Low inventory, a scramble for available homes, and rising prices characterized 2021 in the McLean, Livingston, DeWitt County region, according to the Mid-Illinois Association of Realtors (MIRA).
Bloomington-Normal home prices rose an average of 13.8% in 2021 from 2020. MIRA said that is nearly three points more than the increase for the entire region. The bump-up in average price that began in March 2021 carried all the way through year's end. The full-year average price of a home rose by $26,698 in Bloomington-Normal on increased demand and higher construction costs.
In all, 2,239 houses, condos, and zero lot line homes sold in Bloomington-Normal last year. That is an increase of 3.8%. For the region, sales grew 9.4% for a total of 3,493, suggesting larger percentage increases in rural areas of central Illinois.
"For Millennials and Gen X's there's a trend with that group of looking out into the countryside to find houses that may be more affordable than the houses in the city. But that group still enjoys the amenities of the city, as far as things to do and places to go. But they can buy something just outside of town and find more value for their dollar.," said Ed Neaves of Berkshire Hathaway Home Services in Bloomington.
Neaves is also the 2022 Realtor of the Year for the Illinois Realtors Association and a former president of that statewide group.
The housing market remained more active than usual even accounting for the wintertime seasonal slow period. Pending sales in Bloomington-Normal in the final quarter of last year were about double the numbers for the fourth quarter of 2020.
And though there was a decline in average price of a home sold in Bloomington-Normal in the final quarter compared to the first and second quarter, average price for the quarter remained well above averages in 2020. MIRA President Jessica Devore said the drop can probably be accounted for by having fewer new homes up for sale at that time of year, as the construction season waned. She said prices remained elevated even though the bulk of the sales were of existing homes, because there are fewer homes on the market in the final quarter of any year and demand was still high.
"We were still seeing sales prices at or above the asking point during the fourth quarter," said Devore.
Time on market has gone down even in a traditionally slow period late in the year, she noted.
"It's really pretty unbelievable that it went at the beginning of the year from being in the 30s to 50 days on market to, by the end of the year, trending from May to November in the teens. That's pretty fast turnaround, 18-19 days on market and December even ending with 23 days on the market. Things are really just pacing fast," said Devore. "We talk about the seasons and things like that, but there has certainly been no slowdown that I have felt in the demand for housing and working to get that inventory up."
National experts have said 2022 may be less rosy.
"Most economists are looking at interest rates to increase in 2022. Because of that, there'll be a slowdown in the buying frenzy. And when there's a slowdown in the buying frenzy, then prices may start to get more stable," said Neaves.
Both Neaves and Devore, though, said central Illinois activity will likely still be robust.
Devore said pent-up demand in Bloomington-Normal has kept available inventory at less than two months supply, which will encourage sellers to explore the marketplace once the weather improves and the spring selling season arrives.
"There is some hidden inventory. We find people sometimes have homes that they hold onto or they've been renting and now consider selling. Certainly we need to be looking at our current stock and evaluating and rehabbing," said Devore.
Rising building costs
A part of the growth in sales in Bloomington-Normal in 2021 came from new home construction. Existing home sales rose 1.9% and new home sales rose 75.9%, according to MIRA data. For the three-county region, sales of new homes were up 85.2% and existing home sales rose 7.9%.
A drag on the national market is the price of building materials. Devore acknowledged that is a factor in Bloomington-Normal even at the most mundane level. She said a tube of caulk formerly priced at $2 now costs $6. But even though last year's growth relied on new construction she said she does not think construction costs and supply chain issues will tamp down sales.
"I think the demand is so great it's not really stopping the new construction," said Devore.
Both said the pandemic has changed what people are looking for in a house because people stayed at home a lot, but in contrasting ways, depending on the buyer. Residents have realized they can use space differently for activities.
"Home entertainment, the big screens, so you can stream your movies in a comfortable area, but also whether it's converting converting a room, pantries and kitchens so they can pack up on food. There's a lot more home meals in the last two years with restaurants having different issues. The whole concept of what a home is has changed," said Neaves.
Home offices are important, especially if both spouses are working from home. Some people with open floor plans have different needs now for privacy as they work from home and have had children in class from home and have converted rooms.
"The flexibility of the home is more important than ever. It's going both ways. Some people feel they can do with less space and not have to heat a big house and others really want to expand. It just depends on the needs of the family" said Devore.
There are also generational differences coming to the fore. Some years ago there was speculation that the younger generation might not have as many homeowners because they were later than preceding generations to have families and had made different lifestyle choices that value experiences over property. But Neaves said that may be shifting among the Millennials and Gen X'ers.
"The median age of a buyer in McLean County is 38. They make up the largest percentage of buyers in the marketplace right now across the board. So they're already there. We're seeing a lot of soft natural colors and decor from the buyers, as opposed to maybe 10 years ago, when the buyers were an older demographic, where you would have a lot of dark wood, and different things like that. So a lot more contemporary type designs in our new construction," said Neaves.
Public officials have noted a lack of condos and townhouses in Bloomington-Normal and have called for builders to address that segment. Devore said some of that demand is being met through conversions and rehabs. But Neaves said there is a limit on how much new construction of that type can happen in the Twin Cities.
"One of the issues that's a challenge for builders is zoning. There's a shortage of land that will accommodate that zoning, which is based on density, how many people per acre you can fit there. The land you're talking about is at a premium to find and then development costs are staggering. To build houses, condos, apartments to allow more people, an investor still has to have the return on the investment. And if the prices of those constructions are rising so high, then sometimes it's difficult to justify the expense," said Neaves.
