Posted 7 months ago

October 2023 Housing Market Update (Chicago Southland Homes)

October 2023 Housing Market Update

Supply (New Listings and Homes for Sale) – record lows, contradicting seasonal norms

There were 19% fewer homes listed this September compared to last, the fewest in any September on record.
There are 31% fewer homes for sale than there were at this time last year. Inventory is roughly the same as it was in January, which is out of the ordinary as there are typically over 30% more at this time of year.

Demand (Pending Contracts and Closed Sales) – downward trend may be ending?

Pending contracts were down only 1.8% from last September. Overall, demand as measured by pending contracts has been consistently (and rather rapidly) dropping since November 2021, but in recent months we’ve seen signs of this leveling off as the year-over-year gap begins to close. Sure enough, the 12-month rolling average shows the demand curve having flattened.
September closings were down 21% compared to last year. Closings lag contracts by about 2 months of reporting, so I expect to see this gap level off soon based on contract activity.

Supply/Demand Relationship – seemingly perpetual seller’s market

Seasonally adjusted housing supply still stands at 1.8 months, still unchanged for nearly two years since November 2021.
- o With shorter than 6 months supply dating all the way back to October 2013, this feels more like an era than a market cycle - especially since we’ve seen no signs of when or how this trend will reverse course.
Seasonally adjusted median days to contract remain at 10, virtually unchanged since July 2021.

Prices – rising again

I told you last month I expected to see seasonally adjusted pricing turn upwards, and for the first time in over a year, they have, rising by 1.4%.
September prices were up 7.2% compared to last September, similar to the August gains.

Mortgage rates – highest reported in 20+ years

Today’s (10/3/23) 30yr fixed averages 7.61%. Rates have not dipped below 7% in the past 60 days. What does it tell you about the market fundamentals when prices went up 7% despite rates being higher for the past 60 days than any other 60-day period in the past 20+ years?
FHA/VA loans are over a half-point lower, at 7.08%. There 5/1 ARM averages 7.1%, with the 15yr fixed at 6.91%.
The Federal Reserve held the bank overnight borrowing rate steady (5.25-5.5%) at their September meeting. Their primary goal remains cooling inflation, and recent economic output was stronger than expected. They expect an increase at the November meeting and are projecting only slight decreases throughout 2024.

What to do

Sellers: It remains to be seen whether early signs of price increases will continue. I still recommend pricing against active listings more than closed sales, especially with seasonality in effect.
Buyers: Prices and rates are both rising. Either act quickly, or plan on waiting it out for a potentially VERY long time.