For the second year in a row, home sales in Champaign County have fallen in the month of August, according to the Champaign County Association of REALTORS.
PJ Trautman, the immediate past president of CCAR, said the decrease in home sales is in part due to the level of home inventory in the county.
“We saw a 15% decrease in the number of homes sold in our area,” Trautman said. “A lot of that is attributed to the fact that we just don’t have a lot of listings on the market; not a lot of people are currently selling their homes.”
Many homeowners are reluctant to list their homes because of the current market’s high interest rates, Trautman explained.
“We have a lot of homeowners who are locked in very appealing low interest rates,” Trautman said. “If they were to list and sell their homes … and buy a new home, it’s likely that those interest rates for their new loan would be significantly higher.”
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Shihan Xie, professor in LAS, elaborated on the market’s current macroeconomic conditions.
Xie said that during the pandemic there was a surge in housing prices across the country. The Federal Reserve also increased interest rates to combat high inflation last year.
“This tightening, meaning the raising of interest rates, had a very large impact on the housing market,” Xie said. “We do see … the growth of the housing prices has slowed down nationally since the recent hikes of interest rates.”
These higher interest rates correlate to higher mortgage rates, and the increase in mortgage rates makes borrowing costs more expensive, Xie said.
Thus, the current conditions make it hard for buyers to enter the real estate market, and combined with finite inventory in the Champaign marketplace, home prices have increased in the county.
“Some areas are seeing as much as a 20% increase year over year in their property values just because of the limited inventory and the basic principles of supply and demand,” Trautman said.
However, Xie said economists believe the interest rate will eventually stabilize, making mortgages more affordable than they are now.
In the case of housing inventory, the development of new homes has faced challenges due to supply chain issues, which arose from the pandemic.
“There are some new developments in terms of single-family residences (in the county), but not as much as what we would have seen years ago,” Trautman said.
Trautman noted the Champaign real estate market is perhaps more resilient than other communities due to the employment opportunities.
“We have a lot of transient population with people coming and going all the time … the University and Carle are big employers here in the community,” Trautman said. “So the Champaign-Urbana real estate market is far superior than what the national averages might look like.”
