Real Estate Market Update October 2021 | Burr Ridge IL Housing Market
Wondering how the real estate market is doing? In this video, we consider national trends and look at the Burr Ridge IL housing market, in particular.
Eric Andersen, B.A., M.Div.
Owner/Designated Managing Broker, Eric Andersen Homes
📲 Text/Call: 708.674.6725
📩 Email: eric@eandersenhomes.com
🌎 www.ericandersenhomes.com
Hi everyone, welcome back to my channel. Today, we’re going to get you up to speed about what’s going on in real estate as of October, 2021. We’ll start by looking at some national trends and then turn our attention specifically to the Burr Ridge housing market. I’m Eric, owner and designated managing broker at Eric Andersen Homes, and first up, let’s take a look at pending home sales. This chart goes back about 10 years, and you can see that where we are today is higher than average, but not quite as high as it was through most of 2020. The market really reached a fever pitch last year, and the number of homes under contract were as high as they have been in recent history. The current volume of pending sales still indicates demand, though the pace isn’t quite as breakneck as it has been. One other thing I’d point out is that dashed line, which shows a healthy number of pending sales. You can see it dropped off sharply at the outset of the pandemic, which makes sense because the whole world basically shut down.But real estate has, at least in Illinois, always been considered an essential business, as it has through most of the country, and so as soon as we hit the first round of lockdowns, real estate went crazy. Zillow fever hit an all-time high as people began to look for a quarantine upgrade, the stimulus money started rolling in, and interest rates went down, which created a very active market. I opened my brokerage in March of 2020, and I had never been busier. In 2020, my business increased by 36% as compared to 2019, and most agents I know have said similar things.But back to the chart, you can see there is a dip in pending home sales, and things are starting to cool off, at least a little. Real estate tech firm OJO Labs put it this way:“The U.S. housing market continues to be ultra-competitive even as new COVID cases surge, but new data shows the level of competition – ensuing price increases – may be cooling off just slightly. Data shows that 49.6% of homes sold for more than the initial list price in July – far ahead of the number reported in July 2020, when 26.8% of homes were sold above initial asking price, but below June’s total when 50.4% of homes sold for more than initially listed.So while July had fewer homes going for over asking price than in June, it was a decrease of less than one percent, and almost half of all homes were still going for over asking price. So the data is still very much favorable to sellers, though the trend is downward.Buyer demand, of course, is what makes conditions favorable to sellers, so let’s take a look at what kind of showing traffic we’ve been seeing.Showing traffic today, like pending sales, is much higher today than average. But you can see there has been a steady decrease in showing traffic from April through July. It’s still strong, but you can see the downward trend. Turning to the inventory supply, you can see the past five years’ trends, with each year being represented by a different color. Note, all of the colors except the green show a drop in inventory as you get into the fall markets. 2021, represented by the thick green line, has shown an upward trend. Sellers have finally caught on to how strong the market has been, and so more are trying to cash in.And while the market is still very much strong for sellers, they’re coming a little late to the party. If inventory continues to increase while showing traffic is going in the opposite direction, that will create for more balanced market conditions. Now, that doesn’t mean the market is saturated with homes, prices are going to fall off the cliff and sellers will be giving their homes away. In fact, more inventory is desperately needed. Many buyers have found themselves on the losing side of competitive, multiple-offer situations, often more than once, and even with some very strong offers. During the peak, I had a few clients write offers as-is, no inspection, 5% or more over asking, waiving the appraisal gap if needed, and still not get the home.This is why. You can see we’re still below a 3 months’ supply of inventory, which is considerably lower than where we’ve been over the past 10 years. Inventory matters because it’s a key part of supply and demand, which drives pricing and economics. Inventory is the supply.The National Association of Realtors has provided this helpful definition and analysis: “Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.”The pandemic has provided a crystal-clear illustration of this. Inventory plummeted, and prices shot up. Inventory is now increasing, and home values aren’t as red-hot as they were, though again, we should be careful not to overstate this. Home values are still rising and many homes are still going for over asking price. But not quite as many, and values are rising a little more slowly than they were. Which is a good thing, because what we saw through most of 2020 isn’t sustainable. Normal appreciation is closer to 2 or 3 percent, not 15%-20%, which is what we were seeing. Most forecasts show an average appreciation of five and a half percent for 2022, which is higher than normal, but not absurd or unsustainable. Interestingly, NAR, the National Association of Realtors, has appreciation the lowest of the five, at only 3.1%. You might expect them to be the most bullish on prices. At the other extreme, the Mortgage Bankers’ Association has projected appreciation at 8.4%. But even that is well below what we saw last year, when we were in the fifteen to twenty percent range, nearly double what they have for 2022. It’s also worth pointing out that nobody is showing negative appreciation (or depreciation). The market is still strong and growing, it’s just doing so at a more normal, sustainable rate. The last thing I’d like for us to consider before we turn to the Burr Ridge real estate market is what’s going on with interest rates, as that has a big impact on home values and affordability, too. Here, you can see what rates have looked like each decade since the 1970s. The 2010s anchored us in the four percent range on the low end, and the 1980s had us in the double-digits, with an average of almost thirteen percent.And here, you can see that our current rates are still excellent, near historical lows, which is one of the best reasons to purchase, even in a competitive market. What you save in interest over the life of a loan will more than make up for any premium you might pay on the purchase. Turning our attention to Burr Ridge, you can see here that six single-family homes have sold over the past month. Half were north of I-55 and half were south. A few important stats to note: they went for an average sale price of $940,483, they were on the market for an average of 29 days, and sold for 96.1% of asking price, on average.When you look at Burr Ridge over the past year, you can see that the average sale price has risen by 25%, though it is starting to level off over the past month or two. Turning to active and pending listings, there are currently thirty total, with seven under contract and twenty three active. The average asking price of the active listings is over $1.2M, and the average asking price of the pending listings is just above $880,000. While that seems like a big gap, there are a disproportionately high number of luxury homes on the market in Burr Ridge right now. Over half are asking over $1M, and two are asking nearly $3M. By contrast, only one of the pending homes was asking over $1M. Market time remains low, with the pending listings going under contract in an average of only nine days, which is significantly lower than the average over the last month, which was at 29 days. Overall, then, the market in Burr Ridge is fairly consistent with the national trends. Some of the metrics have improved for sellers, like lower market time, but others have leveled off, like average sale price. The other thing to note is absorption rate. We saw six homes sold in September and seven are currently under contract, so we can reasonably expect 6.5 homes per month to sell in Burr Ridge. There are currently 23 active listings, so at that pace, it would take an average of 3.5 months to sell off all of the current inventory. This is known as the absorption rate, or how quickly it will take the market to absorb the existing inventory. When the rate is below 6, it’s considered a sellers’ market. Above 6 favors the buyer. So at 3.5, you can see Burr Ridge is still a market that is favorable to sellers from a supply/demand perspective, and market time and sale price trends reflect that, too. Well, that does it for our October, 2022 market update. If you’re looking to relocate to Chicago or need help with a purchase or sale in Burr Ridge or the western suburbs, reach out 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.