It’s the proverbial question every real estate agent hears 1,000 times in his or her career: “How’s the market?”
Most agents know that the best answer isn’t, “It’s great.” The real answer is trapped in myriad facts, figures and sometimes personal beliefs.
So let’s dig into the statistics for a moment and look at the end of 2018.
They say that real estate is cyclical, and it sure is. Like the weather in Chicago, if you don’t like it, just wait two days – it’ll change. That’s what happens in real estate. For instance, the trend of new listings that hit the market looks like a hill on a line graph. The beginning and end of the year are the slowest, meaning winter has the fewest number of new listings and, like you’d expect, spring and summer show more homes coming onto the market.
Overall, 2018 was slightly better than 2017, as it showed about 6 percent more properties listed for sale in the county.
Very similarly, the number of closed sales matches that “hill.” However, 2018 was nearly identical to 2017 – it had a little more than 6,000 properties trade hands during the year, with the trend showing strongest in spring and summer. No surprise.
As I train our newest real estate agents, talking about average sales price is meaningless. There really is no average house. Everything is relative to your marketplace, breaking that down to a town, neighborhood or even street when we can. Let’s note, however, that the average home price in the county is up more than 6 percent.
Now let’s focus on my three favorite market statistics – the ones I think are a much better predictor of the marketplace: percent of list price received, market time and absorption rate.
Percent of list price received is the average price a property sells for as compared with its list price. 2017 showed an average of a little more than 95 percent, whereas 2018 ended at a little less than 96 percent.
Sure, a 0.75 percent movement doesn’t sound like much, but in this category, it is a hint at where the market is moving. It could be argued that a buyer’s market is in the low 90s, whereas a seller’s market is in the upper 90s. I contend that the current market at
95.8 percent is moving from a balanced point toward a seller’s market.
Market time is the time it takes a property to go from newly listed to under contract – also known as contingent, in our lingo. 2017 ended with an average of 83 days on the market, and 2018 ended at 74 days. Again, another sign that we might be moving toward a seller’s market.
Absorption rate, also known as “a month’s supply of inventory” is critically tight. If homes keep coming on the market at the rate they are, and if buyers keep buying at the rate they are, the county will run out of supply in 2.6 months (as of the end of 2018). Of course, this never will happen, but in theory, that’s what it is saying. More importantly, 2017 ended at 2.8 months’ supply. This highly suggests a seller’s market. The National Association of Realtors preaches that a balanced market is about a six months’ supply.
So if all signs are pointing toward a seller’s market, why aren’t all properties flying off the shelves? Simple – perspective. Not everyone lives in an “average” home. Homes on the low end of the price range, including first-time homeowners’ properties, are moving quickly.
Agents occasionally are seeing multiple offers on those properties. But move up one click to the lower-middle price range ($200,000 to $500,000), and the stats change to about a 12 months’ supply. Click one more level up ($500,000 to $1,000,000), and the stats change again to about two years. Move to the highest level of the market – more than $1 million – and there is a three-plus years’ supply of properties.
So, how’s the market?
Are you looking to buy a property or sell a property? In what price range? Be sure to check with your local real estate expert who can tell you precisely what your home is worth and where it sits in the statistics. Remember, even an average home isn’t average.
• Jim Haisler is chief executive officer of the Heartland Realtor Organization, which has its headquarters in Crystal Lake. It is a nonprofit trade organization serving more than 1,100 real estate-related professionals throughout northern Illinois and southern Wisconsin. Licensed since 1996, he has a master’s degree in real estate, holds an Illinois managing broker’s real estate license, an Illinois continuing education instructor’s license and an Illinois pre-license instructor’s license. Haisler is not an attorney and does not provide legal advice.