Although many new Chicago real estate developments were projected to be completed this year, the rise of construction prices has significantly affected their progress. Here is the current state of the Chicago real estate market for the first semester of 2019.
Redfin recently reported the first overall decrease in home prices in the country since 2012. Although there was a decrease of 0.1 percent compared to 2018, it’s actually the lowest price rate since February 2012. This slowdown is typified by the market status of cities like Chicago, Sacramento, Riverside, Tampa, and Dallas.
Additionally, Chicago has experienced a decrease of 9.9 percent in home sales, from 9,531 during 2018 to 8,586 this year.
What’s happening with new developments?
The rising costs of construction have negatively impacted the creation of new developments. However, other circumstances have also made the situation worse:
- The price of construction materials has increased by 8% compared to 2018.
- Rise of property taxes
- Proposals of progressive tax policies that decrease the incentives to buy, while increasing the apathy of buyers in the market.
Chicago experienced a decline in home building permits by more than a third during the first months of 2019. Several aspects of the city’s housing market are changing, especially the construction of single-family developments.
The north area of Chicago has been impacted by this change more than other parts of the city. The prices of land and construction costs make the home building process very expensive. As a result, construction companies are preferring to establish new developments on the Southside, as the land costs are considerably cheaper.
Chicago is experiencing a growth of inventory
Since sales have decreased, there has been a current house inventory with stable prices that are very attractive for homebuyers. The Chicago housing inventory reached a 6-month supply in February 2019, which was higher than the national supply of 4 months for the same period. It’s also the highest level of supply for this market in well over a year.
Compared to other metros around the country, the current Chicago housing market has more inventory available. In effect, this has reduced the market for new construction developments.
However, Chicago has made an effort to invest in maintenance and home construction. According to BuildFax, from February 2018 to February 2019, the city increased its development of new and existing construction by 60%.
The sales are dropping!
Chicago has experienced one of the largest decreases in home sales – suffering a decline of 13.3 percent. This situation also affected the median sales price by a decrease of 4.6 percent, going from $301,500 last year to $287,500 in March 2019.
This indicates that Chicago will become a buyer’s market in the coming years. Yet, Chicago home values will have a low point and modestly rise by 1.8% during the next year.
The lack of population growth in Chicago is another factor that impacted the housing market for 2019. The population trend in the city is flat with only very little growth during the last decade: 0.8 percent from April 2010 to April 2017. Ultimately, this doesn’t provide a strong incentive for developers to invest in the city.
Steady population growth puts upward pressure on home prices, while a lack of it produces the opposite result. This indicator plays an important role in all of the below-average home price gains and forecasts of Chicago real estate.
If you are considering selling a property in Chicago, we recommend that you wait it out. It’s currently one of the slowest markets with an average of 90-days on the market before going under contract.
Is it the moment for buyers to enter the game?
Now, if you are considering buying a property in Chicago, take these aspects into account:
- The prices of Chicago listings have slowed but forecasters predict that it will rise in the following years. This is the moment to buy!
- Since the city has a wide property inventory, you will have several options to choose from, compared to other cities. It’ll be easier to find your favorite home at a good price.
- It’s a great time to acquire a mortgage as the rates are very low. The average for a 30-year loan has decreased to 4.31%, which is the lowest level in over a year. If you choose a fixed mortgage, it means that you could keep this low rate for the entire duration of the loan.