Building materials continue to be in short supply along with labor shortages for skilled trades. Despite these challenges the National Association of Home Builders and Wells Fargo found that builder confidence rose in December 2021. Confidence is rising because of the high demand for housing.

“The existing home inventory is quite low, and that is supporting demand for new construction,” said Robert Dietz, Chief Economist with the National Association of Home Builders. Prices in Chicago are expected to continue to increase through the rest of the year while the number of sales is expected to decrease. In September, median prices rose in both Illinois and Chicago PMSA. Homes in Illinois sold at a rapid pace in September as inventory remained low and median price increases slowed, according to data from Illinois REALTORS®.

 The median home sale price in the Chicago Metropolitan Area (it comprises the nine counties) was $290,000 in September 2021, up 5.5 percent from $275,000 in September 2020. In a seller's market, real estate prices increase. The strong buyer demand is driving prices in the Chicago metro area as compared to the previous year. Stronger buyer activity will continue with speedy sales and multiple offers leading to price gains. According to local realtors, Illinois and Chicago PMSA both have already recovered to their pre-bubble levels on average. Illinois home prices will rise 8.3% to 19.6% this year, while the Chicago PMSA will rise 6.9% to 16.0%.

“So we’re seeing a lot more interest in building larger, more expensive homes,” Vitner said, adding that a lot of big investors have been interested in buying rental housing — entire neighborhoods of homes built to be rented. “From a home builder perspective, that offers economies of scale. Because they’re building a lot of homes in close proximity to each other. They have a better idea of what they need to order,” he said.

Vitner said that’s good news for builders, but not so much for potential home buyers — they may have a harder time competing with investors for new homes.