Home prices in the Chicago area are at an all-time high and mortgage rates are at 23-year highs making home affordability more difficult, especially for first-time buyers. Meanwhile, inventory is at an all-time low with 14,724 homes on the market in Chicagoland. Compare that to October 2013 when there were 43,810 homes for sale.
And yet, Goldman Sachs predicts that home prices will continue to appreciate 2% in 2024 and 2.8% in 2025, according to Rodger Ashworth, Managing Director at Goldman Sachs. He notes that in spite of the lack of affordability, appreciation will continue in markets that were not overheated during the pandemic such as the Chicago area. But even “unaffordable” coastal markets are still appreciating. For example, San Diego home prices are up 1.7% and Seattle is 1.5% higher year over year. But these increases are far lower than those in 2022 as higher prices and mortgage rates inevitably slow down the housing market.
Pending sales were up unexpectedly in September by 1.1%. “Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years,” states Lawrence Yun, NAR chief economist. “Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated.”
In spite of some signs of slowing down, the US economy remains strong. US payrolls increased by 150,000 jobs in October, lower than analysts expected. Unemployment edged up slightly to 3.9% due to strike activity. Unemployment in Illinois was down 0.4% versus September to 4.9%. Total nonfarm employment in the Chicago area is up 3.4% year over year. Inflation is cooling off at 3.7% year over year and the Federal Reserve held off raising interest rates in their October meeting. Nationally, Gross Domestic Product increased by a robust 4.9% in October mostly driven by consumer spending.
The market is full of ups and downs. If you are thinking for buying or selling a home, you need to work with a professional. Contact me today for a free analysis of your real estate needs.