Featuring the perspectives of local brokerage executives:

Jennifer Ames
License Partner, Engel & Völkers Chicago

Karen Arenson
License Partner, Engel & Völkers Chicago North Shore

Melissa Archer-Wirtz
CEO, CENTURY 21 Circle

Fran Broude
Regional Vice President, COMPASS Chicago

Mike Golden
Co-Founder/Co-CEO, @properties Christie’s International Real Estate

Jim Miller
Executive Vice President and Designated Managing Broker, City Offices,
Jameson Sotheby’s International Realty

Mark Pasquesi
President of Brokerage, Berkshire Hathaway HomeServices Chicago

Ayoub Rabah
Regional President Midwest, Coldwell Banker Realty

What do you expect for the overall housing market for 2024? Up, down or stable? Why?

Ayoub Rabah: In a promising outlook for the housing market, industry forecasters anticipate a positive shift in 2024. Aligning with these forecasts, I share the belief that improvements are on the horizon. The optimistic projection hinges on the expectation of interest rates inching down, potentially nearing the 6% mark. This anticipated decrease in rates is anticipated to stimulate both inventory growth and increased buyer activity, prompting those on the sidelines to enter the market.

Furthermore, in regions such as Chicago, where the dynamics of the market are influenced by seasonality, a bustling spring market is likely on the horizon. The cyclical nature of real estate in these areas suggests that the upcoming spring season will follow the trend of heightened activity, maintaining the market’s busy momentum. As we look ahead, the intersection of declining interest rates and regional market dynamics sets the stage for a buoyant housing market in the coming year.

Melissa Archer-Wirtz: In the ever-evolving housing market landscape of 2024, we can expect minor fluctuations in interest rates but anticipate overall stability in the Midwest. Real estate is more emotional than people calculate. Outside factors can weigh the market down, and currently having two battlefronts on the world stage has a weight on the purchasing public — making moves slower. Secondly, election years historically create a dip in the market — I estimate it to be around 4% in the Chicagoland market. The tighter the race, the greater the impact. But the Chicagoland market does not swing as widely as the coastal markets. Nationally, the markets will be down next year, but the Midwest will not see those significant drops. The persistent challenge of limited housing inventory, driven by homeowners holding onto low interest rates, will continue to shape the market. While there may be some ups and downs, the prevailing theme for 2024 is likely to be one of steadiness as the market adapts to ongoing economic dynamics, making it a year of cautious optimism for housing.

Mike Golden: Similar to 2023, 2024 will be a challenging year, highly dependent on interest rates and inventory. If rates come down, we could see more inventory, but demand will increase too, which would put upward pressure on prices. That’s not necessarily a bad thing, as the Chicago market remains relatively affordable compared to other major U.S. cities. Election years tend to cause a bit of a market slowdown, too, so that’s something to watch in the second half. The transfer tax is another potential destabilizer in the city if it’s voted in. Similar to Los Angeles, Chicago could see a surge in luxury listings as sellers try to avoid the tax, followed by a pronounced drop in activity once it goes into effect.

Jennifer Ames and Karen Arenson: Based on historical data, we should see increased sales in the first quarter of 2024. However, until inflation and mortgage rates come down, affordability issues will keep some buyers out of the market and cause some homeowners who would otherwise be sellers to stay put. The upcoming presidential election could play a role in providing relief. The sooner interest rates are cut, the more likely the economy will surge, which will benefit the incumbent. However, the Fed (which is independent from the White House) has a different agenda and has vowed to keep rates “higher for longer” until inflation approaches or reaches 2%. Until rates come down, we will continue to see fewer transactions.

Fran Broude: Overall, I expect the housing market in Chicago to remain stable to slightly improve in 2024. While it’s challenging to predict with certainty, Chicago has a diverse economy, strong job market and a steady population growth. These factors contribute to a relatively stable housing market. External factors such as economic conditions, interest rates and government policies could potentially impact the market. In addition, it is a presidential election year, which always makes economic predictions difficult. The continued decline in the number of homes coming on the market is fueling the steady to slightly increasing average sale price, despite the declining affordability and the highest mortgage interest rates in over 20 years.

Jim Miller: The 2024 housing market will be powered only by those that need to buy, including those combining households, those rightsizing due to a family growing or a relocation. With interest rates that are predicted to hover in the 8% range, low inventory and it being an election year, all other buyers will most likely sit it out. We expect a similar market to 2023, only because demand will increase slightly with new “have to” buyers entering the market. Activity in 2023 was impacted by the demand pushed forward in 2020, 2021, 2022. Our prediction is that all of this will result in sales numbers similar to 2023.

Mark Pasquesi: I expect the market to be slightly up — somewhere between 1% and 3%. Insufficient or low inventory will continue to be the industry’s biggest challenge. Factors such as buyers and sellers no longer being willing to hold off on their need to move, and a slight decline of mortgage interest rates, will likely enable the market to increase from 2023 levels.

Do you think any segments of the residential market will see growth in 2024? (new construction, rural, luxury, etc.)

Archer-Wirtz: In the residential market for 2024, rental rates are expected to rise, making rental and investment properties a growth area. With support from Fannie Mae, Freddie Mac and the FHA, it could also be a favorable year for first-time homebuyers, aided by down payment assistance programs to offset high interest rates. Moreover, the ongoing trend of remote work and continuing crime issues in Chicago are likely to drive increased migration to suburban and rural markets as people seek spacious and relaxed living environments, further contributing to the growth of these segments. Lastly, I would anticipate seeing more mid-rise developments near train stations and suburban city hubs. These are likely the only outlet for new developments in the near term.

Golden: New construction should remain strong due to low resale inventory and homebuilders’ ability to offer some mortgage rate relief with buydowns. I think we could see an uptick in downtown condo sales given, where rents are vs. the great values to be found in the market. If the new transfer tax passes, we could also see some city buyers — especially in that first luxury tranche — opting for the suburbs instead, creating growth in those markets.

Pasquesi: New construction, where available, will likely see the largest increase year over year.

Broude: In terms of residential market segments, I anticipate that new-construction and luxury properties will continue to see growth in 2024. Chicago has experienced a surge in new developments and luxury properties in recent years, and this trend is likely to continue. Additionally, with the growing demand for spacious and suburban living, areas outside the city will also experience continued growth.

Miller: Well-priced, new-construction and well-appointed resales will reign supreme, especially in the suburbs.

Rabah: This year we saw many double-digit million-dollar sales, and I do think luxury will continue to be strong as the buyers are less impacted by rates.

Ames and Arenson: The lack of availability of new and move-in ready single-family homes will continue to fuel multiple offers and higher prices in this category, particularly in lower density and suburban neighborhoods. Condo and coop sales may still lag, especially downtown, given that a significant percentage of the city’s workforce is not yet back in the office full time. We also expect the very high end to lag until the city demonstrates a commitment to support the business community with policies that will allow companies to grow and flourish.

What growth, if any, do you expect for your company next year? Do you expect your business to thrive, decline or remain stable? Why?

Golden: For @properties Christie’s International Real Estate, remaining stable is never an option. We always plan and expect to thrive in our business. In challenging markets, that can mean gaining market share; continuing to recruit and retain top agents; further innovation of our industry-leading technology, marketing, and coaching and training; opening new offices, like we’ve done recently in Bronzeville and Northwest Indiana; and strengthening our culture through real estate and non-real estate activities.

Broude: I’m confident that our Chicagoland company will continue to grow and thrive in 2024. We continue to focus on attracting successful agents. We have a growing team of experienced agents and the leading technology platform in the industry. By leveraging our expertise, technology and local market knowledge, we are well-positioned to adapt to changing market conditions and continue providing exceptional service to COMPASS clients.

Miller: In unstable markets, boutique and well-established brands normally do well. With our roll out of new offices, our agent-centric staffing model and our advanced tech stack will all be reasons that Jameson Sotheby’s International Realty will do well in 2024.

Pasquesi: In 2024, BHHS Chicago should see healthy growth. As a leadership team we make sure that coaching and broker development are at the core of what we do. Our brokers have been diligent in discussions with clients, making sure their needs are heard and understood. In a market of low inventory, it takes a broker who is willing and able to go the extra mile for the client to get a leg up.

Ames and Arenson: Considering the recent lawsuits regarding Realtor compensation, highly reputable boutique firms like Engel & Völkers will be more attractive to professional brokers because our brands are aligned. In large companies where there is disparate training and professionalism, it will be more difficult for their highest-caliber brokers to stand out.

In addition to sales, a significant growth area for our company is in out-of-area referrals. Engel & Völkers is a truly global company with shops throughout the Americas and the world. As our advisors actively network with our colleagues in other locations (especially in markets that are enjoying stronger activity), they will generate increasingly meaningful referral income. One of our goals as a company is to continue to facilitate opportunities to develop networking relationships.

Rabah: In the past year, more productive agents have decided to leave their existing firm to join Coldwell Banker than any other firm in the Chicagoland market. The driving force behind this trend is our comprehensive end-to-end platform, offering cutting-edge technology, robust marketing support and the backing of a globally recognized brand and network. With a commitment to providing agents the tools essential for success, Coldwell Banker Realty envisions continued growth as a natural outcome of empowering its agents.

Archer-Wirtz: We believe 2024 will be the year of returning to fundamentals, where we emphasize sales training and coaching. Our commitment to providing top-notch training and support positions helps us to excel in this competitive landscape, making us poised for a year of significant growth. The allure of a career in real estate remains strong, and it will be the companies that can prepare their agents for the future that will have robust growth.

What will be the biggest challenges for agents in 2024? How can they overcome these challenges?

Broude: The biggest challenge to our real estate agents in 2024 may include new competitors, evolving technology and changing consumer behavior. To overcome these challenges, agents should focus on continuous professional development, staying updated on market expertise, and embracing technology tools to enhance their efficiency and provide high-level client service. Additionally, building strong relationships, providing high-touch personalized consumer experiences, and staying proactive and being intentional in their marketing efforts can help agents differentiate themselves.

Ames and Arenson: With the decoupling of the buyer brokerage commission from the listing brokerage commission, one of the biggest challenges for brokers in 2024 will be to demonstrate their value to their prospective clients. Going forward, savvy brokers will ask their buyer clients to sign buyer representation agreements obligating them to cover the shortage in the buyer’s brokerage commission, if any.

Miller: As in all markets, but especially the market we will experience in 2024, agents will need an established CRM full of loyal clients. The challenge is that a CRM with loyal clients is not built overnight, so those behind on this curve will struggle. If you have put this off, start the reconnection with your past clients now.

Pasquesi: The biggest challenges for agents in 2024 will be the disparity in buyer and seller sentiment. Buyers are experiencing the challenge of trying to buy in a rising-rate market while often feeling the increased pressure of a multiple-offer environment. Sellers struggle with the challenge of trying to sell their home, often without securing their next home. To overcome this, agents will need to educate their clients and properly set expectations.

Archer-Wirtz: In 2024, agents are likely to face notable challenges, particularly considering changes in buyer agency cooperation and MLS rules. However, these challenges can be seen as opportunities for growth. At companies like CENTURY 21 Circle, we are well prepared to guide our agents through these changes, ensuring they continue to provide the highest levels of service to our clients. In this evolving landscape, offering a consumer-centric, service-oriented approach will be essential in overcoming challenges and thriving in the real estate industry. Agents need to shout from the mountaintop their worth. They need to be available and to pick up the phone and have conversations. There are always sellers that need to sell and buyers that need to buy.

Rabah: It’s never been more important to provide consumers with outstanding, tailored service and to reinforce the value that they provide to their clients as they help them navigate one of life’s most complex transactions. In uncertain times, we typically see a flight to quality. Agents need to ensure they have the right tools and services to offer the highest value to clients.

Golden: I like to look at challenges as opportunities. The market is going to go up, and it’s going to go down. This is why in robust times as well as slower times, it’s critical to communicate your value. This is especially true given the recent broker commission lawsuits. Make a business plan, communicate your value, keep your skill set sharp, always be prospecting and, especially, stay positive.
What do you think needs to happen for the market to improve?

Miller: Inventory is going to have to increase, and interest rates will need to settle in below 6%. Both of those measures will not happen in 2024. Many economists think we have 3-5 more years of gridlock.

Pasquesi: While most people will likely say we need mortgage rates to come down for the market to improve, I would suggest that we need consumers to accept the current rate environment for the market to improve. I believe many buyers have waited and continue to wait for rates to drop before they make their next home purchase. The best Halloween costume I saw this year was an agent dressed in a dinosaur suit with 3% on its chest. Because 3% mortgage rates have gone the way of the dinosaur and are now extinct.

Rabah: Interest rates need to tick down so they aren’t at historical highs and overall financial market sentiment needs to improve.

Ames and Arenson: Interest rates need to come down below 6% so that homeowners with low-rate mortgages will be willing to sell. Currently, the gap is too wide to make financial sense, regardless of whether they are moving up or downsizing. Another challenge is that many potential sellers, especially in the suburbs, have nowhere to go due to the shortage of inventory. As rates come down, this logjam should open.

Golden: [Co-founder/Co-CEO] Thad Wong and I have been asked this question a lot lately, and the truth is, no one really knows. We counsel our agents not to focus on the question of how or when the market will improve. Instead, focus on your business — the agents who focus on improving themselves in challenging markets will reap outsized rewards when the market improves. If you’re an agent, use this time to improve client service, communication and prospecting and networking, and increase your knowledge and skills.

Archer-Wirtz: To foster an improved market, two critical elements must be addressed: enhancing access to housing and finance and introducing more affordable lending products that provide down payment and closing cost assistance. These measures can help alleviate the housing shortage, make homeownership more attainable, and contribute to a more robust and accessible housing market. The social narrative needs to change from “It is better to rent than buy” to a larger focus on the economic benefits of owning your own home, especially in the Chicagoland area, where the stability of the market makes homeownership a predictable asset and not a gamble.

Broude: To improve the market, we would like to see the Fed stabilize and then reduce interest rates as the economy continues to improve. This would ensure better affordability for buyers. An increase in inventory would also contribute to a more robust market. On a local level, it will be crucial to foster a strong local economy, attract businesses and increase job opportunities. Additionally, investing in infrastructure, transportation and community development can enhance the overall desirability of the area. Collaborative efforts between the government, real estate industry and community stakeholders can help create a positive environment for market improvement.

Which suburbs have the brightest housing outlook in 2024?

Archer-Wirtz: In the Chicago area, several suburbs are showing promising housing outlooks for 2024. Naperville and Aurora are experiencing growth as Chicago residents seek suburban living with good amenities and schools. Additionally, fast-growing markets like Skokie and Niles are becoming increasingly attractive due to their affordability and accessibility to urban centers. It’s essential for potential buyers and investors to explore these suburbs further, considering their unique characteristics and market dynamics to make informed decisions. We are also still seeing a strong market in Northwest Indiana and surrounding areas that are close to the Illinois border and with anticipation of the Double Track NWI train line’s completion next year, we anticipate significant growth along the Northwest Indiana border.

Pasquesi: The suburbs that have been strong will continue to be strong — having great schools, vibrant areas with shopping, dining/entertainment and easy access to Chicago are always in style and will continue to be. When COVID hit and people could work from anywhere, we saw the farther outlying markets really boom. Now, as many companies are bringing people back to the office, the areas that have the great amenities along with easy access to the city will be in demand.

Ames and Arenson: It is hard to specify exactly which suburbs will be more desirable in the future. However, based on current hybrid work models, employees want to remain reasonably close to the city. Those suburbs that offer a shorter commute will fare better. Also, the suburbs that are more established will tend to hold their value, and therefore be more desirable as an investment.

Will the transfer tax increases go through? Any thoughts about other legislation?

Ames and Arenson: It is our sincere hope that the proposed new transfer tax does not get approved. It will be an enormous deterrent for buyers who might otherwise be interested in purchasing a home in Chicago. For example, the current tax rate is 0.75% of the purchase price. While the proposed rate is 0.6% for purchases under $1 million, it jumps to 2% between $1 million and $1.5 million, and to 3% of the price for purchases (including commercial properties) over $1.5 million.

What this means, for example, is that a homeowner in Chicago who sells their $900,000 home and buys a $1.7 million home, they will be paying 0.3% (or $2,700) in city transfer taxes on the sale side, and 3% or $7,600 in city transfer taxes on the buy side. All in, it will cost them $10,300 in city transfer taxes, an encumbrance on top of relatively high interest rates on their mortgages. This will disadvantage the city and encourage buyers to move to the suburbs.

Golden: The really important thing now for opponents of the tax — and I am firmly in that category — is to do a very, very, very good job of messaging the negative impact of the change on all Chicagoans. We know the overwhelming majority of homeowners in the city purchase homes under $1 million. For those individuals, the tax rate will decrease slightly, so they may be inclined to vote for the measure. But a recent study from the University of Chicago found that the drop in commercial real estate values as a result of this tax will cause a 10% increase in residential property taxes. You buy a home once every five or 10 years. You pay your property taxes every year. I’m really not sure most voters are getting this message.

Archer-Wirtz: Transfer tax increases can indeed pose a significant obstacle, particularly for first-time and low- to moderate-income buyers. The Chicago Association of Realtors has been a steadfast advocate for addressing these concerns and highlighting the adverse effects these increases can have on housing market accessibility. Defending the dream of homeownership is crucial, and while the fate of these hikes remains uncertain, continued advocacy for clients’ rights and affordable housing access will be a priority for the real estate community. Monitoring legislative developments and actively engaging in discussions can help shape a more equitable and accessible housing market for all.

Broude: In my opinion, the proposed “luxury transfer tax” in the city of Chicago is likely to pass. What effect that may have on high-end sales is difficult to predict but will be closely watched. Regarding proposed local transfer tax increases and other legislation, it’s important to stay informed about any potential changes in the Chicagoland market. Local real estate leaders and industry associations provide insights on legislative developments and their potential impact. It’s always a good idea to engage with legal experts and stay involved in advocacy efforts to understand and influence any proposed legislation that may affect the real estate market.

Rabah: We can glean valuable insights from successful strategies employed in markets like L.A. Addressing the homelessness challenge in our community requires exploring solutions beyond tax reliance. I advocate for a thorough examination of alternative, effective approaches. Collaborating with experts and engaging in community dialogue could yield insights for a more impactful and sustainable solution. It’s crucial to recognize that raising taxes on real estate might not be the optimal way to achieve our intended goals.

Miller: Yes, the transfer tax will go through. Also, the decoupling of buyer broker commissions will happen in 2024. We are preparing our agents for this eventuality now.