By Kevin Haas
Rock River Current
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ROCKFORD — Kent Holliston spent three years saving for a down payment on his family’s future home.
But by the time he stepped back into the market he had been priced out of the Roscoe area where he preferred to live with his wife and 9-year-old daughter.
Holliston’s story is illustrative of what many buyers are facing here as home sale prices hit a new record high for the second straight month. The average sale price of a home sold in the region last month is up nearly 11% from the same time a year ago, meaning buyers would have to cough up an additional $19,000.
“We’d like to be in a certain area, but the way the prices are there’s no way,” Holliston told the Rock River Current on Friday at a showing for a home in south Rockford. “Eighteen months ago, 24 months ago, yeah, we could’ve lived in those areas. Today, in this market, we can’t afford it.”
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New stats from the NorthWest Illinois Alliance of Realtors show the three-month rolling average price of a home sold in July was $193,118. That’s up 3% from the previous record high set a month earlier, when the average sale price of a home sold in Boone, Winnebago and Ogle counties was $187,271.
“It’s because there are many more buyers than there are homes for sale,” said Conor Brown, CEO of NorthWest Illinois. “That imbalance is putting upward pressure on home prices because demand is extremely high, and supply is at a record low level.”
The combination of low supply and high demand is driving up prices and leading to homes selling at their fastest pace in history. Last month, the average home spent just 10 days on the market. That’s three fewer than the previous record in July and August of 2021.
“The last year and a half real estate has been as much of a speed game as anything,” said Greg Saunders, a Realtor with Sold on Toni.
Two years ago it took almost 44 days on the market for a home to sell.
The growing prices aren’t the only thing putting pressure on buyers. Mortgage rates are also climbing from the historic lows of the past year.
The latest 30-year, fixed-rate mortgage was 5.41%, up from 2.87% a year ago.
“When clients want to be in a specific ZIP code or a specific school district and they’re looking at the average prices in that area, six months ago they could probably afford $15,000 or $20,000 more than they can now because the interest rates have gone up as much as they have,” Saunders said. “Some clients have gotten so frustrated by that they’ve given up.”
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Saunders and Brown say interest rates are still low, even if not at the record lows seen a year or more ago. That means buying now is still a good investment.
“On the flip side, rents aren’t going down either,” Brown said. “If they are able to afford the payment for purchasing their home, it’s still a prudent move because nothing leads to greater wealth generation than home ownership.”
Average home sale prices in the region have more than doubled, growing by 119% since their low of $88,142 in March 2014. But the market really picked up steam last year, when a new record high sale price was set in six different months.
The average home sale price of $171,103 in 2021 was the highest for a full year since Rockford area housing stats were first collected in 1998. This year’s sales are on pace to break that record.
“In terms of price increase: by those percentages, by those amounts, they’re not sustainable,” Brown said. “We do anticipate moderation. It actually would be good to have things like foreclosures on the market to help out with inventory. It would be good to have new construction starts to help out with inventory. ”
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The availability of homes on the market took another hit in July, falling more than 20% year-over-year to 427 homes for sale last month. About three years ago that number was almost three times higher.
A healthy housing market typically has about four to six months worth of inventory for sale, Brown said. Right now, the region’s market has less than a month’s supply.
“It’s really unheard of,” Brown said. “We’ve never been in this in modern times.”
Brown and Saunders both expect sale prices to dip, albeit not drastically.
“Home values are not going to go down. There’s way too much demand and there’s way too low supply,” Saunders said. “With the inventory being so low, home equity, home values are going to keep rising.”
That means buyers like Holliston, who was priced out of the area he desired, has to keep looking in an ultra-competitive market.
“We’ve had to adjust where we think reality puts us,” he said. “Not where we think we should’ve been 24 months ago.”
This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on Twitter at @KevinMHaas or Instagram @thekevinhaas.