The Chicago real estate market saw years of exponential price growth and strong home buyer demand – until now. Home prices are still climbing moderately, but with fewer sales and longer market times, it’s evident that buyers are pulling back. ️
Chicago’s median home price reached $289,250 in August, up 3.3% since last year. The median price for Chicago condos, up 4.2% annually, grew to $307,250.
However, homes in Chicago aren’t selling at the same pace compared to the last few years. Last month, overall residential closed sales fell 7.8% and the condo market felt a similar dip of 5.5% in August.
The median market time from list-to-contract was 35 days in August compared to 30 days in July and 30 days in August of 2018. Chicago condos took even longer to sell at a median 37 days compared to 32 days in July and 28 days a year ago.
While sales are slowing, Chicago’s housing market is not entering the total calamity some are predicting. First, we’ll check out the hyperlocal real estate markets in some of Chicago’s most in-demand neighborhoods near the city center.
Residential sales activity by neighborhood
Condo sales activity by neighborhood
Is the Chicago real estate market headed for a recession?
Many first-time buyers are under the impression that an impending economic recession will not only slow home price growth, but lower sales prices dramatically.
The Great Recession was an outlier in terms of recessions throughout history. When a recession is directly caused by a housing market collapse, as it was in 2008, home prices naturally fall in response. As Curbed points out, home prices rise during most economic recessions because housing is a necessary commodity.
The subprime mortgage crisis and loose lending requirements directly caused the 2008 recession. We now have tighter lending standards.
Currently, Chicago is still in a housing shortage supply. A six months’ supply of housing is considered “normal” – Chicago has a 4.6 months’ supply. Looking closer, the West Loop has a 4 months’ supply, West Town has a 3.5 months’ supply and Bucktown/Logan Square has a 2.3 months’ supply. Low supply and high (or even moderate) demand results in a good market for sellers and a tight market for buyers. Here’s a quick look at Chicago’s housing supply trends from 2008 until now.
Why home sales in Chicago are slowing
If not recession-based, why are Chicago home sales slowing? It could be the result of a self-fulfilling prophecy. After all, for the most part, consumer trends dictate economic activity, particularly as they relate to the real estate market. Essentially, there’s a good chance home sales are dwindling in Chicago now because buyers are “holding out” with the assumption that prices will fall drastically in 2020 or 2021. Fewer buyers = fewer sales and a softer market. But, if droves of millennials buy their first homes in 2020 or 2021, sales increase and home prices rise.
Many US real estate markets are seeing home prices drop – Chicago is not one of them. Overinflated markets are normalizing, not crashing. Home prices in Chicago haven’t necessarily fallen, but the slight slowdown has resulted in fewer multiple offers and better negotiating power on the buyer’s end. Factor in low interest rates, and Chicago home buyers today are in a better financial position now than they have been in years.