Like many other big cities across the country, the COVID-19 pandemic wasn’t kind to Chicago. People seeking more space to accommodate working from home led to a minor outflow of residents that put the housing market on pause.
But people have returned to the Windy City and, lately, home prices have grown at a pace that would be perfect for Goldilocks — not too hot, not too cold, but just right.
“We’re seeing slight price increases, but nothing crazy over the last couple years.” said Tricia Marchert, an agent with Keller Williams Infinity. “We’ve just seen a nice, calm pace, and I think that’s good. [Buyers] have been the ones to benefit from just the steadiness and lack of volatility.”
The long-term trajectory of Chicago largely mirrors that of the Midwest as a whole. The regional housing market was slower to recover from the financial crisis of the late 2000s than other parts of the country, and it had been reeling from a general decline of the region for years before that.
As a result, home prices were stagnant for much of the decade following the Great Recession, but the pandemic unleashed unprecedented volatility to the Chicago market. According to data from Altos Research, the median home price jumped by almost 20% in the first seven months of the pandemic, then jumped another 11% in the first four months of 2021. This was followed by a 15% crash in the second half of 2021.
Chicago has since exhibited a more traditional seasonal home-price pattern, but since February 2023, the median home price is up by 27%.
The current market has largely normalized and is experiencing a pause for the same reasons as many other markets across the country. New listings have stalled as a result of rising inventory. The anticipation of lower mortgage rates has frozen many buyers who think they can get a better deal if they wait a few months, not to mention sellers who are loath to give up mortgages in the 3% range.
Property taxes are another factor that is slowing things down. In Cook County, the property tax rate has increased substantially, a move by municipal officials designed to rightsize budgets that have gotten turned upside down.
“Some communities have been hit with a 35% to 40% increase,” said RE/MAX Properties agent Ryan Smith, adding that the south suburbs of Cook County have been particularly impacted by higher tax rates. “If you take a family of four making $125,000 with a $200,000 house, and their taxes go from $6,000 to $7,500, that’s a couple hundred bucks a month, right? It’s a hard burden to carry.”
Not all parts of the city are fully back from the pandemic. According to Scott Curcio, an agent with Baird & Warner Real Estate, the neighborhoods of downtown, the Gold Coast and River North are still in a recovery phase.
“We’ve seen a higher monthly supply of inventory there, but that has been coming down throughout the year,” Curcio said. “Most of the suburbs have been really hot. I haven’t seen a shift [to a buyer’s market]. I know that some of the U.S. coastal markets are seeing that, and generally what starts on the coasts will make its way here, usually in 12 to 18 months.”
While Chicago agents say they haven’t seen much of an effect from the new rules related to the National Association of Realtors‘ antitrust settlement, mortgage rates will remain a huge variable in the market for the coming months.
Earlier this month, the Federal Reserve lowered interest rates by half a point. While it’s a welcome change, many agents said that the rate cut — which had been anticipated for months — is already baked into the market.
Indeed, mortgage rates haven’t moved much since the cut. On Tuesday, the 30-year conforming rate was 6.25%, according to HousingWire‘s Mortgage Rates Center. But assuming that rates continue to decline, it could make for a busier-than-usual buying season for the rest of the year.
Curcio said that over the past three weeks, he’s taken numerous calls from buyers and sellers who are asking about mortgage rates and wanting to capitalize on the rate cut.
“There’s a lot of consumer confidence that seems to have all of a sudden sprung up,” he said. “So, I’m cautiously optimistic that rates coming down are finally going to bring more inventory that could balance things out for buyers, especially when we get into the first quarter of 2025.”
