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The Illinois housing market is seeing the anticipated higher sales volume and prices associated with the season, but this spring’s market was less hot compared with last year given that high mortgage rates and low inventory remain.
The spring housing market started early — in February — in the Chicago metro area and Illinois and, as expected after last quarter, wrapped up with month-over-month home sales and prices on the rise heading into the summer market, according to Illinois Realtors, a trade association for real estate agents.
Illinois Realtors found that as of June, the median sales price of a home in the city limits was $355,000, up from $335,000 and $340,000 in May and April, respectively. It was $349,940 for the Chicago metro area and $291,946 statewide in June. That’s up from $330,000 and $275,000, respectively, in May, and $320,000 and $272,250, respectively, in April.
Closed home sales in Chicago were down around 25% in June compared with the same time last year, but continued a month-to-month upward trend, with June’s closed sales totaling 2,541, above May’s 2,445, according to Illinois Realtors. These trends followed for the entire Chicago metro area and the state.
“The trend of rising prices and declining sales continued during June,” said Daniel McMillen, head of the department of real estate at the University of Illinois at Chicago, in a July news release. “Our forecasts indicate that prices will begin their expected seasonal decline over the next three months, while the number of sales continues to decline.”
Typically a busy season for home buying and selling, this spring proved the same, yet it is a much slower market compared with past spring seasons given that many homeowners remain reluctant to list their properties for sale, as that would require swapping their 2-3% mortgage rates for ones that have begun climbing toward 7% again. This is leaving local and national real estate markets still plagued with a severe inventory shortage, causing many want-to-be buyers to remain just that.
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Nationally, only 1% of U.S. homes have changed ownership during the first six months of this year, the lowest share in at least a decade, according to Redfin. With fewer transactions stemming from low inventory levels, coupled with high demand from buyers, home prices are being pushed up. Redfin data shows the median U.S. home sale price at $426,056 in June, slightly below its recorded all-time high of $432,397 in May of last year. In Chicago, the median home sale price was $360,000 in June, a price that is down year-over-year but up month-over-month.
Among the 50 biggest markets, Chicago was atop the pack in home value growth from May to June at 2.1%, a trend seen among more affordable metro areas, according to Zillow. Zillow data also shows that Chicago’s rent prices remain some of the fastest growing in the country.
Typical monthly mortgage payments in the Chicago metro area for homebuyers who purchased with a 5% down payment remain much higher this quarter year-over-year, with June data from Zillow showing a monthly payment of $2,074, a 0.3% month-over-month increase and a 12% year-over-year increase. If a homebuyer makes a 20% down payment, the monthly mortgage payment goes down to $1,581, a roughly 13% increase from a year ago in June and a 0.3% increase from last month, according to Zillow. The data is based on Zillow’s Home Value Index for Chicago, which has June’s assumed purchase price at $305,698. Zillow month-over-month data shows that monthly mortgage payments have been trending upward this quarter.
Orphe Divounguy, senior economist for Zillow, said the local and national inventory shortage is “a big deal,” a shortage that already existed prior to the pandemic. Zillow has June’s new listings in the Chicago metro area down 28.5% compared with the same time last year.
“As long as you have these shortages of homes, you are going to have competitive price pressures in the housing market, and that is an issue,” Divounguy said. “And I think policymakers ought to help builders (by passing) zoning reforms to allow for more new construction.”
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After some weeks of decline, the end of April started another upward trend in mortgage rates. Freddie Mac data shows the 30-year fixed-rate mortgage average peaking in the second quarter June 1 at 6.79%, still below the 7.08% reached on Nov. 10 of last year.
In the Chicago suburbs, sales of homes in the second quarter of 2023 were down significantly compared with the same period last year, but are up month-to-month, as inventory levels creep back up, according to Mainstreet Organization of Realtors, a membership association for Realtors in DuPage, Lake and western and southern suburban Cook County. June’s listings saw more than a 40% increase over the last six months, the data shows.
Prices for attached homes, such as condos and townhomes, in June skyrocketed compared with last year, seeing a nearly 13% rise, with prices for single-family homes remaining stable throughout the second quarter compared with last spring, according to the real estate association. Prices for both attached and detached homes are up month-to-month in the second quarter of this year.
Median sales prices for single-family and attached homes in the Chicago suburbs were $386,000 and $255,000, respectively, in June. Mainstreet Organization of Realtors attributes the higher prices for attached homes to the lack of affordable housing in the region and nation as a whole, as well as the demand from baby boomers.
“The buyers are going back to putting in really dramatic incentives,” said Debbie Pawlowicz, president for Mainstreet Organization of Realtors’ board of directors. “In fact, I had one that was willing to pay last year’s taxes for the seller. Even with that, they did not win out.”
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U.S. foreclosure activity continued to climb toward pre-pandemic levels in the first six months of this year, according to ATTOM, a national property data provider. The same data shows Illinois led the nation in foreclosure rates with 13,619, or 0.25% of its housing units, and Chicago was in the top 10 for metropolitan areas with a population of more than 200,000 at 0.28% of its housing units.
“Similar to the first half of 2022, foreclosure activity across the United States maintained its upward trajectory, gradually approaching pre-pandemic levels in the first half of 2023,” said Rob Barber, CEO of ATTOM, in a news release. “Although overall foreclosure activity remains below historical norms, the notable surge in foreclosure starts indicates that we may continue to see a rise in foreclosure activity in the coming years.”
Lawrence Yun, chief economist for the National Association of Realtors, said in a recent news release that July’s consumer price index report, which showed inflation slowing compared with last year, could mean positive signs for the housing market ahead.
“Low inflation means low mortgage rates. Therefore, decelerating consumer prices could steadily lift home sales and increase home production in a few months,” Yun said.