The Illinois housing market is expected to see higher sales volumes and prices associated with the season, but given high mortgage rates and low inventory, the market was less active this spring than last year.
According to Illinois Realtors, a real estate trade association, the Chicago metropolitan area and the state of Illinois had an early start to the spring housing market (February) and, as expected since the previous quarter, ended the summer market with month-over-month home sales and prices rising.
The median home sale price within the city limits was $355,000 in June, up from $335,000 and $340,000 in May and April, respectively, according to a survey of Illinois realtors. was $349,940 Chicago metropolitan area and $291,946 statewide in June. This is up from $330,000 and $275,000 respectively in May and $320,000 and $272,250 respectively in April.
Illinois Realtors said Chicago’s closed home sales were down about 25% in June from the same period last year, but continued to trend upwards from the previous month, bringing the total closed sales in June to 2,541, up from 2,445 in May. This trend continued throughout the greater Chicago area and statewide.
“The trend of higher prices and lower sales continued into June,” Daniel McMillen, dean of real estate at the University of Illinois at Chicago, said in a July news release. “Our forecasts show that prices will return to the expected seasonal decline within the next three months, while sales numbers will continue to decline.”
It’s usually the busiest season for home sales, and this spring was no different, although the market is much slower than in past spring seasons, given the high number of home sales. Homeowners remain reluctant to put their properties up for sale. This will require a switch from 2-3% mortgage rates to mortgage rates that are starting to rise again towards 7%. As a result, the local and national real estate markets continue to suffer from severe inventory shortages, leaving many would-be buyers stuck.
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Only 1% of U.S. homes nationwide changed ownership in the first half of this year, the lowest percentage in at least a decade, according to Redfin. Low inventory levels have led to a decline in transactions, coupled with high demand from buyers, driving home prices higher. The median U.S. home sale price was $426,056 in June, just below the all-time high of $432,397 set in May last year, according to Redfin data. In Chicago, the median home sale price in June was $360,000, down from the same month last year but up from the previous month.
Among the 50 largest markets, Chicago led the way with 2.1% home price growth in the May-June period, according to Zillow, a trend seen in more affordable metropolitan areas. Zillow’s data also shows that Chicago’s rent prices remain some of the fastest-growing areas in the country.
Typical monthly mortgage payments for homebuyers in the greater Chicago area who bought a home with a 5% down payment remained significantly higher this quarter compared to the same period last year, with monthly payments of $2,074, up 0.3% month-on-month and up 12% year-on-year, according to Zillow’s June data. If homebuyers paid a 20% down payment, monthly mortgage payments would drop to $1,581, according to Zillow, up about 13% from a year earlier and up 0.3% from last month as of June. The data is based on Zillow’s Chicago Home Value Index, with an assumed June purchase price of $305,698. Zillow’s month-over-month data shows an upward trend in monthly mortgage payments this quarter.
Orphe Divounguy, senior economist at Zillow, said local and national stock shortages were a “huge problem” and were already there before the pandemic. Zillow’s new listings in the Chicago metropolitan area fell 28.5% in June compared to the same period last year.
“As long as housing is in short supply, there will be competitive price pressure in the housing market and that’s the problem,” Divongay said. “And I think policymakers should support builders[by passing]zoning reforms that will allow more new construction.”
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Mortgage rates have trended upwards again since the end of April after falling for weeks. The 30-year fixed-rate mortgage average peaked at 6.79% on June 1 of the second quarter, but is still below the 7.08% it reached on November 10 last year, according to Freddie Mac data.
In the suburbs of Chicago, home sales fell sharply in the second quarter of 2023 compared to the same period last year, but are increasing month by month as inventory levels gradually recover, according to the Main Street Organization of Realtors, a membership organization of realtors in DuPage, Lake and the western and southern suburbs of Cook County. The number of listings in June increased by more than 40% over the past six months, according to data.
Prices for attached homes such as condos and townhomes soared in June compared to last year, up nearly 13%, according to the Real Estate Association, while single-family home prices remained stable throughout the second quarter compared to last spring. In the second quarter of this year, the price of single-family homes and single-family homes increased month-on-month.
Median sales prices for single-family homes and attached homes in the Chicago suburbs were $386,000 and $255,000, respectively, in June. The Mainstreet Organization of Realtors attributes soaring attached housing prices to a shortage of affordable housing in the region and across the country and demand from baby boomers.
“Buyers are back to throwing in very dramatic incentives,” said Debbie Polowitz, president of the Mainstreet Organization of Realtors board of directors. “We actually had a vendor who paid last year’s tax for the seller. Still they couldn’t win.”
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U.S. foreclosure activity continued to climb toward pre-pandemic levels in the first half of this year, according to state property data provider ATTOM. According to the same data, Illinois has the highest foreclosure rate in the nation with 13,619 homes, or 0.25% of homes, while Chicago is in the top 10 for metropolitan areas of 200,000 or more with 0.28% of homes.
“As in the first half of 2022, foreclosure activity across the country continued its upward trajectory and gradually approached pre-pandemic levels in the first half of 2023,” ATTOM CEO Rob Barber said in a news release. “Although overall foreclosure activity remains below historical standards, the notable surge in foreclosure initiations indicates that foreclosure activity may continue to increase in the years to come.”
Lawrence Yun, chief economist at the National Association of Realtors, said in a recent news release that July’s consumer price index report, which showed inflation slowing year-over-year, could bode well for the housing market going forward.
“Low inflation means low mortgage rates. So a slowdown in consumer prices could certainly boost home sales and boost home production in the coming months,” Yoon said.
ekane@chicagotribune.com
