Laura Ellis keeps a close eye on the leading indicators that speak to her. And right now they are saying hang in there.
The Baird & Warner chief strategy officer and president is always thinking about what’s next for the housing market, especially during an unpredictable economic cycle. And as a real estate veteran, she is cautious about trying to predict where things are headed, even as the spring market heats up.
“We just have to have humility about it, and we’ve got to deal with what we’re looking at now,” she said. “People on my team, my senior vice president, regional managers, say showing inventory is up, and I’m like it doesn’t mean we’re spending any more money until that translates into closed sales.”
The Real Deal spoke with Ellis to get her thoughts on Chicago’s housing market, why it tends to be an outlier compared to other major markets and how she and her team are thinking about a possible recession.
This interview has been edited and condensed for clarity.
TRD: What are you doing to get buyers reengaged in this market?
LE: Now that we’re about a month or so into the spring market, we’re not really seeing a problem with getting buyers engaged in the market, which I know sounds a little bit counterintuitive because the rates have gone up significantly, and they’ve recently taken another little jump. What we’re finding though, is our problem is lack of inventory.
When a listing comes on the market and it’s priced right it’s selling very quickly with multiple offers. So it’s a very strange market, one that I have not experienced in my 30 plus years in this case. Just when I think I’ve seen it all. Here we are with interest rates that have really effectively more than doubled in the last year and buyers are still there. We’ve actually seen a big uptick in pre approvals coming through our mortgage company in the last several weeks — a dramatic uptick, but again, the problem is we don’t have enough properties to sell.
What’s contributing, I think to the lack of inventory is many people who would like to move are afraid to put their house on the market before they find something because they’re afraid their house is going to sell too quickly and they won’t be able to find anything.
TRD: I always try to put Chicago in the context of what’s happening nationally. We buck a lot of the trends here, because we’re not in New York, Miami or an emerging market. How do you view this Chicago versus some of the other mature markets across the country?
LE: All the predictions are that real estate is going to decline in value anywhere from 3 percent to 10 percent around the country. But our sales price is up year to date. We never know what’s going to happen, but I don’t believe we’re gonna see price softening here in Chicago and the metro area, and that’s because we didn’t go up dramatically. Some of those other markets, they’re so heavily cash, there were no appraisals being done to slow that down. You know, it’s competitive, people are paying hundreds and hundreds of thousands of dollars over list price to get properties. Well, that’s a little bit more moderated here.
I go to a lot of national conferences and with everything in the last couple years, I’m sitting around with people from Miami, Sarasota and Phoenix and I’m feeling like a loser. I’m like we’re up 4 percent and they’re like, we’re up 18 percent. But you know, when times get tough, I’ll take that stability all day long.
TRD: In seeing @properties’ news that it’s tacking on a 1% broker fee, and monitoring Q1 earnings reports from public brokerages, the broad story that we’re seeing is a sense that some are bracing for impact. Are you concerned we’re heading into a recession?
LE: I would describe our stance as cautiously optimistic. We have never seen a market shift so fast. If you go back to The Great Recession it took like two years from the time we started till we got to sort of the bottom of our numbers. This change in the market happened so rapidly to see that inside of a year is really extraordinary. We are watching all of our leading indicators. I’m not going to try to say it’s anything other than what it is. We’re in the same boat as everybody else. All of our costs went up. We’re trying to pay bigger bills with less money.
So far showing activity is up. It’s very reflective of last year, actually a little bit better than last year, where we’re struggling is the listing inventory.
We’re trying to look at everything through a historical lens. If we do in 2023 the business we did and 2022 it’s still a very healthy level of business.