North Side of Chicago Home Sales Crater | Q3 2023 Analysis

Chicago's North Side Market Analysis | Q3 2023

How slow is the current real estate market? We're actually experiencing the slowest market in over a decade, and current data suggests we will most likely slow further from here. Unless for a life-changing event, people simply don't want to move. Buyers are hesitant to purchase with mortgage rates hovering around 8%, and sellers are equally unwilling to give up their historically low 2-3% mortgages. The result is a stalemate, with an extremely slow but relatively stable real estate market. Total real estate transactions on the North Side of Chicago are down 43.5% year-to-date, and current data suggests a continued rough road ahead. Inventory levels (homes & condos listed for sale) are at historic lows, indicating that outside of an unexpected catalyst, the market's slow pace should continue throughout 2023. While each neighborhood's data is unique, the general slow-market trend is both city and nationwide.

In this newsletter, we will dissect the current state of the North Side of Chicago real estate market (defined as North Ave - Lawrence, and Lake Michigan west to Western Ave. Chicago neighborhoods of Lincoln Park, Lakeview, Bucktown, Lakeview, Roscoe Village, North Center & Lincoln Square / Ravenswood), including what's causing the slowdown, current inventory levels, valuations, and our prediction for the remainder of 2023. 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 realtors 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 September 30th, closed real estate transactions on Chicago's North Side declined 33.9% when compared to the same period in 2022. Look at the graph below of monthly sales and note that we're using a 12-month rolling average (month-to-month data is too volatile and may not accurately represent current market trends). You can see the outlier effects of the easing of COVID restrictions in 2021 and 2022, where transactions hit all-time highs. The headline 33.9% 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 volumne, and as you will see in the data and commentary below, contracted properties and inventory levels point to the market slowing even further from here.

The good news is that valuations are relatively stable (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 are hesitant to take on a new 8% mortgage rate, and sellers refuse to part with their rock-bottom 2-3% rates. The result is a stalemate (no one wants to move) with both diminished supply and demand contributing to the slow market we are all experiencing.

_{Closed transactions are down 33.9% for the rolling 12 months ended Sept 30th, 2023}

Inventory Levels | North Side

The inventory of homes for sale (SFHs & condos) is currently so low that it's literally almost off the charts (see below). The current inventory of listed homes is down 31.8% from last year. And this is after 2022's inventory levels were off 36% from 2021. To put this in perspective, there were nearly 2,000 properties for sale on the North Side in 2021. Today we have a total of 682 or a decline of 73% from the peak year of our data series. Low inventory levels are actually good for supporting property valuations as we will see below. As discussed, we anticipate inventory levels to remain low for the foreseeable future.

_{Current inventory off SFH & condo is down 31.8% for 12 rolling months ended Sept 30th, 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. Q3's headline number shows a dramatic 32.8% decline in year-over-year contracts written for SFHs and condos on the North Side of the city. 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 are also down 31.8% 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 the summer months.

_{Contracts accepted are down 32.8% for 12 rolling months ended Sept 30, 2023}

Median Sales Price | North Side

Real estate valuations on the North Side of the city remain relatively stable, despite a statistical 1.0% increase over the 12-month period ending September 30, 2023. This is actually very good news for us considering many areas of the country are experiencing declines of more than 10%. Neighborhoods including Lincoln Park, Lakeview, Roscoe Village, and many of our suburbs are actually seeing an increase in valuations, where demand is outpacing the very limited available supply.

_{Valuations remain stable with a 1% increase for the 12 rolling months ended Sept 30th, 2023}

Market Insights & Outlook | North Side

Persistently high mortgage rates and home prices continue to put off many prospective homebuyers as fears of ongoing inflation, bank sector volatility, weakening economic growth and an impending recession hang in the air. Chicago also has the ongoing issues of increased crime, a lingering remote working environment, and the recent trend of suburban flight that may directly impact demand for Chicago housing. How Chicago fares going forward is difficult for anyone to predict. With so many of us with 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 the 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 demand once again return to more normalized levels.

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.