What a unique spring market we experienced this year! Properties sat, inventory increased, and to me the biggest change this year is buyers’ mentality: for the first time in a long time, buyers felt that they had the space to be picky. I think we were was shocked by the market’s changing course, and of course everyone is now trying to anticipate the fall and winter markets to avoid the surprise factor again. Here are my thoughts on what the next several months hold for us Chicagoans.
Like it or not, my prediction is that the fall and winter markets will be fundamentally the same as the spring and summer: a nearly balanced market. We will see our typical slow downs in August, December and January, with a little bump in September. For the past few years we have been in a heavy seller’s market meaning that demand was high and inventory was low. We call this tabulation Months Supply of Inventory (MSI) in the industry, and it uses two factors: supply, or the number of listed properties, and demand, or the rate at which the properties are selling. In a balanced market, each measure is about the same.
I’ve broken down the market by price point and outlined how the balanced market is affecting both buyers and sellers.
Properties under $500K
I believe that entry level buyers at this price point have been most impacted by increased interest rates and are therefore taking their time in buying, or not buying at all. As a result, MSI has increased, and properties not priced for this more sluggish market are sitting.
Here is the bracket that we see a lot of competition between sellers for a limited group of experienced buyers. Many buyers at this price point have been looking for several years, and are very aware of their newfound power. Sellers in this market segment seem less willing to make price adjustments, and are therefore sitting.
This segment of the market has been exciting as of late! For about the past two years, we have been at peak inventories, however, because sellers and particularly developers are pricing to sell, properties are moving faster than they have in quite some time--units under contract are up 30%.
What does this mean for buyers?
While indeed we are closer to a buyer’s or neutral market than we have been in years, buyers still need to keep their wits about them. Buyers are experienced and market savvy, so if you are new to the game, make sure you are educated. When a property is priced properly, things still move quickly--don’t get left behind.
What does this mean for sellers?
Whereas before sellers could list their property even 10% higher than market value and still see lots of traffic, it is a different story today. Sellers must price their home properly right off the bat, or they will see less traffic. Photography that shows every feature of a home is also as crucial as ever with so much competition amongst sellers.