The real estate market in Chicago and its suburbs in April 2023 has seen a significant cooling trend in recent months and people wonder whether a housing crash is in our future. We take a look at the factors impacting the housing market.
Factors Impacting the Chicago Real Estate Market
- Median Days on the Market
The market has become more favorable to buyers as home prices have started to level off and inventory has increased. According to data from the Chicago Association of Realtors, the median days on the market have increased from 48 days in April 2022 to 63 days in April 2023. Two months on the market is less than ideal, but it alone doesn’t signify a housing crash.
2. Mortgage interest rates
The cooling trend in the market has been driven by several factors, including rising mortgage interest rates, an increase in the number of homes for sale, and a decrease in demand. Mortgage interest rates have a significant impact on the current housing market. The new 30-year mortgage interest rates have risen from an average of 3.5% in April 2022 to the highest prices in 20 years in April 2023. This increase has made it more difficult for buyers to afford homes, which has led to a decrease in demand.
Mortgage application rates have also decreased, indicating a decrease in buyer interest. According to the Mortgage Bankers Association, mortgage applications have decreased by 11% since April 2022. Potential buyers may be hesitant to take on debt or may be struggling to find homes that meet their needs. This decrease in demand has led to a more balanced market where cash home buyers have more negotiating power.
3. Foreclosures
One trend that has been of concern is the increasing number of foreclosures. According to data from RealtyTrac, there were 2,671 foreclosure filings in the Chicago metropolitan area in March 2023. Foreclosure rates have been steadily increasing since the beginning of 2023, with some experts predicting that they will continue to rise throughout the year. The rise in foreclosure rates has been attributed to rising mortgage interest rates and an increase in the number of homeowners who are struggling to make their mortgage payments.
4. Economy
The real estate market is a reflection of the current economy. Current economic indicators show that unemployment is up in the vast majority of counties in Illinois over the last month. Illinois is ranked 45th out of 50 states in its current economic outlook.
While the economic factors are pointing downward, this still does not portend a housing crash. The underlying structural factors that led to 2008 are different from today. However, if home prices continue to soar, a housing crash could be on the horizon.
One trend that has emerged in the real estate market is the rise of cash buyers. A cash buyer is someone who has the funds available to purchase a property outright, without needing to obtain a mortgage or other financing. This can be a highly attractive option for sellers, as it can lead to a quicker and smoother transaction.
There are several reasons why someone might choose to sell to a cash buyer. First, if you’re concerned about a housing crash, you don’t want the value of your house to fall further. In addition, selling to a cash buyer can reduce the time and hassle involved in the selling process. A cash buyer can often close the deal within a matter of days, compared to the weeks or months it can take to secure financing through a traditional lender. This can be particularly appealing to sellers who need to sell quickly, perhaps due to a job relocation, divorce, or other personal circumstances or financial difficulties.
Another advantage of selling to an investor is the certainty it provides. Because cash buyers have the funds readily available, there is less risk of the sale falling through due to issues with financing. This can give sellers peace of mind and help them avoid the stress and disappointment of a failed sale.
Finally, selling to a cash buyer can sometimes lead to a higher sale price. Because cash buyers are often investors or individuals with significant financial resources, they may be willing to pay a premium for a property that meets their specific criteria. This can result in a more lucrative sale for the seller.
Overall, the real estate market in Chicago and its western suburbs is cooling but stable in April of 2023, with demand for mortgages slowing. Selling to a cash buyer can be a smart move for sellers looking for a quick, hassle-free, and potentially more lucrative transaction. Of course, it’s important to do your research and work with a cash buyer to ensure a successful sale. Learn more about us today and reach out for a free, no-obligation offer.