This article was written by Nichole Veihman, a local mom and real estate agent with @properties. So thankful for expertise as many of us may be wondering how Covid is changing the real estate market.
I get lots of questions about the western suburb real estate market during this COVID pandemic. People are unsure about so much right now, but surprisingly, real estate doesn’t have to be one of them. I wanted to share some insight on the market and changes in real estate related to COVID, so you can see if now is the right time for you buy or sell.
Are we heading for a 2008-like crash?
People are worried that as a result of the shelter in place order, we will be looking at a financial crisis like 2008. However, there are some key indicators in the data that show us that in regards to real estate, we don’t anticipate a crisis.
• Leading up to the crash of 2008, mortgage standards and home prices in general, were both out of control, which eventually caused a crash. Today, mortgage standards have never been more stringent and our home prices (especially in Chicago) have stayed very level, both leading up to COVID and now.
• As mentioned above, housing was the catalyst for the crash in 2008. Here, we are in a healthcare crisis, not a housing crisis.
• We have about ¾ more equity in our homes now than we in did in ‘07 and ‘08, which leads to a more stable market. In 2008, there was $824B worth of US home debt, today we have $232B in debt.
• Currently we are experiencing low inventory and high demand, which keeps the prices steady. The opposite was true in the crash 12 years ago. In 2007 we had 8.2 months supply of inventory, today we have 3.1 months.
Western Suburbs Market Outlook
The Chicago market, in general, is a very stable compared to the coasts, like NY and LA. Our prices don’t fluctuate with every little move in the economy, which has helped us to maintain that stability, even through this pandemic. The data on this topic, (that is released so far), shows us that:
• Showings and contracts have gone down, but homes are still selling. People still have to move, so those serious buyers have been out looking and buying in the spring. One data point for the La Grange market during April showed us that showings were down 80% but contracts were only down 50%.
• There is now pent up demand. Those people that wanted to move this year, but didn’t have a certain timeline, have temporally put their search on hold. But now people are getting back out into the market and starting their search or listing their home. We anticipate a very busy summer of real estate, since the spring market was depressed.
• We have not seen buyers getting major housing deals because of COVID. Our stable market has been holding, so buyers hoping for a steal during this pandemic will be let down in most cases. Of course (as with the market at any time) there is always a seller who needs to get out and someone will get a deal, but you won’t see COVID fire-sales happening regularly.
• Market in May already seems hot. I have seen multiple offers on certain price points, things being sold off the private network and a competitive market. Now, more than ever, is the time to have a local and savvy agent.
New changes for real estate, here to stay?
COVID has brought changes into every aspect of our world, and real estate is no exception. Though we are all waiting until we can again operate as normal, there are some changes that may stick around. It has taken a pandemic to start some of these, but perhaps this is the way we should continue. I think people will appreciate these new practices and efficiencies as they get back to their busy lives.
• Virtual closings and curbside closings are finally taking place, making the long, in-person, sitting at the table, closing, less appealing.
• Less traffic in homes has been a huge change. The process of searching for a home the past 10 years, has always started online, looking at pictures. But now during COVID, that online process continues with virtual tours and Facetime walkthroughs. So before stepping foot in a home, buyers have vetted the pictures, floorplan, location, street, size of tub in the bathroom and height of the celling in the basement. This is a safer and more efficient buying system for both sides.
• Increased use of video has helped people really feel like they are in the home without stepping foot inside. Having video walk through’s of the floorplan and doing virtual open houses have become very common.
• New home needs after COVID. We anticipate seeing an increased need for home offices as more and more companies are allowing people to work remotely. Instead of setting up at the kitchen table, people will be looking for a separate and quiet place to work. Also, we may see the number of buyers who need walk to train locations go down.
• We believe we will see an increased demand for vacation properties in the coming years. People who have been thinking about a second home may now take the leap, knowing for the next few years vacations may be halted and activities, camps and pools are cancelled or closed. In fact, if people can now work from home regularly, we will see people migrate permanently to Indiana, Michigan and Wisconsin for a slower pace of life, lower taxes and more affordable housing.
Closing thoughts
If now is the time in your life that makes the most sense to move, still go for it! You can successfully buy and sell for market value and do it safely. If you can wait a year or two for the dust to settle, and that will put you more at ease, that is also a great approach and we anticipate the market to continue to be stable.
