Chicago Market Update | October Issue

by Jenny Wright

The persistent low inventory of homes is a complex issue driven by several factors. One major contributor is the slow pace of new construction, which has been hampered by supply chain disruptions, rising material costs, and labor shortages.

Additionally, the underbuilding of homes over the years has not kept up with population growth, exacerbating the shortage. High demand further strains the market, as more people seek larger homes or move to new areas due to lifestyle changes brought on by the pandemic.

Existing homeowners are also less inclined to sell, particularly those who are locked in low mortgage rates and have significant equity in their properties. The presence of investors and institutional buyers, who purchase homes to rent out or hold as investments, further reduces the number of available homes for potential owners.

Regulatory and zoning issues also play a role. Strict zoning laws and lengthy approval processes for new developments can limit the addition of new homes to the market. Economic factors, such as rising construction costs, make new housing projects less viable for builders.

Together, these elements create a challenging environment for buyers and contribute to the ongoing low inventory of homes. Addressing this issue requires a multi-faceted approach, including encouraging new construction, easing regulatory barriers, and supporting potential sellers.

However, luxury properties and new construction are expected to remain strong in Chicago, especially as many buyers continue to seek spacious living or high-end homes, who are less impacted by rising interest rates. At the same time, downtown condos and co-ops may continue to show steady activity and trading, as corporations push for in-office work post-pandemic. (Chicago Agent), (Chicago Agent Magazine) (Propstream).