Chicago is Becoming a Buyer's Market

David Yates, Real Group Real Estate, Chicago RealtorFrom the Desk of David Yates, Real Group Real Estate Team, Baird & Warner

Since the beginning of 2013, the Chicago Real Estate market has been a feeding frenzy creating one of the strongest seller's markets in recent years. A combination of low interest rates and a lack of housing inventory created an ideal sellers market and a perfect storm of multiple offer situations and above list price offers. 

As a result, this helped the overall market reverse the negative price trend and turn it into a positive one. This upward market movement didn't come without a cost though. This feeding frenzy and multiple offer cycle put most buyer's in a tough spot. Many buyers found themselves submitting offers on properties only to find out that there were 3 other offers on that same unit. Therefore, on one hand it was great that this seller's market was increasing housing prices, but on the other hand it was causing a lot of buyer's to become frustrated and burned out.

Chicago Northside Housing Inventory in 2013 & 2014Fast forward to the end of the summer market in 2014.... The increase of housing prices which resulted from all of the multiple offer situations and lack of inventory, had now allowed many more sellers who were previously underwater, the ability to sell. This increase in the number of seller's has lead to a substantial increase in available inventory which in return, stabilizes the market. This combination of more available inventory and still relatively low interest rates would lead many market followers to indicate that we are in a "stable" market. 

We are going to explain to you why we feel otherwise and why we actually believe that we are in the beginning stages of reversing back to a buyer's market.

We believe that the market has a few other variables that people should keep in mind when determining where the current "state of the market" lies. We'll explore the following variables in more detail:

  • Consumer Confidence
  • Rising Student Debt
  • Rising Cost of Rent

Consumer Confidence

Consumer confidence has been all over the board for the last few years. With a volatile stock market, Government problems such as continually rising debt and no cross party agreements on key issues, along with outside threats of Ebola and terrorist groups such as ISIS, we now find ourselves focusing more so on these issues rather then the real estate market. With a lack of buyers who are focused and confident, this leads to less competition among buyers.

Rising Student Debt

Many students graduating from various Universities throughout the United States now find themselves with an uphill battle after graduation; paying off student loans. With young professionals spending available income on paying off these debts, instead of saving for a down payment, it has led to less or no purchasing power on the home buying side. This is another variable that is affecting the number of available buyers which in return leads to less competition.

Rising cost of rent

For those that are lucky enough to graduate without student debt are usually not lucky enough to avoid the ever increasing cost of rent in downtown Chicago. Because fewer and fewer people can afford to buy, this causes more people to rent. This increase in the number of renters leads to more competition and an increase in rent prices all over the board. This increase in rent prices disallows people to save that income for a future down payment. It's a catch 22 scenario that once again allows fewer people to buy, which leads to less competition amongst buyers.

In the end, we believe that it's an incredible time to be a buyer because of the lack of competition. Additionally, the increase in available inventory to choose from allows for a buyer's advantage. Lastly, with interest rates still in the low 4% range, money may never again be cheaper. This perfect storm of various factors has certainly indicated to us that we are in the beginning stages of moving back into a buyers market.

Real Group Real Estate

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