What Does the Chicago Housing Market Look Like for the Rest of 2017?

What Does the Chicago Housing Market Look Like for the Rest of 2017? (Source: pixabay.com - used as royalty free image)

What’s in store for the Chicago housing market in 2017? In most respects, more of the same.

According to market experts, Chicago is on track for a fourth straight year of price gains. However, some see this growth as relatively weak tea. According to a forecast by the National Association of Realtors, for instance, Chicago is expected to have the weakest housing market out of any of the 100 largest major metropolitan areas in the nation.

On the one hand, this stunted growth may be cause for some worry. On the other, our unique market may be uniquely primed to offer advantages to both home buyers and sellers in the months ahead.

Now that we’re moving out of the frigid days – and marketplace – of winter, what are the housing trends you should be following for the rest of 2017? Let’s explore.

The Most Interesting Stat: Sales Prices

Sales prices may grow by 3.8% to 8.4% in the Chicago area, according to predictions from the Illinois Association of Realtors and Geoffrey Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois. These numbers are positive, and they look even better compared to the state as a whole; the Chicago region’s median price growth is notably higher than the 2.1% to 6.9% growth projected for Illinois as a whole. In terms of total sales, Hewings expects only a moderate increase in the Chicago area, of 2.4 to 3.3%.

As the Chicago Tribune reports, this slow growth seems “entrenched” in the Chicago market, particularly compared to other markets around the country. For instance, our market is lagging in terms of recovery from the market crash compared to much of the nation; Chicago's home prices on average remain about 20 percent below July 2007 levels, according to the Tribune.

With that said, these lower prices also make Chicago more attractive to the right buyer; prices are highly competitive when stacked up against other comparable markets, and, in many cases, buying in Chicago is actually more affordable than renting.

The Big Spoiler: Inventory

One of the biggest factors putting a cap on the Chicago market’s ability to grow sustainably? Inventory, which seems likely to remain somewhat limited in 2017. In Chicago, inventory – the number of homes available for sale on the market – has been in fairly steady decline since 2008, settling at a low of 57,310 homes in November 2016, the last data available.

This impacts the housing market in several key ways. First, it discourages many would-be buyers from entering the market in the first place; consumers are much more engaged and motivated to buy when they have a lot of choices available. On the other hand, these conditions do make the Chicago area quite appealing to sellers; the lack of supply has led to slow but steady price increases, for both homes and condos. If you price your property right, demand is strong enough that your sale may be both quick and lucrative.

The Wild Card: Interest Rates and the Economy

One big factor spurring that nationwide housing recover was interest rates, which have been kept to historic lows for the past few years, allowing buyers to secure affordable mortgages.

By historical standards, mortgage rates – which sit just above 4% at the time of this writing – are still quite low, especially compared to when boomers first started buying homes in the 1980s and 90s. With that said, our current period of global instability suggests that rates may be volatile in the months ahead; Fed policymakers say we can expect up to three hikes this year, and, at this point, we don’t really know how a Trump economy might affect markets. Nor can we predict shockwaves like Brexit, which put rates near record lows back in 2016.

Other economic factors that may affect the market? Economic instability on the state level. As the Tribune reports, Chicago’s job growth in 2016 was just one-third of the national level, largely thanks to Illinois’ continued budget woes.

There are plenty of economic bright spots to focus on, though! As Bisnow notes, Chicago averaged a 2% economic growth rate over the past five to seven years, better than either New York or Washington, DC. And while job growth appears to be stagnating, Chicago is succeeding in drawing diverse, highly trained, and creative professionals to the city; according to Bisnow, 35% of workers over the age of 25 in Chicago hold an advanced degree, a higher percentage than the national average and the California average (eat it, Silicon Valley).

The Bright Spot: Millennials

Per the Tribune:

“About 42 percent of homebuyers in the Chicago area have been under age 35. Nationally, the under-35 group is expected to make up only 33 percent of the homebuyer pool next year. Baby boomers are expected to represent 30 percent of buyers nationwide.”

Millennials make up our country’s largest share of first-time homebuyers, and they have consistently shown significant interest in purchasing property in Chicago and around the Midwest.

While changing interest rates may hold back the purchasing power of this age group the most, there is also plenty of reason to believe that young people are the future of the Chicago marketplace: Chicago’s Ukrainian Village was named the hottest neighborhood in America in 2016, and we’re seeing steady, big-ticket development in West Town, Logan Square, Fulton Market, Bronzeville, and Lincoln Square, to name just a few ‘hoods that millennials are making their own.

So don’t count out Chicago; history has shown time and again that those who underestimate the Windy City do so at their own risk.

Want to talk Chicagoland real estate or estimate the market value of your home? Whether you’re looking to buy or sell, Real Group is here and ready to help! Drop us a line today to get the conversation started!

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