After years of dramatic price increases in the country’s largest cities, major metro real estate markets are seeing the beginnings of what some are calling a correction — a shift that should bring overvalued properties back down from lofty heights. Sales are down in places like Manhattan, San Francisco, and Los Angeles, key regions where prices have soared since the recession.
But as coastal cities reel from the unbridled rebound, what's the outlook in Chicago?
According to a report from the Illinois Association of Realtors, sales in the Chicago metro region — Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry, and Will counties — are down by nearly three percent between August 2017 and August 2018. In the city itself, year-over-year sales are down by five percent, going from 2,791 sales in August 2017 to 2,649 sales in August 2018.
Despite the waning number of sales, the median price for a home in the metro area is still high, gaining more than two percent in the same period, the report indicates. For Chicago, the median sale price has increased by just 0.4 percent. The drop in total sales is a stark change from this year's hot spring market, during which high demand and low inventory drove sales and prices up to a high point.
Now, with sales down but prices staying strong, homeowners looking to sell should prepare for buyers with a little more leverage than before.
"Sellers need to act now but be a little more realistic about their pricing," says veteran broker Rafael Murillo. "In areas like Wicker Park, the West Loop, River North, and Lincoln Park, sellers shouldn’t be so ambitious about prices. Buyers are just not able or willing to pay high prices anymore."
Murillo also points out that slowly rising interest rates — plus fatigue from losing out on homes to competing offers — has led many buyers to rent while they wait out the market.
On the North Side — specifically in Lake View, Lincoln Park, Roscoe Village, Wicker Park, Bucktown, parts of West Town, and the Near North Side — there's been an increase in inventory over the last couple of years. And the number of North Side homes under contract for purchase this September is also down compared the same period in the last two years.
David Bailey, the managing broker for Baird & Warner’s Lincoln Park office, says that he judges a healthy market based on its supply of inventory: the number of homes on the market and the time it takes to sell them.
"A market that really favors the seller is one that has less than five to six months supply of inventory," he says. "And between 2015 and 2018, there were areas in Chicago that had only one to one and a half months' supply of homes."
Bailey says that metro Chicago will shift to a more balanced market before there's a full swing to a buyers' market. But even this gradual shift, he adds, is enough to worry many, considering the last decline in sales led to the national housing crash.
That said, Chicago's market is resilient, and changes are likely to be far less dramatic than in its coastal peers. "Buyers have more choice now than they’ve had in the last couple of years," Bailey says. "It’s a transition for sure, but it’s a pace that the market is ok with."