What a great start of the year for the Chicagoland real estate market! Despite the rise in interest rates, the mortgage rates have not increased significantly and remained very much affordable.
The number of closed transactions in 2017 is just slightly higher in comparison to the same period last year (25,149 vs 24,777), but the overall dollar volume of the closed transactions has increased significantly. This indicates that the average price increase for all closed transactions in Q1 is 5.95%. The average sales price in March alone was $277,693. Townhouses contributed least to the price increase with an average townhouse increase of 2.9% over last year. On the flipside, the highest price increase came from condos, where the average price increase was 10.9%.
|Sales||$ 6,670,773,667||$ 6,203,152,076||$ 5,665,979,909|
|Average Price||$ 265,250||$ 250,359||$ 239,424|
|Average Price Increase YoY||5.95%||4.57%|
Average market time for closed properties in Q1 2017 dropped to 103 days, from 111 in 2016. Townhouses and condos were selling as quickly as 83 days, while homes (defined as detached single dwellings), were selling in 113 days. Interesting note is that the average market time for larger homes (3000sf+) has increased from 175 days in Q1 2016 to 190 days in Q1 2017. Homes up to 2000sf, including condos and townhouses, appear to sell the quickest (89 days).
Month’s supply graph shows the number of months it would take to sell out the entire inventory of real estate currently on the market, at the current demand, without adding additional inventory. Supply continues to be the biggest issue and concern in the market currently and it is what is driving the increase in prices. The supply of real estate continued to shrink over the years and has reached a low of only 3.3 months. This is the lowest supply in the area in decades. The decrease came despite the increase in the number of new listings in Q1 of 2017. The number of new listings hitting the market has increased by 1.2%, but a strong demand continues to absorb any good listings that hit the market.
We expect that the demand for the real estate in Chicago will continue to be strong in the near to medium term. There is a limited amount of new construction producing the number of properties needed to fill the demand and the high rents are driving more and more millennials to transition into homeownership. It is expected that the interest rates will continue to rise this year at a slow to moderate rate. It is feasible that we will see a 30 year mortgage rate reach 5% by the end of the year. Although this may discourage some buyers from purchasing, it may be balanced by reluctance of the current owners to sell their homes. The reluctance will likely be the result of current homeowners hesitating to take on a higher interest rate on the new house (come on, who hasn’t locked in a 3.5% rate already??). We expect that the balance between buyers and sellers will, in the near term, remain similar as it is now, with sellers driving the market.