What to Know When Purchasing a Home in the Current Market
The year 2019 was a buyer’s dream for the Chicago real estate market due to falling interest rates, especially for the first seven months or so. In August, for example, the number of homes sold was down seven percent year-on-year.
Toward the end of the year, however, the housing sector bounced back, although very slowly despite the property taxes, political instability, and the fears about a recessionNevertheless, homebuyers were still able to dictate the direction of the negotiations and walked away with substantial discounts from the listing price.
Now, Chicago started to gain traction in January this year, and you can hear the collective sigh of relief from real estate investors. For instance, nearly 5,800 homes were sold in January 2020, which translates to a 9.5% increase over the past year.
Then the coronavirus happened. As of the latest data, there are more than 180,000 positive cases in the United States, more than any other country in the world, including China, where it originated. The spread of the virus is unprecedented in scale and stoked fears into the hearts of everybody. Unfortunately, it turned the real estate market upon its head, not just in Chicago but throughout the country. But there is hope and the market is looking to rebound.
What’s selling in Chicago?
The median housing value in Chicago is $246,933, with the average price of $243 per square foot, according to Zillow. At the start of the year, the market was forecast to grow by 3.2% by the end of 2020. The projected rate remains unchanged for now.
Since last year, the demand has always been for mid-sized and small-sized properties rather than luxurious homes. For example, the inventory for homes over the median price is selling more than 100 days on average. For homes under the median housing value, they stay on the market for an average of two months or less. The reason is apparent: the number of Millennials buying their first home is on the upswing. In the same vein, the number of baby boomers who are downsizing is also increasing. And they are both competing for the same bargain home.
Opportunities in Uncertain Times
Real estate agents are stepping up to think creatively and to implement strategic marketing initiatives amid the coronavirus.
Open houses have been canceled as part of the physical distancing policy. Everybody is told to stay home as the economy shuts down. But it does not mean that you should stop house hunting. Real estate agents are still showing houses to prospective buyers, as long as there is not a crowd.
Also, we can make use of technology by giving virtual tours of the property. You can stay in the safety of your homes while you visit properties online through your smartphone.
It is ultimately the best choice for everyone, including real estate agents who also have to worry about their health.
According to the National Association of Realtors, buyer traffic and seller traffic are both down. It is understandable as everybody is in a wait-and-see mode. The group projected a 10% decrease in home prices. As interest rates hover at their historic low and perhaps continue to drop there will be opportunities for buyers in every price point.
Here are some of the advantages and disadvantages of purchasing a home in these uncertain times:
PROS
- Federal interest rates are down to zero, which means the mortgage would be the friendliest in years. It is the best time to buy your first home as you can better budget your resources.
- Sellers are willing to take a price cut as inventory stays on the market longer.
- The uncertainty would not likely last long, based on the experience of the other countries. The economy will correct itself.
CONS
- 3D virtual tours are nice but buyers cannot closely inspect possible defects. Critical to have an agent you trust and who has your best interests at heart.
- The economy is in flux, which means jobs are not as stable. There are already reports of massive retrenchments. What happens if you lose your means of income, and you have a mortgage to pay?
- Lending conditions are tight. If your debt-to-income ratio is higher than 40%, your mortgage application may not likely be approved.
Conclusion
The real estate market in Chicago has not braked to a full stop. However, people are anxious.
What lies ahead of the real estate sector depends on how serious this administration is at implementing policies and regulations to contain the coronavirus. But we can take comfort in the fact that China and some countries that were hit earlier have already restarted their lives. It would not likely be a repeat of the housing crash in 2008, where everything had to start from scratch.
In conclusion, if you have saved enough to absorb the short-term impact, this is the best time to buy that dream home in Chicago.
