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2015 was a great year for housing. Looking forward to 2016, here are some trends REALTOR.com® chief economist Jonathan Smoke wants you to keep in mind:
Real Estate Is Cool, Again
Real estate fundamentals have shifted solidly towards a stronger and healthier market.
Chicago is an affordable large market (median list in November $236k compared to $230k for US). Only Philadelphia has a substantially lower median out of the largest 10 markets in the US.
Inventory had been growing as the market worked through final foreclosure hangover but it appears that the market began a tightening phase this fall with the major counties (Cook, DuPage, Lake, and Will) now seeing lower inventory than last year.
Chicago, We Have An Inventory Problem
Demand continues to exceed supply.
Inventory in this market is now moving 11 days faster than the US overall (median days on market is 73 vs. 84 days respectively). On the demand side, listings in this market get approximately 22% more views than the US overall.
In 2016, we expect single-family home sales in the Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area to decline compared to 2015 as a result of tighter inventories. Median single-family home prices are expected to increase more than in 2015 and well above average due to the tighter supply.
That sort of mixed growth outlook is a result of the market transitioning from having an elevated level of foreclosure sales and distress to having less distress and more healthy sales but with tightening supply. This happened for the US in aggregate in 2014 when home sales declined but price growth accelerated. Like other judicial states, IL is behind the US in terms of working through the foreclosure overhang.
New Construction is Back
New construction is on the rise, but demand is outpacing the inventory yet again. Also, new construction leans heavily towards the rental market, as rents continue to climb.
Millennials Matter
Demographically, the Chicago market is younger than the US average, and has a higher share of Millennials. Their numbers plus the affordability factor and improving economy have resulted in more Millennials buying homes (41% vs 35% nationally based on purchase mortgage market).
Inventory becomes an issue as Millennials want to buy, but there isn’t enough to meet that demand. Hence, rising rental rates and a boom in new construction on luxury apartments.
Don’t Forget the Baby Boomers
Just as Millennials will drive demand, Baby Boomers are equally important to the 2016 market as they look to downsize or find the home for their next chapter. However, as Baby Boomers list, there may be a disconnect between where Millennials want to buy, and where Baby Boomers are selling.
Video
Check out Jonathan Smoke’s full presentation, as well as the panel discussion, below:
As regular attendees of our annual Market Outlook will remember, Jonathan Smoke also DJs. Here’s DJ Smokey Smoke’s 2016 Housing Outlook playlist for your enjoyment!
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Check out what your fellow REALTORS® thought of the event: #CAROutreach.
