Keeping up with Chicago's North Shore Real Estate Market!

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Thursday, January 1, 2015

How's the Market? End of Year Recap for 2014

First let me say. Happy New Year! Hope your 2014 was a year of blessings and much happiness. Once again, I am writing my end of year recap for our local housing market on the North Shore ... 

The housing market continued to stabilize in 2014.  

There are a couple of numbers that I like to study, when determining how the market is performing. Are we selling more or less properties than last year and what is happening to the median prices? 

The thing I find most interesting about last years numbers is that while number of units sold were down - and down fairly substantially from 2013 -- the median sales price went up. 

It varies, of course, by community/price point, etc. I believe this is an indication that prices have stabilized and have begun to come back to more normal levels. It could also be that more and more of the distressed properties are being dealt with and not causing property values to go down any more.

The numbers that most Realtors like to follow are the inventory levels. Inventory is measured in months. What a "month's inventory" means is this: if sales were keeping pace with new properties coming on the market, how many months would it take to sell the outstanding inventory? It's a better way of interpreting the unit count, because it reflects how quickly certain price points are moving or stagnating.

A healthy balanced market is around 6-10 months of inventory. An unbalanced sellers' market is about 0-8 months of inventory. And a buyers’ market is considered anything over 8 months of inventory.

Overall, the trend is fantastic. We saw some remarkable improvements this year. (One caution, though, is that sellers often take their homes off the market in December, so inventory levels are generally lower during the winter months and start to go back up in the Spring. These numbers are absolute and not seasonally adjusted to reflect this reality.)

source of data for the charts: Midwest Real Estate Data
These charts only present the numbers in aggregate. Various price points have higher or lower levels of inventory.

While 2014 was a more stable and less dramatic year than we previously saw in 2013 and even 2012, it's difficult to predict what's going to happen in 2015 – there are just so many outside variables that will determine how the housing market will play out on the North Shore this year.

There are trends afoot that make the sales of our homes on the North Shore a little more unpredictable. The biggest question mark to me - does our current inventory match our current demand?
A study by Harris Poll indicated that, for the same price, 41% percent of Americans would prefer to buy a newly built home instead of an existing home. Twenty one percent prefer an existing home while thirty eight percent didn’t have a preference.

That said, of those desiring a new home only forty six percent are willing to pay at least 20 percent extra to purchase a new home versus a comparable existing home.

It makes me wonder what that means for our older inventory in the established communities along the North Shore.

I thought this article in Chicago Agent was worth sharing: 3 Important Trends To Follow For the 2015 Housing Market.  To me, the point of interest is this: Housing affordability is on the decline because wages aren’t keeping pace. There is also the prediction that interest rates will finally see an uptick after years of historic lows.

Another trend is demographic. To quote an article from US News and World Report:

"For years, many millennials have postponed homeownership in favor of renting, but that may also change next year as a growing number of Gen Yers start families and seek more stability.   By the end of 2015, millennial buyers will represent the largest group of homebuyers, taking over from Generation X...They prefer smaller units closer to the urban core, so it will be interesting to see whether they follow the time-honored path towards the periphery of the metro...

"Baby boomers are also likely to make a move in 2015. ...With fewer homes underwater, they're finally in a position to sell."

Regardless of the health of the market, my hope for 2014 is that people move and change homes based on what is in the best interest of their own families. I’m a big believer that decisions should not be driven by fears or uncertainty -- if getting a bigger house or if downsizing are the right answers, then I think it’s best to move forward and live one's life.
I read good article that highlights this: Stop thinking of your home as an investment
As some of my readers know, I publish a monthly newsletter, How's the Market? Here's an example of one of my newsletters. If you'd like to be on my mailing list, I encourage you to sign up. (You can always opt out at any time.)

Finally, on a personal note, I would like to thank my clients who have helped to make 2014, a successful year for me.  As the saying goes, "Home is where our stories begin."   As a real estate broker, there is no greater privilege than to have the satisfaction of knowing, you’ve made a difference in peoples' lives and helped clients with their stories.

Wishing you and yours all the best in 2015!

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”We spend January 1 walking through our lives, room by room, drawing up a list of work to be done, cracks to be patched. Maybe this year, to balance the list, we ought to walk through the rooms of our lives... not looking for flaws, but for potential.” – Ellen Goodman 

It's 2015 -- new laws; new rules