Aerial photo of downtown Chicago and Lake Michigan.

Spring/Summer 2022 Market Forecast

Bees are buzzing, birds are chirping, and the first buds are appearing on trees. Spring has sprung, and potential home buyers and sellers are eager to know what the real estate outlook is for the upcoming season. Will it be a warmer climate for buyers or sellers? Let’s find out!

2021 was an unpredictable year in many ways, real estate included. The markets were still on a wild ride thanks to the global pandemic and its economic impact that left no one – and no industry – untouched. While mortgage rates were at an historically low rate, home prices were skyrocketing, and demand outpaced supply, all leading to competitive bidding wars. 

For many would-be buyers, their search simply didn’t pan out and many will be back this season to try their hand again. Traditionally, spring and summer have been peak seasons for real estate transactions: the rosy prospect of pleasant weather makes the moving process more manageable and children are in-between school years for a less disruptive transition.

Still a Seller’s Market

If you waited until now to put your home on the market, there’s no reason to fret over missing out on the frenzy that was 2021. While the initial consensus among industry experts was that this year would be less competitive for buyers, those predictions have shifted based on results from the first quarter.

Roughly three-quarters of the nation’s housing markets are already signaling low inventory levels that have dropped by 30% in some regions – and Chicagoland is showing no signs of being an exception. That represents an even greater drop in available homes for purchase than we saw last year, which made for a tough market for buyers as it was. It looks like this year’s spring and summer will be even hotter than 2021’s when it comes to real estate.

Such a low inventory rate means that some sellers will likely have the enviable position of multiple offers that come in over listing price, and probably some all-cash offers to boot. We predict that sellers who aren’t looking to simultaneously purchase a new home will find themselves in an ideal situation to turn a profit in the upcoming season.

What to do if you’re looking for a new home? Plan ahead and start looking sooner rather than later. Make sure you know your numbers – how much can you put towards a down payment? A monthly mortgage? Get pre-approved for a mortgage, and be prepared to make an offer fast if you find something you like!

Price Predictions

In 2021, the biggest story besides inventory was cost – increases in home prices jumped as high as 20% year over year in some months. Approximately one-third of buyers paid above the asking price. Though we’ve been living in an ‘anything can happen’ state of mind for the last two years, the market looks strong – and probably more stable than last year’s.

Home prices are still expected to rise because demand continues to outpace supply, but perhaps not quite as much as they did previously. In fact, 2021 saw the largest increase in home sale prices in 15 years. 2022 is expected to see the second largest increase in sale prices, but it won’t be a drastic surge.

One factor that is likely to have a somewhat cooling effect on the market, though, are mortgage rates. These play an important role in determining how much home buyers can afford to pay for a new home in the first place. Mortgage rates fell to record lows in 2020 and 2021, largely due to the pandemic. When rates go up, sale prices typically come down to compensate.

Rates have already begun to climb, though modestly, and are expected to continue to climb in additional modest degrees through the spring and summer. As with the past two years, economists are prepared to expect the unexpected; activities at the Federal Reserve and the ever-present threat of new COVID variations could turn the market any which way. 

In general, market experts predict mortgage rates to hover around 4% by the end of the year, so it shouldn’t be a big climb over the next two seasons. Not as astonishingly low as we’ve seen, but still lower than average pre-pandemic rates.

Homebuyers should plan to shop around with various mortgage lenders and take the potential increase in rates into account when planning how much house they can afford to buy.

Longer Lead Times 

Another thing to be prepared for, whether you are planning to buy or sell a home, is that renovations may take much longer than they have in years past. It’s not uncommon for a seller to make a lot of quick fixes prior to putting a home on the market; it’s also not uncommon for a buyer to want to make some modifications prior to their move-in date, before they need to move furniture and rugs around to get anything done.

The primary hold-up will be supply-chain issues that have plagued the home improvement industry. The same semiconductor chip shortage that is driving down the availability of new cars is also slowing production on household appliances. That new refrigerator, dishwasher, or dryer you have your eye on may take weeks, if not months, to come in. 

If you’re planning to remodel or add an addition, prepare to be patient and possibly pay more in supplies. Lumber has come back down to Earth from its peak but is still more costly than it was pre-pandemic, and harder to come by. Windows and doors have also been backed up, and it can take quite a while for orders to be fulfilled.

Add on to that the labor shortage affecting just about every industry in the United States, and you might be hard-pressed to find a contractor with a crew and the supplies needed to carry out your project on your preferred timeline. Bottom line – plan ahead. Be prepared to put your home on the market without a makeover if need be, or move into your new home right away and save the renovations for later.

When Home Means More, You Need A Team With More To Offer

Whether you are planning to buy or sell a Chicagoland home this summer, we know that home is about so much more than just four walls. Buying or selling a home is a big deal, and our homes have never been more important. That’s why your local Baird & Warner agent is with you at every step of the way, from finding the perfect home to connecting you with local experts in mortgage and title. Whether it’s the beginning of a story or the end of a chapter, we’re here to help.

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