Is The Housing Market Going To Cool Off Soon

Is the housing market going to cool down?

According to data provided by the Federal Reserve, inventory bottomed out nationally in October, hitting levels we haven’t seen since 2004. This has led to one heck of a seller’s market over the last couple of months. 

The months supply of inventory for single-family homes in Chicagoland has also bottomed out.


Chicago InventoryAs of February 2021, things at a Nationwide level may be changing. That month’s supply index for homes in the U.S., jumped up to 4.8, which is the highest level we’ve seen since May of 2020. For reference, the average for the four years leading up to the COVID-19 pandemic was 5.6. We’re not however seeing this jump in Chicagoland.

What happens if inventory increases?

Supply and demand tell us that, generally speaking, when supply—or housing inventory—increases, prices will fall, presuming that demand remains constant. Simply put: When there are more houses for the same number of buyers, buyers don’t have to compete as hard as they do now for a limited supply of properties.

Unless, of course, mortgage rates continue to rise.  Even if the rates do climb, however, they’re likely to still stay extremely low—at least from a historical perspective. But these two factors converging could really slow down the irrational marketplace.  Less competition from buyers plus more expensive mortgages may be a recipe for returning to more normal growth rates.