
Chicago’s 2022 new-home sales volume came in well below the pandemic boom years of 2020 and 2021, but last year’s sales tally was higher than the average annual rates seen between 2015 and 2019, according to a recent report from Zonda Market Intelligence.
In addition to the abrupt increase in monthly mortgage costs caused by interest rate hikes, the ongoing deficit in the supply of new homes, particularly at lower price points, was a big factor in Chicago’s new-home sales decline last year. In 2022, only Connecticut and Rhode Island constructed fewer new homes per capita than Illinois.
The current number of active projects in Chicago remains down year over year and is the lowest of the 21st century.
Strengths
Chicago has a low rate of new-home contract cancellations due to its prices not increasing as much as boom markets during the pandemic. The percentage of new-home closings as a share of total has been increasing since May 2022 and is the highest in three years.
Weaknesses
Growth in population and households is forecast to decrease in 2023. Accounting only for local incomes, Chicago’s new-home affordability ratio hit a new 10-year low at the end of 2022, while its existing home affordability ratio has been improving since June.

Supply
Fourth quarter housing starts decreased 34.8% from the previous year, while the number of available vacant developed lots sits at 22,805, down 3.6% from the same quarter in 2021. In terms of supply/demand balance, the market area is 3.58% oversupplied.
Sales
New-home sales in the Chicago-Naperville-Elgin metropolitan area decreased 20% year over year to an annualized rate of 5,433 units in January. Over the past 12 months, 1,727 of sales were attached units, and 3,706 were detached. Existing-home closings for the 12-month period ending in January posted a year-over-year decline of 28.7% to an annualized rate of 138,982 units. Of those, 44,728 were attached units and 75,687 detached.

Prices
The average listed price for a new detached home in the Chicago-Naperville-Elgin region increased 7.7% from 2022 to $436,309 in February, while the average list price for a new attached home increased 25% over the same period to $594,701. Home prices under $250,000 experienced the most closing activity over the past year. The new-home affordability ratio for a detached home reached 30% in January.

Economy
Total nonfarm employment increased 2.9% year over year in December to 4,771,700 payrolls. There were approximately 11,300 more jobs in December compared with the previous month, and the local unemployment rate increased to 4.8% in December compared with 4.7% the previous month. December’s jobless rate is lower than it was at the same time in 2021 when it stood at 5.1%.
Community
The population for the Chicago-Naperville-Elgin metropolitan area is 9,302,550 people. Population in the area is projected to decrease by 0.1% in 2023. There are approximately 3,639,050 households in the region, which is down 0.2% year over year. Forecasts show that current household formation is expected to increase by an annual growth rate of 0.3% by 2027. Incomes increased by 8.7% from the previous year to $88,920.
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