Is the housing market finally starting to cool off? All indicators say it is. In this video, I will share the data and some of my recent personal experience working with buyers and sellers to give you a better idea of what the real estate market in Burr Ridge and the Western suburbs of Chicago is like right now.
Eric Andersen, B.A., M.Div.
Owner/Designated Managing Broker, Eric Andersen Homes
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📩 Email: eric@eandersenhomes.com
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⭐️ Platinum 2021 Top 1% Sales Award (Mainstreet Organization of REALTORS®)
⭐️ Top 3 REALTOR® in Brookfield, IL (2021)
⭐️ 20 under 40, class of 2021 (Mainstreet Organization of REALTORS®)
⭐️ Gold 2020 Top 3% Sales Award (Mainstreet Organization of REALTORS®)
⭐️ Endorsed Local Provider (RamseyTrusted)
⭐️ Best of Zillow
⭐️ Pricing Strategy Advisor (National Association of REALTORS®)
⭐️ Certified Staging Consultant (Mainstreet Organization of REALTORS®)
Transcript:
It’s no secret that the housing market has been completely bonkers since the pandemic began. The good news is there are early signs that the market’s cooling down, which is excellent, because the market can’t keep growing at the rate it has been and buyers are about to jump off a bridge. And while this might sound like bad news for sellers, a stable and healthy market is in the the best long-term interest of homeowners. I’m Eric with Eric Andersen Homes, and in this video, we’re going to look at what the data shows about the current market. And on top of the data, I’ll share a little bit of my own recent experience. Over the past week, I’ve shown a handful of homes that have been on the market for thirty-plus days. The last time I can remember doing that was well before COVID. Since the pandemic, it seems like everything has been selling the first weekend. If you blink, it’s gone. I’ve also seen more price reductions lately. Buyer demand isn’t quite as ridiculous as it has been. It’s still a sellers’ market, but we’re seeing early signs of cooling. Now, when we talk about a sellers’ market or a buyer’s market, we’re talking about inventory levels. When the supply is greater than 6 months’, we call that a buyers’ market. A buyer’s market is one where the market is saturated with listings and supply is higher than demand. That favors the buyer. When inventory levels are below 6 months, that’s a sellers’ market. Demand is greater than supply, and that keeps prices up and competition high. Here you can see that current supply levels in Burr Ridge are at 3.1 months. Hinsdale is at 2.2, Downers Grove is at 1.4, and Brookfield is at 1.1. The other thing to note here is that inventory was much higher in 2019 and early on in 2020, but it has dropped sharply since then. In Burr Ridge, inventory decreased by seventy percent since before the pandemic, going from a ten months’ supply down to three. And at three months’ supply, it’s still clearly a sellers’ market. But as of May 13, mortgage applications were down twelve percent from the previous week, or fifteen percent from a year ago. As demand begins to decrease, this has forced more and more sellers to reduce their asking price. Daryl Fairweather, chief economist at Redfin, said, “Sellers are finally starting to drop their prices at rates that we haven’t seen since before the pandemic. Home sellers are now rushing to find a buyer before demand gets any weaker.” Still, we shouldn’t overstate the case. The number of homes that had price reductions only increased one point three percent in April, or almost seven percent year over year. As of this recording, there were twenty homes with “price change” status in Burr Ridge, Hinsdale, Downers Grove, & Brookfield, and many of these price changes were significant, many falling into the twenty-five to fifty-thousand range. One culprit for the slowing down of the market is rising interest rates. Last week, rates were sitting at five point two five percent, an increase of over two percent since the beginning of the year. This has had a big impact on monthly payments. The median mortgage payment at the beginning of the year was $1,700. Now, it’s almost $2,500. Fannie Mae projects that home sales will be around ten percent this year, which is a one percent decrease from last year’s eleven percent. David Person, economist with Nationwide Mutual, said, “The housing market is cooling and we’re likely past the peak in home sales, especially for existing homes. House price gains have been unsustainably rapid—even faster than during the housing boom of 2002-2006. Importantly, this won’t be a repeat of the housing bust of 2008-2010. The people who bought homes over the past decade can actually afford the mortgages they got.” A study by Redfin showed that bidding wars are slowing down, too. In April, sixty-one percent of listings had multiple offers, down from sixty-three percent in March and sixty-seven percent from one year ago. In April, seventy-six percent of people surveyed in the Home Purchase Sentiment Index said it’s a bad time to buy a home. This is the lowest level since May, 2020. Only nineteen percent said they thought it’s a good time to buy. The reason you might consider buying now is that home values will continue to appreciate—albeit at more sustainable levels—and interest rates are expected to continually rise through the summer. This means that waiting to buy will cost you, as higher home values and rising interest rates will only make homes more expensive. The benefit of waiting is the competition level for homes should be lower. Fewer homes are getting multiple offers and selling above asking price, and some are even reducing their price. A year ago, “asking price” was more like “opening bid.” But still, waiting to purchase will almost certainly cost you. You may have less competition and get a home for asking price or below, but future asking prices and interest rates will most likely be higher. Another benefit of waiting is for those who would like to buy but also have a home to sell and their purchase is contingent on their sale. Getting a home sale contingency accepted over the past two years has been next to impossible. But if there’s less competition, sellers may be more willing to take the risk of accepting a sale contingency, which eases the pressure for those having to buy and sell at the same time. A few final points. The National Association of Realtors just reported that new contract signings are at their slowest pace in nearly a decade. Pending sales fell three point nine percent in April, which is the sixth consecutive month of decline. New construction sales dropped by sixteen point six percent in April, which is a two-year low. So to summarize, current market conditions are still decidedly in favor of the seller, but we’re also starting to see a few promising signs of the market starting to balance out. If you’re thinking of buying and/or selling a home or would like some more insight into the current market in Burr Ridge, Downers Grove, or the Western suburbs of Chicago, reach out to me anytime. I’m Eric with Eric Andersen Homes, here to remove the headache from real estate and provide expert guidance for your next purchase or sale.