The Chicago real estate market has seen some significant changes in 2022. In this post, we will take a look at some of these changes and how they have impacted both buyers and sellers. We will also discuss what trends are emerging as the market continues to grow. By understanding how the market has shifted over the last year, investors can make better-informed decisions about where to place their money in order to maximize profits. Let’s dive right in!
Rising Mortgage Interest Rates
One of the biggest changes in the Chicago real estate market in 2022 has been an increase in mortgage interest rates. Rising inflation earlier in the year caused the Federal Reserve to implement a series of rate hikes that have, in turn, caused significantly higher mortgage rates. As a result, buyers are finding it harder to afford housing as mortgages become more expensive.
As an example, last December, buyers could still get a 30 year fixed rate mortgage for near 3% interest, while now the equivalent rate would be close to 7%. On an outstanding mortgage balance of $250,000, the annual interest has gone from $625 a month to $1458 a month — it has more than doubled. This would be a difference of about $10,000 a year, which many families would struggle to accommodate.
Fewer Home Sales, Stable Prices (For Now)
This can be seen in the decrease in home sales over the past year – home sales in October 2022 totaled 1,709 homes sold, a 30.8 percent decrease from October 2021 sales of 2,469 homes. As expected, this has caused some concern among both buyers and sellers who are worried about their financial situation going forward.
Surprisingly, this has not led to decreases in home prices yet: the median price of a home in the city of Chicago in October 2022 was $320,000, an increase of 2.2 percent from $313,000 in October 2021. But what is actually happening is more localized — some areas with less demand are seeing home prices fall, while other more popular areas are propping the median prices up.
Some sellers are taking the hint and staying put — inventory of available homes decreased by 16% year-over-year, from 22,974 to 19,299 units for sale. Another reason for this may be that sellers know they’d have to purchase their new home at a significantly higher mortgage rate than their current one.
One metric has stayed the same year over year: days on the market until sale is still at an average of 26 days, same as last year.
As we continue into 2023, it will be interesting to see how these trends develop and whether or not they will continue to shape the future of Chicago’s real estate market. With inflation still relatively high, there is a chance mortgage rates will go even higher from here. That should have a further dampening effect on home sales. We expect if things continue as they have been, 2023 may be the first year in a long time that average and median Chicago home prices will see a modest decline.
Buyers and sellers should stay aware of how these changing conditions will affect their bottom line and make decisions accordingly. At Hales Property Management, we have over two decades of Chicago real estate experience! If you are looking to buy or sell a condo or building in Chicago this year and need a trusted advisor, contact us today to learn more about our services!