At the time that we’re writing this post, there’s a sheen of icy mush on the sidewalks, and a fresh round of snow is just starting to fall. And yet, nevertheless, it’s time to talk about the spring real estate market in Illinois.
Spring is generally considered to be the peak of the real estate market here in Chicago, and around the country. Historically, existing home sales tend to increase by an average of 33% between February and March, according to data from HousingWire. Home sales often peak in the late spring and early summer, with “an average month-over-month growth rate of 10% each month until June,” per HousingWire.
But remember, there are many moving parts to the real estate process. Buyers need to start searching through listings. Sellers need to decide to go to market. Both parties need to find their brokers, and their real estate attorneys. The timeline isn’t always cut and dry. That’s why many seasoned real estate professionals will tell you that the spring market unofficially begins on Super Bowl Sunday – yes, that means the very beginning of February.
“True, spring may seem light years away, yet numerous real estate experts confirm that home buyers who plan to purchase property this year typically start warming up to the idea right about now—by poking around online real estate listings or popping out to an open house or two.”
Bottom line? If you’re interested in real estate at all, then now is the time to sit up and pay attention. This is true whether you’re a buyer or seller looking to enter the market, a developer looking to start a project in the months ahead, or even just an observer looking to get a feel for the ins and outs of the Chicago economy.
Already, major trends and stories are developing in the world of Chicago real estate, well worth keeping an eye on as we head into the heart of the spring housing market and beyond. What are some of the major real estate factors that brokers, agents, marketers, and consumers are watching right about now? Here are a few worth noting:
Broadly speaking, inventory refers to the number of homes available in a given market, at a given time. Inventory is a major factor influencing local real estate markets. If there’s a “surplus” of inventory, then prices tend to fall; if there is high competition for the limited amount of inventory available, then prices tend to rise, sometimes pushing values “beyond affordability,” as Kenneth R. Harney put it for the Chicago Tribune.
In 2019, market watchers, realtors, and economists are keeping a close eye on inventory in Chicago. As Harney notes in the Tribune, RE/MAX research in December 2018 found that “inventories grew by 4.6 percent,” marking “the third consecutive month of increases.” Similarly, real estate news site The Real Deal predicts that “inventory will rebound in 2019 following years of historic lows,” with inventory growing by as much as “5 percent across the country,” and higher than that in some Chicago markets.
This can offer significant benefits to buyers, who for years, “put up with bidding wars and homes flying off the market,” as The Real Deal puts it. On the other hand, increased inventory could cause sellers to become more patient when it comes to listing. It’s also important to keep an eye on how inventory levels could impact new construction in Chicagoland.
Overall, real estate experts are currently predicting that home sales could go down in Chicago in 2019 – but that a slight drop in sales volume isn’t necessarily going to be a bad thing.
As local brokerage president Steve Baird put it in a conversation with The Real Deal:
“We’re now 10 years into a cycle… There’s going to be a downturn, the only question is when. So we’re basically predicting that the market will be off by low single-digits in terms of unit sales. The market itself is going to be off, but not by a whole lot.”
Other market experts are taking an even rosier view. Indeed, according to The Real Deal, Curt Beardsley, the vice president of industry development at Zillow, anticipates that Chicago “will have a better year in 2019 than in 2018, when home sales dipped slightly year-over-year.” Largely, he anticipates that the upswing will be due to the larger amount of inventory hitting the market in the months ahead.
Chicago is also a city of neighborhoods, with an incredibly diverse array of housing stock. Home values and inventory levels can change from one side of the street to another. With this in mind, it may also be worth keeping an eye on where home sales are happening in Chicagoland. For instance, as The Real Deal observes:
“Whereas the overall Chicago housing market saw sales drop in 2018 by about 2 percent, luxury sales in the area grew. The ultra-luxury market had a record year in 2018, with more $4-million-plus homes sold that year than in any year prior. That trend will continue into 2019, and will help buoy the Downtown market, where much new luxury product is concentrated.”
Other Economic Factors: Interest Rates, Local Politics, and Generational Changes
The housing market doesn’t exist in a vacuum. It’s impacted by many different internal and external factors, and it’s going to be important to keep an eye on all of these different influences as time goes on.
For one thing, the real estate market is significantly impacted by the strength of the economy, on the local, national, and even global level. Many market watchers are keeping an eye on interest rates right now, as these are a major driver of mortgages. However, as the Tribune points out, mortgage rates are actually fairly affordable as of early 2019, with “conventional rates averaging 3.87 percent for five-year adjustable-rate home loans, or conventional 30-year loans at fixed rates of 4.45 percent,” according to Freddie Mac – comparing favorably to late 2018, when rates were at 5 percent.
Similarly, brokers, consumers, and economists are all keeping an eye on the government. On a national level, fears over future government shutdowns and changes to the federal tax code could have a major impact on markets. On the local level, it’s an election year for Chicago, which is causing many to take a “wait and see” approach, as Crain’s Chicago Business points out. Changes in the mayor’s office and the city council could have a ripple effect on everything from property taxes to development, factors which will, in turn, eventually impact the housing market.
And finally, it’s always worth considering the ways in which demographic changes could impact the real estate market. Specifically, it’s worth keeping an eye on the millennial market, according to The Real Deal. Millennials already make up the largest share of mortgage buyers, and even more of this generation is going to be entering the market in force this year. It will be worth watching some of the choices that Millennials make, which could affect the local market.
About the Gunderson Law Firm
At the Gunderson Law Firm, we place significant focus on the field of real estate law, with a full range of real estate legal services that includes:
- Residential Real Estate
- Commercial Real Estate
- Purchases and Sales
- Mortgage Conveyancing & Advice
- Real Estate Litigation
- Title Insurance
- Title Examinations & Disputes
- Asset Protection/Trusts
- Estate Planning/Wills
- Property Development
- Condominium Law
The attorneys and staff of the Gunderson Law Firm are here to be your real estate resource. We offer expertise and insight that is reinforced by years of experience and long-term connections throughout Chicago’s real estate, finance, and insurance industries. Whether you are a couple wanting to buy or build a house, a corporation converting commercial properties to residential, or a commercial developer looking to change the Chicago skyline, the Gunderson Law Firm can help you get through the zoning boards, historical commissions, licensing boards, easement granters, and more. Drop us a line with any questions or to set up your free initial consultation.