This is the time of year that many people remove their home from the market due to weather conditions and holiday obligations, or simply do not list it at all. We are seeing subtle differences this year so far, and are predicting that the trends of 2013 will be the reverse of that. Housing supply is down 40% to 50% from last year. In some areas in the Chicagoland area, we are seeing significant improvement in the housing market. Some areas are even being affected by positive indicators that the trends are reversing, for example: decreasing listings, increasing sales volume, lower days on market, increasing Sales Price to List Price ratios. These are all positive indicators, however; Pricing (appreciation) is the indicator that is still falling behind.
Cook County Area Prediction
Cook County had an 8.24 months supply at the end of 2010, last year it was 7.63 months, and currently, it has dropped to 4.65 months. This is a -43.6% decline. Many other Illinois area counties show a 52% to 57% decline, and have a 4 to 5 month supply of inventory. This is awesome news as we head into 2013. It may be hard to judge the market with only a few weeks of the new year under our belt, but it should become more clear in the next quarter. This prediction is based solely off of trends and past statistics, and what leads us to this is that our current Supply of Inventory. Overall, our supply is down 40% to 50% from just one year ago, and in some areas is down 70% from 5 years ago.
Supply and Demand
When the supply exceeds the demand, the oversupply of inventory becomes a buyer's market, which puts a downward pressure on prices. An under-supply of inventory gives seller's an advantage, while buyers are scrambling for the best homes and are willing to pay more to get them. What is exciting is that in many cases throughout the Northern Illinois area, our supply is now considered a shortage supply. The following communities have a shortage of inventory: Arlington Heights, Buffalo Grove, Deerfield, Evanston, Glenview, Grayslake, Northbrook, Round Lake, and Vernon Hillsto name a few.
Renters Are Turning to Home Ownership
There are other indicators that can prove to be beneficial for residential real estate in Cook County area in 2013. Apartment rents are one factor that are influencing our market. Just in the past few years, we have seen many previous homeowners turn to renting while they waited for the market to recover. In doing so, the rental market became very strong. Rents have continued to rise, and this trend is now sending more affluent renters into the housing market, a trend that should continue in 2013.
New Construction Makes a Comeback
The demand for new construction is on the rise again. Land values have fallen, so the homebuilders who survived have reorganized or prioritized, and are now building more affordable homes that are smaller and more obtainable than they have in the past. Take a drive through subdivisions that halted building midway through development in 2006 or 2007. You will now see new homes rising from the dirt again. Check out local and national headlines too... the national home builders are profiting again. These are all great indicators that things are looking up.
Where do Distressed Properties Come In?
A negative factor that may be slowing the recovery of our market is the influence of distressed housing - short sales and foreclosures. But positives may be seen in this area as well. Three years ago, RealtyTrac.com reported that the typical Foreclosure property was selling 35% below market value, and short sales were selling 15% below market. In 2012, NAR reported that foreclosures were selling at 15% below market, and short sales were selling at 10% below market. In September 2012, Realty Times reported that buyers enjoyed a 7.7% discount on bank-owned properties. This trend can be seen that either distressed properties are catching up with the market, or the market has fallen to the level of the distressed properties. Either way, if a buyer has an option between a home that will be a smooth arm's-length transaction versus the complex issues surrounding the purchase of a distressed property, it may no longer be worth the hassle to deal with the distressed property. This is good news for home sellers. Another positive is that with these distressed properties, investors are active again. Many of these properties are relisted 2 to 4 months later, and have been purchased by investors and rehabbers, who have picked up the property at a great price, remodeled the cosmetic issues and are flipping the home for a profit or renting it for a period of time.
Remain Hopeful in 2013
Challenges remain with new tax laws and our government's deficits. Even with these challenges, unemployment is finally trending down from 9.8% from last year to 8.5% this year, and mortgage interest rates remain very favorable which can be a major factor for potential buyers. While sales activity is expected to be slow for the first quarter, activity is picking up now, and is building momentum into our Spring market. You can anticipate 2013 to be a great year for residential real estate in the Cook County area. We have seen a boost here at The Sharron Kelley Team, so contact us to sell or buy real estate in the Cook County area. The predictions are great, and the outcome of buying or selling is even greater!
Courtesy of A. L. Wagner Appraisal Group