We’re writing this in January 2020, the start of a new year — and a new decade. So, what do the twelve months ahead hold for Chicago’s real estate market? If you’re looking to buy, sell, or develop real estate in the year to come, this is probably a question you’ve asked more than a few times.
Unfortunately, it’s not necessarily a question that is easy to answer as we look to the future. Chicago’s real estate market is a dynamic and ever-changing beast, which has a tendency to stand out from big shifts and trends on the national level — for better and for worse. In many ways, the housing market for Chicago and the surrounding suburbs is also quite unique and singular even when compared to statewide trends in Illinois. It’s also crucial to remember that Chicago is often described as a city of neighborhoods, where consumer behaviors and market conditions can change on a block-by-block basis.
There are also some interesting stories that are making the year ahead somewhat difficult to predict for real estate prognosticators (and interested consumers). For one thing, 2020 is an election year; historically, this can have a major impact on the housing market nationwide, as shoppers, investors, real estate professionals, and government agencies all adopt a cautious “wait and see” approach. Meanwhile, the American economy has been turbulent in recent years, seeing enormous ups and downs in equal measure. While many key economic indicators and consumer sentiment in the country are largely positive, global instability and unclear international economic policies are making it difficult to lock in an economic forecast for the months ahead. Finally, experts are predicting an enormous generational swing in real estate in the coming years — and it remains to be seen how millennials will shape the housing market in their image as they become an even more dominant force in the marketplace.
While many things are up in the air at the start of this new decade, real estate and economic experts have also issued some important predictions worth keeping an eye on as we move into 2020 — and the start of the spring real estate market. Here are three key factors that brokers, agents, marketers, and consumers are watching for Chicago’s real estate market right now:
1.) Home Sales and Prices
Broadly speaking, experts are predicting a relatively stable market in the year to come — both on the national level, and here in Chicago.
Indeed, Geoff Smith, executive director of the Institute for Housing Studies at DePaul University, recently told Crain’s Chicago to expect “more of the same steady, boring housing market” in 2020.
Citing data from Realtor.com, Crain’s forecasts that the number of sales in the Chicago metro area will be down 0.9 percent, while home prices will dip 0.3 percent, which is “essentially flat.” As Crain’s notes, Chicago is not alone in seeing declines in both home sales and home prices. Indeed, 17 metro areas are expected to see both attributes to dip in 2020, per Crain’s; 14 of those 17 are forecasted to see volume and price drops steeper than Chicago’s.
Nationally, Realtor.com anticipates that home sales will fall by 1.8 percent in 2020, with home prices increasing by just .8 percent. Other market watchers have a slightly rosier outlook; real estate resource Zillow forecasts a slow climb in home sales and a 2.8 percent increase in median home value, while the National Association of REALTORS (NAR) foresees an 11 percent increase in new home sales, a 4 percent increase in existing home sales, and a 4.3 percent increase in the national median sale price of an existing home.
2.) Interest Rates
The Fed slashed interest rates in 2019, spurring a substantial increase in housing activity in the back-half of the year. As the consumer information site Bankrate notes, the average 30-year fixed mortgage rate finished 2019 at 3.93 percent — down substantially from the start of the year, when this metric came in at 4.68 percent.
Broadly speaking, real estate experts and forecasters anticipate that interest rates will remain low as we move into 2020, with Bankrate predicting that rates will not stray “too much higher or lower from the 4 percent mark.”
As the site’s chief financial analyst explains:
“The benchmark 30-year fixed rate mortgage will hopscotch back and forth over the 4 percent mark for much of 2020, remaining low enough to facilitate homebuying and providing ample refinancing opportunities on those trips below 4 percent.”
However, mortgage rates may rise later in the year “as inflation kicks in and economic activity markedly picks up,” as Lawrence Yun, chief economist for the NAR, explains to the Washington Post. Still, Yun predicts that, overall:
“Interest rates will remain low, as long as we have government backing of mortgage-backed securities.”
As we’ve noted previously, inventory refers to the number of homes available in a given market, at a given time. Inventory is a major factor influencing local real estate markets. Broadly speaking, if there’s a “surplus” of inventory, then home prices tend to fall; if there is high competition for the limited amount of inventory available, then prices tend to rise.
Here in Chicago and around the country, various factors are affecting the amount of inventory available — and the types of inventory available. For instance? As Chicago Magazine notes, inventory in the Chicago metro area was up overall near the end of 2019 — though competition is increasing for mid-range level housing even while “inventory of high-end homes ($1 million or more) continues to pile up.”
Part of the reason for this trend is that homeowners are staying put for much longer than they used to, especially when it comes to “entry-level” housing. According to reporting from CNBC, the typical American homeowner now spends “13 years in their home, up from eight years in 2010, as more households are choosing to age in place.”
Across the country, many experts are forecasting that inventory levels will remain somewhat restricted throughout 2020, though there are some important bright spots to note. Chiefly? The National Association of Home Builders (NAHB) says that builder confidence is at its highest level since 1999; the trade group also predicts a 4 percent increase in single-family construction for 2020. Realtor.com, meanwhile predicts that single-family home construction is expected to increase by 6 percent in 2020.
Looking to Understand the Stories Behind the Data?
Getting a handle on all of these numbers is one thing – but putting that knowledge into practice? That’s something else entirely. If you’re looking for a Chicagoland law firm that understands the human element that powers real estate trends in our area, then the Gunderson Law Firm would be happy to be your guide.
The attorneys and staff of the Gunderson Law Firm are here to be your real estate resource. We offer expertise and insight that is reinforced by years of experience and long-term connections throughout Chicago’s real estate, finance, and insurance industries. Our full range of real estate legal services includes:
- Residential Real Estate
- Commercial Real Estate
- Purchases and Sales
- Mortgage Conveyancing & Advice
- Real Estate Litigation
- Title Insurance
- Title Examinations & Disputes
- Asset Protection/Trusts
- Estate Planning/Wills
- Property Development
- Condominium Law
Whether you are a couple wanting to buy or build a house, a corporation converting commercial properties to residential, or a commercial developer looking to change the Chicago skyline, the Gunderson Law Firm can help you get through the zoning boards, historical commissions, licensing boards, easement granters, and more. Drop us a line whenever you’re ready to keep the discussion going!