The real estate market run has lasted longer than any of us expected, and this is as true in Chicago as it is in other major urban centers. Over the past year, Hales Brokerage Services has experienced homes selling in the Chicagoland area in a matter of hours, and at times even before listings have been made public. Similarly, we’ve seen homes getting multiple offers above asking price.
This is great news for anyone intending to sell their home, though it does usually come with the necessity of also buying a new home in this market. For buyers, the current climate is less than optimal, but this doesn’t seem to have deterred many, as demand remains high and buyers probably figure it’s better to buy now at these prices than next year at even higher ones.
There are a few drivers for the current market conditions. The main reason is insufficient home inventory combined with strong buyer demand, likely spurred by the lowest interest rates in history. Rates are still near 3%, so low that it actually doesn’t make sense to pay off your home ahead of schedule. As a point of reference a good fixed mortgage rate in the 2000s would have been around 6%; in the mid-90s, a good rate would have been around 8%.
The COVID-19 pandemic also likely had an effect. For one, loss of employment for many showed the potential instability of renting. After initially being frozen due to the pandemic, rents are also now on the rise, even more so than home prices. Renters are seeing that having a predictable home payment, particularly at the current attractive rates, can be a great thing.
Finally, the COVID-19 pandemic permanently changed workplace culture, making many more jobs at least partially remote. Now that people are no longer tied down to their place of work, they’ve been able to consider a home that is further from work but is more affordable. This is another factor increasing buyer demand.
The Zillow Home Value index for Chicago, something like a median home price, is $300,430. Over the past year, home prices increased an average of 9.5%, a steeper increase than any time since 2013. Overall, since 2013, home prices have increased by a staggering 71%.
According to Redfin, the Sale-to-List price ratio in Chicago is 98.7%, meaning that homes sell, on average, for the original asking price. The average days on the market for a home at the peak of the 2021 season was just 15 days, half what it was last year.
What’s in store for 2022?
Most industry experts think we can expect more of the same. Home supply relative to demand is expected to remain low, continuing the current seller’s market. Home prices in the area are expected to increase another 10% next year on the low end, and maybe higher. Of course, this isn’t certain — one factor that could dramatically change things would be a tightening of monetary policy by the Federal Reserve. The latter has shown concern that after years of low interest rates, inflation is on the rise; increasing interest rates should help to control inflation, but will almost certainly have a cooling effect on the real estate market.
Have a question about how these market conditions might affect you? With over two decades in the property management business, we know a thing or two about Chicagoland real estate. Contact us today to find out more about buying or selling a condo in Chicago!