As winter approaches, sales activity has remained very active
In recent months inventory of homes for sale have surged, and interest rates have plummeted, which has created a “perfect storm” of home buying and selling activity. Meanwhile, with continued COVID-19 spread and unemployment, the strong rental market Chicago is used to just has not happened this year.
Strong sales and surging inventory
This September we saw a large jump in inventory compared to previous years. Inventory of condos in Near North Side is up 46% comparing September 2019 to September 2020. We are seeing a similar spike in inventory in the neighborhoods as well, in Lincoln Park for example, condo inventory went up 22.8% September 2019 vs. September 2020 and single-family home inventory is up 10.2%.
Looking at the entire year this year compared to last, we are down overall in New Listings by 4%. But after an extremely quiet start to the year this year, to get even this close to the pace of inventory of last year means inventory has really skyrocketed in recent months to catch up.
In the tables below you can see the surge in listings under contract and closed sales in September 2020 compared to the previous two Septembers:
What is next for the sales market as we head into winter?
We believe the low interest rates, and high stabilized prices will continue this strong sales market further into the fall than in typical years for Chicago, where traditionally the market begins to cool off. Prices also seem to have reached a tipping point, with average condo sale price down 7% September 2020 vs 2019, and we expect there to start being some real deals for buyers with this surge in inventory.
For our sellers, if they aren’t in a position where they need to sell their property and depending on their specific market, we are starting to recommend waiting for some of the current inventory to clear out before potentially listing. This is especially true in heavily saturated markets near the downtown area.
Rental market continuing to struggle
While we traditionally experience a slowdown in traffic going into the fall, it typically comes after 6 months of very strong activity. Due to many different factors this year however, that strong rental demand that we typically see just didn’t come to be. Vacancy is trending 15-20% higher than typical for this time of year, and we’ve seen rental prices drop pretty much across the board (especially in neighborhoods with a saturated supply of rental product).
What are our specific recommendations for landlords?
-Being priced accurately is incredibly important at the moment. You must know what your competitors are offering, and you must be ready to adjust quickly with the market.
-In order to attract renters, landlords have been offering a lot of “free rent”, meaning owners are willing to take short term losses for long term stability. In order to compete, and to set yourself up for success at the same time, be smart in your approach to concessions (consider the use of short term leases, and respect your lease expiration matrix: if you are giving concessions think about how it may affect your renewals).
-Renters have a lot of options at the moment, so make sure your units are not only priced appropriately, but cleaned and painted if they are vacant, as well as do the small things to keep up the aesthetic appeal. Such as make sure all light bulbs are working, clean up the hallways, and other common areas.
What are our recommendations for renters?
This is the most “renter-friendly” market of the last 8-10 years. Concessions are increasing – we are seeing as high as 3 months at specific projects. Now is the opportunity to get a rental deal of a lifetime. We expect between now and spring for the deals to be in your favor.
Make sure to explore all your options, as there are more than typical, and make sure you are asking about any specials the property may be offering. Some offerings may include large concessions, but they may not be something you will get to carry in a renewal, which is something to consider for your long-term budgeting.
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