2021 Forecast – Buying a Home in a Competitive Real Estate Market.
The 2021 North Shore Chicago Real Estate Forecast & 2020 Market Review:
2020 has been a year full of surprises and many challenges. Remarkably, residential real estate especially in suburban areas has done amazingly well. A major indicator that measures the housing supply is the months’ supply of inventory. According to NAR: “Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace.” Historically, six months of supply is considered a normal real estate market. Less than six months’ supply is referred to as a Seller’s market, and more than six month’s supply is viewed as a buyers market.
In Chicago and the surrounding areas (entire MLS area) the supply of homes is around 8 months. This graph illustrates how well North Shore suburban areas, such as Wilmette are doing compared to the City of Chicago.
In Chicago, the average months’ supply of homes has trended downward since 2017, but it is still a buyer’s market in the city with months’ supply of homes around 8 months or more in some areas.
On the North Shore however, homes are selling quickly, with the average months’ supply of homes in Wilmette for properties over $600,000 is now approaching 5 months. This is for all homes over $600,000, including multi million dollar ‘mansions’. Homes below $600,000 will sell much faster, many times within hours of hitting the market if the property is priced right and in move in condition.
This means the home you see now likely will not be on the market in 3-5 months time, with more expensive homes taking longer to sell and most homes that are fairly priced for their condition will sell faster compared to the time it took to sell a few months ago.
In a seller’s market, there is more competition for the same home which can not only cause the home to sell more quickly because there is a larger pool of possible buyers but also can cause prices of homes to increase.
The graph below, which is updated in real time, shows the average percent closed price of a residential property verses it’s asking price. The blue line on the graph reflects home sales over $600,000 in Wilmette IL (60091) for the past 2 years and also shows all residential sales in the Chicago land area reflected by the red line.
How will this effect the 2021 Home buyer?
Most homes that are fairly priced for their condition will sell faster compared to the time it took to sell a few months ago. In a seller’s market, there is more competition for the same home which can not only cause the home to sell more quickly because there is a larger pool of possible buyers but also can cause prices of homes to increase.
How can a buyer prepare for home buying success in 2021?
Now more than ever it is of utmost importance to be an educated and informed buyer. This means being able to ‘pounce’ when you see the right property. Having a real estate agent who can carefully listen, observe and guide you towards your ideal home is of utmost importance.
Dropping the ball and putting off for a day touring your ideal home or not being one of the first to buyers to know about a new house coming on the market right away can mean missing out on putting in an offer. Be flexible with your schedule, see homes you like right away. In a competitive housing market, waiting even a day to tour a home you are interested in might cause the property to go under contract with another buyer before you even have a chance tour and possibly put in an offer.
As a buyer you not only need to be aware of the homes currently on the market, but also what homes are worth and what the average home in your price range looks like so you will be able to be educated and confident enough to know when you are seeing ‘The One’. Doing your due diligence early before you are seriously looking will help you feel confident when you do finally see the right house and you will likely be able to know you are making a good decision and feel confident ‘pulling the trigger’ and submitting an offer.
Steps to take now if you are planning to buy a home in the next year
If you are thinking of purchasing a home in the next year it is a good idea start educating yourself now. Start looking at listings and going to open houses and perhaps even tour a few homes, talk to a banker to correct any credit mistakes and get your credit scores up if needed so you can qualify for the lowest available interest rate when you do go out to buy.
Start a conversation with a realtor.
A good realtor will be able to not only share the most current listings with you and even show you off market private listings (Search Private Listings Here). A great agent will listen to your needs and make recommendations on areas to look and homes to look at in your budget which are most likely to best fit your needs. Your real estate agent should be able to listen to what you want, construct the home in their mind and then once the vision is established, go out the find you your next home in real life.
As a buyer, be patient during your home search. It may take time to find a home you love. Remember you will likely be living in the property for a long time and with ‘unplanned situations’ flaring up from time to time you may be spending a lot of time in the house so it is important to wait for the right property and not settling on a property that does not fulfill your needs.
Once you do find the right property, be decisive. Now is not the time hesitate and think about a home for a few days or even a few hours before putting in an offer if you are interested in purchasing the property. Often in a competitive market homes go under contract and ultimately sell before they even come on the Multi listing service or are seen on Zillow.
What does this mean to sellers?
Realize that, in some ways, you’re in the driver’s seat. When there’s a shortage homes and at the same time there’s a strong demand, the seller is usually in a good position to negotiate. Always be reasonable when you are a seller but in a competitive market a seller is more likely to get their desired price, close date and a contract with less contingencies than in a less competitive housing market.
If you are buying a property and also have a home to sell, a more competitive housing market will also likely make it much easier to sell your current home which will ultimately make it easier to move forward with your life and transition into your new home.
Summary and forecast into 2021
Home prices will likely continue to rise at a modest rate or stay at present levels. The inventory levels for homes on the North Shore of Chicago will likely stay the same or go down with the average time on market for homes continuing in its downward trend.
Expect more competition when bidding on a home and plan to go in with a strong offer if you you really want the property. This is not a time for ‘lowball offers’, and a protracted negotiation process. A strong initial offer will increase the probability for the seller to say ‘Yes’ quickly with minimal back and forth. The faster the negotiation period, the less opportunity there will be for other possible buyers to become interested in the home and possibly submit competing offers.
Many homes are now sold under multiple offer situation. Having the highest price does not always win the deal. Many times flexibility with close dates and other contingencies can win a buyer the house over another offers.
Call or contact me to if you have any Real Estate questions ~ I look forward to helping you.
Tara Lubin | Jameson Sotheby’s International Realty