The housing market in Chicago has taken a dramatic turn from where it
was a couple years ago. Condos and Single Family Homes in Chicago's
hottest neighborhoods are moving fast in all price ranges. Where is the
sweet spot? The hottest section of the market is currently
between$300,000 and $500,000 but we are also seeing higher end
properties sell in only a matter of days.
Over the weekend I put a
2/2 loft under contract. My clients had to pay more than $7,000 above
list price. We put an offer in after the property was only on the market
for a day. Our goal was to get the property under contract by the
weekend. We were up against one other buyer but we knew if it dragged
into the weekend we could easily be up against multiple buyers. This
property was in Bucktown.
Another property down the street in
Bucktown had 22 showings in a 2 hour period last weekend. My buyers
looked at this property on Sunday (the first day of showings for this
new listing). On Wednesday they e-mailed me saying they wanted to make
an offer. Unfortunately it already sold. Of the 22 showings the property
received 3 offers from buyers. More than likely it sold for above list
price as well.
A colleague of mine was showing a home in the
$600,000 to $700,000 range in Old Town. She was one of 6 agents with
buyers submitting offers. Her clients went $30,000 above list
price....guess what? They didn't get it. While we don't know the exact
sale price it has been eluded that it likely sold for almost $50,000
The most obvious question people may have is "What the
h*ll is going on?!" Is this sustainable? Well here are my thoughts on
Currently in Chicago, in the more desirable
neighborhoods, we have an inventory problem. Inventory has decreased to
all time lows and buyer demand has increased dramatically. Lets start
with demand, however. Why has demand increased?
The Hangover Effect: After
2008 everyone had a hangover in the real estate market. Just like in
real life, when you wake up with a hangover the last thing you want is
another shot of tequila that you had the night before. This hangover
lasted in the market for several years. People simply wanted nothing to
do with the market. Granted, many people did not have the finances to
buy and many were worried about their jobs and lending (the bars) were
not very open.
Now the "hangover effect" has mostly lifted. The
economy is rebounding and consumer confidence in the housing market is
back. During this hangover period many people rented and saved cash.
Now, as they have seen the market stabilize we are seeing a rush of
buyers into the market. With increased confidence we are also seeing
record low interest rates and property values are back to normalized
It is important to note that in distressed areas most of
the demand is made up of investors. However, in prime "Class A" areas
the majority of demand are first time, Second time and second home
buyers who plan to use the property.
Where is all the supply? There
are a couple reasons for low supply. First, we haven't seen any new
construction for condos or single family homes in almost 5 years. Only
now is construction starting to pick up again and it is doing so at a
The largest reason supply is low is due to many
homeowners still underwater on their values. Many "would be" sellers
simply cannot afford to sell their homes. Many homeowners are still
refinancing using HARP and similar programs and some are still
completing mortgage modifications. These homeowners are not selling
Who is selling now?Â I've noticed
that many current sellers were buyers back in the early 2000's before
prices ran up. Some were buyers at the peak in 06 but put more than 5%
down so they can at least walk away from the sale with some cash.
is most interesting are tenant occupied properties selling. Many of the
condos I have been showing in Lakeview, Lincoln Park, Near North, etc.
have tenants in them. These are not standard "investment" condos for the
owners but instead were their primary residences they could not sell
back in 08, 09 so they rented them. They are now able to unload them for
what they feel is a "decent" price.
What does the future hold? The
inability for developers to obtain financing on large buildings is a
good thing. This will help supply remain low. Interest rates will likely
stay low for a while. The FED is talking about slowing or limiting
their purchase of MBS however they will likely continue for a short
while. The MBS market is in recovery mode especially with treasuries at
record prices (low yields).
At the end of the day interest rates
should remain low through 2015 and supply will likely remain low. This
will start to push up pricing in your better markets which will slowly
allow those who could not sell before to start to sell. The hope is that
supply will be introduced slowly into the market.
Paul Blackburn is an Illinois licensed Realtor and Broker with @ Properties in Chicago. He can always be reached via e-mail at Paul@PKBlackburn.comÂ For more information on home buying specifically in Chicago please visit www.BuyingInChicago.com