The Illinois housing market has been on an upward trend for the past few years, but in 2023, many are wondering if this trend will continue. With the ongoing pandemic and economic uncertainty, some are predicting a drop in home prices. In this report, we will examine the current state of the Illinois housing market and make a forecast for what we can expect in terms of prices and trends for the rest of 2023.
Illinois Housing Market Trends in 2023
The Illinois housing market in 2023 has experienced notable shifts in home sales, prices, and inventory compared to the previous year. Data from Illinois REALTORS® reveals key trends that are shaping the real estate landscape in the state.
Statewide Home Sales and Prices
In July 2023, statewide home sales, which include single-family homes and condominiums, saw a significant decline, with 12,076 homes sold. This represents a 21.4 percent drop compared to the 15,356 homes sold in July 2022. Despite the decrease in sales volume, the median price of homes in July 2023 stood at $285,000, marking a 5.6 percent increase from the previous year when it was $270,000.
Furthermore, the average number of days it took to sell a home in July 2023 increased to 22 days, up from 20 days in July 2022. This extended time on the market suggests shifting dynamics in buyer behavior and demand.
Available Housing Inventory
One of the notable trends in the Illinois housing market is the decrease in available housing inventory. In July 2023, there were 19,432 homes for sale, reflecting a substantial 34.7 percent decrease compared to July 2022 when there were 29,774 homes on the market. The limited inventory has implications for both buyers and sellers, impacting their options and decision-making processes.
Regional Variations
The Illinois housing market is not uniform across the state, with variations in different regions.
- Chicago Metro Area: In the nine-county Chicago Metro Area, home sales in July 2023 totaled 8,292, a 21.5 percent decrease from July 2022 when 10,561 homes were sold. The median home price in the Chicago Metro Area in July 2023 was $340,000, up 5.3 percent from the previous year's $323,000.
- City of Chicago: The city of Chicago experienced a 20.0 percent year-over-year decrease in home sales in July 2023, with 1,986 sales compared to 2,481 in July 2022. The median home price in the city in July 2023 was $342,500, a 2.1 percent decrease from July 2022 when it was $350,000.
Market Observations and Expert Insights
Dr. Daniel McMillen, head of the Stuart Handler Department of Real Estate at the University of Illinois at Chicago College of Business Administration, noted that while median prices rose in the Chicago suburbs in July, they began their usual seasonal decline elsewhere in the state. Forecasts indicate that prices will continue to decline over the next three months, although they are expected to remain higher than the previous year. The number of sales remains low, and surveys suggest an increase in consumer confidence in the economy.
Sarah Ware, president of the Chicago Association of REALTORS®, emphasized that the real estate market in July showed decreases in activity while median sales prices held steady. She mentioned that buyers and sellers appeared to be in a holding pattern due to various factors, including student loan payments restarting and the return to offices with the start of the school year.
Mortgage Rates
It's essential to consider the impact of mortgage rates on the housing market. In July 2023, the monthly average commitment rate for a 30-year, fixed-rate mortgage was 6.84 percent, up from the previous month's 6.71 percent. This rate increase compared to the July 2022 average of 5.81 percent indicates changing conditions for home financing.
Illinois Housing Market Forecast 2023
This report, by Illinois Realtors® from UIC Stuart Handler Department of Real Estate, provides an insightful analysis of the Illinois housing market in the Second Quarter of 2023 and offers forecasts for the Third Quarter of 2023. It outlines key trends, sales data, and median price changes in various Metropolitan Statistical Areas (MSAs) across the state.
Second Quarter Overview
In the Second Quarter of 2023, overall home sales in Illinois decreased compared to the previous year. Notably, none of the MSAs recorded positive growth in this period. Median home prices experienced a decline in five MSAs: Champaign-Urbana, Davenport-Moline-Rock Island, Kankakee, and Peoria-Pekin. The analysis provides insights into the trends and dynamics that shaped the market during this quarter.
Third Quarter Forecast
Looking ahead to the Third Quarter of 2023, the forecast indicates positive developments in the Illinois housing market. Overall sales are expected to increase during this period, with all MSAs forecasted to experience an uptick in their sales volume. Median prices are anticipated to exhibit mixed trends, with some areas experiencing decreases, while others are forecasted to see an increase in median home prices.
Key Points from the Forecast
- Median Price: The forecast for Q3 2023 suggests a median price increase with an annual growth rate of 6.5%. This indicates potential price appreciation in the Illinois housing market during the third quarter.
- Sales Volume: The sales forecast for Q3 2023 indicates a negative trend, with annual rates of change ranging between -9.5% to -12.8%. While prices may rise, sales volume is expected to face some challenges.
- Price Stability: In Q2 2023, median prices remained unchanged compared to the previous year, indicating a degree of price stability in the market.
- Sales Volume: In contrast, sales volume in Q2 2023 saw a significant decline of -23.4% compared to a year ago, highlighting a notable reduction in the number of homes sold.
- Market Shares: Homes priced between $300,000 and $500,000 experienced a shift in market share, increasing to 28.2% in Q2 2023 from 27.2% a year earlier.
- Supply: By Q2 2023, the overall quarter's supply decreased to 0.5 quarters, down from 0.6 a year ago, indicating a tighter supply of homes in the market.
Illinois Housing Market Forecast by Zillow
Zillow provides valuable insights into the Illinois housing market as of August 31, 2023, including key metrics such as home values, sale-to-list ratios, and days to pending. Here are the highlights of Zillow's forecast for Illinois:
- Average Home Value: The average home value in Illinois stands at $252,134, reflecting a 2.5% increase over the past year. This indicates a modest appreciation in home values in the state.
- Median Sale to List Ratio: As of July 31, 2023, the median sale to list ratio is 1.000, indicating that, on average, homes in Illinois are selling at or very close to their listed price.
- Percent of Sales Over List Price: In July 2023, an impressive 49.5% of sales closed above the list price, highlighting strong competition among buyers in certain segments of the market.
- Percent of Sales Under List Price: Conversely, 36.6% of sales in July 2023 closed under the list price, indicating that opportunities for negotiation exist for buyers.
- Median Days to Pending: Homes are going pending in just 7 days on average, demonstrating the brisk pace of transactions in Illinois.
Top 10 MSAs for Home Price Growth
Zillow's data also includes forecasts for the top 10 Metropolitan Statistical Areas (MSAs) in Illinois with the highest expected home price growth by August 2024. Let's explore these areas and their price growth projections:
- Macomb, IL: Macomb is forecasted to experience a slight decline in home prices by -0.8% by August 2024.
- Jacksonville, IL: Jacksonville is expected to see a modest increase in home prices by 0.6% by August 2024.
- Carbondale, IL: Carbondale is forecasted to have a slight price increase of 0.2% by August 2024.
- Mount Vernon, IL: Mount Vernon is projected to experience a price growth of 0.3% by August 2024.
- Taylorville, IL: Taylorville is expected to see a notable price increase of 0.7% by August 2024.
- Davenport, IA (MSA in Illinois): Davenport is forecasted to experience a moderate price growth of 1% by August 2024.
- Galesburg, IL: Galesburg is anticipated to see a robust price increase of 1% by August 2024.
- Lincoln, IL: Lincoln is projected to experience a price growth of 1.2% by August 2024.
- Quincy, IL: Quincy is forecasted to have a price increase of 1.4% by August 2024.
- Springfield, IL: Springfield is expected to see substantial price growth of 1.8% by August 2024.
These forecasts provide valuable insights for both buyers and sellers in the Illinois housing market, helping them make informed decisions in a dynamic real estate landscape.
Are House Prices Dropping in Illinois?
As of the latest available data, house prices in Illinois have exhibited mixed trends. While Zillow reports a 2.5% increase in the average home value over the past year as of August 31, 2023, it's essential to note that real estate markets can vary significantly by location and property type.
However, the market forecast for the Third Quarter of 2023 suggests that median home prices may experience fluctuations in different Metropolitan Statistical Areas (MSAs) across the state. Some areas may see price increases, while others may experience decreases. It's crucial for prospective buyers and sellers to monitor specific regions of interest to gain a more accurate understanding of local market dynamics.
Is Now a Good Time to Buy a House in Illinois?
The decision of whether now is a good time to buy a house in Illinois depends on several factors, including your individual circumstances, financial readiness, and long-term goals. Here are some considerations to help you make an informed decision:
1. Current Market Conditions:
As of the latest data, the Illinois housing market exhibits various trends, with some areas experiencing price appreciation, while others may see slight declines. If you're considering a specific location, it's essential to research the local market conditions, including supply and demand dynamics and recent price trends.
2. Personal Financial Situation:
Evaluate your financial readiness to buy a home. Consider factors such as your credit score, available funds for a down payment and closing costs, and your ability to secure a mortgage at a competitive interest rate. It's advisable to consult with a financial advisor or mortgage professional to assess your financial readiness.
3. Long-Term Goals:
Think about your long-term plans and objectives. Buying a home is a significant investment, and it's essential to align your real estate decision with your future goals. Consider factors such as job stability, family plans, and your intended length of stay in the property.
4. Local Real Estate Expertise:
Engage with a local real estate expert, such as a real estate agent or realtor, who possesses in-depth knowledge of the Illinois market. They can provide valuable insights into specific neighborhoods, property values, and negotiation strategies.
5. Interest Rates:
Monitor mortgage interest rates, as they can impact your monthly mortgage payments and overall affordability. While rates may fluctuate, securing a favorable rate can be advantageous for long-term homeownership.
Sources:
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- https://www.illinoisrealtors.org/marketstats/
- https://fred.stlouisfed.org/series/ILSTHPI#
- https://www.zillow.com/il/home-values/
- https://www.neighborhoodscout.com/il/real-estate
- https://fred.stlouisfed.org/series/ACTLISCOUIL#
- https://ides.illinois.gov/
