Chicago Third Quarter Report – Luxury Sales, Prices Rise
Written by Breck Hapner
For a while now, we have been reading various disparaging reports about the luxury real estate market. The general outlook has been bleak. Because of too much available high-end inventory, seller after seller has succumbed to lowering prices, often painfully, taking losses amounting to hundreds of thousands of dollars — sometimes more.
Why? Because luxury buyers were sick of the previous real estate equity rollercoaster caused by the recession. While many multi-million dollar estates across the nation sat unwanted, buyers were flocking to less expensive homes caught in the inventory noose for economic security.
Ergo — There weren’t many of these homes available, and their pricing was high, and therefore somewhat more stable as a long-term investment. The demand would always be present, and money wasn’t going to be lost if the market began doing backflips again.
The luxury ground had become quicksand, and buyers navigated around it, seeking firmer investments.
Well, that was then.
Surprising (or maybe inevitable) things do happen. The third quarter 2017 has shown that across the nation and in the Windy City, the inventory shortage that constricted the populist market has finally coiled around the luxury segment, causing upscale sales and prices to rise significantly.
What does this mean? Buyers are actually seeking out the top 5 percent most expensive homes in each city due to the declining inventory, despite the soaring prices — meaning the property should retain its value in the market, according to a recently released Redfin luxury market report.
Nationally in the third quarter, luxury home prices grew 4.9 percent, selling at an average of $1.71 million, while prices rose due to the supply shortage. The number of homes for sale priced at $5 million and higher shrank 19 percent, sending a clear, ringing message to prospective luxury buyers.
Agents were also in high spirits after learning luxury homes were being gobbled at a quicker pace, on the plate 70 days during the third quarter 2017 versus 74 days in the third quarter 2016, according to the report.
“There is still strong buyer demand for high-end homes. Despite declining inventory, luxury sales soared in the third quarter,” Redfin chief economist Nela Richardson said. “Sales of homes priced at or above $1 million were up 11 percent from a year ago, while sales of homes priced at or above $5 million were up almost as much at 10 percent.”
And this brings us to Chicago.
What can we expect?
True to the evidence, the Chicago luxury market is performing as prognosticated by the online real estate information service, Attom.
According to the report, which was released before the third quarter analysis, the Chicago luxury housing market was poised for tremendous growth due to a higher number of mortgage applications and preapprovals.
Attom’s measurement of the existing home owners applying showed Chicago possessed a pre-mover index of 241, 141 higher than the nationwide index of 100, meaning Chicago-area homeowners were twice as likely to purchase a home than homeowners nationwide.
“We expect the Chicago area to one of the hottest in the nation in the third quarter,” Attom Senior Vice President Darren Blomquist said.
How very right he was.
And this is now.
So we’ve seen the national picture metrics, and we’ve had a taste of Chicago’s future via the Attom analysis. To sink the last statistic in the conclusion, the RE/MAX Luxury Report on Metro Chicago Real Estate registered a gain in luxury home sales activity during the third quarter of 2017.
Chicago luxury sales in the third quarter were 1.8 percent higher than during the same period last year, and 10 percent higher overall, year-over-year, underscoring the fact of a “fairly stable luxury market,” according to RE/MAX marketing communications manager Chris Calomino.
The Chicago market is strong because sales are growing, and available homes on the market are selling fast. Third quarter sales registered a 15.6 percent increase over the same period in in 2106. The sunnier picture is luring buyers into pre-mortgages due to low inventory levels, signifying continued market stability and maybe even larger asset growth. Buyers once on the sidelines are feeling better about investing in luxury properties.
In Chicago, this is certainly being felt in Lincoln Park, which led the city in sales of attached and detached homes, according to the RE/MAX third quarter report, culled from Midwest Real Estate Data.
From July through September, 34 attached homes sold for $1 million or more, a 79 percent increase from the same period a year ago, with a median price of $1.35 million, up 15 percent. Lincoln park won the distinction of reclaiming the top detached luxury home area after relieving North City of the prize, selling 45 estates for $1 million or more, up 7.1 percent from the same period last year, with a media price of $1.66 million, also up 5.4 percent.
North Center registered a 12.9 percent increase from a year ago with 35 houses sold for $1 million or more, and other upscale million dollar or more Chicago neighborhood sales included Lakeview, with 32 sales, and West Town with 28. Other regions possessing homes selling for $1 million or more included Cook, DuPage, Kane, Kendall, Lake, McHenry, and Will counties.
Who would’ve thought?
Definitely not the naysaying analysts writing about the Chicago market earlier this year.
"Sellers are definitely reaping the benefits of a luxury market which in many areas continues to be dogged by tight inventories," said Illinois Realtors President Matt Difanis, co-owner of RE/MAX Realty Associates in Champaign.
"Although the summer selling season is drawing to a close, interest on the part of many buyers does not seem to be waning as evidenced by the short time on average it is taking to complete a Chicago luxury home purchase,” Difanis said.
So, although unanticipated, the metrics speak for themselves, and if you are ready to take the proverbial palatial plunge, now may be the time.
The current luxury market is exhibiting "a healthy sign of upward mobility available to current homeowners and prospective homeowners" in the Chicago area, and "something many of the red-hot coastal high-end markets are missing in this housing boom," Attom’s VP Blomquist said.
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