful year for local developers, who sold just 3,753 units in 2009, down 41.0% from the year earlier and 88.7% from the market’s peak in 2005.

Though a federal tax credit and low interest rates have propped up the market, high unemployment and a tight lending market have depressed demand, which isn’t likely to bounce back anytime soon.

“We see normalcy in the Chicago market probably being established in 2013,” says Tracy Cross, president of the Schaumburg-based consulting firm. Normalcy, he says, “will more or less look like ’93 to ’98 or ’99,” not the boom of the last decade.

Sales in the city fell 12.5% in the fourth quarter, to 21 units, while suburban sales rose 4.6%, to 563 units. For the year, city builders sold 848 homes, a 42.7% decline from 2008, and suburban sales totaled 2,905, a 40.5% drop.

New-home sales will rise about 10% this year, “but that is off such a low base that it is meaningless,” Mr. Cross says. Many sales “will result from reselling of distressed properties that are bank-owned.”