Mortgage interest rates began to climb in early 2022, and higher rates are in store for Chicago home buyers in the months ahead. Will higher rates mean a slowdown in Chicago’s real estate market?
Before we answer that, let’s get a quick dose of perspective. As of January 27, 2022, the average rate for a 30-year, fixed-rate Conventional mortgage was 3.55%, with an average point, or pre-paid interest, of just under 1%. During the same period a year ago, the same financing had a rate average of 2.73%.
Let’s also consider the state of the Chicago real estate market in 2021. From January 2021 through November 2021, median homes prices in the 9-county Chicago metro statistical area reached $300,000. This was a 12% increase in median home prices over 2020.
The driver behind the surge in home prices was the shortage of homes for sale. The Chicago area had 31% fewer homes for sale in November 2021 than it did during November 2020. This situation isn’t unique to Chicago; low home inventory has been the story around the country. During the pandemic, most homeowners hunkered down and stayed put while buyers sought multi-purpose living space.
The pandemic created a race for space in the Chicagoland real estate market unlike anything we’ve seen before. It isn’t over yet. As rents go up with inflation, buyers will continue to see home ownership as the best hedge against an uncertain future. And they’re right! When there is so much in life that you cannot control, having your own home can bring a sense of stability.
With this in mind, it’s unlikely that rising rates alone will slow down the market. It will take much more home inventory becoming available, for buyers to catch a break.
But, a combo punch of rising rates, rising home prices and rising inflation could sideline some first-time buyers. It is absolutely essential to stay in contact with your mortgage lender and keep your pre-approval updated! Increases in rates will reduce your home buying purchase power. If you are not already pre-approved, let us refer you to top-notch Chicagoland mortgage lenders who will help you out. Getting, and staying, pre-approved for your mortgage is critical in today’s fast-moving market.
StartingPoint Realty – helping first-time home buyers since 2004!
StartingPoint Realty proudly serves first-time home buyers throughout the entire Chicago area. Get an introduction to home buying by attending our free home buying seminar! There’s no sales pressure and no obligation. Always feel welcome to contact us for help with your Chicago home buying questions!
Ryan Gable Broker/CEO Starting Point Realty
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