Buying your first Chicago home could be a challenge this summer, due to lean home inventories and rising prices. Here’s what’s happening in the Chicago real estate market, and what it means for first-time home buyers!
Chicago foreclosures are down. The inventory of distressed homes is at its lowest level since 2008. While this is good news for the market overall, it means that bargain-priced homes are in short supply. With fewer foreclosures around to anchor Chicago home values, home prices are enjoying a rising tide. This is great news for homeowners who are building equity, but it makes things tougher for first-time buyers who need affordable homes.
Chicago home prices are up. According to the S&P/Case-Shiller Home Price Index, Chicago home prices were up by 3.1% this spring. This is a very broad average; “Chicago” covers an 8-county region for statistical purposes. The most popular neighborhoods and suburbs are seeing home price increases of 5% or more. Increases are also greater in price ranges that have the most demand.
Entry-level and mid-range homes are in high demand. Chicago homes priced under $400,000 are going fast. The inventory of homes for sale in the entry-level and middle price ranges dropped 23.3% from a year ago. Entry-level homes are seeing the sharpest price increases, averaging 4.8% higher than a year ago.
Money is still cheap to borrow. Mortgage interest rates are at 3-year lows, and due to geopolitical uncertainties, rates are likely to stay low for the foreseeable future. Meanwhile, down payment requirements are reasonable, and lenders are being less stingy with loan approvals. While this empowers home buyers, it also adds buyers to an already-crowded pool.
Where are all the entry-level homes? There are three big challenges, as we see them. First, home builders are not, for the most part, building new homes in lower price ranges. It simply isn’t profitable for them, given the cost of land, materials, labor, regulations and other overhead costs.
Second, property investors bought up a lot of entry-level homes during the market downturn, and they would rather collect rent than sell. (For now.)
Third, home buyers who got bargains in the past several years are enjoying low mortgage payments, while their homes appreciate in value. Even though mortgage rates are still cheap, these buyers haven’t shown much motivation to “trade up” to a larger or newer home.
All these things aside, first-time home buyers should not despair! The real estate market is always changing, and Chicago home supply, home demand, and home prices vary by neighborhood. Stay in the market, stay prepared, and work closely with StartingPoint Realty! We will educate you about the market trends, so that you can make the most of every opportunity.
StartingPoint Realty – helping first-time Chicago home buyers!
StartingPoint Realty serves first-time home buyers throughout Chicago and the Northwest suburbs. We provide education and guidance during the entire home buying process! Our expert insights will help you make the best decisions.
Attend our free home buying seminar for great information about Chicago home buying! There’s no sales pitch, and no obligation. Always feel welcome to contact us for help with your Chicago home buying questions!
Ryan Gable Broker/CEO Starting Point Realty
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