There’s an old saying in real estate: “The best time to buy a home was five years ago.” Or even one year ago! But right now, Chicago’s home affordability is at its worst level since 2008, with median home prices rising 9.6% from a year ago. Chicago home buyers are feeling the pinch. There is no easy solution when the inventory of homes for sale is 34% lower than a year ago, which is keeping pressure on home prices. Meanwhile, mortgage interest rates are the highest they’ve been in twenty years, averaging 7.49% for a 30-year fixed rate Conventional loan. Despite these challenges, the pace of Chicago home sales continue to steam ahead, with homes averaging just 21 days on market before going under contract.
There are some hard-working home buyers who can’t keep up with the pace of home prices and interest rates. There are too few affordable homes on the market, and those that do appear tend to sell above the asking price. We talked about the impact to home buyers with Crain’s Chicago Business a few weeks ago. Buyers who have deeper pockets, in the form of substantial cash savings or investments, are doing okay in the market. (If they have to pay more to buy a home, they can!) But the average wage-earning person who needs a home for a growing familly, or needs to downsize or relocate, has limited options. Buyers in these situations find themselves going for townhomes instead of single-family homes, or moving to areas without the amenities and schools they hoped to be near. And in other cases, would-be buyers give up and continue to rent, hoping for better conditions in the future.
For those who hope for an easier market in the future, consider these sobering words from Lawrence Yun, Chief Economist at the National Association of REALTORS©: “Higher mortgage rates are still not dampening home prices. Only by unleashing supply – essentially doubling from the current levels – can home prices moderate with far fewer cases of multiple offers.”
It isn’t likely that we’ll see home inventory doubling anytime soon. Higher interest rates are expected to stick around for a while. This leaves home buyers to face a challenging market that could grow more expensive in the year ahead. The best thing to do is obtain a home buying education that will prepare you for a mortgage and for the home buying process. Consider these strategies, too:
- Tap into home buyer assistance programs that could help you.
- Look for home sellers who offer mortgage buydowns, especially new home builders.
- If you are fortunate enough to have resources through the Bank of Mom & Dad, or any family member who may be willing to co-sign or help you with a down payment, have a conversation with them. Ask your mortgage lender about the rules for cash gifts or down payment assistance before moving money around.
- Consider pooling resources with close friends or family who might share a home with you. (Be sure about what you’re getting into there, but it can work!)
We will always do our very best to help you succeed!
StartingPoint Realty – serving Chicagoland since 2004!
StartingPoint Realty proudly serves home buyers and sellers throughout the entire Chicago area. Contact us for your free home buying or home selling consultation!
Ryan Gable Broker/CEO Starting Point Realty
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*Median home price comparison between August 2023 and August 2022, increase in median sales price of 9.6% on year-over-year basis, as reported by the Chicago Tribune.
*Chicago home inventory and days-on-market as reported by Chicago Agent Magazine.
*Mortgage interest rate national average as reported by Freddie Mac.