Sales Plummet to Lowest Since 2011 While Prices Hold Steady
Home sales have been expected to drop because of the sharp increases in mortgage interest rates in the past several months, pushed by the Federal Reserve raising its rates to help slow inflation. Mortgage interest rates have more than doubled over the course of 2022.
Median Home Prices Have Risen
The increase in the median price of homes may also be a result of those increases. Many buyers at lower prices have dropped out of the market, while upper-end buyers who aren’t impacted by interest rates have continued buying. As the median price is the middle on a list of prices from highest to lowest, upper-end buying may be pulling the median up.
Rising prices are also being fueled by a super-low inventory of homes for sale, which often causes those that are on the market to sell at higher prices than they might if buyers had more options.
The median price of homes sold in the nine-county metro area in October was $300,000, up 3.5% from October 2021. It’s the smallest monthly price increase for the metro area since June 2020, before the pandemic-era housing boom kicked in, but it’s important to remember that this figure is on top of two previous Octobers’ increases. The median price of homes sold in October 2019, before the pandemic, was $240,000. Last month’s figure is 25% higher than that.
In the city, the median price of homes sold in October was $320,000, an increase of 2.2% from a year earlier. Compared to the median price in October 2019, $275,000, last month’s figure is up 18%.
Home Sales have Slowed Down
In the nine-county Chicago metro area, 7,645 homes sold in October, according to data released this morning by Illinois Realtors, a statewide professional group. That’s down 32.4% from the same time in 2021, when the pandemic-era housing boom was raging.
More to the point, this October’s sales tally is not only below October figures for the years before the pandemic, but it is the lowest for the month since 2011, when there were 5,889 homes sold. At that time, the Chicago-area housing market was on its way up from the housing crash of 2007.
October sales rarely dipped below 9,000 and never below 8,000 in the years between 2011’s 5,889 sales and last month’s 7,645 sales.
Sales nose-dived in the city as well. In October, 1,709 homes sold in Chicago. That figure too is the lowest for the month since October 2011, when 1,349 homes sold. In the intervening years, October sales were never below 2,000. This October’s tally is 15% below 2,000.
The drop in sales here was slightly bigger than the national figure. According to separate data released this morning by the National Association of Realtors, October U.S. home sales were down 28.4% from the same time a year ago.
A decline in home sales can have a ripple effect in the larger economy. Research out of the Kellogg School at Northwestern University shows that homebuyers spend an average of $3,700 on purchases and services related to settling in during the first year after they buy.