Well, it is that time of year again. The season is changing which means it is time for me to send out my quarterly letter to my past and present clients. Here is what is being placed in the mail this weekend.
Chicago Real Estate Market Update
Fall is here. How will the real estate market react?
The spring and summer real estate market in Chicago was very interesting. Inventory levels were at record lows and buyers were coming out of the woodwork. Multiple offers became the new norm. Listings that sat on the market for more than a couple weeks were assumed to have something wrong with them. It felt like 2006 all over again!
While the market rebounded nicely this summer it was also nice to see that hysteria did not take hold. While many places sold for above list price with multiple offers there were still many places sitting on the market for months. Listings that have poor floor plans or were simply not in “ideal locations” still were not selling. While demand did pick up with great force, it did so with caution and common sense, something that was greatly lacking during the real estate boom. The new question is: Will this market continue as we head into the fall and winter season?
I believe the market will remain strong through the fall and winter mainly because inventory levels will remain low. While prices have increased year over year they have not increased enough for many people who purchased in 06 and 07 (the peak of the market) to cover their losses. While demand will remain high, I do believe we will see less multiple offers and less units selling at or above list price this fall and upcoming winter. There were many buyers who had been sitting on the sidelines for a while and many decided to take the plunge this past spring and summer. This surge of buyers in the market, coupled with rapidly depleting inventory, is what fueled the crazy buying frenzy we saw. I do believe strong demand will continue, just at a slower pace. This in turn should make a healthy market for both buyers and sellers as we enter 2014.
What is going on with interest rates?
Just in case you don’t follow the bond market much, interest rates have increased significantly over the past few months. Rates on a 30yr fixed went from the 3.7% range up to 4.8% and even higher. What caused this? As you may remember the fed starting pumping more money into the system….again! This time it was called QE3. The fed did this by purchasing X amount of Mortgage Backed Securities each month which in turn pushed down interest rates to the crazy lows of 3.7% and 3.6% for a 30yr fixed. A few months ago the fed started running its mouth and said it may “taper” their bond buying; in other words buy less, if the economy continued to improve. Naturally the bond market freaked out and almost instantaneously started trading as if bond buying by the Fed was already screeching to a halt. The Good News? The good news is the fed recently announced that they will continue their bond purchasing and will not “taper” for the time being. Long story short interest rates on 30yr fixed mortgages should start to hover around 4.25 to 4.5. At the time of me typing this letter rates are averaging around 4.37% APR for a 30yr fixed. Hopefully these rates will last into 2014.
What is going on with the rental market?
The rental market is still strong but I believe we have definitely hit a price ceiling. New inventory is starting to hit the market downtown and inventory levels will continue to increase through 2014 and even 2015 as new projects are announced on a weekly basis. I’ve personally noticed that market times for rentals have started to increase even in some of the most desirable neighborhoods and buildings. This does not yet mean we will see rents falling however, it does mean is we are at the peak of the rental hysteria that we have seen since 2011.
Is it a good time to buy or sell?
In typical realtor fashion I will say it is a good time to do both! What is most important, however, is to understand your goals and your time constraints. If you are a buyer in today’s market you need to understand that inventory is low. Therefore, you will likely not be able to find that perfect place in only 30days so be sure to budget plenty of time to find the right place. How much time? I would say budget at least 3 months plus 30 to 45 days to close.
If you are a seller now is a good time to test the market since inventory levels are low. Prices have increased year over year and should continue to do so. Keep in mind pricing has not sky rocketed, however, most areas of the city have weeded themselves of the pesky low priced short sales and foreclosures that were killing values and lender appraisals. While buyers are out in the market in full force they still do not want to over pay. Pricing your listing 20% above your competitor won’t get you any more money. If anything, it will only hurt you.
I hope you enjoyed the summer and enjoy the fall weather that is slowly falling upon us! As always if there is ever anything I can do for you, your friends, or your family please do not hesitate to reach out or pass along my name and number.
Paul Blackburn is an Illinois Licensed Realtor and Broker with @ Properties in Chicago. He can always be reached on his cell or via e-mail at Paul@PKBlackburn.com Also visit http://www.BuyingInChicago.com for information if you are a first time buyer in Chicago!