Seller’s market: Kane County housing market leans toward those that already have a house

While many economists anticipate dropping interest rates to continue into 2025 and local Realtors are hopeful for a good start to the new year, Kane County real estate professionals don’t believe the Fed’s influence is as strong as other factors and expect current market trends to continue unless new construction picks up drastically.

Local Realtor Jimmy Zitnik said in 2021 and 2022 it wasn’t surprising for listings to see 30 to 40 offers, buyers were waiving inspections and appraisals, buying homes as-is and putting more money down than ever. He said while the market isn’t nearly as competitive as it was just a few years ago, many homes still see multiple offers and are selling fairly quickly.

“It’s been a good time to sell a property since 2020,” Zitnik said. “It’s supply and demand 101. You’ve got historically low inventory and you’ve still got a lot of people who want to buy, so houses are selling quickly.”

Zitnik has been a licensed Realtor since 2019 operating in Kane County and across the northern Illinois region.

Kane County homebuyers currently are limited by several factors, including lack of inventory, high interest rates, low affordability and heavy competition, and local experts don’t expect these factors to dissipate any time soon.

Although the consensus is that Kane County is and will continue to be a seller’s market, those looking to sell their homes are facing their own problems. While increasing home values and decreasing market time makes for a good time to sell, those living in the homes they aim to sell are having a hard time coming to grips with the high costs and payments that will come with buying a new home. In other words, unless they already have another home, those looking to downsize are faced with paying more per month for much smaller homes because of high interest rates.

Realtors Association of Fox Valley president Justin Letheby has been in real estate since 2006 and became president of the association in October. He began his career as a Realtor in DeKalb and Kane counties and now spends most of his time training and coaching Realtors and other real estate professionals.

Letheby said the current climate definitely is a seller’s market. He said while homes are selling fairly quickly thanks to Kane County’s low inventory, they are starting to see an increase in new construction in some areas, which will help increase market traffic.

The Fed’s impact

Kane County Realtor Anne Kothe has been in local real estate for almost a decade and works with Geneva firm Keller Williams Inspire.

Kothe said she has not yet seen an impact on the market based on dropping interest rates. She said the seasonal trends of the market and lack of inventory in Kane County are greater driving forces than interest rates.

The Federal Reserve lowered its interest rate a quarter of a point Nov. 7, part of a series of decreases this year.

Kothe said based on the seasonality of the market, except for during the pandemic anomaly, she always encourages buyers to buy in the last three months of the year and sellers to sell in the first four months of the year.

“We really haven’t seen [interest rates] drop very much,” Kothe said. “Just because the Feds cut the rates didn’t mean it affected the interest rates all that much at all.”

Kothe said with so many homeowners holding onto 2% to 3% interest rates, unless the rates go down, it is difficult to make a transition into a new home less painful. For those looking to move up to a better house, even though they will get good money for their current home, to buy a house at the same price is going to cost them more in interest.

“Our hope is that we’ll see it drop, especially into the spring season,” Kothe said. “It’ll be interesting because we’ll probably get another one of the flurries of a lot of buyers coming on and the multiple offers that we saw during the pandemic. ... I anticipate it being a good 2025.”

Low rates, historically

Zitnik said there is a great deal of recency bias when looking at interest rates. He said while current rates are below the median interest rate of about 7.5% since 1971, when compared with the rates of 2020 to 2022, the current rates seem extremely high.

This year, rates have been fluctuating between 6% and 7%, and though economists predict more decreases in 2025, Zitnik said homeowners with interest rates around 3% seem to be holding out.

Zitnik said he has several clients that are retired and looking to downsize, but even with moving to a home half the size of their current one, they would end up paying more a month because of the interest rates. He said those looking to upsize are having an even harder time coming to terms with higher interest rates.

“If you’re trying to downsize, you’re paying more per month for a smaller house,” Zitnik said. “If you want to upsize, your payment is going to be a disgusting amount more than what you’re currently paying and a lot of people are having a hard time swallowing that pill.”

Insufficient inventory

While interest rates are a factor, Zitnik said the biggest challenge the housing market faces across the country, and especially in Kane County, is lack of inventory.

According to data from the U.S. Census Bureau, while new construction in Kane County has been picking up in recent years, it is still at less than half of the rate seen before the crash of 2008.

Zitnik said inventory has been declining steadily since the pandemic and has been historically low for the past few years. Since the substantial drop in inventory in the fall of 2019, in the past four years there has been about one third the inventory there was in the four years before 2020.

According to data from the Federal Reserve Bank of St. Louis, since September 2023, the average number of homes for sale in Kane County has remained under 700 compared with an average of about 2,000 from 2016 to 2019.

Zitnik said he doesn’t believe the pandemic affected home buyers’ and sellers’ sentiment toward the market as much as it affected home builders. He said from 2020 to 2022 the cost to build went up exponentially, supply chain issues delayed the building process and homes were selling much faster than they could be built.

Letheby said since the unpredictable fallout of the 2008 crash, the market saw a steady growth in the 2010s and tremendous growth in the past four years. He said while Kane County inventory remains low, slow increases in new construction began around 2017 and there has been consistent increases in new homes on the market month-over-month since 2020.

“We’re starting to see everybody understand the need to have new inventory out there,” Letheby said. “With more and more buyers coming on the market, we need to have new opportunities for them to purchase their first-time home or even their move-up home.”

Home values increasing, market time dropping

Based on data from Fox Valley Archives and the Kane County Multiple Listing Service website, Letheby assessed the current market climate as very active with a lot of excitement and competition among buyers, which is good news for sellers and for home values. He said over the past few years, the market has seen a year-over-year increase of 4% to 5% in median sale prices of homes.

“People are getting more for their homes than they have in a long time, which is tremendous,” Letheby said. “That helps a ton. You’re also seeing homes move quickly.”

Letheby said the time that homes spend on the market is down about 7% year over year, with most sellers getting an offer within the first five to 20 days of listing their home. He said Realtors now are just hoping to see more inventory come to the market to keep that trend going.

“We believe the Fed rate drop will lead to an increase in inventory,” Letheby said. “We are still very confident – with interest rates and low inventory being major factors – we will see home values continue to rise, as well as more inventory will come out and help our motivated buyers to buy.”