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2023 Real Estate Market Forecast by Chris Katsulis
Dated: January 24 2023
I am excited for the year ahead, and appreciate the opportunity to share some of my thoughts and insights on our local Chicago market. As is the case in any shifting market, a clear understanding of local data and information is key to forming a successful strategy, and this year that is more important than ever. As one of my colleagues said to me, “we don’t look at the national weather report when deciding what to wear and real estate is no different. Local data is key to making informed decisions.”
Looking back to 2022, it was really a tale of two markets. The first six months accounted for nearly 70% of the written contracts for the year on the north side of Chicago and the second six months were about 30% slower than the same time period in 2021. While real estate is almost always subject to some seasonality, this was a significant difference in the first half of the year versus the second half. Coming off of a market wide record year for transactions in 2021, it is not surprising to see total transactions pull back but the pace of change was noticeable.
Median sales price remained stable, increasing for the year overall and stabilizing over the last few months. Many buyers are waiting for prices to fall quickly and dramatically, and while that may happen in other markets, that will not be the case here. We had a steady increase in median sales price over the last two years, but nowhere near what some other areas of the country saw. As such, the supply and demand fundamentals that remain in place do not support the idea that we will see a dramatic reduction in prices.
For much of the year, tight inventory and strong demand drove multiple offers, and I would expect a similar story heading into spring of 2023. More than ever before, it is crucial that we connect as soon as possible to discuss any real estate plans you may be considering to ensure we have the right strategy in place to help you reach your goals.
Like any marketplace, Chicago’s housing market is driven by two primary forces — supply and demand. Let’s take a look at where we expect those factors to be as we head into 2022:
Two big stories will carry over into 2023 that impact demand - mortgage rates and inflation. While rates have come down over the last month (currently about 6.5% for a 30 year fixed rate mortgage), the health of the overall economy and the cost to borrow money will be a continued story.
Conventional loan limits once again increased at the end of 2022 to $726,200 increasing the purchasing power of borrowers for a conventional loan.
Overall, people have more clarity on what “return to work” looks like for their given situation. In many cases, that means that a hybrid schedule will necessitate a more permanent home office solution and thus a need for more space.
The often discussed millennial buyers are now 26-42 years old and entering their peak life change years with marriages, growing families, etc. Combine that with the significant increases in rent, and I believe that purchase demand will remain very strong in 2023.
There are many buyers that were not able to purchase in 2022 given the lack of inventory. Those buyers are still in the market and even with higher interest rates, they are ready to act.
Chicago continues to have an inventory challenge. On the north side of Chicago, we finished 2022 with 2.2 months supply of attached homes (condos/townhomes) and 1.7 months supply of detached (single family) homes. A balanced market is typically 5 – 6 months supply of homes for sale and we continue to operate well below that level.
There is no clear path to a dramatic increase in supply. The cost of land, construction materials and labor will continue to make new construction opportunities more challenging. In addition, many potential sellers that are considering downsizing may sit on the sidelines until interest rates come down a bit more. Many of those sellers have mortgage loans below 3% and the financial motivation is not there to make a move.
Condition matters. While buyers are out there and ready to take action, it is important to prepare your home to be positioned correctly in the market. Most buyers are looking for turnkey, clean and well maintained homes. Buyers are willing to push their budget/pay at the top end of their budget for move-in ready homes, especially if it means not having to deal with contractor and supply chain delays for renovations.
Overall, I’m extremely optimistic about Chicagoland real estate, and I think 2023 will bring another very productive real estate market. Now more than ever, it is important to have a savvy real estate broker on your side to help develop an agile and realistic real estate strategy.
As always, I am here to support your real estate goals and am happy to discuss your specific strategy. I encourage you to reach out to me with your questions and share this letter with your friends and co-workers who may be interested in this information as well. I truly look forward to connecting with you!
Best Wishes in 2023,
P.S. Before you buy, sell, and/or invest in real estate anywhere in the country, let me know and I can get you plugged into the right resources with top brokers in Chicagoland or world-wide.
A Chicagoland native and expert, Chris Katsulis is a real estate specialist and consultant who combines a background in finance, an entrepreneurial spirit, and a genuine commitment to his clients in ....
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I am excited for the year ahead, and appreciate the opportunity to share some of my thoughts and insights on our local Chicago market. As is the case in any shifting market, a clear understanding of