With Coronavirus looming, what is next for Chicago’s real estate market?
COVID-19 is impacting our lives in some way, local (and large) businesses, and presenting new challenges on a daily basis. While the full effects are not yet known, it is already having an effect on our nation’s economy and financial markets and will likely have an effect on Chicago’s real estate market as well. It may end up being a substantial effect or equate to a sort of pause in overall market activity, only time will tell.
Before we get into it, we hope that you are safe and healthy, it is always important to remember that is what is most important. While our business continues to go on, we are making necessary adjustments to offer our clients virtual tours, video tours, and live Facetime tours. We haven’t stopped because housing is an essential business, and we take pride in providing council to our clients and offering our expertise to you. That is why, even with this pandemic at our doorsteps, we have continued to study and analyze the markets for you as well as provide you our insights.
Now, we have no crystal ball that can tell us the future, but we do have something that can help us understand how this will affect Chicago’s real estate market as it unfolds. We analyzed February’s Chicago Association of Realtor’s housing data, which is the most recently available data, and it reflects the state of the market before coronavirus really began it hit us in Chicago. Understanding this recent data can help us make better interpretations of what may come, and will provide a strong point of comparison as we watch the future months unfold.
At the outset of this year we seemed poised for a very strong sales market. Median sales prices were high, and the number of active listings was on the rise. After analyzing February’s data, we have discovered a few interesting benchmarks, which we will explore below, and should provide a solid baseline to measure any future impacts COVID-19 may have.
2020 Vision
We were setting up for a super strong and stable market in 2020. Realtors across the board seemed united that this would be a historical year for sales. And the data backed up this claim:
Going into March we saw increases in 2020’s YTD Median sales prices (+2.9%), New Listings (+4.5%), Under Contract (+14.7%), and Closed Sales (+5.1%) compared to this time last year. February 2020’s average List price was up 2.3% and Average Sales Price 3.9% compared to February 2019.
Closed Sales (YTD)
Median Sales Prices (YTD)
New Listings (YTD)
Under Contract (YTD)
These increases from 2019 to 2020 were built upon several years of similar increases. But now with COVID-19 affecting us will that strong growth continue? If we take a pause in the market while we are home quarantining, will we rebound? Will that rebound be quick? These are the questions we will explore in this article.
Theoretically in a typical year prices will continue to go up into the summer months like a bell curve, so that is something we will want to look back on in the coming months. Also, when looking at Chicago it is important to realize it is really an aggregate of many different neighborhood markets, so each sub-market can have its own story.
"Days on Market" Adjustments
There is one thing Coronavirus has already done which we know will affect the housing data. While the state has enacted its “shelter in place order” CAR has adjusted the “days on market” policy: Now listings which are marked TEMP will not accrue days on market. So if a home was just listed today, and then moved to TEMP tomorrow, it would only have 1 day on market. If the property was then moved to ACTIVE on June 1st and sold on June 1st, you would only see 1-2 days on market.
Typically, days on market sends an indication of how much interest a property is receiving. If it receives offers within less than a week, it was likely priced fairly and therefore desirable for one reason or another to a buyer. If however a property spent more than 30-45 days on market it may indicate that there is something buyers are not liking about it, and usually price is a big factor in long market time.
This may change how much value we place on “days on market” until we return back to normal activity and the orders for us to stay home have been lifted. We are predicting that next month we may see the under-contract numbers dip.
Neighborhood Benchmark: West Town
West town is a neighborhood that has seen strong market activity for the last several years. It is by no means leading the way in terms of the highest prices, nor is it toward the bottom. We view it as an indicator for where the strong middle market is, and by tracking it, where that core middle market might be heading.
Looking at condo sales YTD compared to 2019, the number of closed sales has jumped 20.3% and the median sales price has risen over 22.1%. Both of which indicate that leading into the year we were seeing major growth in West Town.
Meanwhile the story for new listings is a little bit different. Year to date we have seen a small decrease (-2.2%) while if we look specifically at February 2020 compared to February 2019 a major decrease (-16.8%). This may be another indicator of an effect from COVID-19: A hesitation to list with the upcoming uncertainty.
Closed Sales (YTD)
Median Sales Price (YTD)
New Listings (YTD)
New Listings (Feb 2020 vs 2019)
Neighborhood Benchmark: Avondale
Avondale is another sub-market of Chicago that we view as a strong indicator of where things may go. It is a market that has seen tremendous growth in recent years. It doesn’t represent the top end of the market, nor is it quite in the middle. Comparatively speaking it represents the strong bottom end of the market. When we look for growth, this is a neighborhood we look to.
We are seeing a similar story here as in West Town. Overall closed sales is up 25%, and year to date median sales price is up 17%. This again indicates a very strong start to the year. However, when it comes to new listings, we are seeing another major drop in February. In 2020 compared to 2019 the number of listings is down 38.2%.
While interest rates are at historically low levels, we would normally assume that this would create a market full of hungry buyers. But again, with the market uncertainty looming, we believe that people may be hesitant to bring their property to market.
Closed Sales (YTD)
Median Sales Price (YTD)
New Listings (YTD)
New Listings (Feb 2020 vs 2019)
Neighborhood Benchmark: Near North
The Near North neighborhood represents Gold Coast, River North, Streeterville, and parts of Old Town. Historically this has been one of the strongest sub-markets in the city. When we try to see what is going on in the top of the market we will often look to the Near North as an indicator.
In the Near North Side, we see a slightly different story than in West Town and Avondale. Year to date condo sales have increased in terms of Median Sales Price (2.5%) and closed sales (2.5%), though overall closed sales are slightly down (-1.6%). What is strikingly different for the Near North Side compared to other neighborhoods is that overall new listings are up by 17.1%. Why is this neighborhood not experiencing the same hesitation from sellers to list their property?
Compared to the neighborhoods, downtown is extremely dense with homes. The number of homes per block is substantially higher, and that sheer volume of supply may account for some of the continued strong numbers in new listings. Additionally, we see more investor owners that live downtown in general than in the neighborhoods. Where a single-family homeowner may want to “wait out” the effects of COVID-19 to ensure they reach the highest possible selling price for their main property, an investor may have so many units and need to sell any of their individual properties for various reasons.
Closed Sales (YTD)
Median Sales Price (YTD)
New Listings (YTD)
New Listings (Feb 2020 vs 2019)
So what is next for Chicago's Markets?
For now, we must wait and see to be able to fully answer that question, but here is what we are seeing so far:
If you would like to speak with one of our brokers today, please get in touch! While the stay at home order is in effect, we are running our entire showing operation online, and we have video tours available of select units.
Stay tuned for next month’s market data article and stay safe out there!