The US economy slowed down, indicated by GDP going negative for a second quarter, and home sales have moderated. The CoreLogic Home Price Insights report showed that home prices increased nationally 18.3% from June 2021 to June 2022, the 125th consecutive month of year over year price increases. On a month-to-month basis home prices increased only .6%. In the Chicago area the average month-to-month home sales price actually declined -7.4% but increased for the year. CoreLogic predicts that national home prices will increase by 4.3% over the next year. In the Chicago area, the UIC Stuart Handler Department of Real Estate is forecasting home appreciation at 5% for the remainder of 2022.
Buyer demand is clearly cooling off because of high prices and interest rates. Rates on a 30-year conventional loan surged as high as 5.81% in June but have since fallen back in recent weeks to about 5.3%. We may be spoiled by low interest rates, in the 2.8-3.25% range one year ago. Over the past 50 years interest rates have averaged 7%, peaking in 1981 at 16.63%, so 5.3% is historically low.
In spite of economic headwinds demand for homes remains strong. The inventory of homes for sale is increasing slightly, giving buyers more choice. But the average month’s supply is only 1.9 months, still a seller’s market. Once again, a tight supply of homes is driving the market.
In spite of recession fears due to poor GDP performance and high inflation of 8.5%, the US economy is surprisingly strong. In July the US economy created 528,000 jobs and unemployment stands at 3.5%, a 50-year low. All 22 million jobs lost in the pandemic have been recovered and there are 11 million unfilled jobs. In Illinois, non-farm payrolls increased by 249,000 from June of 2021 to June of 2022 and unemployment stands at 4.5%. Unemployment in Illinois has fallen -27.1% in the last year. A strong job market creates confidence in the future and increases household formations—both prerequisites for a strong housing market.
The economy is constantly changing but when you need to sell or buy a home don’t worry, we have seen many different markets and we know how guide you to a successful outcome. If you are thinking of making a move, call us today!