Chicago’s home buying market is recoiling under the effects of the COVID-19 pandemic. Open houses, the bread and butter of realtors, are harder to host because of social distancing requirements. It’s true, however, that some people still need to find new homes, and there are now technical solutions to help with home tours – self-guided or virtual tours seem to catch on pretty quickly. Moreover, prices in Chicago are still holding strong, most probably due to low inventory levels. Let’s dive in and see how the market has changed due to the current pandemic and how realtors and clients are dealing with the new realities.
Chicago’s already low housing inventory exacerbated by the current crisis
According to Chicago’s Association of Realtors, at the end of February 2020 there were a little over 2,800 houses on the market in the city, almost 15% down year-over-year. The stock of houses for sale has followed a descending trend for a few years now – inventory in February 2019 was also 14% lower than in February 2018.
This trend is further enhanced by the current COVID-19 crisis. A market that’s already tight on available inventory is only getting tighter as uncertainty governs economic sectors across the board. “We can see approx. 60% decline in new listings as opposed to active listings compared with a year ago for the end of April,” said Chicago realtor Daniela Duta. “Normally, in spring the number of new listings jumps, but now new listings are down 38% and have dipped 19% since March. So, if you need to sell and list the property today you can get additional offers.”
Buyers expect a price drop, unlikely to come just yet
Uncertainties related to the state of the economy and the effects that the pandemic will have on jobs and personal finances are persuading some people to postpone their home buying plans. “I have buyers who are ready to buy, so we are trying to find their dream homes, and I have buyers waiting to see what’s going to happen next week, next month or even next year,” added Duta.
Data from Illinois Realtors show that the median sales price for a single family home in the city of Chicago was $242,000 in the first quarter of 2020, 7.6% higher year-over-year. The median price for a condo during the same period was $338,000, which is also 7.6% higher compared to the first quarter of 2019. The price for all properties increased by 7%, to $295,000 year-over-year for the first three months of 2020.
Some of the prospective buyers are now at a standstill, expecting house prices to drop. However, it’s unlikely that major price changes will occur in Chicago’s real estate market in the near future. One of the reasons is the low inventory mentioned above.
“Some people are looking for a big price reduction, like in 2008, which for now I don’t see happening. We are in a different position, with a very low inventory and high equity: 53% of all homes in the US have at least 50% equity and 37% are owned free and clear. Plus, the monthly rent is higher than a monthly mortgage payment,” explained Duta.
However, a clear evolution of the market is still hard to predict; there are too many variables, including the re-opening of the economy, movements of the employment market, a possible medication for the virus to tame fears, as well as buyer and seller sentiment when this is all over.
Are open houses still open for business?
Open houses are the engine behind the real estate market. But due to the social distancing rules, organizing old-school open houses is hardly a viable option right now. Realtors are an essential business, so they have continued their work. However, they adjusted to the new realities and traded open houses for online or self-guided tours.
As Daniela Duta says, describing the new environment realtors are dealing with at the moment: “The entire process has changed quite a bit. There are no more open houses and we are relying heavily on virtual tours, FaceTime, Instagram Live and Zoom. We shifted toward minimal contact for properties that are lived in. We also must fill out COVID-19 forms before entering some properties and everyone has to disclose any symptoms. I had inspections and appraisals where I just got to the property, opened doors and turned on lights and let them do the walk through by themselves. Of course, masks and gloves are a must have.”
Closings are less celebratory than they used to be. “Closings usually are a joyous occasion where buyers invite friends and family. That can’t happen anymore, as only the required signees can come into the closing office,” adds Duta.
Celebratory or not, closings are usually followed by moving in, hence the need for storage. Most self storage facilities in Chicago continued their regular activity during this period, while also observing the social distancing rules recommended by authorities. A storage unit in Chicago rents for about $100 per month, according to Yardi Matrix data.
Although Chicago’s real estate market is dealing with unprecedented conditions – just like the rest of society and the economy – the housing sector is still active and resilient in the face of pandemic-related turmoil.