Home prices within the Chicago area housing market leveled off during 2018, and modest gains are predicted through 2019 and into 2020. This is largely the result of inventory growth within the local real estate market. The metro area’s population, meanwhile, has remained nearly flat over the past decade.
As a result of these and other housing-related trends, Chicago could become more of a buyer’s market in 2019 and 2020.
Inventory Growing in Chicago Real Estate Market
Chicago currently leads the way in terms of new home construction, among the nation’s largest metro areas. That’s according to a recent report by BuidFax.
In March, the Austin, Texas-based property data company reported that Chicago “experienced the highest increases in activity across maintenance and new construction [of homes].”
The graphic below shows which metro areas experienced the biggest increase in new home construction, from February 2018 to February 2019.
There is more evidence of growing inventory within the Chicago real estate market. According to the latest real estate industry reports, Chicago had about a 6-month supply of homes for sale as of February 2019. That was the highest level of supply for this market in well over a year.
By comparison, the nation as a whole had an average 4-month supply of homes during that same period. When compared to most other major metros across the country, the Chicago housing market currently has more inventory available.
This is mostly good news for home buyers, especially those who are planning to enter the market in 2019 or 2020. In fact, from an inventory standpoint, one could argue that Chicago is becoming more of a buyer’s market.
Home Price Forecast: Modest Gains Ahead?
A recent forecast predicted that Chicago’s housing market will see modest gains this year, when compared to the nation as a whole. In March 2019, Zillow’s real estate research team wrote:
“Chicago home values have gone up 0.7% over the past year and Zillow predicts they will rise 1.8% within the next year.”
The group issued a stronger forecast for the broader metro area, stating that home values across the Chicago-Naperville-Elgin metro area “have gone up 3.5% over the past year and Zillow predicts they will rise 2.7% within the next year.”
For comparison, they predicted a gain of 7.5% for the nation as a whole during that same 12-month period. These predictions were issued in March 2018 and extend into February/March 2019.
The median home price in Chicago was around $250,000, as of March 2019. The average price was slightly higher.
Chicago’s Population Remains Relatively Flat
Population growth (or the lack thereof) is another major factor affecting the Chicago real estate market in 2019. It’s also influencing the housing forecasts for 2020, most of which predict modest price gains over the coming months.
The population trend for the Chicago metro area could be best described as “flat.” There has been very little growth over the past decade or so, especially when compared to other major metros across the U.S.
According to the Census Bureau, the city’s population grew by just 0.8% from April 2010 to April 2017. The nation as a whole saw a 5.5% increase in population during that same seven-year period.
Population trends influence housing market conditions on the demand side, mostly. Steady growth tends to put upward pressure on home prices (with all other things being equal), while outmigration tends to have the opposite effect.
That’s a bit of an oversimplification. But the lack of population growth in the Chicago area is no doubt playing a role in the below-average home price gains (and forecasts) mentioned above.
Homes Are Taking Longer to Sell
If you’re planning to sell a home in the area, you might need to pack your patience. Recent data show that Chicago is one of the “slowest” housing markets among the major metros, when based on median “days on market.”
Median days on market is a metric that real estate analysts use to measure how quickly (or slowly) homes are selling in a particular area at a given time.
Last month, homes listed for sale in Chicago spent a median of roughly 90 days on the market before going under contract. That figure is indicative of a relatively slow housing market.
For comparison, the nation as a whole had a median “days on market” reading of around 55 days during that same period. Some of the most active real estate markets across the country had medians in the 20- or 30-day range.
Granted, this is just one metric. So it doesn’t tell the full story. But when viewed alongside all of the other data, it suggests that the Chicago real estate market is somewhat sluggish at present.
Other observers have noticed this trend as well. Last month, real estate reporter Dennis Rodkin from ChicagoBusiness.com pointed out that: “Chicago-area home sales fell sharply in January, digging a deeper hole after December’s biggest-in-seven-years drop, according to data released this morning.”
Is Now a Good Time to Buy?
- Home prices in Chicago have slowed, but they are expected to creep upward over the coming months. So new homeowners have a chance to build equity in their homes, going forward.
- In 2019, Chicago’s housing market inventory remains high. And new construction continues. Buyers have more homes to choose from, when compared to a lot of other metro areas across the country. This increases the chance that buyers can find a suitable property at the right price.
- Mortgage rates are very low right now. The average rate for a 30-year fixed-rate mortgage loan was down to 4.31% as of March 14, 2019. That was its lowest level in over a year. Chicago home buyers have a chance to lock in at historically low rates — and to keep that low rate for the life of the loan, if they choose a fixed mortgage.
- The real estate market in Chicago is starting to favor buyers more. Buyers today have more negotiating leverage, compared to a few years ago. Sellers are generally more motivated, due to the supply and demand situation.
Buying a home brings a lot of personal and financial considerations into play. But from a market perspective, one could argue that 2019 is a good time to buy in Chicago.
Disclaimer: This article includes forecasts and predictions for the Chicago real estate market through 2019 and into 2020. Those forward-looking projections were provided by third parties not associated with the publisher. Housing forecasts are the equivalent of an educated guess and should be treated as such.