Housing Slowdown in Chicago Area

Crain's Chicago Business reports:

New-home sales are falling in the Chicago area, signaling an abrupt end to an unprecedented growth streak.

Amid rising interest rates, weakened consumer sentiment and talk of a housing bubble, sales of new homes slipped this fall, a trend expected to accelerate next year. Real estate consultant Tracy Cross projects Chicago-area sales will drop 6% in the fourth quarter and a steep 12% in 2006. That would be the first annual decline since 2002, and only the second in the past 12 years.

"We're starting to see some erosion in the market," says Mr. Cross, president of Tracy Cross & Associates Inc. in Schaumburg. The economy and job growth are "not going to be strong enough to offset the impact of (mortgage) rate increases."

Inventories of unsold homes are rising, prices are falling, and builders are rolling out incentives to stoke demand. In a recent Chicago Tribune ad, Dallas-based builder Centex Corp. touted price cuts at 15 homes in the far west suburbs. A four-bedroom house at a Centex development in Elgin now sells for $390,015, down about 10% from $435,015.

The beginning of a trend in the Chicago area?