What's In Store For Chicago In 2023?

Much of what happens in the housing market in 2023 will depend on whether the Federal Reserve backs off from a series of rate hikes that chilled sales in 2022. If hikes continue, the chill could become an all-out freeze. If they don’t, buyers and sellers may get back in action, although nobody predicts a return to the frenzied market of the pandemic-era housing boom.

Redfin and Zillow, two online real estate marketplaces, both expect existing-home prices to hold up better in Chicago than in most major cities, largely because they didn’t rise frothily here, so there’s less air to be let out of them. As prices drooped elsewhere around the country, they only flattened in the Chicago area, at least for now.

In the new-home business, like in the overall housing market, “most of the damage that resulted from dramatic price increases followed by interest rate hikes occurred in other areas of the country, such as Phoenix and Dallas, where price increases were much higher than here at home,” said Erik Doersching, CEO of Tracy Cross & Associates, a Schaumburg-based consultant to the homebuilding industry. “In the Chicagoland area, while sales have slowed recently, price increases were not as dramatic and, more importantly, slower sales have resulted in large part from supply depletion,” not from buyers exiting the market.

Doersching sees one particular source of strength in the local homebuilding industry. While early in the 21st century there were many small, locally owned suburban building firms, a fallow decade after the housing downturn of 2007-08 shifted the profile. Now, national firms based in other cities build about three-quarters of the new homes in Chicago-area subdivisions. Because those large, publicly traded firms have deep pockets and a national perspective, they “have flexibility on pricing,” he says, which helps “our region’s ability to offer incentives, such as buying down mortgage interest rates, thus mitigating any significant falloff.”