Low interest rates, desire for more room make for hot housing market

Andrea and Adam Anders are paying about $50 more per month on a mortgage than they did when, as a childless, unmarried couple, they bought a 900-square-foot house in Bartlett 11 years ago.

But they now live in a 1,900-square-foot home in the same village, with more bathrooms and plenty of space for them and their two children.

That move happened late last year when they joined one of the hottest housing sales markets the U.S. has seen in some time.

It sizzles, agents say, for several reasons, but it's primarily fueled by low interest rates. Reduced inventory and the desire for more space during the COVID-19 pandemic also are factors.

“This is an incredibly competitive market,” said Linda Dressler, president at Mainstreet Organization of Realtors. The Downers Grove-based group serves agents largely in Lake, suburban Cook and DuPage counties. “During this unprecedented year, we've seen many homebuyers put down an offer the first time they see a home — or in some cases without seeing a home in person at all. Homes that might have seen one or two offers in the past are now getting four to five.” A host of numbers support just how hot the housing market is.

Friday morning, the interest rate on a 30-year fixed-rate mortgage was an average 2.76%, according to Mortgage News Daily. Last January, rates were averaging 3.54%.

According to the Illinois Realtors association, in its nine-county Chicago Metro Area, closings were up 32% in December 2020 from a year before. The number of days houses were on the market before they were sold was down 37.5%. Inventory was down 36.8%. The median sales price was up 12.3%.

Traditional move

“We really did need a bigger house,” Andrea Anders said, with the addition of their second child last spring.

They found one, but there were already five offers on it and the buyer wasn't taking any more. They found their new house online before it was formally listed. Anders arranged to see it the day before.

“We came in right as the photographer left,” she said. They submitted their offer that night. “We'll take it no matter what,” they told the sellers, provided they could sell their house.

They didn't hear back for two days, which worried the couple. They dropped the home-sale contingency — and that sealed the deal.

According to their agent, Ryan Carney of Dreams and Keys Real Estate Group in Schaumburg, dropping contingencies has become common. The Anders had already agreed to pay any gap between the sales price and the appraised value.

“It didn't seem such a rush (11 years ago) to put an offer in,” Anders said.

Pandemic push?

“It was really weird that first month or two (of the COVID-19 pandemic), then (home buying) took off,” Carney said. “People were looking for a little more space.”

He said he is seeing a lot of clients in their later 20s and early 30s, plus people looking to upgrade because they have a lot of equity in their current houses.

Listing and selling within a day is common, Carney said. Tuesday, he saw a house go under contract within 30 minutes of being listed.

People are including escalation clauses in their offers, indicating they are willing to pay a certain amount over the highest offer received.

As for prices, four-bedroom houses built in the mid-1980s in Schaumburg that were going for $400,000 to $425,000 a year ago now command $50,000 more, he said.

Dressler said there isn't enough data yet to support contentions people are migrating from cities to suburbs due to the pandemic.

“Many of the current buyers need more space to accommodate changes due to the pandemic, such as children's e-learning and their individual work-at-home situations,” she said. “Another driving factor may be multigenerational living, which we know has surged during the pandemic.”

Inventory may be low, Dressler said, because people are holding back on selling until they are confident about what is happening in the area to which they are going to move, including the state of the pandemic.

“Once things start to normalize, we might see the inventory increasing as sellers are more confident of their next move,” she said.

What's selling?

While buyers in recent years wanted smaller spaces with less yard to maintain, houses on quarter- and half-acre lots are popular now, Carney said.

And, Dressler said, many buyers don't want to update a house themselves, even if the price point reflects the condition of an “unmodernized” property.

More houses are being sold as-is, Carney said.

“Usually in the winter, the market slows down,” he said. “This year, I would say it hasn't slowed down at all.”

Chicago-area housing market by the numbers

December 2020 vs. December 2019

<b>+32% Increase in closed sales </b>+12.3% Median sales price, $266,250

- 36.8% Decline in inventory

- 27% Drop in days homes are on market

+36.5% Single-family closed sale rise

+23.9% Condominium closed sale rise

Source: Illinois Realtors data for nine-county metro area