Throughout the COVID-19 pandemic, The North Shore Weekend has been keeping a close eye on the North Shore real estate market. The pessimism expressed by brokers as the pandemic began to emerge early last year quickly faded as the North Shore became a desired destination for families seeking more space.
The hot market that materialized in late Spring 2020 continues, and new numbers show it’s having an exponential effect on home prices, which so far this year are up 15 percent over 2020, according to data released by Illinois REALTORS® (illinoisrealtors.org). We surveyed North Shore brokers this week to learn what they are advising buyers and sellers to do as the hot market continues.
“It’s the Hunger Games of real estate right now. Demand is out of control while there is virtually no inventory available,” says Barbara Shields of @ properties in Winnetka. “It’s now become a vicious cycle because sellers, who were scared to list earlier due to COVID-19, now feel that they have nowhere to go if their home sells. It’s a frenetic marketplace and I sense that inventory levels are going to go even lower over the summer months.”
Carly Jones, a broker with Engel & Völkers Chicago North Shore, says even though buyers are scrambling to scoop up whatever properties are left on the market, they still must conduct due diligence.
“I always warn buyers from taking unnecessary risks. Even in a competitive market like this, buyers should always do an inspection even if it is for their information only,” Jones says. “Buyers are still making a big purchase and want to ensure they have done all of their due diligence and that there is no buyer’s remorse even though you need to move quickly.”
Just because there’s high demand from buyers, sellers shouldn’t think they can cut corners and still get a good price for their sale, according to Linda Martin with Coldwell Banker in Winnetka.
“I instructed clients months ago to start thinking about getting their houses on the market as soon as possible, and to prep their homes for sale and be well-positioned,” Martin says. “This market is so highly competitive that sellers are going to hurt their chances of getting the highest return on their investment if they neglect to follow their agent’s guidance.”
Martin adds that buyers need to approach their purchase with a sense of urgency to compete with other buyers in the market.
“Time is of the essence for buyers as inventory is low and they are almost guaranteed to find themselves in a multiple-offer scenario,” says Martin. “I once waited more than 12 hours for a buyer’s agent to execute a contract, and ultimately my seller decided to accept another offer. It’s imperative for buyers to work with an agent who brings solid expertise and adequate resources to negotiate the complexities of this thriving and complex market.”
While high demand on the buy side might represent lack of balance of power between sellers and buyers, Cathy Deutsch of @properties in Glencoe says buyers are still discerning about price.
“No doubt, it’s a sellers’ market, but I tell my sellers not to underestimate buyers and their power as well. Even with low inventory, buyers can tell when a house is priced too high,” Deutsch says. “I tell sellers the market will reward a well-priced home. I also tell them to be thoughtful in how they respond to multiple offers. Buyers are making very fast decisions and writing offers to win the moment, but just as quickly they can change their mind and cancel a deal.”
Jamie Roth, with Engel & Völkers Chicago North Shore, says the most important thing for both buyers and sellers in the tight market is to do their homework and come prepared.
“First and foremost, whether you’re a buyer or a seller, you need a strategic plan of how you’re going to get to the finish line, which is the closing table,” says Roth. “While we’re in a vibrant market, we’re also in a volatile market, with many deals falling apart. Regardless of what side you’re on, you should have an experienced agent who knows how to finesse a deal, navigate through all kinds of issues, and still keep the transaction together.”
The more things change, the more they stay the same, says Scott Lackie, Designated Managing Broker for Griffith, Grant & Lackie Realtors in Lake Forest. Both fast and slow markets have their own sets of challenges.
“An active market presents as many challenges as a slow market. One of the biggest challenges is a seller who sells his home quickly yet cannot pivot into another home because of lack of inventory and a paucity of rental options,” Lackie says. “I suggest to our clients that they explore ideas with their attorney and realtor. One idea gaining steam is the sale and leaseback where a seller closes on his home and then maintains an ability to lease the home back from the new seller for a pre-determined period.”
While preparation and bringing a clear strategy to the table when looking to buy or sell a North Shore property are important, being aggressive can help too—within reason, says Joanna Koperski of @properties in Lake Forest.
“As aggressive as the market has become, my advice to both my buyers and sellers has become equally aggressive to ensure their most favorable position, with their ultimate success in mind,” she says. “The recommendation to sellers is to accept the most reasonable pricing. Higher pricing, not supported by market stats, results in contested appraisals.”
Susan Brown Burklin, a broker with @ properties in Highland Park, says with so many buyers in the market, the early bird gets the worm.
“Buyers need to be ready to pull the trigger on sight. No more ‘thinking about it.’ It is unfortunate, as it is a huge decision and normally should require time to think, but not so in the current climate,” she says. “We need to have all of our ducks lined up and position the offer so that we present strongly. The less contingencies the better. A home-close contingency is almost always a deal kill right now.”
In the front seat for now are buyers who can submit cash offers. With contingencies and inconsistencies in appraisals that could impact financing, sellers are likely to lean toward the cleanest offer.
“Sellers are putting a higher value on cash offers or those that are not contingent on financing,” says Winnetka @properties broker Elise Rinaldi. “Buyers are also wanting to negotiate hard on inspection issues because they just overpaid. The market is moving so fast right now that buyers have to value a house by what they are willing to pay or at what price are they willing to lose it.”
Joey Gault, Senior Broker with the Wexler Gault Group and @properties in Highland Park, concurs with Rinaldi. The fewer barriers that can get in the way of a close the better.
“Find out the closing date the seller is looking for and definitely don’t plan on a home-sale contingency,” Gault says. “If the buyer plans to put a big chunk of money down, consider removing the appraisal contingency. Terms are everything right now.”
“Be prepared to present the best possible offer, which is more than just price,” adds Beth Wexler, Gault’s partner in the Wexler Gault Group. “Talk to your lender to see if you are in a position to make a cash offer and remove your mortgage contingency.”
Julie Mangan, an agent with @properties in Winnetka, stresses the importance of doing the work up front to put yourself in the best possible position when making offers. “Work with an agent who knows the market and has strong relationships,” she adds.
As a result of low inventory of existing homes, new construction is ticking up, and buyers should see what’s currently under construction or what new homes might be coming on the market.
“With low inventory, buyers should ask their agent about new construction options. Some new communities on the North Shore, like Kelmscott Park in Lake Forest, offer homes for immediate delivery,” says Keri Cook Falls, Managing Broker at @ properties’ Lake Forest office. “In other instances, buyers may have to wait for a home to be finished or built but the trade-off is you get something new, and they might be able to customize.”
Jena Radnay, broker with @properties in Winnetka, offers a dose of reality for buyers who are currently in the market for a home or who are thinking about it. She says buyers must have reasonable expectations.
“For buyers, it’s all about concessions, meaning submitting offers ‘as is’ and raising only health, safety, and hazard issues,” Radnay says. “They may have to give a rent back that works for the seller. Buyers should be flexible and not expect PITI (Principal Interest Taxes & Insurance) for a rent back. Be kind. People are getting so aggressive that those who are kind and compassionate toward the seller’s situation get an upper hand.”
On the flip side, in a high-demand market, sellers need to understand the heightened emotions that buyers are bringing with them when looking at a property or making an offer, according to Lori Neuschel, a broker with @properties in Wilmette.
“I am educating my sellers about how stressed the buyers are today and how this angst, on many occasions, causes buyers to make rash decisions and then second guess themselves.” Neuschel says. “It is important to pick the right buyer and those discussions are had going into the listing process.”
For buyers, Neuschel says it may be time to think of a home purchase less as an investment and more as a comfortable place to live.
“If my buyer may need to sell in a few years, we need to have up front conversations about what that could look like—per haps a loss,” she says. “But if they intend to be in the house for the long haul, then buy the house you love. You can afford to not lose any sleep over the fact that you are paying more today than you would have last year at this time. It is your home!”
What’s important in the long-term during volatile real estate markets is that both buyers and sellers have solid data to make good decisions, says @properties Glencoe broker Mike Mitchell.
“Providing good analytics, whether the market is up or down, helps buyers set expectations and not bid with an emotional approach but from a business perspective,” Mitchell says. “For sellers right now it’s good news, but they can’t get too excited.
Price fairly or they won’t get showings. It’s not a license to be outlandish.”
For buyers who are financing their home purchases, it’s vitally important that they develop a relationship with their lender and not do anything that might have even a small negative impact on their credit. With so many properties generating multiple offers, it could make the difference in offers being accepted or not.
“Buyers should know their credit scores and not make any significant purchases prior to closing, which could lower their credit scores,” says Colleen McGinnis, a broker with @properties in Winnetka. “Most importantly, I tell my buyers to create a relationship with their mortgage lender and make sure that person knows who they are. In a fast-moving market, buyers want their lenders to go out of their way if they’re in a pinch.”
One of the big outstanding questions is how long the hot market will last.
With so many variables due to COVID-19—new variants, vaccination rates, and the continued impact on the economy—and other factors such as interest rates and rising prices, what does the future hold?
“I can see this hot market lasting at least through the fall of 2021 and possibly continuing into next spring. Perhaps it even continues at a less fevered pace for a few years to come,” says Rick Richker, a broker with @properties in Glencoe. “There are many economic and social factors that will contribute to the real estate landscape on the North Shore over the next few years.”
Carrie McCormick, a broker with @properties in Chicago, says if people continue to want more space, this market isn’t going away.
“People want space—they want to find their ‘home,’ wherever that is. What I love is that people have a real appreciation for their homes and want to love where they live,” McCormick says. “Millennials have aged into their prime homebuying years, and they are now the fastest-growing segment of home buyers. 2021 will remain strong.”
Others see a slight cooling off when the 2021-2022 school year begins, as schools reopen and the uncertainty about how schools are structured dissipates.
“In a typical year our spring market cools off by June, and it slowly becomes a bit of a buyer’s market in the last quarter or two of the year, especially after the school year starts,” says Chris Veech, with @properties in Winnetka. “I think the demand we are seeing will take us through summer this year, cool off as school begins in August, and exceed the typical fall market. Families with little kids and relocating families will still be moving in the fall.”
For Cha McDaniel, a broker with @properties in Winnetka, the near future of the market will depend on available inventory.
“It is difficult to say how long this fastpaced market will last, but I do believe it will continue through the summer,” she says. “There is a great deal of demand for North Shore homes, yet many homeowners have decided to stay where they are. Until we see an increase in inventory, the market will remain very hot.”
Glenview broker Connie Dornan believes that Illinois real estate prices have been deflated, and that part of the equation is that the state is just catching up to the rest of the country.
“Illinois is uniquely different. Nationally, I think this will persist for the balance of the year and possibly into the next, largely dependent on interest rates,” the @properties broker says. “On a more micro-level here on the North Shore, I honestly do not think that our home prices are inflated at all. I think we are finally catching up to where we should have been all along. It’s a correction of pricing rather an increase.”
“Chicagoland experienced some record market lows pre-COVID, so I see the highs now not being that extreme, but rather a correction spurred on further by low inventory and post-COVID-19 economics,” adds Julie Morse, a broker with @properties in Lake Forest. “I see a stable and strong market forward for the foreseeable future, but more listings and builds would definitely help.”
Mark Wortman is a broker for @properties in St. Joseph, Michigan, a region where many Illinoisans own summer homes. Wortman doesn’t see much change in the market soon.
“I do not see any change in the market in the short term. As long as inventory stays ow, the prices will continue to rise,” Wortman says. “I believe it will stay this way until the end of the year unless there is something out of our control that causes a major shift in parameters.”
The bottom line is the North Shore has always been an attractive option for homebuyers, and that attractiveness has been illuminated by the needs of families that have emerged during the pandemic.
The economy is strong in most sectors and businesses have adapted to diminished need for employees working in offices and traveling to clients,” Rinaldi says. “Employees have more freedom in where and how to live, and they are making a comfortable home a priority along with good schools and safety. I don’t see this demand for housing on the North Shore abating anytime soon.”