In January the Chicago Association of Realtors hosted a 2023 market outlook. Dr. Lawrence Yun, National Association of REALTORS®, provided the residential outlook while Rhea Stephen, CoStar Group,
provided commercial predictions.
What can you expect from 2023?
ARE WE HEADED TOWARDS A HOUSING CRASH?
NOT LIKELY.
There are lots of media headlines about whether or not we’re heading towards a housing crash similar to the one we experienced in 2008. Looking at the state of the current economy, Dr. Yun suggested that a
housing crash will likely not occur.
Currently, we are seeing more jobs in the economy, fewer subprime loans and less inventory in comparison to the state of the market in 2008. The two most important indicators — subprime lending and inventory — both are decreasing, signifying how different this market is compared to 2008,
when both were high.
MORTGAGE RATES WILL LIKELY EVEN OUT.
The future of mortgage rates is dependent on inflation, but we expect to see it start to even out, Dr. Yun said. Mortgage rates hit a peak in November 2022 and have been declining ever since. If inflation continues to decrease, we can expect mortgage rates to continue to do the same.
Don’t expect this to be a sharp decline in rates. Dr. Yun suggested that it could take at least 18 months for inflation to reach its normal rate of 2%.
RENT PRICES ARE EXPECTED TO GROW IN CHICAGO.
Before the COVID-19 pandemic, the rental growth five year average was 2%. In 2023, Stephen said that we are expecting that growth to double to 4%, putting it towards the top of the nation’s cities with the highest forecasted
rental increases this year.
With any national forecast, different regions of the country will have conflicting experiences. Some will increase while others decline. Moody's Analytics published its forecast for 322 markets with various fundamental economic factors. Some of the overheated markets are predicted to have significant price declines and others that have experienced sustainable growth to steadily rise.
So where does Chicago fit in?
With mortgage rates where they are and predictions for a slight decrease in rates by the end of 2023, as well as taking into account the affordability index, it leaves Chicago relatively flat for price growth. Each area/neighborhood will have its own experience continuing to see price growth, stagnant or moderately declining.
Hopefully these predictions are helpful as you navigate the Chicago real estate market. My goal is to keep you informed of your local market conditions.
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