Housing Market Now Split In Two
The luxury market has a very different story than the one for more affordable homes.
CHICAGO—Prices steadily increased last month throughout the metropolitan Chicago housing market, an echo of the numbers recorded in May 2017, RE/MAX reports. But the firm also found that the market has essentially split in two, and the luxury market has a very different story than the one for more affordable homes.
“There is an extraordinary amount of inventory for luxury homes,” Paul Wells, a real estate expert with RE/MAX in Barrington, IL, tells GlobeSt.com. But few moderately-priced homes, meaning those costing less than $550,000, are hitting the market. And for those that do go up for sale, the market “is on fire,” with multiple offers coming in for many properties. “I have seen as many as 10, 12 or 15 offers on some houses.”
Total home sales in the seven-county region totaled 12,186 units, down -1.2% from the same month last year, while the median sales price gained +2.8% to $256,000, according to RE/MAX. The May median price is the highest for any month since June 2008 and the highest for any May since RE/MAX began tracking that data in 2005.
RE/MAX uses sales data collected by MRED, the regional multiple listing service. It covers homes in the IL counties of Cook, DuPage, Kane, Kendall, Lake, McHenry and Will.
The overall lack of inventory means one notable difference between last May and this May was the amount of time homes spent on the market. The May average fell -8% to 71 days, down from 77 days last year.
The current inventory of homes priced under $550,000 equals a supply of four months or less based on the pace of May sales. Sales in those categories fell 314 units, compared to May of last year, a -2.4% decline. In contrast, the number of homes selling for $550,000 and above increased by 60 units, or +4.7%, while inventory in those categories now range from a 5.1-month supply to as high as a 25-month supply.
“Our rule of thumb is that when we see a less than six-month supply, it’s become a seller’s market,” Wells says. “If it gets to nine months or more, it’s a buyer’s market.”
“I still believe the average person is not comfortable with the economy,” Wells adds. And many are also reluctant to put their homes up for sale. The lack of moderately-priced homes has in some ways become a vicious circle as many feel they won’t find a replacement home. Furthermore, “there is very little new construction.”
Still, “it’s all very good for homeowners, because it’s driving up prices.”