Eric Andersen, B.A., M.Div.
Owner/Designated Managing Broker, Andersen Realty Group
📲 Text/Call: 708.674.6725
📩 Email: eric@eandersenhomes.com
🌎 https://www.ericandersenhomes.com
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I have a number of awards and designations, including:
⭐️ Gold, Diamond, & Platinum Sales Award (Mainstreet Organization of REALTORS®)
⭐️ 20 under 40 (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®)
⭐️ Accredited Buyer’s Representative (ABR®)
Transcript:
Welcome to the roller coaster ride that is the real estate market in 2024! If you’re feeling like you’re on a tilt-a-whirl without a seatbelt, you’re not alone. I’m Eric with Andersen Realty Group, and I’m here to help keep the whiplash to minimum. Today, we’re focusing on one of the most significant and overlooked aspects of the market. There’s a significant imbalance right now between supply and demand, which has made for ultra-competitive market conditions.
The housing market right now is kind of like Black Friday, except without the low prices and great deals. We’ve all seen the extreme shoppers camped outside of the stores overnight to get the latest deal. Usually it’s some new piece of technology that’s being produced in limited supplies, so if you want it, your only options are to camp outside overnight or pay 10x over retail price on eBay. Companies know that scarcity creates demand and drives price. They could easily produce more supply, but that would kill the buzz and keep prices reasonable. By artificially reducing supply, it creates off-the-charts demand. Inventory is the heartbeat of the real estate market, except here, nobody’s artificially keeping supply low. Today’s limited supply is due to high interest rates, which have kept sellers from relocating except when necessary. Most homeowners either own their home outright or bought or refinanced when rates were much lower, and they’re reluctant to give that up for today’s premium rates. Rates are high today due to the Federal Reserve’s monetary policy. In their fight against inflation, raising interest rates and keeping them high is their weapon of choice. While nobody enjoys high rates, there is wisdom in their policy. Inflation is a problem, and while homeowners have enjoyed significant equity gains as a result, there is such a thing as unsustainable growth. If homes continued appreciating at COVID rates, that would be cancer to the real estate market. The downside of today’s higher rates is very limited inventory, and inventory is the lifeblood of the real estate market. More inventory gives buyers more choices, more negotiation leverage, and better deals. Low inventory, like what we have now, presents buyers with a number of challenges. The good news is markets are pricing in an interest rate cut after the Fed’s September meeting, and Bill McBride from Calculated Risk offered a note of cautious optimism about the supply of homes for sale when he said, “Inventory is increasing year-over-year, but is still well below pre-pandemic levels.” Supply is increasing, but it will take years for supply and demand to come back into balance.
Let’s take a look at the data. According to Realtor.com, active listings in April, 2024 reached 734,318—a 30.4% increase compared to last year. Inventory increases are happening both nationally and in every state. Looking at the western suburbs, here you can see what’s been happening with inventory levels in Naperville, Downers Grove, Hinsdale, and Burr Ridge since January, 2023. Naperville has experienced no increase in inventory, remaining completely flat at a staggeringly low 1.2 months supply. Each of the other three markets have higher inventory levels today than they did at the outset of 2023, but the increase in Burr Ridge and Downers Grove isn’t even close to the 30% national trends. Downers Grove and Burr Ridge both have about 7% more inventory than they did in January, 2023. Burr Ridge is more saturated at a 2.8 months supply, and Downers Grove is sitting at a very low 1.5 month supply. That’s barely an increase from the 1.4 months supply Downers Grove had a year and a half ago. So inventory technically has increased in Downers, but by the smallest possible amount. For reference, a balanced market, where there’s an equal amount of buyers and sellers, is one where there’s at least a 5 months supply of inventory. So even Burr Ridge, with a 2.8 months supply, is still a strong sellers’ market. Hinsdale has experienced the greatest increase of supply, a 33% increase since January, 2023, at a rate that outpaces the national average. And yet, Hinsdale is sitting on a mere 2.4 months supply, which is even less than Burr Ridge. So again, trends show inventory picking up, but a lot of buyers feel like they’ve slipped through the looking glass. And if you’ll pardon the mixed metaphor, we’re not in the balanced market of Kansas anymore.
Given the high interest rates, we might ask why sellers are returning to the market and more homes are popping up for sale, even if gradually. Lance Lambert from ResiClub suggests the lock-in effect is easing. It’s like being stuck to your favorite chair because you’re nervous a new one won’t be as comfortable. Initially, higher mortgage rates kept people from moving. But life goes on: jobs change, families grow, tenants realize they’re getting zero ROI on their rent payments, and some landlords realize they’re not cut out for the renal life. The glue is softening, even if slowly. Trading in a lower payment for a higher one is like trading in your comfy slippers for a pair of fancy dress shoes. It’s financially painful and a difficult psychological barrier to overcome.
An interesting wild card in our inventory discussion is new construction. Nationally, one in three homes on the market today is brand new, compared to an average of just 13% from 1983 to 2019. Builders have stepped up to fill the gap left by fewer existing homes for sale. Census data shows four consecutive years of record-setting, single-family housing developments. Builders are like knights in shining armor, riding in with hammers and blueprints to save the day.
As we move further into 2024, there’s a sense of cautious optimism. Danielle Hale from Realtor.com says, “Sellers are starting to warm up to the current environment.” It’s like a winter thaw—slow but steady. The ice is melting, and sellers are gradually coming back into the market. Over time, this trend could restore balance to the force of real estate, creating more favorable market conditions for buyers. If you’d like expert guidance for buying or selling a home this year or down the road, reach out anytime. And if you’re still watching, please remember to like this video, subscribe to my channel, and turn on notifications. I’m Eric with Andersen Realty Group, a family-owned brokerage where we treat our clients like family.