Rising interest rates continue to slow the housing market in the Chicago area but demand remains high. A conventional 30-year fixed rate mortgage is at a 20-year high, averaging 7.5%. Fannie Mae predicts that rates will go down to 6.1% in 2024. There seems to be a leveling off of home prices in the Chicago area as the median price of a home in August was unchanged year over year while the average price climbed 6.5%. Home sales picked up in September versus August by almost 9%. For the year sales were down -14.5%, an improvement because year-over-year sales in August were down -31.5%. The Chicago region is bucking the national trend as August home sales in the US overall were down -2.2%.
A panel of more than 100 economists surveyed by Pulsenomics predicted in August that national home prices will increase 3.3% annually for 2023.
But again, if there were homes to buy the numbers would be very different as demand remains strong. Because of the lack of inventory of existing homes, buyers are turning to new homes. This is borne out by the new home industry which saw a stunning year-over-year increase in Midwest sales by 47% to 84,000 units (Trading Economics). Sales of new homes nationwide increased by 4.4% with an annual pace of 677,000 homes. Future sales of new homes look bright in the near term as The Mortgage Bankers Association reports that August applications for new home mortgages increased by 20.6%.
In August the Consumer Price Index rose 3.7% as inflation stubbornly hung on. The main cause was due to the price of oil increasing 11% in August. According to Oilprice.com, OPEC+ is limiting supply by 3.66 million barrels of oil per day, pushing the price of a barrel of oil close to $100. In its latest meeting on September 20, the Fed left interest rates unchanged for the second month in a row. The US economy continues to show signs of strength as the GDP is increasing at 2.1%. Even though the national unemployment rate jumped to 3.8% it is still historically low.