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

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Monday, January 2, 2017

How's the Market? End of Year Recap for 2016

Happy New Year! 2016 was certainly a year of surprises – the most exciting, of course, was the Cubs winning the World Series! As I was watching that last game, I wondered, if this really was their year. And so it was.

I hope your 2016 was a year of blessings and much happiness.

Once again, I am writing my end of the year recap for our local housing market on the North Shore ...These charts present data as of January 1, 2017.   (A caution: 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.)

The housing market held its own in 2016. It varied quite a bit along the North Shore, as the following charts would indicate.

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?

Every community has its own story and you can analyze the numbers to draw your own conclusions.   The one thing I did notice, in the towns where unit volume increased, the median prices seemed to go down.    This would suggest that sellers are dropping their prices to get their properties sold.  

I was particularly struck by the absolute sales in each community.   For example, the absolute number of units sold in Lake Forest went up in 2016, and yet inventory levels remain high.   

Which leads me to the next chart.  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.

So while the number of sales increased, so did the number of new listings.  Until the market can keep pace and absorb new listings, the inventories will remain high.   The only communities that have a real surplus of detached homes are Kenilworth and Lake Forest.   The rest of the North Shore is fairly balanced -- or even a buyer's market.   Attached housing is tight throughout the North Shore.   These charts only present the numbers in aggregate. Various price points have higher or lower levels of inventory.

According to the Multiple Listing Service, the highest sale in 2016 was a lake front property in Winnetka on Hoyt Lane.     The following chart shows the highest sales in each of the communities this year.

source of data for the charts: Midwest Real Estate Data

While overall levels of inventory are pretty stable, the North Shore continues to have a surplus of high end homes.  The chart below shows how many homes priced over $2M that we currently have active on the market and how many sold in 2016. 

Currently Active
Under Contract
Sold in 2016
Month’s  Inventory
Highland Park
Lake Forest
Lake Bluff

The National Association of REALTORS put forth their Housing Forecast for 2017. It's their opinion that the 2017 housing market will be slower, moderate growth.

With the new administration in Washington and and Illinois's fiscal realities one hates to predict what's going to happen in 2017 – there are just so many outside variables that will determine how the housing market will play out on the North Shore this year.

Various groups present their forecast for the housing market.

Inman News, a real estate industry watch group, released their 2017 real estate industry outlook. The key points from the report were as follows:

  • There is solid optimism about the housing market in 2017, with 27.43 percent of respondents saying they are extremely optimistic.
  • More than half of this survey's respondents (52.21 percent) expect President-elect Donald Trump to have a positive effect on the U.S. housing market.
  • A strong majority (71.24 percent) of respondents have plans to expand their businesses next year.
  • Nearly 50 percent of respondents think unit sales will go up in 2017, and 75 percent of those surveyed think that prices will go up.

The Illinois Association of Realtors also prepared their forecast for the state.   If you would like to see the report, click here.  

Basically the IAR forecast positive gains in Illinois, but not so much in Chicago area.  The negative growth rates are likely driven by the trend of declines in the foreclosed sales. 

Forecasts are all very interesting, but the statistic I like to watch is the job market and as it relates to the North Shore, wage growth.  Without a healthy business community, our towns are impacted probably more than much of the rest of the state.  

According to the Bureau of Labor Statistics Employment Situation report, the national unemployment rate edged down to 4.9% from 5.0% a year ago (as of October), while according to the Illinois Department of Employment Security, the Illinois unemployment rate fell to 5.6% from 5.9% a year ago and 29,500 non-farm payroll jobs were created. While professional and business services led the job growth (31,400), manufacturing experienced the largest loss (-10,000).  We still have a higher unemployment rate than the US overall -- although I'm encouraged that professional and business services show job growth.  

I tend to believe that if Illinois created a more business friendly environment, we would see the housing sector take off like is happening in other parts of the US. 

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? Other local agents may have a different perspective than I do, but it’s my feeling that we have a surplus of dated, high end homes and a lack of newer and more moderately priced homes. Many of my clients are looking to downsize and are finding the options wanting.   Many of the younger buyers want newer, more modest homes.  

People often ask, what do today’s buyers want? What are the current trends? BUILDER recently asked real estate professionals to share their thoughts about the top design trends their clients are currently requesting. According to their survey, here are some of the top design trends that real estate pros say are in demand:
· Open layouts
· Neutral color schemes
· Multigenerational floor plans
· First-floor master suites
· No dining rooms
· White kitchens
· Extra-large garages
· Big closets
· Finished basements with 9-foot high ceilings
· Barn sliding doors
With my clients, I haven’t seen the big demand for no dining rooms or barn sliding doors, but I would have to agree with other items listed. If you’re thinking about selling your house, you might want to review this list and see if you can get your house to at least appear to have some of these features. (e.g., purge items from closets, neutralize decorating, remove pieces of furniture to provide a more open feel, etc.) Lately, I’ve noticed a number of sellers have painted dated kitchen cabinets white – the kitchens are looking amazingly fresh – especially in the photographs. Something to consider…

The National Association of Realtors publishes an annual report about home buyers and sellers. This info graphic summarizes some of their findings.   (click on the chart to see it enlarged.)

* * * *

Regardless of the health of the market, my hope for 2017 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 today is best time to move on. Waiting for tomorrow only delays the inevitable.

As some of my readers know, I publish a monthly newsletter, How's the Market? 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 2016, 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 2017!

“Cheers to a new year and another chance for us to get it right.”
– Oprah Winfrey

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