Real estate has been on a tumultuous ride over the last few years. Between a buying frenzy causing soaring home values and historic low mortgage rates followed by an unprecedented rate spike, buyers and sellers may have a bit of whiplash. Real estate markets across the country have been on a roller coaster, and Chicago, specifically Wicker Park real estate, has not been immune. If you’re interested in entering the market right soon, as either a buyer or a seller, keep reading for insights on the latest trends in the Wicker Park real estate market.
Both buyers and sellers have likely been watching rates of all kinds increase in recent months. The Federal Reserve continued to make headlines with another rate hike in November 2022
and raised interest rates at an unprecedented pace last year amid stubborn, rising inflation.
While mortgage rates are not directly dictated by the Fed’s rate, there is an indirect correlation, and these dynamics have definitely affected the real estate market. Banks look at much of the same economic data that the Fed impacts when setting mortgage rates, so the two rates often move similarly. As far as the most recent Fed rate hike goes, the mortgage market had largely been anticipating another rate hike, and many suggest that this rate increase had already been priced into mortgage rates.
As a result, mortgage rates have risen above 7%
. The popular 30-year fixed-rate mortgage has not been this high since the early 2000s
. While it is easy to feel discouraged if you “missed out” on the rock bottom interest rates, it’s important to remember that compared to historic averages, 7% is still a relatively low rate.
Even still, the rate spikes have undoubtedly had an impact on the real estate market. Increased rates raise monthly mortgage payments and, as a result, price some buyers out of the market or force buyers to look at homes in a lower price range.
While this can feel discouraging, there may be a silver lining. Keep reading for insights into how changing mortgage rates have affected homes for sale in Wicker Park.
Supply and demand
If you have been looking to buy a home in the last year or two, the laws of supply and demand have not been in your favor. The real estate frenzy, driven in part by low interest rates, caused demand for homes to far outpace the available supply. This drove the price of homes up at a pace never seen before and caused bidding wars up and down the block.
In the Wicker Park and West Town area, in particular, median home sales prices were more than $800,000 in June 2022
. This was an 8% increase from the prior year and nearly a 13% increase from pre-pandemic values.
Many buyers, specifically first-time buyers, were unable to compete. There simply weren’t enough homes available, and a lot of families were left on the real estate sidelines. This is where the rising mortgage rate silver lining comes in.
As we mentioned, rising mortgage rates will increase monthly payments and price some buyers out of the market. This means there is less demand for homes and the supply has a chance to catch up. For buyers who were beat out during these bidding wars, now is your chance! There is less competition in the market and well-qualified buyers now have a better chance of getting that home they’ve been dreaming of.
Shift to buyer’s market?
The changes in supply and demand have set off chain reactions of shifting market dynamics that will continue to favor buyers. With more homes available and less competition in the market, buyers are starting to get some of their buying power back. During the height of the recent real estate frenzy, sellers could do no wrong. They had all the buying power, and buyers had very little ability to negotiate.
With fewer buyers in the market and more homes available, buyers have more choices, and sellers have to up their games. Overall, sales are down, so sellers are pulling out the stops to attract buyers. Current home sales in Chicago are down 8% from their June peak
and trending even lower.
These changing dynamics are allowing buyers to request price adjustments, additional repairs or renovations, or even credits from the seller to cover closing costs. All of these negotiating tools can help to offset the increased costs of rising interest rates. These shifting dynamics also make it a good time to buy a home if you’ve been beaten out in the last year or two. If you’re looking for homes for sale in Wicker Park, Melanie Giglio is ready to help you find that home you’ve been dreaming of at the best deal possible.
Hope is not lost for sellers
So if the market is shifting in favor of buyers, does that mean it’s a bad time to sell your home? In short, no. There are still plenty of sales happening in Chicago. In September 2022, there were more than 9,000 home sales
compared to just 7,000 homes sold in January
of this year. There are still qualified buyers out there looking for their next home.
Market dynamics have certainly shifted in recent months. Bidding wars seem to be a thing of the past, although houses are still getting multiple offers. This is an indication that the market is coming back into balance. And while increased mortgage rates have driven costs up for some buyers, there are still opportunities to offset those costs with the right negotiations. It can be a great time to enter the market, and with the right real estate agent, your dream home is within reach. When you’re ready, contact Melanie Giglio
, an experienced real estate agent in the Chicago area. She’s looking forward to helping you navigate the real estate market this year.