Its All About The Rates Baby: 2024 Chicago Housing Outlook
Experts agree that the 2024 Chicago real estate market will improve if mortgage interest rates continue to fall. We would shift from a seller’s market to a more “balanced” market of 6-8 months of inventory. This will mean more sales, which are down a mind-boggling 37% from the pre-Covid years 2017-2019.
MORTGAGE RATES WILL DEFINE HOUSING MARKET
As of today, 30-year mortgage interest rates are hovering around 6.5% (with zero points) for buyers with good credit. That’s up from 3-4% in the pre-2021 hey day (that most homeowners enjoy now) but down from 8% peaks in 2023. Where rates go in the future is the single most pivotal factor to determine if our housing market stabilizes. All eyes are on whether we continue to get good news on inflation and whether the Fed drops the overnight lending rate. This should lead to further rate drops.
WHY RATES MATTER
Why do rates matter? The past few years have been marked by lowest level of inventory (homes for sale) in history. We are going into 2024 with even less homes for sale than 2023 which is mind blowing- last year prices soared as buyers had few choices , especially in first-time buyer market (under $700,000).
If rates keep falling, inventory will increase as sellers have confidence to trade up into a new home with a higher mortgage rate. Owners will list their homes for sale and inventory will increase slowly. For buyers, rate drops will stimulate more interest and activity as homes become more available and more affordable. In the near term, prices could soar as there is lots of pent up demand from buyers sitting on the fence waiting for rates to fall. Even with continued high prices, the Chicago market remains relatively affordable compared to other major U.S. cities.
Rate increases would hurt buying power, and keep more buyers and sellers on the sidelines.
CLOUDS ON THE HORIZON
One more thing that looms is the March referendum on a proposal to boost the city’s real estate transfer tax on sales of properties at $1 million or more. The increase applies to both residential and commercial properties, and while commercial represents a far larger dollar amount, residential buyers at $1 million or more may feel the city is “punishing people for making an investment and buying a home”. Lets see if it becomes law.
Crime or the perception of crime continues to weigh on the Chicago housing market. Especially downtown. Election years also slow sales are people think their guy winning will fix things. People keep leaving Chicago and Illinois at an alarming rate.
BUCKLE UP!