Time To Gaze Into The Future Of Chicago’s 2016 Housing Market
It’s time to dust off that crystal ball and gaze into the future of Chicago’s housing market in 2016.
The stock market many look cloudy early in the New Year because of economic problems in China, and instability in the Middle East, but experts see brightness on the horizon for house hunters in Chicago because of a vastly improved job market and low interest rates.
Experts say the following factors will influence the housing market in 2016:
• Job gains. The American employment machine was running smoothly at the end of 2015, with the federal government reporting the creation of 292,000 jobs in December. The unemployment rate held steady at 5 percent for the final quarter of the year.
In Chicago, the lion’s share of the new jobs were tech positions in the downtown area, where increasing numbers of Millennials—college-educated residents age 18 to 33 years old—are contributing to a robust job market.
• Mortgage interest rates. Benchmark 30-year fixed home-loan rates fell back to an average of 3.97 percent on January 7th after ending the year at 4.01 percent, reported Freddie Mac’s Primary Mortgage Market Survey. A year ago, the 30-year loan averaged 3.73 percent.
“Concerns about overseas economic developments have dominated financial markets to start the year,” said Sean Becketti, chief economist, Freddie Mac.
In mid-December, the Federal Reserve raised its benchmark short-term federal-funds interest rate a quarter of 1 percent, the first Fed rate hike in nine years.
Financial analysts said the modest rate increase will put upward pressure on interest rates in 2016 for a wide assortment of consumer and business loans—from home equity loans and mortgages to auto loans and student borrowing obligations.
Thirty-year fixed mortgages may rise to 4.5 percent or 5 percent by the end of 2016, predicted Lawrence Yun, economist for the National Association of Realtors (NAR).
• Home prices on the rise. Home and condominium prices in Chicago have weathered the Great Recession, and should start to appreciate above 2008 levels, experts say.
Adjusted for inflation, existing home and condo prices in Chicago have rebounded to 84 percent of their November, 2008 levels. And at the current rate of price growth, complete recovery could happen in the next 12 months to 18 months, predicts economists for the Illinois Association of Realtors (IAR).
The median price of homes and condos in Chicago rose 2.2 percent to $235,000 in November of 2015. A year earlier, the median price was $230,000, the IAR said. The median is a typical market price where half the homes sold for more and half sold for less.
Rising prices will nudge more and more first-time buyers off the fence, experts predict.
• Higher property taxes. When Mayor Rahm Emanuel’s $500-million property tax increase kicks in this year, home and condo owners in wealthy North Side neighborhoods are expected to be bashed with hefty real estate tax bills.
Cook County Assessor Joseph Berrios’ office estimated whopping North Side assessments increases of 28 percent to 48 percent.
Increased assessments in North Township, following the county’s triennial reassessment in 2015, are expected to rise around 33 percent in Streeterville and River North, and about 32 percent on the Gold Coast, Near North Side, Lincoln Park and Bucktown.
In Wicker Park and Ukrainian Village assessments are up about 28 percent. Goose Island property owners were slapped with an unbelievable 48 percent assessment increase.
• Higher apartment rents. Once the property tax increases hit landlords, steep rent hikes are expected to follow in high-demand North Side neighborhoods. Rent increases could match those seen in 2014, when they skyrocketed 14 percent on the Near North Side, rose 6.5 percent in Lincoln Park, 6 percent in West Town and 5 percent in Logan Square and Lincoln Square.
With apartment rents on the rise, experts say more young renters will realize the benefits of home and condo ownership in 2016.
For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.