As they say, real estate is local, so today, I’m going to give the facts of what is essential to know about the change here in the Chicago western suburbs. I will go over which suburbs are hot and which are not. 

In this blog, I will cover everything you need to know to help you decide whether to buy, sell, or rent in 2023.

Let’s get straight into it!

Interest Rates

The recent and sudden change in interest rates is on everybody’s mind. A year ago, 3.0% was the highest 30-year fixed mortgage rate we had seen, and now we’re almost at 7%.

Even though this doesn’t seem like much of an increase initially, it can have large consequences for your monthly payments.

With a 3% interest rate, your monthly mortgage payment for a $500,000 home would be $2,200. However, if the interest rate were 7%, your monthly mortgage payment would surge to $3,300; that’s an additional

$1,100 per month!

With interest rates remaining at an all-time high, the demand for houses has significantly decreased.

A year ago, there were 20% more homes on the market than there are now. Fewer choices for new homeowners might be due to sellers not wanting to leave their current interest rate or lack of available options.

With the housing market always in the news, you might wonder how it’s doing where you live. It’s important to remember that real estate is local though, so even if prices are dropping in some areas of the country, that doesn’t mean it’s happening everywhere. Here in the Chicago western suburbs, for example, we’re still going strong!

The largest drops in home prices have come in the areas of the country that have dramatic increases in appreciation, areas as Arizona, Texas, and San Francisco. Chicago, however, was ranked 5th as the fastest-shrinking inventory in the nation. 

The Midwest is a linear market; this means appreciation never gets too hot or cold, unlike cyclical markets on the coasts.

Median Sales Price

However, not all suburbs are doing as well as others. Let’s cover the Western Suburbs that are still strong and those that have seen a decrease in value.

Chicago Western Suburb Prices

In this section, we will cover a year-over-year change in median sales price for the largest suburbs of the Western Suburbs.

Most suburbs are seeing a rise in median sales prices, except Clarendon Hills and Glen Ellyn. Both recorded lower sales prices this year compared to last year; however, Glen Ellyn only experienced a slight change of -1.2 percent, while Clarendon saw a much more dramatic decrease of 13%.

Carol Stream, Naperville, and Schaumburg have seen the biggest jumps in median sale price at 9.8%, 9.1%, and 8.5%, respectively, while most of the other suburbs are between 4-6%.

Market Time

Now, we will look at the days on the market metric to see how long a house takes to sell.

This comparison is between Q3 last year and today. All suburbs have shown a decrease in the number of days on the market, except for Lombard and Glendale Heights. Lombard increased by 2.4%, while Glendale Heights’ numbers more than doubled, increasing to over 50%.

This number should generally be around 60 days; anything over is not good news for sellers and buyers. The lower the days on the market, the more demand vs. inventory.

While demand is lower because of rates, the lower supply balances prices and keeps a stable market.

Glendale Heights had a large change in market time in March 2022, at the same time as interest rates started to increase aggressively. Glendale Heights, an entry-level housing market, is likely getting priced out of the market by potential buyers who can afford to buy in Glendale with today’s interest rates.

We are still in an ideal market for sellers. With interest rates increasing but fewer properties available to buyers, prices could stagnate or decrease just a bit as winter arrives.

Months Supply

Months Supply has been dropping for over a decade but much more aggressively since the pandemic’s start. The short supply is the main reason prices skyrocketed.

The suburbs with the largest home supply decrease are Hinsdale, Glen Ellyn, Addison, and Schaumburg.

While the average monthly supply number is still very low at 1.7 months supply for the entire MLS, these four suburbs have seen a decrease in inventory for sale. This could be a leading indicator of prices starting to increase or stabilize a bit.

Most all other suburbs had a drop of around 20-30% in supply compared to just a year ago.

Conclusion

Ok, so what does this mean for you? Should you buy, sell or rent? I hate to answer that it depends, but it’s true. It depends on your personal situation, needs, and goals.

Today is a great time to buy if you are a first-time home buyer or someone who needs to move up to a larger house.

Prices have come down from the highs of just a few months ago but are still much higher than last year or even 5. The problem most people are finding is the limited supply of new listings.

I talk to people regularly, waiting for the market to drop or even crash. The truth is, there is no sign of any large increase in supply. And so, wishing that prices drop significantly could be a long wait.

If you can buy it today, you should consider it. I always tell my clients to buy when they are ready to buy; no one can time the market.

Suppose you are interested in buying or selling in the Chicagoland market id love to hear about your goals. You can call, text, or set up a video meeting in the description box below to cover your exact situation.

So if you’re confused don’t worry -– we’ve got your back! We believe the best decisions are made using data. Everyone has an opinion and although some may be right, it’s really all speculation.  In this article, we break down the Chicagoland Real Estate data to help you decide whether to buy or sell in 2022. We’ll help you separate normal seasonal fluctuations from the more significant market indicators. We will also give you our opinion on where we expect the Chicago real estate market to go in 2022.

Alright, let’s get started!

Median List Price     

The median list price has dropped from its $397k peak in September 2020 to $315k in November 2021. Although the median list price is declining, it is still well above the 2018-2019 pre-pandemic levels – and so the depreciation is likely an early sign that the market is getting back to normal. 2020 created such a high level of pent-up demand that it threw home sales off their usual seasonal trend. The move down in median list price is twofold; a return to normal levels and the normal seasonal slowdown. 

This is a great sign for Chicago real estate. The rapid price appreciation we saw in 2020 creates high risk. A slower appreciation of 2-5% is best for everyone. The return to normal levels will make a stable market and both buyers and sellers will have confidence in the purchase price and list price.  

Properties With Price Decreases

Price decreases are the early indicator of a correction in median sales price. For example, an overpriced home may stay on the market and eventually need to decrease the list price to sell.

In a normal market, we can expect about 30%-40% of all homes to be overpriced and eventually decrease their list price to close. Although we are currently at 45%, it’s still closer to the 2019 trend.   

At the same time, we are seeing much higher showings per listing compared to 2018-2019. With record low levels of inventory, it seems it’s taking buyers longer to find the right home.   

Total Inventory- What About Supply?

The total amount of homes for sale in the Chicago area is still at a historic low. We have a growing population and very little inventory of homes to choose from.

Some analysts believe the inventory will increase again when the forbearance period is over. The increase in inventory won’t be enough to ‘crash the market’ but will likely be absorbed by high demand from investors and home buyers alike. Keep in mind that homeowners have benefited from the higher than normal appreciation and will likely sell before short selling or foreclosing on their home.  

Taking a look at the 7 and 90 day moving averages, we can see a move up from our lowest inventory in March 2021. But, inventory levels are still well below both 2018-2019 levels. 

New listings in our entire MLS area are also slightly declining in the last month, which is also a great sign that inventory is on its normal seasonal trend. New listings and seasonal inventory have peaked but are still lower than normal years. 

Relisted: A Signal To Watch

The relist percent can signal panicky or uncertain buyers. Homes that have gone under contract will be relisted if the contract has fallen through. This happens either when inspection reports significant repairs or when consumers get cold feet and believe they have overbid for the property.

Notice a record low relisted percentage in summer 2021 and an increase sharply since then. Relisting also has a seasonal trend and the increase in listings is also a sign of a return to the normal seasonal trend.   

2022 Outlook

What is the Segment of The Chicago Real Estate Market With The Most Demand?

The market segment that will continue to see high demand is the median price range of $264k, which is currently taking an average of 42 days on the market to sell. Because of the exceptionally low supply of affordable housing, demand continues to be high. If you are searching in the $250-$350 price range, you can expect higher competition than other price segments throughout 2022.

Higher than average inflation and higher labor costs will likely continue to keep home prices high, although we expect demand to eventually return to normal levels. Well-priced homes in great condition will continue to receive multiple offers, though these are unlikely to match the white-hot demand of 2020. 

If we see an increase in interest rates, sales prices may dip slightly –  but the monthly payment will likely stay the same. Home prices follow affordability and total monthly payment.

Should I Buy or Sell in 2022? 

We predict the price and demand to change very little in 2022 – but our philosophy is that it’s always a good time to buy or sell. We recommend buying a home when you are financially stable and selling when your lifestyle changes. It is impossible to predict what will happen in the next 5 years so your personal circumstances should drive your decision – not the market. 

As always, we recommend speaking with a real estate professional regarding your specific situation. Location and price points vary and understanding your market is what’s most important when buying or selling. 

If you are in the Chicagoland area and would like to speak with us about selling your home and or buying. We would love to hear from you, whether by call, text, or email.

Currently, It takes an average of 35-49 days on the market before selling in Chicago, but this number is greatly affected by the property, specific location, price point, and if there are any major renovations or updates that are needed.

Realtors use a metric called Days on Market or DOM for short. Realtors use this metric to determine current market conditions and relative demand in the market. It also shows the best time of the year to sell a house. 

The median list price for Chicago, IL is $299,900 with the market action index hovering around 53. This is an increase over last month’s market action index of 52. Inventory has increased to 1,537. Click here for the latest real estate data for the Chicago market! 

Click on the image below to see real-time days on market for Chicago IL!

If you are selling your house you might have questions like 

• What is Days on Market and How is it determined?
• Why does Days On Market matter?
• What’s the average Number of Showing to sell a house?
• How long are houses on the market before they sell?
• What are ways to reduce Days On Market?
• How can I find out the average days on market for my area?

In today’s blog post, we will answer all these questions and more. We will also show you what DOM for Chicago currently is and why this number matters so much for realtors, sellers, buyers, and investors alike.

There are also seasonal trends. You can expect a longer DOM in the winter months vs the summer.

What are Days on Market and how is it determined?

Days on Market (DOM) is the number of days from when a property goes up for sale until the seller signs a contract to purchase. Days on market will give you an idea of how long homes are listed for sale until they find a willing and able buyer.

Days on market is a great way to determine the strength of the market for similar homes in your neighborhood.  An increasing number of days on market is a sign that there is an abundance of homes on the market, and buyers are finding it more difficult to find their dream home. The opposite is true when days on the market have decreased.

Why does DOM matter?

DOM matters because it shows you what the market is doing and how long your home will be on the market before it’s sold. If you are thinking of selling, days on the market can help determine if now is a good time to list your property for sale.

Realtors use DOM as a way to set prices given current demand and competition within their area. They also determine if you priced your home correctly. If your home has not had any offers within the average time on the market for your area, your home price is set to high.

Average Number of Showing to sell a house?

This number varies by location and property. For example, the average for a single-family home in Chicago is 10-15 showings before it sells. But the number can be much higher for a duplex or condo. Recently listed homes have the most attention and showings within the first two weeks. This is also when you are likely to get your best and highest offer, according to statistics.

If your house has passed the two-week period and or past the average days on market, you need to change your approach before the market considers your listing and home stale.

If the home sits on the market for too long, prospective buyers will start wondering why it hasn’t sold. Additional willing buyers will also have more negotiation power since the home has been on the market for a longer period than the neighborhood’s normal DOM. 

How long are houses on the market before they sell?

The average DOM for your neighborhood and when your house actually sells are two different periods. Remember DOM is the time it takes from listing to a signed purchase agreement. The home will be pending or contingent until it actually sells. If you accept an all-cash offer, the quickest you close will be 10 business days after acceptance. If your buyer is receiving a loan to purchase your house, you can expect to finalize the transaction 30-45 days after the contract has been mutually signed. 

Ways to Reduce Days On Market (DOM)

Many different factors can affect DOM for your home. Some factors are completely out of your control. However, here are the most proven ways to reduce your DOM and get the highest and best offer for your home.

Professional Photography

You can’t get an offer if you don’t get people through the door. Photography is the home’s first impression on potential buyers. The home must catch the buyer’s interest enough for them to ask for a showing. 

Make sure the photography displays the uniqueness of your home and its attributes. Photography matters, it matters a lot.  It’s why we all have the very best photo of ourselves on our profiles. Your realtor should be promoting your home for sale with professional photos.

Staging

Sellers must have a shift in their mindset when listing their homes for sale. When you list your home you must have the potential buyer in mind. They don’t care for your mug collection, family photos, or unique and antique furniture. This is the time to put the buyer first. What would a buyer like to see? Clean, decluttered, and bright.

Staging a home with a professional gives your home the best chance to sell. Interior designers can find the perfect furniture to compliment your home. A staged home will always attract more buyers vs an empty home. Staging gives buyers an idea of what the space can look like with their new furniture.  

Renovations

Renovate or update any necessary improvements before listing your property for sale, this can make it easier for buyers who are looking for more updated homes. A completely renovated home will always attract the most buyers and those homes that need very little repairs will also bring the highest sale price. 80% of buyers are looking and prefer a home that needs very little to no repair. The closer you can get the home to this point the better for your sales price.

There are however a few repairs that give the best return for your investment. If you don’t or can’t repair a home to an acceptable condition, paint and floor are almost guaranteed to return 100% for money invested. You can also talk about this with your realtor. He/She can point out things that might have the best and largest impact on the sales price.

Priced Correctly

Often you find overpriced homes on the 90+ days on the market list. Waiting for the perfect offer that will never come. ‘Just testing the market’ is sure to get you very little action and no or low offers. This is why you and your realtor should be in agreement on the price strategy. Realtors and sellers should make data-driven marketing decisions to place the home in the best position to sell. 

Don’t overprice your home. It’s the most common and costly mistake to make. 

How can I find out the average days on market for my area?

Realtors have access to the MLS where they are able to determine all the data about your neighborhood. The MLS offers a great tool that calculates how many showings are needed before your home will sell on any given day, week, or month. You just need to input your zip code and it will give you an idea of what DOM is like for homes.

I also like to see the data generated by Altos Research. Unlike the MLS, Altos Research calculates local real estate data weekly and will give you a better snapshot of your current market conditions.

Conclusion

The days on the market for a home in Chicago can be reduced by following these steps.

1. The first step is to make sure your property looks its best with professional photography and staging it with furniture that will attract buyers.
2. Next, you should take care of any necessary renovations before listing your house including painting or flooring which are guaranteed ways to get back 100% of the money invested.
3. You should also price your home appropriately so that it gets viewings. Overpricing is one of the most common mistakes made when selling a house in today’s competitive housing market.
4. The last thing would be to find out how long homes typically stay on the MLS or search online for recent data about DOM rates in Chicago from sites like Altos Research who provide the very best real estate data. 

If you have any questions about the days on the market for your specific zip code, city, or neighborhood, we would love to hear from you.

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If you are thinking about buying a house in Chicago, it is important to know if this is the best time. After years of price appreciation and good market conditions, some analysts have started questioning whether or not the market will cool down or even crash. This blog post will help answer that question by analyzing inventory, price appreciation, and what’s going on for the remainder of 2021. You’ll also get my opinion as a real estate agent on when it would be wise to buy in this market.

The best time to buy is when prices are low. But that’s all relative, people who purchased homes in 2020 for example, are fortunate that they did not lose money on their home and even took advantage of the price appreciation of the last year.

The Chicago market has been on a steady incline for the past few years, but some analysts question how long this will last. In addition, many of Chicagoland’s neighborhoods are currently experiencing inventory shortages. Meaning it can take months or more than a year before you find your dream home!

In this blog, we will cover

• Current Market conditions
• What the reopening will mean for Chicago Real Estate
• What it will it take for the market to crash
• When you should buy a house in Chicago

Current market conditions

It is no secret that many parts of the economy are experiencing a shortage of many goods and services, housing being one of them. As a result, we have seen an increase in cost across the whole US economy. There is a simple explanation for the increased cost of housing. Over the last three years, going back to 2018, the Chicago land area has seen a drop of over 30% of inventory, helping homes appreciate over 14% in the past year. Lower supply with similar or higher demands naturally causes prices to increase.

The most significant drop of inventory in the Chicagoland area has been seen in lower price ranges, primarily homes around the median sales price of $270k. As a result, buyers purchasing around the median sales price will see significantly less supply. 

The entry-level housings low inventory is now defined as the affordable housing crisis. Economists highlight many years of underbuilding, higher labor prices, and higher material prices as the higher cost and shortage in affordable housing.

What this means for you, the home buyer, is simple. If your budget is $270k-$320k or below, be prepared to have reduced choices and higher competition when it comes time to buy, leading to longer wait times and more aggressive negotiations. 

Will the reopening relief housing inventory?

Without question, the pandemic has affected Chicago’s real estate inventory. Months supply is at a historic low at around two months. A standard market months supply is considered 5-6 months. Many people believe the reopening of our economy will lead to more inventory and alleviate the red hot conditions.

Will the Reopening lower real estate prices?

Although I expect an increase in the supply of homes for sale, I don’t believe the increase will have much of a change in cost. The number of homes on the market is still well below normal levels, and a 10-20% change will likely only help stabilize the market. In addition, over the lasts three years leading back to 2018, we have also seen a 30% increase in closed sales, meaning demand for housing is also increasing.  It is this increased demand for housing that will likely keep prices higher than pre-pandemic levels.

As a home buyer, you have to ask yourself if the current market conditions are sustainable or not.  If they are, go ahead and buy now because we don’t see significant changes on the horizon where real estate should be concerned.    

What it will it take for the market to crash?

Some economists believe the real estate market frenzy is temporary and will be short-lived.  The short-term fever is attributed to the lack of inventory. We haven’t had any foreclosures or evictions since the pandemic’s start, Which leads many to believe that the foreclosure inventory along with regular pre-pandemic listings will dramatically increase inventory and crash the real estate market.

It’s simply something you must consider if you are currently looking to purchase a home in the Chicagoland area. Since the start of the pandemic, there have been 7.2 million borrowers that have participated in the forbearance program—allowing borrowers to put a pause on mortgage payments for the last 18 months. But since the start of the program, 72% of participants have become current, leaving just over 2 million homes in the program. Unfortunately, this will likely come to an end this August, and borrowers will need to find another solution to their dilemma.

Mortgage servicers, in general, want to keep as many borrowers in their homes as possible since the foreclosure process is costly. When a borrower defaults on their mortgage, the lender can offer help with modifications to lower interest rates or tack missed payments onto the end of the loan. If neither option is acceptable, homeowners will have the opportunity to sell their homes and may end up with a profit in today’s market.

Comparing today’s market conditions to that of the last real estate fall out, in 2007, 26% of the homeowners owed more on their home than it was worth. In comparison, today, over 90% of those homes in forbearance have at least 10% equity on their home. So, if you are expecting the carnage of 2008, it likely not going to happen.

Interest rates are another likely factor that might affect the real estate market. Traditionally real estate prices fall as interest rates rise- due to the increase in the monthly payment for borrowers. Although we will likely see higher rates in the next 12-18 months, it will not change the monthly mortgage. The home might cost less, but the cost to borrow will increase, canceling them selfs out. 

Should I wait to buy Real Estate in Chicagoland Area?

Should I wait to buy real estate- Is the million-dollar question and probably the most challenging question to answer because no one knows what is really to come. Furthermore, every person’s situation and location are different, so you will have to answer this question independently. But if you need a recommendation, I will give you my opinion on who should wait and who should still consider buying in 2021.

If you are purchasing in or around the median price range for your desired area, you should continue to pursue your home purchase aggressively. The current market conditions have a lot to do with the lower inventory, reflecting the lack of affordable housing and higher building costs. 

Waiting another year or two to purchase a home at the most optimal time may not come at all. Compared to other markets across the US, Chicagoland entry-level real estate is still very affordable and will likely continue to increase for the foreseeable future. Find the house that fits your needs, don’t worry too much about what is to come. Inventory has made a turn but is increasing much slower than the higher price ranges.

For those purchasing a home at or above $500k, you can play more of a waiting game. We have likely passed the lowest inventory as there has been an increase in inventory over the last three months. I would continue searching for the home that fits your need but with less urgency than lower price ranges.

The current market conditions have a lot to do with supply, but the most significant factor in price increases seems to be housing affordability. Although I agree home prices might have a slight correction, it will likely not be enough to make much of a difference in your monthly housing costs.

If you believe the market is going to crash, then, by all means, wait. But be prepared to wait for a year or two or longer. We have likely passed the lowest point for inventory, but that doesn’t mean the market will crash again, as we saw with the 2008-2009 housing crisis.

Conclusion

In conclusion, the most important thing to consider is your situation. Your location and price point will have a significant say in whether or not you should buy now or wait for market conditions to change. If you are purchasing in an area with low affordable inventory, I would recommend going ahead with your purchase because this could be the lowest we see for a while.

On the other hand, if you are purchasing in an area where there isn’t limited inventory and housing prices have increased, I would wait at least another year before making your decision as the market will likely cool down to more normally seen levels.

As always, evaluate your situation and market conditions with your real estate professional. Then, make your decision based on available data and make data-driven decisions.

We are real estate agents in the Chicagoland area and would love to help you find the right home. If you have any questions feel free to contact us.

Thanks to the trillions of dollars of stimulus in the name of economic relief, and because people are now spending more of their time at home for activities that would traditionally require them to leave the house, more people than ever are buying houses. Demand has increased dramatically since 2020 and is expected to continue to grow for the foreseeable future.

However, with a boom in demand for homes to buy comes a boom in the prices those homes sell for. A combination of low supply, low-interest rates, and government assistance has all contributed to propelling real estate prices to historic highs. If you are currently looking to buy or sell this year, here is what you should expect when searching for housing in 2021.

Low Supply

The Chicagoland real estate market has seen constantly decreasing inventory levels since 2008. Despite this, 2020 has brought a dramatic drop in inventory. There is a high demand for housing, especially in entry-level housing. The low inventory is likely to continue and with low inventory, and as a result, prices are likely to accelerate higher throughout the year.

A decade of under-building has now caught up with supply, just as demand seems to be peaking.

According to the United Census Bureau, housing permits are up 22% from just one year ago. New housing will help relieve pressure on the higher value inventory. However, building materials have not escaped the increases in prices and they are now at an all-time high. The higher price for building materials affects entry-level housing the most. High building costs make entry-level housing almost impossible to build for a profit, which discourages building to sell.

Lumber and plywood in particular, for example, have seen a 28% increase in price from just one year ago. We have no evictions, no foreclosures, and no inventory. I don’t see where the supply will come from until something changes, meaning there will likely continue to be price increases..

Price increase

The price at which a home may sell for is generated from the simple economics of supply and demand. As supply dwindles and demand continues to grow dramatically, the price of real estate goes up as a result. Real estate prices in the Chicagoland market have increased by just under 10 percent year after year. I believe this is likely to accelerate upwards as we go into the spring market. We can expect to see as much as a 20% increase in home prices in some of the hotter, more volatile markets.

Millennials are being stretched thin as the housing market continues to accelerate faster than increases in wages can keep up with. If you are looking to buy this year, the sooner you can get under contract, the better. Beating the heat of the market in the mid-spring might save you at least a few thousand dollars.

Rates expected to stay low

The average rate on a 30-year fixed mortgage rose almost half a percent since the end of January. The extremely low-interest rates have helped real estate prices continue to swell by driving demand up. According to a bankrate.com article, 42% of mortgage experts expect the interest rate to continue to climb. Mortgage interest rates closely follow the 10-year treasury bond which has been climbing since August 2020.

The jump in mortgage interest rates will increase mortgage payments and lower home affordability. Higher interest rates will put downward pressure on home prices.

For example, the same $1,500 budget in January will allow a max home price of $367,400. That same budget in February will only allow a home price of $350,200. Interest rates are likely to affect real estate prices negatively, however, low inventory is likely to still be the largest factor in home pricing.

FED Chairman Jerome Powell has promised low-interest rates until 2023. Recently Jerome Powell has lost credibility with investors. Most believe the money printing from the economic relief packages for the COVID-19 pandemic is going to result in inflation, which will then increase the value of homes as a result.

A continued climb in the interest rate will complicate the recovery of the economy by driving what people can afford down because higher rates will continue to affect home affordability.

Multiple Offers

Every home that is priced right and shows well is flying off the market. Well over half of all buyers, 56%, are facing bidding wars, according to a Redfin survey. The reason many home buyers are still looking, is they continue to get outbid.

If you are out looking for homes it is extremely important for you and your Real estate agent to go over strategies to compete in this market. The very best qualified buyers with realistic expectations are having the best luck. Nice homes in great shape that are priced well are flying off the market, making speed more important this year than ever. Sellers have all the leverage, so it’s important to act accordingly.

If you are competing with other buyers, the best thing you can do is try to be the first one in the door and compromise. This environment is likely to continue through the 2021 home buying season.

Conclusion

In this blog, we have provided information on the Chicagoland real estate market in general. Remember, real estate markets are local and the market could vary in your specific area and price range, depending upon supply and demand and general cost of living. If you, or anyone you know, are interested and need assistance navigating this market, we would love to hear from you. We provide professional real estate services to make your dream home a reality.

I spent my first three days of quarantine, glued to the television and media sites. Only to break occasionally to try and remember every apocalyptic strategy I had ever seen in the movies. This Coronavirus is unreal! 

I calmed myself down after realizing 99% of us would make it through this. The first time I can remember praying NOT to be in the 1%. Nevertheless, if you planned to sell or buy a home in 2020, you might be wondering if it will also ruin your ability to buy or sell your home in 2020 now that coronavirus has shown up. Is this a good time to buy or a good time to sell?

OK, first off I want to let you know the economy just went into a self-induced coma. Never in modern history has a strategy like this ever been attempted before. No one knows what kind of side effects this will cause and what the economy will look like in a year or even two.

This is just to remind you an economy is a complex machine that sometimes reacts in mysterious ways. They say meteorologists and economists are the only two people that get it wrong all the time and still keep their jobs. I’m going to let you know what the statistics and economists expect in the real estate market.

Before The Virus

After a record-setting bull run, the economy is now most certainly in a recession. The virus was the needle that burst the bubble. Let’s take a look at what the real estate market was doing before the virus showed up. We will look at Chicago and then the nation as a whole.

Chicagoland real estate was still showing promising numbers closing 1.6 percent more homes in February 2020 than a year before. Chicago has had a very low inventory for many years now and with steady demand, it has had a slow but steady climb out of the previous recession.

Homes that were priced around the median price or lower had good demand. The higher-end real estate $500k +, on the other hand, wasn’t doing well, it had slowed down before the recession.

This was likely due to multiple reasons including high property taxes, a possible change in state income tax code, and a new federal code that did not favor high property taxed states like Illinois.

The nation as a whole was going strong. Although there were signs of a slow down there was still a high demand for real estate across the states. The coasts had recovered from their 2008 lows and had even surpassed their previous highs before the housing crisis. With strong demand, the southern and middle of the country was busy building new housing. 

Coronavirus Impact On Real Estate

The coronavirus has already impacted real estate. Showings are slowing down, inspections are slowing down and we even heard of buyers getting cold feet and backing out of deals.

This is all because of the high amount of uncertainty across the world. Congress is working on passing a Multi trillion dollar plan to stall the economy and inject money into both Wall Street and Main street. All with the hope that we can turn the switch back on and act like the epidemic was just a bad dream. The big question is, Will it work?

This strategy has never been attempted before; the very best outcome would be the economy would switch on and look like it did in spring 2019. This is only if the squeeze does not expose weak balance sheets and cause major long term unemployment.  

Frederick Warburg Peters, the CEO of New York-based Warburg Realty, told Business Insider that he believes the city’s housing market will react to the coronavirus pandemic much like it did after 9/11 and the 2008 recession. 

That might be true for residential but commercial and retail have their own challenges. The Retail apocalypse was already undergoing.  

In 2019, US retailers announced 9,302 store closings, a 59% jump from 2018. And with consumers stuck to couches unable to purchase their merchandise, Covid 19 might be the straw that broke the camel’s back for many retailers. Some in the commercial real estate market warn many intermediate banks can not hold the cash squeeze if they don’t allow interest holidays and rent holidays.   

The true and most important variable is the consumer. How will the consumer think? And how will he act? No one really knows. I know it will take me a bit to get over all the times I went through all worst-case scenarios with Coronavirus. It might be tough to get over the nightmare that has become coronavirus.

Additionally, coronavirus might change the consumer experience forever. Social distancing has put a lot of stress on local businesses and restaurants, making them all scramble to adapt and find solutions. Electric payment and food delivery services were already picking up steam. Maybe electronic ordering and curbside pick will become the norm. Remember, at one time, the drive-thru was a foreign concept. Necessity is the mother of all inventions, and If consumers get accustomed to the new way of doing business and remotely working, it might also change unemployment numbers. 

Unemployment will affect real estate, in the third and fourth quarters. The loss in consumer confidence and high unemployment numbers are likely to cool the real estate market and put downward pressure on prices.

The housing crisis created a strong financial foundation for our current housing market though. 

Chicago real estate is likely to have a quick V-shaped recovery. Chicago has had poor growth since the housing crisis but still has a low home inventory. Chicago also has many diverse industries and while it has had its problems, it has also kept a good value vs the rest of the nation. We have seen an exodus, high taxes, and corruption, but honestly, it’s already built into the price.  

The nation might look a little different. There are areas that do have more home inventory and many new builds. Those areas that were quickly building when the economy was booming, might take a bigger swing the other way. 

Chicago is a linear market, we don’t really see high highs but also don’t really see low lows. Cyclical markets (mostly on the coasts) might experience the most change. This is because they are markets that were already cooling off before the coronavirus. Additionally, the world recession might eliminate some foreign investor demand.  

Conclusion

The Fed has injected enough cash to buy us some time to hopefully make it out of this nightmare. But will the economy look the same when we wake up? I don’t believe so, the epidemic will cause changes in not only consumer behavior but networking. 

Strong companies will find efficiencies and figure out how to make it through these hard times that could change their business practices from here forward. With the sudden increase in unemployment, it will give buyers a great buying opportunity in the medium price range. Homes priced at higher than median house prices might experience an even stronger buyers market. Overall I expect the real estate market to recover quickly. Rates will remain low or zero for the next few years giving real estate fuel to get back to its previous highs.