Interest Rates in 2022: Exploring the Chicago Real Estate Impact

Interest rates have been a topic of discussion countrywide for a handful of years. The pandemic, and its aftermath, has created an unstable economy where government bodies, like the Fed, feel they must make changes to maintain balance.

The result? Interest hikes that could have big effects on the real estate market across the country and in Chicago.

The Current Status of Interest Rates

To fight inflation, the Federal Reserve is expected to raise interest rates for the sixth time this year to combat inflation that continues to rise. This next hike is expected to be 0.75% again, like the last one.

This has caused a fairly rapid deceleration in the housing market which was intensely active during the pandemic and few years after.

What Happens to Chicago’s Housing Market if Interest Rates Rise?

Along with rising costs for bank loans, credit cards, and mortgage rates, housing costs could fall as much as 20%. What remains to be seen is the long-term effects of lowered prices and demand. What this means for Chicago is what it’ll mean for much of the country: a big slowdown in the housing market that’ll include a few different factors, including:

• Housing prices are already down 8% from June with prices now down 5%, too. Prices are expected to continue falling.

• Mortgage rates are currently around 6% nationwide but are expected to rise, as well. This could impact people’s ability to get mortgages and, naturally, decrease demand for homes.

• Demand for homes is expected to drop as mortgage rates rise. This could accelerate the drop in home prices.

Essentially, rising interest rates will have a major impact on all the major facets of home buying, but rising mortgage rates will keep most people from buying homes, decreasing demand which will pull down home prices, too. It’s an economic Rube Goldberg machine of reactions, but experts continue to monitor the situation over time.

For legal guidance on Chicago real estate, schedule an appointment with the attorney at Lee Scott Perres, P.C.