Exploring the Illinois Housing Market in 2021

Amidst the economic fallout from the COVID-19 pandemic, the housing market in Illinois and nationwide has been in a unique position with low mortgage rates and decreased inventory motivating buyers to bid above the asking price and scoop up homes as soon as they are listed. With vaccination rates increasing and the economy reopening, many people are wondering if real estate will remain hot or if we’re headed for a downturn. In this article, we look back at 2020, take stock of where we are now, and explore forecasts for the real estate market throughout the remainder of 2021.

The Illinois Real Estate Market in 2020

At the outset of the pandemic last year, the Federal Reserve lowered its benchmark interest rate to nearly zero. While this move was intended to help an economy suddenly in crisis as businesses and schools shuttered, it also contributed to the rising home prices and limited supply that we saw last year. 

When mortgage interest rates fell to historically low rates last year, many homeowners refinanced their mortgages and others took out home equity loans or lines of credit to finance renovation projects. As we all adjusted to the new social distancing way of life, people added home offices, family rooms, and other new spaces, or improved kitchens and bathrooms that were suddenly seeing a lot more use. 

At the same time that many homeowners decided to stay put and improve their spaces, others, particularly residents of densely populated urban areas, suddenly wanted to move to a larger home and/or get more outdoor space. Thus, a supply-and-demand emerged with a sudden surge of buyers and fewer sellers than usual. 

The same trends that played out nationwide in 2020 also impacted the real estate market in Illinois. According to Illinois REALTORS®, home sales boomed in 2020 while inventory fell. Annual closed sales were up by 9.6% last year and the annual median sales price rose by 7.7%. Meanwhile the inventory of homes for sale in Illinois last year fell by a whopping 38.8% compared to 2019.

As you can see, the Illinois housing market hit a high point in 2020 despite the uncertainty and economic pain caused by the pandemic. Now the question is whether or not the real estate market will stay hot through 2021. 

So Far in 2021

“As consumers’ appetite for homes coincided with the traditional real estate season, a reduced inventory led to faster sales and higher median prices in May,” according to the most recent market update from Illinois REALTORS®. 

Key metrics like Closed Sales and Median Sales Price are up from May 2020, inventory has decreased by 45.7%, and Days on Market Until Sale has decreased by 20 days from the previous year.  

So, the Illinois housing market remains hot into the first half of 2021, with demand continuing to outweigh supply and many listings receiving more than one bid above the asking price. The big question is whether or not it will last, and how long. 

A 2021 market forecast from Illinois REALTORS® suggests that “median prices are forecast to continuously grow in 2021 within a higher and broader range compared with 2020” and “sales are forecast to experience overall positive gains in 2021 for Illinois.” Notably, average mortgage rates are expected to stay at around 3%, which could continue to motivate homebuyers to act now to lock in these historically low rates.

What's next?

The housing market may be hot right now, but it’s worth noting that, prior to 2020, Illinois had one of the weakest real estate markets in the country, according to Illinois Policy. When the economy shut down at the beginning of the pandemic, more than a million state residents lost jobs and mortgage delinquencies rose to the highest increase on record. Unfortunately, that trend has continued into 2021, with Illinois experiencing the second-highest foreclosure rate in March. 

Anytime the housing market gets hot, people start talking about a crash, but so far there is no data to support an impending crash. As with the economic recovery in every sector, there are still many variables to contend with in real estate. For example:

“The uneven impact of the COVID-19 pandemic on employment by sector and income level is likely to be reflected in the housing market in 2021” noted Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory of the University of Illinois, in the 2021 market forecast from Illinois REALTORS®.

Increasing remote work opportunities for white-collar workers could drive demand in suburban and exurban areas with larger homes, whereas supply and demand in the bottom quarter of the price distribution may decrease due to layoffs and furloughs for retail, leisure, and hospitality workers.

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While we may not be able to predict the future of the housing market, we will stand side-by-side with you for whatever comes next. If you’re looking to buy a new home in Illinois or need affordable financing to renovate your current home, we can help you find the perfect home loan or home equity loan to meet your financial needs. Connect with our team of experienced mortgage lenders or visit one of our 12 conveniently located branches today to learn more!