Market Conditions From Redfin: Midwest Cities Cooling the Least As Rates Hit 6%+
Redfin recently put out data indicating which housing markets are cooling the most, and the least.
Seattle, as you might imagine, is one of those cooling the most now that rates have hit 7%. Seattle’s median price is high and many buyers are now priced out.
But in Chicago, and the Midwest, in general, housing is more affordable. That means, in these metro areas, home prices aren’t cooling as much.
Chicago, and two suburban areas, made the top ten list of those holding up better.
From Redfin:
Lake County, IL–located about 45 miles north of Chicago–is holding up better than any other metro in this analysis. It’s followed by Albany, NY and Chicago. Rounding out the top 10 are New Haven, CT, Milwaukee, New Brunswick, NJ, Elgin, IL, Bridgeport, CT, Pittsburgh and El Paso, TX.
That’s according to a Redfin analysis that ranks the 100 most populous U.S. metropolitan areas based on how quickly or slowly they’re cooling, according to changes in numerous metrics from February 2022 to August 2022. Those metrics are prices, price drops, supply, pending sales, sale-to-list ratio and speed of home sales. The housing markets holding up best are those that are cooling slowest.
It helps that the Midwest has a bunch of affordable housing. Many cities don’t have homes for sale under $300,000 anymore.
The lower the home price, the lower the dollar impact on monthly mortgage payments. With today’s 6% mortgage rates, the typical monthly payment on a $310,000 home–Chicago’s median sale price–is $2,000. That’s up from about $1,600 with the 3% rates common at the beginning of the year–a sizable increase, but smaller than the $1,100 monthly-payment uptick on the typical home in Seattle, where the housing market is cooling quicker than any other U.S. metro.
Interestingly, even with higher mortgage rates, demand hasn’t dropped as much in the Chicago metro area but it has ground to a halt in other cities. There are still some buyers looking.
Is it our affordability?
Is it a strong job market?
Crain’s recently had an article about the sale of the house in Hyde Park that was owned by Bill and Melinda Gates. It went under contract in just 9 days and sold for more than they paid for it when their son started college at the University (he has now graduated so they sold.)
Inventory is still low in many neighborhoods and for certain types of housing, such as single family homes.
Here are some current inventory levels. These are homes on the market and NOT under contract/pending per Redfin.
- Lakeview: 407
- Wicker Park: 84
- Logan Square: 120
- Lincoln Park: 346
- Hyde Park: 96
We’ve chattered about how inventory is much higher in downtown neighborhoods, especially the Gold Coast.
But even with rates at 7%, inventory is not surging. Many properties are selling quickly because there isn’t enough on the market and some buyers ARE looking.
The South Loop was the epicenter of the housing bubble in Chicago, with thousands of new condos built. The national press called the South Loop the hottest neighborhood in the country during that time as condo tower after condo tower went up.
In September 2022, there are just 380 properties on the market.
Chicago didn’t see the huge price appreciation and boom like cities in Florida, Texas, Nevada and the Carolinas saw during the pandemic.
Will this be a blessing in disguise with 7% mortgage rates?
Affordable Midwest and East Coast Markets are Holding Up Best as the US Housing Market Cools [Redfin News, by Dana Anderson and Sheharyar Bokhari, September 27, 2022]
Let me know when Millenials are going to move out to Archer Heights or Brighton Park to get one of those $310k homes
About 17% of deals in Chicago (Aug) are falling out of contract – Bullish?
“But even with rates at 7%, inventory is not surging. Many properties are selling quickly because there isn’t enough on the market and some buyers ARE looking.”
Why would anyone expect inventory to surge? People (Despite your assurances) arent going to trade down to by a property. Whats “Many”. There’s always lookers, bigger question is what they’re qualified for
“The South Loop was the epicenter of the housing bubble in Chicago, with thousands of new condos built. The national press called the South Loop the hottest neighborhood in the country during that time as condo tower after condo tower went up.
In September 2022, there are just 380 properties on the market.”
LOL – Appreciation has been horrible in SL and good luck selling
https://www.zillow.com/homedetails/2024-S-Wabash-Ave-APT-206-Chicago-IL-60616/60271208_zpid/?
Sub $300k condo iN ThE CitY wHErE All ThE MiLleNnEAlS aND GEnZ WanT tO lIvE . Why havent buyers snatched this up?
I wonder how all those Bronzeville “developers” you liked to hype are doing these days?
It would be nice to see some humility and/or shame from the Shills
“Seattle’s median price is high and many buyers are now priced out.”
“Is it a strong job market?”
Compare types of jobs/industry in Seattle vs. Chicago and effects of interest rate policy on those industries.
Too many in Seattle (and the West Coast overall) are having their stock vest at much lower values (or stock options expire out of the money), have been told bonuses will be down (stock + cash) and management has stated internally or publicly shape-up or ship-out.
It’s not that people are now “priced out” it’s that people thought their stock compensation was real money prior to it vesting and subsequently liquidating to cash to buy an asset or worse leveraging the vested stock to buy the house and receiving margin calls.
“With today’s 6% mortgage rates, the typical monthly payment on a $310,000 home–Chicago’s median sale price–is $2,000. That’s up from about $1,600 with the 3% rates common at the beginning of the year–a sizable increase, but smaller than the $1,100 monthly-payment uptick on the typical home in Seattle,”
It’s all relative. Redfin says median home price is $840K in Seattle. Their “incomes” were and are much higher in order to qualify. The average person purchasing the $310K home in Chicago is just as impacted by a $400 increase as the Seattle buyer is impacted by the $1100.
The reason why Chicago is perceived as doing “better” now is because it was doing “worse” compared to everywhere over the past decade.
It will be also worth watching if there’s an impact of the Chicago Housing Market with the delayed property tax due dates. People will be paying a tax bill in December and then another one 60 days later in February – at the same time as they finally find out how much their assessment went up and Lightfoot looks to increase property taxes on all with the 2023 budget.
Hopefully too many aren’t caught off guard having a liquidity crunch at the beginning of the year.
The midwest is cheap for many many reasons, the insanely high property taxes in Chicago and Illinois are just compounding the issue. They aren’t helping your real estate value that’s for sure. 7% 30 year conforming rates… lol I would absolutely hate to be a seller right now, yikes
Fed has to pause soon or else this will be real ugly real fast (and of course call for a few more trillion of bailout dollars to the big banks, sigh)
“7% 30 year conforming rates… lol I would absolutely hate to be a seller right now, yikes”
Ken Griffin just sold one of his 4 penthouses. Have only been on the market for a month or so. Wow. Obviously, that buyer doesn’t care about mortgage rates, most likely.
Also just talked with a friend who is selling a house suddenly near Philadelphia due to a job transfer. First weekend had 20 showings and 10 offers. Rates were in the 6s during all of this.
The economy is strong. People are working and feel good. They have to live somewhere and inventory is low. They will still buy homes.
Chicago is affordable. No one is priced out here even with high rates.
“Why would anyone expect inventory to surge?”
Sales have crashed 50% or more. Usually that would lead to rising inventory.
“LOL – Appreciation has been horrible in SL and good luck selling”
Yet, everything IS still selling there and there is nothing on the market. If it was a “bad” market, inventory would be rising in the South Loop like it is in the Gold Coast and River North. But 380 properties isn’t even one new apartment high rise.
Over 8,000 apartments were absorbed in the first half of the year. What happens when some of those people want to buy property?
It is still red hot in the housing market. It has seized up with higher rates but the low inventory is going to put a big floor under the market.
“Let me know when Millenials are going to move out to Archer Heights or Brighton Park to get one of those $310k homes”
Someone is, right? There aren’t hundreds of homes on the market in Brighton Park.
Currently 42 on the market, 25 are under contract/pending and 62 have sold in the last 3 months. Seems pretty healthy in that neighborhood.
With mortgage rates this high, I would feel stuck if I wanted to sell. I’m happy I sold last fall against the advice of my agent. I would be stuck now if I hadn’t sold because I wouldn’t have been able to afford a mortgage interest rate of 6% or more. I wouldn’t sell my house now, but I don’t feel stuck because I’m happy here.
My friends who were thinking of selling are going to wait because they either can’t afford a higher interest rate or simply don’t want to pay a higher rate than their current rate.
I don’t see inventory increasing until unemployment spikes and people are forced to sell. I suspect that some of today’s buyers assume that they will be able to refinance after a few years without realizing that refinancing is expensive. I also wonder what % of buyers now are paying cash vs before this interest rate increase.
“Ken Griffin just sold one of his 4 penthouses. Have only been on the market for a month or so. Wow. Obviously, that buyer doesn’t care about mortgage rates, most likely.”
Because the UHNW folks are the best proxy
“The economy is strong. People are working and feel good. They have to live somewhere and inventory is low. They will still buy homes.”
You cannot be serious
So renting is no longer an option?
“Someone is, right? There aren’t hundreds of homes on the market in Brighton Park.
Currently 42 on the market, 25 are under contract/pending and 62 have sold in the last 3 months. Seems pretty healthy in that neighborhood.”
Yeah, lots of buyers ditching their RN 2/2 and moving to AH
Clowm
“Yet, everything IS still selling there and there is nothing on the market. If it was a “bad” market, inventory would be rising in the South Loop like it is in the Gold Coast and River North. But 380 properties isn’t even one new apartment high rise.”
So selling for a loss is now a positive sign
“If it was a “bad” market”
Isn’t “bitterly cold” the description of a bad market?
https://cribchatter.com/?p=28724
“RN 2/2 and moving to AH”
Clear upgrade.
QED.
“Fed has to pause soon or else this will be real ugly real fast (and of course call for a few more trillion of bailout dollars to the big banks, sigh)”
What the Fed started in March (announced in November of last year) is having the intended effect. Powell said in August “there will be pain.” So if you and others believe or experiencing it getting “ugly” that is the goal. Unless something “breaks” (See UK and the BofE) the Fed is not pausing anytime soon.
It may start doing 50 bps hikes each in November and December instead of 75 bps and may move to 25 bps hikes next year along with additional QT but they aren’t pausing.
If something does “break” it’s likely not going to be a Bank it’s going to be a Non-Bank (hedge fund, pension fund, insurance fund, non-Agency MBS holders, Non-Bank Lenders, etc.). Could also be some poor treasury auctions as well.
There’s been plenty of Non-Bank Mortgage Lenders that have already gone out of business since summer in the US since the loans they originated dropped in value before they could sell along with their credit lines being cut and margin calls occurring.
https://www.bloomberg.com/news/articles/2022-08-19/mortgage-lenders-are-starting-to-go-broke-as-loan-volumes-plunge
“So selling for a loss is now a positive sign”
If you MUST sell, then, yes, you are happy to go under contract.
People are living JohnnyU. They don’t sit in their basements on a real estate blog everyday. They are getting married, divorced, dying, getting job transfers, retiring, having families. Needs change.
It’s a good sign that things are holding up okay in Chicago. We didn’t boom and we’re not going to bust.
“Yeah, lots of buyers ditching their RN 2/2 and moving to AH”
I don’t understand this comment. Millennials are Millennials. They are buying everywhere now.
It’s a good sign that there are still middle class neighborhoods in Chicago and sales are brisk in them, even with high mortgage rates.
“Because the UHNW folks are the best proxy”
In case you didn’t know, Chicago is a hellhole. Supposedly, it’s doomed. People are leaving the city, and state, in droves.
Shouldn’t smart money be doing so too? Instead, $20 million condos are selling.
LMFAO.
Just another thing the bears on this site have gotten so, so wrong.
Where is Bob the Bear, by the way? He is missing still. His “dream” of massive foreclosures occurring once the foreclosure freeze was ended didn’t happen so now he waits for…something.
Because higher rates aren’t pushing prices down in Chicago. Not yet. We need inventory for that.
“I don’t see inventory increasing until unemployment spikes and people are forced to sell. I suspect that some of today’s buyers assume that they will be able to refinance after a few years without realizing that refinancing is expensive. I also wonder what % of buyers now are paying cash vs before this interest rate increase.”
Good questions Jenny. We will have to wait and see how it all plays out.
I suspect it’s going to matter how long the rates stay “high.” We have been trained to just “wait” 6 to 9 months and rates will go back down but what if they don’t this time? Many people probably not willing to wait a year or more to buy a house. We could see people using 10-year ARMs in order to get a lower rate with the expectation of refinancing later.
Buyers will adjust to the higher rates the longer it goes on. Since we are a monthly payment nation, people will be looking at different properties by next year if these rates stay high.
“I suspect that some of today’s buyers assume that they will be able to refinance after a few years without realizing that refinancing is expensive.”
It shouldn’t be if you go to the right places….I refinanced twice during 2020 and didn’t pay a cent to refinance. “No cost” refinances both times…and locked in 2.5%/30 year the second time. The lender covered the fees.
Some mortgage providers do charge insane fees though — or require higher rates should you want no cost.
Having said all the above, it’s certainly no guarantee rates will be low again in the next 5 years. I think there’s a high likelihood it will occur within the next 10 years so might go with an ARM myself if I were to buy, but the ARM rates aren’t that much of a discount right now….So, I wouldn’t rely on the ability to refinance when making a purchase right now. Others may come to a different conclusion. It’s amazing how impactful these higher rates are on monthly cost — I actually think many buyers focus on purchase price TOO much and not the impact rates have on monthly cost…..at least in my demographic. Perhaps it’s because people aim for “20% down” and see that as the hurdle they need to get over.
“If something does “break” it’s likely not going to be a Bank it’s going to be a Non-Bank (hedge fund, pension fund, insurance fund, non-Agency MBS holders, Non-Bank Lenders, etc.). Could also be some poor treasury auctions as well.”
Agreed. The banks are fine. The Federal Reserve has had them under their thumbs for 14 years. Nothing going on there. Heck, they were only allowed to start paying dividends again a few years ago.
“Heck, they were only allowed to start paying dividends again a few years ago.”
What?!?
https://www.cbc.ca/news/business/us-banks-stress-test-1.6079941
After the financial crisis, the banks were restricted from paying dividends. Some paid just a penny in order to say they continued to pay it every quarter. Others didn’t pass the stress test and couldn’t pay any.
During the pandemic, the Fed again put the kibosh on dividends unless they passed the stress test.
I recently sold in the South Loop, granted it was 10 months ago and I did get decent appreciation. It sold very quickly and we had a ton of interested parties. That neighborhood is getting dense fast, north of 18th.
Nothing about the Chicago market gives me pause, it looks healthy based on the inventory levels. This will happen when all the new starts are for apartments.
This site will always have the doom and gloom group, but now that they are complaining about tax rates within the city, it’s just laughable.
“I recently sold in the South Loop, granted it was 10 months ago and I did get decent appreciation. It sold very quickly and we had a ton of interested parties.”
I don’t think it’s exactly doom and gloom to point out that 10 months, or 15 months ago, and most certainly 5 months ago, were very, very good times to be selling. But even with ongoing inventory shortages (overall), today is not a very good time to be selling. What do you think you’d get for your place in the South Loop today? I’d have gotten about $150k more 10 months ago, maybe $300k more 5 months ago, than today.
” now that they are complaining about tax rates within the city”
???
20 years ago, Chicago had a serious property tax advantage over the (hesitate to say it: more desirable) suburbs, but it is much less an advantage now. And the property tax rates in Illinois are genuinely high, compared to much of the country, for all the usual Illinois Government reasons.
It’s a fair thing to consider.
“I don’t think it’s exactly doom and gloom to point out that 10 months, or 15 months ago, and most certainly 5 months ago, were very, very good times to be selling.”
Yep. One of the best markets in 15 years. Inventory at record lows and record low mortgage rates.
But Chicago didn’t see the craziness of other parts of the country. It sucks, but maybe it won’t now that Boise, Austin, most of Florida, are busting.
Median price is down $50,000 already in Austin as sales dry up. Went from $550,000 to $500,000. But lots of speculators buying homes and flipping them there which may have been caught still holding now that the market has seized up.
You can see some of these in LA too. They bought the bungalow for $1 million, did the renovation, listed it in May or June for $1.7 million and it’s still sitting. I’ve seen some reduced down to $1.4 or $1.5 million. Still no dice. Some of those flippers may lose money. They have holding costs.
Chicago didn’t have as much of this type of behavior.
I hope MikeHG and his family/friends are okay down in Florida after Ian. He never said what part of Florida he was in.
It’s just a terrible tragedy down there.
There still is a considerable advantage, especially if you want to be near the lake.
“20 years ago, Chicago had a serious property tax advantage over the (hesitate to say it: more desirable) suburbs, but it is much less an advantage now. And the property tax rates in Illinois are genuinely high, compared to much of the country, for all the usual Illinois Government reasons.”