2023 Year-End Analysis | Northside Chicago

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 Chicago's North Side Market Analysis | 2023 in Review

In this newsletter, we will dissect the current state of the North Side of Chicago real estate market (defined as North Ave - Foster, and Lake Michigan west to California Ave.) Chicago neighborhoods of Lincoln Park, Lakeview, Bucktown, Lakeview, Roscoe Village, North Center, Irving, and Lincoln Square / Ravenswood), including what caused the historic slowdown in 2023 transactions, current inventory levels, valuations, and our prediction for the 2024 selling season. Let's get started and dive into the numbers...

Who doesn't love data? We certainly do, which is why we pay such close attention to Chicago's housing trends and the analysis that will be discussed below. It's impossible for us to truly work in your best interest without a deep understanding of the data that leads to real-world housing supply and demand fluctuations. While the data below supports a macro or high-level look at the current state of the North Side of Chicago real estate market, it's even more critical to analyze similar data in the specific neighborhood and the property type you hope to buy or sell. We're happy to share our knowledge, experience, and analytical skills. Contact us today if you have specific questions on Chicago or suburban real estate. Our team is here to assist.

Closed Sales | North Side 

As of December 31, 2023, closed real estate transactions on Chicago's North Side declined 29.5% when compared to 2022. Look at the graph below of monthly sales and note that we're using a 12-month rolling average. You can see the outlier effects of the easing of COVID restrictions in 2021 and 2022, where transactions hit all-time highs. The headline 29.5% year-over-year decline in sales is less dramatic when you consider 2021 & 2022 as outlier years. Yet we are still at decade lows in sales volume, and as you will see in the data and commentary below, contracted properties and inventory levels point to a continued slow start for closed transactions in 2024. 

The good news is that valuations are stable and continue to rise - depending on the property type and specific neighborhood (covered below). The reduced demand we are experiencing - due to higher interest rates and market uncertainty - is more than offset by historically low inventory levels. Buyers hesitated to take on a new 8% mortgage rate, and sellers refused to part with their rock-bottom 2-3% rates. The result was a stalemate (no one wants to move) with both diminished supply and demand contributing to the slow market we experienced.

_{Closed transactions were down 29.5% in 2023 when compared to 2022}

Inventory Levels | North Side 

The inventory of homes for sale (SFHs & condos) is so low that it's literally off the charts (see below). The current inventory of listed homes is down 33.1% from last year. And this is after 2022's inventory levels were off 36% from 2021. To put this in perspective, there were nearly 1,700 properties for sale on the North Side in 2021. Today we have a total of 617 or a decline of 65% from the peak year of our data series. Low inventory levels are good for supporting property valuations as we will see below. As discussed, we anticipate inventory levels to remain lower than normal but to increase as we move into 2024  

_{The current inventory of SFH & condos is down 33.1% in 2023}

Contract Activity | North Side 

Home contract activity, when combined with current inventory levels, is easily the most important data to analyze if you hope to fully understand the current state of the real estate market. 2023's headline number shows a dramatic 27.1% decline in year-over-year contracts written for SFHs and condos. While this number alone is eye-popping and a potential risk to future valuations, it's less of a concern when you consider inventory levels were also down 33.1% over the same period. Higher interest rates and lower inventory levels are the catalysts for the steep reduction in real estate transactions Chicago's market is experiencing. This decrease in contracts written is not an indication of direction on valuation (at least not yet), but it does indicate that closings will once again be well below historic norms as we move into 2024's selling season.

_{Contracts accepted were down 27.1% in 2023}

Median Sales Price | North Side 

Real estate valuations on the North Side of the city remain relatively stable, with a 5% increase in the average sales price of a home over 2023. Neighborhoods including Lincoln Park, Lakeview, Roscoe Village, Old Irving and many of our suburbs have experienced steady increases, while areas directly surrounding the loop continue to lag and are reporting slight declines in valuations. 

_{Valuations remain stable with a 5% average increase in 2023}

Market Insights & Outlook | North Side 

Persistently high mortgage rates and home prices sidelined many prospective homebuyers in 2023. Fears of ongoing inflation, bank sector volatility, weakening economic growth, and a possible recession caused many buyers to pause. Chicago also faced the ongoing issues of increased crime, a lingering remote working environment, and the recent trend of suburban flight that all impacted demand for Chicago housing. How Chicago fares in 2024 is difficult for anyone to predict. With so many holding historically low 2-3% mortgage rates, I anticipate many owners will choose to stay put and not sell unless they absolutely must. Others may decide to rent their homes and cash flow their low mortgage rates. All variables above point to continued low inventory levels going forward (lack of sellers). This same lack of inventory may ultimately be the catalyst for increased valuations should mortgage rates continue to moderate, causing buyers back into the market.  

We are here to assist... If you are in the market to buy or sell a home please contact us. Our goal is to educate, communicate, and execute to the best of our abilities. We will work tirelessly to ensure your next real estate transaction is a complete success. 

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