This summer, it’s not just the temperatures that are steamy; the local real estate market is so hot that many local experts say they’ve never seen anything like it.
Elissa Palermo, president of the Oak Park Area Association of Realtors, calls the market “very interesting, to say the least,” while Baird and Warner’s Swati Saxena and Berkshire Hathaway HomeServices’ Zak Knebel both point to statistics showing that the market is very active for sellers and challenging for buyers.
All of the agents point to a clear factor in the busy local market — there are simply more buyers than there are homes for sale.
“It’s really all based on supply and demand,” said Palermo, who added that attending meetings on behalf of the OPAAR gives her insight into the factors driving the low inventory of homes available for sale.
“Twenty to 30% of inventory is being purchased by large investment groups,” she said. “They took their money out of the stock market and put it in real estate. Couple that with people who bought their homes with great interest rates, and they don’t want to sell to have to buy something new with a higher rate.
Steve Scheuring of Compass also sees interest rates at play, pointing out that a family who bought a starter home with a low interest rate years ago might be ready to move up to a bigger home. Even though they could get a great price for their home, their interest rate on a new home, if they can find one, will more than double.
“There are people like us, who’ve been in our house since 2000,” Scheuring said. “For the same monthly payment, I can’t even get into one of those high rises on Lake Street.”
Scheuring says he also sees some reluctance from older adults to embrace communal living residences post-pandemic, keeping many of them in their homes longer.
For Knebel, a balanced market for single-family homes looks like a five- to six-month supply of houses. In May 2023, Oak Park had 1.5 months of inventory and River Forest 1.7, while Forest Park was up to 2.7.
“There is a notable scarcity of available inventory,” Knebel said. “As a result, sellers currently have the advantage, leading to prices that are often reaching or exceeding the asking price.”
Buyers willing to pay more
All of the experts agree that the lack of inventory makes things hard for buyers. Many of them are offering more than the list price to make their offers stand out in multiple-offer situations.
Saxena points out that of the 48 single family homes that have closed in the last month, 35 sold at or above asking price with one home selling for 115% of the asking price.
Scheuring says he has been surprised that the bidding wars from the post-pandemic period continue.
“A year and a half ago, we had an interest rate that was probably half of what it is now, but we’re seeing more bidding wars now,” Scheuring said. “It’s only because the inventory is low.”
He has a strategy for sales in this volatile market. On listing a house, he will schedule two days of showings, followed by an open house. After collecting all offers on a Sunday night, he will respond to interested sellers on Tuesday. He says that 48 hours ensures that buyers who have offered more than the asking price are comfortable with their offer.
With one recent sale on Mapleton Avenue in Oak Park, he had 15 scheduled showings on Friday, 15 on Saturday and an open house on Sunday. He received 11 offers on the house, three from people who had not seen the house in person, and the house sold for above asking price.
Another trend Scheuring sees is the growth of the high-end market in Oak Park.
“Oak Park has never really been a strong million-plus market,” he said. “The pandemic has really changed that. Everyone wants more space, yard and pools. When has a pool ever been a thing in Oak Park?”
Tips of the trade
Realtors are getting creative with their clients on both the selling and the buying side. Saxena notes that her buyers want a house that’s move-in ready.
“Even with higher interest rate, people are willing to pay more money for something that’s already updated,” she said.
Saxena is seeing buyers compromising in other areas, though. After one client could not find a move-in ready house in River Forest without a multiple-offer situation, they bought a home in Hinsdale instead.
Palermo says buyers are making other concessions, often offering appraisal-gap waivers, in which the buyers agree to make up the difference if the house does not appraise as high as the contract price.
Scheuring says that with clients who are frustrated at losing out to buyers making all-cash offers, he’ll ask if they have relatives who have cash for the purchase. That allows them to make a cash offer with the option to get a mortgage.
“You’re still getting a loan, but you’re promising to the seller that if you don’t qualify for a mortgage, you can pay in cash,” Scheuring said. “Sellers are treating this like a cash offer.”
On the selling side, Scheuring notes that the Private Listing Network is “all the rage right now.” The PLN is a network visible only to brokers, where they can share some aspects of a property prior to listing it publicly on the Multiple Listing Service.
Palermo has seen an uptick in brokers using the PLN and says the practice of listing a house there can make sense in certain circumstances, such as the recent case when she had a house that was being rehabbed. It wasn’t quite ready for photos and the Multiple Listing Service, but she listed it on the PLN and found a buyer.
Saxena says that the PLN can be a great tool for a house that needs a little work and isn’t quite photo-ready, though that’s not always the case.
“For almost everyone else, if you want to get the most money, the wisdom is to go on the standard market,” Saxena said. “More people will see it that way.”
Knebel agrees stating, “In my opinion maximizing exposure provides sellers with the best opportunity to maximize their profit.”
No end in sight?
All of the agents agree that the pandemic is the cause of some of the buyer demand –people still want more square footage to work from home and suburban homes with more outdoor space.
Whether it’s a new job, an empty nest or a growing family, the motivation for a move is also as old as the real estate industry itself, they say.
“It’s important to remember that, much like sellers, buyers are likely seeking a new home due to significant life changes,” Knebel said.
While buyers’ motivation is obvious, what’s not as clear is when the market will cool. Scheuring says he no longer makes long-term predictions about the market.
“My ask is, ‘When is this going to stop?’” he said. “Every house that comes on the market sets a new benchmark.”