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Monday, January 1, 2018

How's the Market? End of Year Recap for 2017

Happy New Year! 2017 was certainly a year to remember.   I hope your 2017 was a year of blessings and much happiness.  

I had a wonderful year both personally and professionally.  It was a great year with my business as I end it on an upbeat note by moving to @properties in Lake Forest.  And personally, it was also great fun with my cross-country trip on Route 66.  
That said, events in the world seem to be a bit more uneasy with challenging weather conditions and unpredictable national leaders.  This article highlights many of these events,  Biggest Housing Stories 2017: The News That Rocked the Real Estate World.  

Probably the one story that will impact us most is the recent passage of the modifications to the tax code.   What does it mean to us?  The Trib outlined some of the impact to residents in How the tax bill impacts homeowners, buyers and sellers
While all real estate is local, we’re not immune from world events so it makes for interesting conditions coming into 2018.
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, 2018.  (Just 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.)
(To see a chart more clearly, click on each one to enlarge.)

The North Shore housing market did quite well in 2017.  The big news is Glencoe and Kenilworth.   Glencoe saw an uptick in the volume of units sold, while Kenilworth increased both units sold and the median price went up.   Good news all around.   While Northfield and Winnetka had strong showings as well, the median prices dropped somewhat.  

Every community has its own story and you can analyze the numbers to draw your own conclusions.   
This leads me to the next two charts.  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.

With single family homes, inventory levels dropped in every community this year except Evanston.   With the exception of Lake Forest and Kenilworth there is actually a scarcity of inventory.   It appears the market has pretty much recovered after so many years of challenges.  With the exception of Lake Forest, we have a real shortage of attached housing in all the communities.     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 lakefront property in Wilmette on Linden Avenue. 

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 2017.   Kenilworth was the big winner – they cleared out a substantial number of the high-end homes and are left with a significantly reduced inventory level.  

Currently Active

Under Contract

Sold in 2017

Month’s Inventory
Highland Park
Lake Forest
Lake Bluff

With the new administration in Washington and Illinois's fiscal realities one hates to predict what's going to happen in 2018 – 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.  One that I thought was worth sharing was from Trulia.
This year brought a new political administration, and all the changes that came with that, an onslaught of natural disasters and a period of the lowest level of homes for sale on record.
All of this will change the climate for the housing market going into 2018, according to the latest research report from Trulia.  They commissioned a survey of more than 2,000 Americans 18 and older to determine their housing thoughts in the year ahead. 

In order to determine what changes to expect in 2018, Trulia commissioned a survey, conducted online by Harris Poll of more than 2,000 Americans ages 18 and older, about their housing sentiments, hopes and fears in the year ahead.

According to the survey, Americans are less optimistic about home buying. About 25% of respondents say 2018 will be a better year to buy a home than 2017, while another 25% say it will be worse. And only 10% answered that they plan to buy a home within the next 12 months.

However, what they lack in enthusiasm about buying a home, Americans make up for in their belief that now is a good time to sell a home. About 31% of Americans say 2018 will be a better year to sell a home than this year was, versus just 14% who say it will be worse. This represents the second highest gap since Trulia began asking the question in 2014.

Probably because of the natural disasters in the U.S. this year, many Americans, a full 39%, said they are more concerned about the potential threat of a natural disaster affecting their home.

Therefore, based on the results of this survey and other research, Trulia made these predictions for housing in 2018:
·       The majotax overhaul will shift burdens for homeowners, cooling home prices especially amid high-cost coastal areas. However, Trulia also forecasted that the doubling of the standard deduction will boost housing demand in the Midwest and South.
·       The homeownership rate will continue to rebound as Gen Xers transition back into the homeownership market and Millennials enter for the first time.
·       The South and Midwest will see the most growth in 2018 in cities such as Grand Rapids, Michigan; Nashville, Tennessee and Raleigh, North Carolina.  

(The Top 10 Growth Markets according to the NAR include Las Vegas and Dallas.   See their complete list at The New Gold Standard: 10 U.S. Housing Markets That Will Rule 2018. published it's annual forecast of key housing indicators:

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

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 4.1% from 4.9% a year ago, while according to the Illinois Department of Employment Security, the Illinois unemployment rate fell to 4.7% from 5.6% a year ago.
In the last 12 months, Illinois has added 18,200 jobs. Illinois’ employment growth rate for the last 12 months was less than one-quarter that of the U.S. as a whole.   

We continue to have a net decrease in population, which is a little troubling.  “Illinois is among just eight states to lose residents, putting its population at 12,801,539 people, its lowest since about 2009. Illinois' population first began to drop in 2014, when the state lost 11,961 people. That number more than doubled in 2015, with a loss of 28,497 people, and further multiplied in 2016.” Source: Chicago Tribune

While all these population, unemployment and wage growth factors give me pause, I think 2017 was a good year on the North Shore.   It feels like things are improving and we’re coming into 2018 on positive note. 

People often ask, what do today’s buyers want? What are the current trends? 
BUILDER recently put together a list of new design trends for 2018.  Some of the things cited include:
  • Mixed materials - “a vast assortment of mixed metals, integrated color combinations, the use of lush textures”
  • Spaces that sizzle – “experiences are driving space planning and design”
  • Colors continue to change – “Warm neutrals, including taupe-tinted grays, are becoming increasingly popular; deep exotic hues… deep purple, hunter green or rich navy…black is back”

Realtor Magazine also called out their design trends for 2018.   A few of the things listed include. 
  • Smart homes
  • Smart Glass
  • Spiritual Gardens That Lift the Soul
Read the article to get the complete list: What's Hot: Trends in the Pipeline for 2018 

Annually the National Association of Realtors publishes profiles about the buyers and sellers. This chart summarizes their findings:

*  * * *

Regardless of the health of the market, my hope for 2018 is that people move and change homes based on what is in the best interest of their own families. I’m a strong 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 2017, a very successful year for me.
As the saying goes, "Home is where our stories begin." As a real estate broker, there is no greater honor than having the satisfaction of knowing, you’ve made a difference in peoples' lives and helped people with their move.  Last year my clients downsized, transitioned and created new chapters in their lives.   It was interesting to hear their stories and I look forward to 2018 to help more folks again!

Wishing you and yours all the best in 2018!
“Tomorrow, is the first blank page of a 365-page book. Write a good one.”

― Brad Paisley

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