Record low inventory of homes for sale in the Peoria-area market pushes prices up, sales down
The Peoria area's real estate market continues to cope with a sharp decline in homes for sale, leading to a drop in first-quarter closings with prices on the rise.
The Peoria Area Association of Realtors reported 564 listings on the market in the first quarter, down from 1,087 a year ago and 2,174 in 2020. PAAR president Ryan Cannon said it’s the lowest supply on record for the market, resulting in a 12.2% decline in sales.
“We had 48% less houses to sell, so of course there was a little bit of a decrease in the number of sales compared to 2021,” said Cannon. “But overall, (with) 48% less houses, 12% less sales is still a good number.”
The low inventory has homes selling quickly and costing more. While the number of sales dropped by 166, the average price climbed from $155,937 to $159,076 and the average time homes stayed on the market fell to 47 days, down from 77.
“Prices, since 2020, have increased almost 20% almost 20% – 19.8%. So you're seeing price increases year over year, and I still expect to see more price increases this year,” said Cannon, adding the situation is not unique to the Peoria market.
“We're not alone. I mean, it's like this across the country. Other markets, even in Illinois, have less inventory than that,” said Cannon. “We're still listing a good number of houses, we're just selling them very fast.”
Indeed, Illinois Realtors reported the state’s March median sale price of $260,000 is up 4.6% over last year while the inventory of homes fell off by 32.1%. The number of homes sold statewide last month dropped 9.2%, and the average home sold in 36 days.
Meanwhile, the U.S. Home Affordability Report lists Peoria County among the country's top three locations where the smallest portion of average local wages (10.2%) is needed to pay the mortgage on a median-priced home.
Cannon listed the market’s affordability among the factors creating the current supply-demand imbalance.
“We just simply have more buyers in the market than we ever had before. You have people nationally looking at Peoria and (it’s) affordability, they’re valuing that. So we have people from out of the area looking to invest in Peoria.
“We have ‘Gen Z’ and millennials buying at a faster rate than they ever had before, and then we also have seniors not transitioning into assisted living or independent type living facilities as fast as they have in the past.”
Another explanation behind the low inventory, according to Cannon, is more than a decade of reduced new home construction.
“Builders kind of got out of – a lot of them, from 2008 until 2020, just weren't really building spec houses; they were building when somebody asked them to, but they weren't building entire neighborhoods,” said Cannon. “So, under-building for a decade and then all of a sudden wanting to build with the supply chain issues and labor issues has made building very expensive.”
Cannon said he believes the market’s inventory of homes will begin to normalize this year as interest rates increase as a way to offset rising inflation. As for advice for buyers and sellers facing a complex market, Cannon recommended working with real estate professionals – and acting quickly.
“Sellers, now is the time. There's no reason to wait until May or till June to put your house on the market, if you have a plan for where you're going,” said Cannon, noting many people selling homes are opting to find their next place before they list their property.
“As far as buyers, it's all about being ready. To kind of get your feet wet and test the market, it's not a great market for that. A colleague of mine said it's like drinking from a firehose from a buyer's perspective. It’s like you get out there and you kind of want to understand the market and feel it out, but you instantly have to make a decision on the houses that you like.”