The Chicago Association of REALTORS®, the “Voice for Real Estate” in Chicago since 1883, represents over 17,000 members from all real estate specialties including commercial sales, development, property management, appraisal, auctions and residential sales.
Our economy’s foundation will be solid, but we do have some wild cards entering the mix. The summer of 2016 had mortgage rates so incredibly low, they rendered home affordability extremely possible. Now, we don’t know how high they’ll go and how quickly that will happen. The Trump administration in Washington is also a wild card. We really don’t know what to anticipate, but we can be sure that it will include significant reform on tax policies, interest rates and trade – which presents a significant challenge to any economist trying to put out a forecast.
Low inventory is our #1 problem.
We have the lowest amount of inventory ever recorded on realtor.com®. How did this happen? REALTORS® sold homes at a faster rate than the year prior, and new construction is on the negative side, mainly in single and multi-family. We have a certain amount of pent-up demand, but low inventory is slowing down the home purchase process. This is something that is actually very much in our control, which leads to the next point.
Build and sell now.
Consumer confidence is at its highest since 1985 – that’s when Madonna, Prince and Michael Jackson were topping the charts. We are seeing people who are planning to purchase a home this year at a high. Builders nationally are more optimistic now than they have been in the last 15 years. Take advantage of this optimism! It is of utmost importance to get people selling and buying as early as possible. Use your expertise and market insight to talk to homeowners about why now is a good time to sell, and talk to builders about the growing demand for multi-family homes. This will get inventory back on the market to match the growing demand.
Mortgage rates remain affordable.
It is officially easier to get a mortgage now than ever before, though you can rest assured it is nothing like 2004 when even your pet could qualify for a mortgage. Talk to Baby Boomers and Millennials about this! Nationwide, the average down payment on a mortgage is 11%. Baby boomers who haven’t moved in 20 years might not realize it’s easier to qualify for a mortgage, while younger, first-time buyers face financial hurdles like credit scores and down payments. It is up to REALTORS® to influence these two demographics. The perfect time to do so is right now, before mortgage rates change too much from their current status.
Get ready to hear lots more about millennials.
As of December, we are in our 75th straight month of job expansion, and job creation has principally gone to Millennials. They are young, talented, inexperienced, and cheap. 43% of purchase mortgages in Cook County in 2016 went to people under 35, which made Chicago appear weak compared to other markets. This is because these younger, first-time buyers are extremely rate-sensitive and skewed our ranking. Nevertheless, it’s important to note that 25-34 is the largest demographic in Chicago. It’s not about attracting them to this market; it’s about keeping them. Millennials can only put off life events so long, and as they build families, they are going to find rentals cannot serve their future needs.