Chamber of Commerce Economic Update: Dr Cornel Darden Jr. on the Housing Market in the Southland (Robbins, IL) – The economic fabric of the Chicago Southland is very unique. As residents and investors in the Southland, we are in a very fortuitous position. Having natural waterways and geography conducive to a hub of transportation, the Southland is one of the greatest places to be in the world economically. Many issues hinder the ability of the Southland to live up to this natural potential. One of the issues right now is housing. Housing in this month October 2021, is a global issue. This issue has amplified, starting in the beginning of the pandemic. Home prices are currently soaring. Appraisers are having a difficult time keeping up.
Appraisers have tremendous influence on how much buyers can borrow for their home purchases. While a home borrower would be willing to overpay in a hot sellers market, appraisers aren’t willing to over appraise. Bidding wars have become common in the Southland and appraisal gaps are at historic levels.
Apparently, home prices haven’t risen at this pace in decades. According to a report, CoreLogic stated that home prices increased year over year by 18.1% in August 2021 compared with August 2020. This represents the largest annual gain in home prices in the 45 years.
According Frank Martell, President and CEO of CoreLogic,
“Home prices continue to escalate at a torrid pace as a broad spectrum of buyers drive demand for a limited supply of homes. We expect to see the trend of strong price gains continue indefinitely with large amounts of capital chasing too few assets.”
Record low borrowing costs (mortgage rates) and being able to work remotely may have encouraged such a demand.
This seems to be a simple supply and demand issue. We need more homes built in the Southland and abroad. We also need to rehab what can be economically salvaged. Compounding this issue of supply is a historically low home ownership rate. Black home ownership rates nationally dropped during the pandemic. According to Market Watch, Black home ownership rates dropped to 40.6%, which is down seven percentage points from a decade earlier. Black home ownership rates are now 44%, while the white home ownership rate is far higher (approximately 74%).
Home ownership has long been considered a bedrock of the American Dream. Increasing home ownership is seen by many to be a economic plus for many in the Southland.
What can help, in the Southland in particular, is encouraging home building and new construction. Those looking to purchase homes should look to build new. America as a whole has had a bad taste in it’s mouth for new construction since the Great Recession.
Chamber of Commerce Economic Update Dr Cornel Darden Jr on the Housing Market in the Southland