The nation’s recession and the housing bubble burst effectively stalled the housing market, leaving homes on the market for lengthier periods of time even as sale prices significantly dropped.
The economic climate was just as brutal, if not more, for the home building industry. Robert Dietz, vice president of the National Association of Home Builders, summed up the situation this month before the Senate Finance Committee during a hearing regarding the country’s tax policy for homeowners.
“The decline in home construction has been historic and unprecedented. Single-family housing production peaked in early 2006 at an annual rate of 1.8 million homes, but construction fell to 353,000 per year in early 2009, an 80 percent decline in activity,” Dietz said. “A normal year driven by underlying demographics should see 1.5 million single-family homes produced. If home building were operating at a normal level, there would be 3.3 million more jobs in home building and related trades.”
But new construction could negatively affect surrounding home prices, according to the national association. With vacant homes and foreclosures, creating more homes could keep home prices low.
At the same time, having too little construction activity may result in a lower supply to demand, which could lead to significant price increases.
Over the years, construction permits have fluctuated throughout the county. But the overall trend has been downward.
In Woodstock, there were 323 permits issued in 2006 and 221 in 2007. Following the burst of the housing bubble and the recession, only 24 permits were issued in 2009. Woodstock permits went up slightly the next year with 31.
The village of Algonquin had averaged more than 200 permits a year for new single-family residential buildings in the late 1990s. Then, after 2002, the number of those permits dropped to fewer than 50. Though the number doubled in the next few years, it dropped again in 2006. Since 2008, the village has approved only 16 new residential permits.
It’s a similar story for the village of Huntley, where residential permits went from 800 to 1,000 a year during the early 2000s to only 107 new permits in 2010.
Still, there’s light at the end of the recessionary tunnel.
Marengo, a city with a population of just more than 7,000 residents, is starting to get a stalled development back on track.
Marengo city officials this summer gave the green light to several proposals for expansion and new housing. North Star Trust and Marengo Development LLC plan to develop Pleasant Grove Estates on 100.29 acres with 88 estate lots.
The Seven Oaks subdivision on Pleasant Grove Road, west of Route 23 and adjacent to the Pleasant Grove subdivision, will expand with 363 units. About 100 of those units will be set aside for senior housing. The rest will be single-family homes.
Property developers and city leaders say the current project picks up from where a previous developer who had plans to build a hotel left off. The previous developer walked away from the work during the tougher economic conditions.
In Wonder Lake, a housing development project that stalled a few years ago is expected to pick up sometime in 2013.
Initially, the developer had anticipated the $200 million construction of Thatcher Meadows to commence much sooner, as early as 2010.
Nonetheless, if the 3,700-residence subdivision does finally build out, it would double the size of the small village.
Plans for the 1,395-acre Thatcher Meadows include 460 acres of open space in addition to commercial, residential and mixed-used development.
To encourage growth and new construction, some local governments, including the city of Marengo, extend economic incentives to developers. One commonly used tool has been the tax increment financing district, which gives municipalities authority to issue bonds and borrow money to fund improvements to entice new development into the area.
The city of McHenry established a TIF district in 2002 with hopes of attracting developers to the downtown areas along Boone Creek and the Fox River. According to the latest available fiscal year summaries to the state – reporting from May 2009 to May 2010 – the city’s ending balance for its TIF fund was $1.3 million in the red after starting the year at negative $1.6 million. Nearly half of the $584,000 property tax increment generated that year went toward debt service.
The city made an agreement with Curtis Commercial in 2007 to provide incentives worth about $2 million for multistory developments, which includes a 27-unit residential project that was completed last year.