Impact of COVID-19 Outbreak on Real Estate Market in Chicago

CHICAGO, March 26, 2020 (Newswire.com) - ​​As the world witnesses the spread of the COVID-19 pandemic, all eyes are pointed toward the stock market. But how will value be affected? Dan Cuckovic, a Managing Broker of Enterprise Realty Brokers, Chicago's leading real estate firm, offers some insights into this matter.  

Many still remember the 2008-2010 economic downturns where homeowners lost all their equity and were forced out of their homes. People all over the world, including Chicago, are wondering if they will soon face the same fate.

2008-2010 Great Recession vs COVID-19-Pandemic

The major difference between the current scenario and the Great Recession is that the latter was triggered directly by the real estate industry. The lack of regulation coupled with the overall economy slowdown resulted in a downward economic spiral that was difficult to stop. 

In regards to the current situation, it’s important to note that up until few weeks ago, the U.S. economy was doing well. Chicagoland real estate markets saw an amazing February with over 30% increase in under-contract properties vs February 2018, mainly driven by strong demand and ultra-low interest rates (30-yr conventional mortgage near 3.00%). Stock markets reached their peak on Feb. 19 and it looked like 2020 will be the best year since the Great Recession. 

What if a Recession does occur?

Most economists are predicting a recession, but that doesn’t automatically mean a loss in property value. During the previous two recessions (2001-2002 and 1990-1991), real estate prices remained stable.​​

Unemployment and supply

Illinois unemployment rates reached a new low in 2019 of 3.9%. While the unemployment rate due to the COVID-19 Pandemic will inevitably increase, it’s unlikely that it will reach the 2008-2010 levels of 9%+. Even if it should, this may be a short-term spike, assuming the virus is contained by mid-summer.

For 5 years, the limited supply of real estate in the Chicagoland area has pushed values higher. For the right balance, the market must have 6-7 months of inventory available at any given time. In Chicagoland, that supply is currently at 3.5 months.

Don’t panic sell

The best decision sellers can make now is to hunker down and ride out the Pandemic. Selling during the Pandemic will inevitably result in a loss of value. Assuming the virus can be contained in the weeks to come, it’s reasonable to believe that market conditions will return to normal soon. For those in dire need of selling their property, consider consulting one of the discount brokerages in the Chicagoland area. Many offer full real estate services while charging fees as low as 3.5% to sell a home.

About Us

Enterprise Realty Brokers is a leading Chicago Real Estate firm focusing on helping clients with the purchase and sale of residential real estate. With our 1% Listing Fee and the unparalleled service, we are the best resource for the sale of your residential real estate.

Source: Enterprise Realty Brokers Inc.