The real estate market continues to remain hot as we begin the new year. Early reports indicate that sales are strong as buyers are out early hoping to take advantage of the relatively low mortgage interest rates before they increase. Rates have ticked up to +3.625% on a 30-year fixed conventional loan. That is still historically low. Mortgages averaged 4.25% in pre-pandemic 2019.
Last year was a record year for real estate with 6 million home sales nationwide. In the Chicagoland area over 138,000 total homes sold in 2021, up +14.5% over 2020. Average sales prices are up +9%. Starck Real Estate also had a record year with sales volume up +20%. Luxury home sales were especially strong in the Chicagoland area with 100 closings above $4 million, double the record of previous years.
Inventory remains a thorny issue, falling -34% versus this time last year. Brokers report they have more inventory that will soon hit the market. With interest rates going up and prices at record highs, the market will slow down and inventory will increase. The Stuart Handler Department of Real Estate at the University of Illinois, Chicago forecasts a decrease in sales in the range of -9.1% to -12.3%. To use an analogy, that would be like slowing down from 100 miles per hour to 80. But we expect 2022 to be easier for buyers.
Inflation spiked to 7% in December, a 40 year high, guaranteeing higher interest rates. The Fed now states that inflation will be more long-lasting than originally projected. The Fed announced they will do at least 3 interest rate increases of 25 basis points each in the coming year. In spite of inflation, the economy is doing well. Unemployment in the Chicago metro area fell to +4.8% according to IDES and down to +3.9% nationally. US Gross Domestic Product rose +6.0% in Q4 for a strong finish to the year and corporate profits were up +3.4% in Q3. All of this will keep the housing market strong in 2022.
As always, the ups and downs of the housing market make hiring a real estate professional a necessity. If you are thinking of buying or selling, contact us today at 847.485.2500!