After a 2018 that saw slowly rising mortgage rates put new pressure on homebuyers to enter the market sooner than later, residential real estate experts are looking ahead to 2019 with tempered optimism. The National Association of REALTORS® (NAR) 2019 forecast expects stable housing market conditions to continue in most states, predicting a 1 percent rise in existing home sales and continued – but slowing – home price appreciation. Meanwhile, Dodge Data & Analytics predicts new-construction single-family housing starts to have a modest 3 percent decline.
Against that backdrop of anticipated steady, yet flat, market conditions, here are some of the trends that will impact residential real estate in 2019, according to leading Midwest experts.
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- Watching the Ticking Interest Rate Clock
- Finding the Missing Middle
- Who Put That Living Space in My Kitchen?
- What’s Next in the Digital (Closing) Age
- Condo and Townhome Floor Plans Wide It Out
- Statement Ceilings Raise the Roof
Watching the Ticking Interest Rate Clock
Following the Federal Reserve’s multiple short-term interest rate hikes over the last two years – and with additional increases forecast for 2019 – housing experts are watching economic indicators closely.
“Although interest rates are low historically speaking, they are becoming high relatively speaking,” said Paul Lueken, CEO of Draper and Kramer Mortgage Corp. “The economy has been strong year-to-date in 2018 but is beginning to stall. Cracks are starting to appear in the auto and housing sectors, which are usually leading economic indicators. Look for the housing sector to have a tougher year in 2019 unless 30-year fixed mortgage rates can fall back to the low 4s.”
Laura Ellis, president of residential sales and executive vice president of Baird & Warner, Chicagoland’s largest family-owned independent residential real estate services company, is also anticipating the impact interest rates, and inventory, will have on the housing market.
“We’ll see interest rates likely level out at slightly above 5 percent and then stabilize. That’s still a low rate and buyers will have every reason to enter the market,” Ellis said. “Unemployment is low, and wage increases will outpace interest rates. As for home prices, we still have a lack of inventory that will drive appreciation. The market will continue trying to catch up to meet the supply and demand, and we’ll see prices follow.”
Finding the Missing Middle
With a shortage of attainable housing in the right urban as well as close-in suburban locations and in the right price point between affordable and luxury, addressing this “missing middle” market will offer significant opportunities for homebuilders in 2019.
Jeff Benach of Lexington Homes notes much of the demand for “missing middle” housing is driven by the local workforce, including educators, health care workers and tradespeople who are priced out of gentrifying city neighborhoods. His firm is answering the call with communities like Lexington Village at Avondale, which offers 22 single-family rowhomes priced from the low-to-mid $500,000s in Chicago’s trending Avondale neighborhood. “This infill site was a hidden gem and allowed us to build new-construction family homes for almost $100,000 less than similar new and existing homes in the neighborhood,” he said.
Belgravia Group is also identifying pockets that are ripe for “missing middle” development. Its latest project, a seven-story condominium building called Triangle Square, is nestled between Lincoln Park and Bucktown – two of Chicago’s priciest and most sought-after neighborhoods. Compared to the median listing price of $710,000 for recently listed new homes in Lincoln Park and the median listing price of $519,000 for new condos in Bucktown, according to Redfin, Triangle Square offers a more affordable price point with new-construction condos starting at $495,000.
“Buyers and builders can both find success with ‘missing middle’ housing, but there’s always a bit of risk to find the reward,” said David Goldman, executive vice president and chief operating officer at Belgravia Group. “For Triangle Square, that means developing a building that, while sandwiched between two coveted residential Chicago neighborhoods, is in an area better known for industrial use. But as the factories move out, residents want to move in because they’re getting in on the ground floor of an area that will serve as a gateway to Lincoln Park and Bucktown.”
Who Put That Living Space in My Kitchen?
In newly constructed and renovated homes, the emphasis for kitchen design in 2019 will be as much on creating an inviting living space as on cooking itself. According to Elissa Morgante, co-principal of Morgante Wilson Architects, her firm is designing some of its biggest kitchens ever, but the extra square footage is devoted to features such as expansive banquettes, oversized islands and bar seating, rather than workspace, which was the focus in previous years.
Morgante is also seeing the resurgence of “unfitted” kitchens where pieces are more furniture-like, materials are more complex and open shelving replaces expanses of cabinetry.
“Kitchens are now a full-fledged part of a home’s living space, so it makes sense homeowners want to blur the line and take it up to the design level we’re seeing elsewhere in the home,” said Morgante. “We’re using different types of wood, mixing in a variety of metals, colors and textures, and in general adding the layers of visual interest that are part of a rich and engaging space.”
In the condominiums at One Bennett Park, a 70-story residential tower in Chicago’s Streeterville neighborhood designed by Robert A.M. Stern Architects (RAMSA), developer Related Midwest has made sure the kitchens are part of an expansive great room that includes an everyday dining space as well as a comfortable family room where kids can lounge or do homework while parents prep a meal.
To underscore the kitchens’ seamless interaction with the dining and family spaces, Related Midwest selected family-owned Plain & Fancy Custom Cabinetry in Pennsylvania Amish country to design cabinetry that would simultaneously highlight the kitchens’ sophisticated designs and clean lines while also showcasing their customization and handcrafted details.
What’s Next in the Digital (Closing) Age
Millennials make up the largest share of recent homebuyers at 36 percent, according to the National Association of REALTORS® 2018 Home Buyer and Seller Generational Trends study, and this first generation to have grown up in the digital world continues to spur the implementation of technology tools at all stages of the homebuying process.
“Many millennials are not only comfortable completing major transactions digitally, they prefer it,” said David Garside, executive vice president of title and escrow operations at Proper Title, LLC. “In response, the title insurance industry is developing technology to elevate the customer experience by offering e-closings that could shrink or eliminate the stacks of paper to be signed at the real estate closing table.”
Garside expects three types of e-closings to become more common in 2019, ranging from hybrid e-closings that include a mix of traditional pen-and-paper signings and digital documents that can be read and signed ahead of the closing, to online e-closings, which are completed entirely online with documents signed digitally and the closing overseen by a notary via webcam. Hybrid closings make up the majority of today’s e-closings because they more easily meet current regulations governing notarization and they make the borrower feel more comfortable with the process.
“The adoption of e-closings has been slower than the digitization of other aspects of the homebuying process as the technology must do much more, such as catch and eliminate wire fraud and other cybersecurity issues,” said Garside. “As technology improves, transactions will become more seamless. However, human interaction and a trusted relationship remain integral parts of the process.”
Steve DiMarco, president of Key Mortgage Services, added that new digital technology also will become more important to the mortgage industry next year as a means to enhance transparency during the lending process – something consumers increasingly demand. For example, Key Mortgage allows consumers to be notified of the status of their loan application through real-time alerts via email or text messages. “We’ve learned that communication at all steps of the process is a real priority for customers, so we’re incorporating tech tools that make it easier than ever to connect loan officers, real estate agents and consumers during the loan process,” said DiMarco.
Condo and Townhome Floor Plans Wide It Out
Look for many builders and developers to skip over starter townhomes and condominiums in 2019 in favor of floor plans with wider footprints and amped-up square footage to emulate the space and feel of single-family living.
Jeff Benach of Lexington Homes noted he is already seeing an uptick of both families and move-down buyers looking for townhome options with single-family-style features at its communities, including Lexington Heritage in Arlington Heights, Ill. As such, the builder has created a collection of townhome designs that live like a single-family home due to their wider layouts and inclusion of semi-private backyards. “Townhomes typically tend to be long and narrow, but by shifting the footprint to be wide instead of deep, we gave these homes a more expansive feel in the configuration of the open-concept kitchen and great room,” Benach said. “The plans also have full basements with 9-foot ceilings that can add a whole extra level of living space to the home, if finished.”
Condo designs are also taking a page from single-family-style spaces. At Renelle on the River and Three Sixty West, two luxury condominium buildings under construction in downtown Chicago from Belgravia Group, floor plans measure up to 3,434 square feet to appeal to buyers who want access to a maintenance-free urban lifestyle, but in a home with the space and privacy of single-family living.
“When designing floor plans for Renelle and Three Sixty West, our research showed it was important to offer homes with defined spaces that incorporate both gracious open areas for entertaining and casual living, as well as rooms that offer privacy and seclusion,” said David Goldman, executive vice president and chief operating officer at Belgravia Group. “We saw an opportunity to provide floor plans that evoke the feeling of a single-family residence, but one where residents can also enjoy the views and lifestyle of a luxury building in the city center.”
Located at the intersection of Chicago’s Gold Coast, Lincoln Park and Old Town neighborhoods, the new luxury condominium mid-rise Fifteen Fifty on the Park from CIM Group, Golub & Company and Avoda Group features generously sized plans, including four-bedroom residences with up to 4,500 square feet. Interiors for the 32 condominiums are designed by Gary Lee Partners, who created floor plans that offer a single-family home sensibility with expansive layouts incorporating elements of stately Gold Coast homes, along with casual living spaces, such as dens, study nooks and open kitchens, that are more conducive to contemporary living.
“Because its location provides immediate access to three of Chicago’s most-popular neighborhoods, Fifteen Fifty on the Park appeals to a wide range of buyers, including those looking for a city residence that feels like a single-family home,” said Lee Golub, principal and executive vice president of Golub & Company. “These condominiums offer highly functional space for family living with the traditional advantages of an upscale urban home.”
Statement Ceilings Raise the Roof
Designers will go to new heights in 2019 as the statement ceiling has its moment, adding dimension and personalization to rooms small and large.
“No matter how dramatic or modest, a statement ceiling is an exciting way to elevate the layers of interest in a room,” said Elissa Morgante of Morgante Wilson Architects. “What many of our clients love is that a unique design element on the ceiling is often a little unexpected – particularly if we’re incorporating an unusual material or treatment – which makes it all the more special.”
Morgante noted the statement ceiling trend encompasses a broad range of design elements, from delicate trim details to an intricate design using beams, to a bolder look where materials such as plaster finishes, wallpaper or even brick are the focal point.
“Many buyers may overlook the impact of the so-called fifth wall, so we work with them on identifying designs that can help accentuate a room,” said Julie Whitley, director of architecture design at Red Seal Homes. “A decorative interest on the ceiling can serve as a completely unique detail that enhances depth, dimension and texture.”
Whitley noted that a statement ceiling also can add more than aesthetic appeal to a space. For example, using architectural trim to adorn a ceiling can accomplish the big visual effect of connecting rooms, but with little impact to a budget. She explained that a simple use of crown molding or ceiling trim can cost as little as $1,000 yet achieve a dramatic change in a home.
At One Bennett Park, a 70-story residential tower in Chicago’s Streeterville neighborhood, architecture firm Robert A.M. Stern Architects (RAMSA) created statement ceilings in a variety of the building’s bespoke common areas, from the condominium and apartment lobbies, to the third-floor lounge, to the entertainment space on level four. According to Ann Thompson, senior vice president of architecture and design at developer Related Midwest, these thoughtfully shaped and ornamental ceilings enhance the sophisticated spaces and reflect the level of design and craftsmanship sought by buyers of high-end urban condominiums.
“Our team considered every design element at One Bennett Park, including the treatment of the ceilings in many of our amenity spaces,” said Thompson. “Multilevel surfaces, bold shapes and textures draw the eye upward, and the ceilings’ finishes complement so many of the rooms’ details – from custom-designed lighting and decorative metalwork to patterned wall coverings, natural flooring materials and luxuriously upholstered furnishings.”