‘Remarkable and unparalleled’: 2021 was a ‘housing boom’ in the Rockford area

By Kevin Haas
Rock River Current
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ROCKFORD — A combination of historically low interest rates and a limited number of homes for sale made 2021 the most lucrative and competitive real estate market on record.

Last year’s average home sale price of $171,103 was the highest since Rockford area housing stats were first collected in 1998, and the $19,400 increase in price was also the largest recorded in history, according to the Rockford Area Association of Realtors.

“It was both remarkable and unparalleled,” said Conor Brown, CEO of Rockford Area Realtors. “Fierce demand driven by historically low interest rates and limited inventory created conditions for this housing boom.”

Related: Rockford area home prices keep rising. Should you buy now or wait for a dip?

Homes also sold at their fastest clip in history, spending an average of 22 days on the market compared to 42 last year.

The 5,347 homes sold last year was the highest in 15 years and 379 — or nearly 8% — more than 2020. The last time more homes were sold was when 5,844 properties sold in 2007, the last year before the housing market crash.

But Realtors say this runup on prices is different. There are stronger mortgage qualifications in place, buyers are making higher down payments and there are more cash buyers. There is also much less new construction.

“If we have a landing somewhere it’ll be nothing like 2007,” said Ginger Sreenan of Pioneer Real Estate Services and the incoming president of the Rockford Area Realtors board of directors. “It will be very soft, very moderate and those levels of price appreciation are going to level off to something that’s probably more realistic for everybody: buyers and sellers.”

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There were 3,118 fewer homes on the market last year than 2020, and it marked the lowest monthly average inventory of homes for sale in history.

“It was a difficult market for buyers … first-time buyers especially,” Sreenan said. “The message is out there that buying a home is wealth-building and we want as many people as possible into a home to build wealth.”

Related: ‘Just let me buy a house’: Hot Rockford real estate market creates bidding wars for buyers

Building more new homes would help make prices more competitive, but the high cost of lumber and other materials makes home construction challenging.

“We would absolutely welcome new construction,” Brown said. “Certainly the lots are out there, the dirt is very affordable, but with material and labor costs being what they are right now it’s really cost prohibitive.”

What to expect in 2022

Brown said he expects more price growth in the coming year, but it should be more moderate than the nearly 13% spike the region saw in 2021.

The Federal Reserve has signaled that it will begin raising interest rates in March for the first time in three years as part of an effort to curb inflation. Although the Fed doesn’t set mortgage rates, key players in the mortgage industry follow the Fed’s moves and its actions could affect home loan rates in the coming year.

Mortgage rates increased to 3.22% during the first week of January to highest level since May 2020. But small increases from that rate are still a deal for homebuyers, Sreenan said. She recalled buying her first home in 1980 with a 15% rate.

“We paid points to get 12% and thought we were winning,” she said. “Anything with a single digit, something still in the 3s, although it’s crept up, is phenomenal for buyers and they’re going to want to get in on that.”

Brown says buyers may try to make their purchases in the first part of the year because of the threat of rising interest rates. He said it should remain a seller’s market throughout the year. Even though the organization expects sales and price growth to cool off, it won’t be enough to turn it into a buyer’s market.

“We still expect homes to sell very quickly, but again it’s probably not going to be at that same frenzy that we saw back in 2021,” Brown said. “Don’t be surprised if it’s a little bit more moderate this upcoming year.”

This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on Twitter at @KevinMHaas.