Chicago Market Update | November 2024

The Chicago real estate market in 2024 has experienced notable changes, reflecting a complex interplay of factors influencing prices, inventory, and buyer behavior. Here’s a deeper dive into the trends, along with some additional insights.

Price Growth Amid Lower Sales

The median home price in the Chicago metro area reaching approximately $375,000, a 7.1% increase from 2023, indicates high demand for housing despite a market slowdown. In the city of Chicago, prices have also seen a 6.3% increase, settling at $379,925. This demonstrates that while fewer homes are selling, those that are available are attracting higher prices, indicating competitive interest in desirable locations.

The 15% drop in sales volume suggests that while buyers are willing to pay more for homes, they are also facing barriers such as affordability, financing challenges, or a lack of suitable properties. This scenario can lead to bidding wars for limited listings, particularly in sought-after neighborhoods.

Inventory Shortages:

The continuing inventory shortages mean that there are fewer homes for sale compared to the demand from buyers. This has been a persistent issue in urban markets, driving prices up. The shortage is exacerbated by homeowners opting to stay in their current homes due to rising interest rates, limiting the turnover in the market .

As buyers compete for the limited number of homes, especially in popular areas, this can lead to quicker sales and higher offers, reinforcing the upward pressure on prices despite a broader decline in sales activity .

Stabilization of Prices:

Looking toward 2025, the expected stabilization of prices, with a projected slight decline of 0.3%, indicates that the rapid appreciation seen in 2024 may not be sustainable. Factors such as rising inventory and economic uncertainty—potentially due to changes in employment rates or consumer confidence—could contribute to a more stable market.

If interest rates stabilize or decrease, this could improve buyer affordability, potentially leading to an increase in sales as more buyers enter the market, despite the anticipated price stabilization.

Continued Inventory Growth:

The forecast for more listings coming to the market is promising. As sellers respond to the rising home values and seek to capitalize on their investments, this influx could help alleviate some of the tight supply issues that have characterized 2024. This trend may create more balanced market conditions, benefiting buyers. A more balanced market could shift some negotiating power back to buyers, making it a more favorable environment for those looking to purchase homes.

Regional Differences:

The expectation that areas outside of Chicago, like Rockford, may see price increases while regions like Peoria might experience declines reflects the localized nature of real estate markets. Economic conditions, job growth, and community desirability can significantly affect performance across different regions.

It's also worth noting that suburban areas may see different trends as remote work continues to influence where people choose to live. Buyers seeking more space may be drawn to suburbs, potentially increasing demand in those areas compared to the urban core. However, this trend may start to shift as more employers require employees to return to office.

Heading into 2025, the Chicago real estate market appears poised for a shift towards a more balanced environment, with prices stabilizing and inventory levels improving. While competition in prime neighborhoods is expected to remain high, overall trends indicate a potential easing for buyers.