Written by our real estate broker Charlie Wood
As Chicago Realtors in a very seasonal market, we will soon see the end of the typically slower Summer market, where buyers and sellers alike take time to enjoy the glory of warm weather and travel. As brokers at the Olive Well Team at Compass we always look forward to Fall in what is normally a busier real estate market. Will it be so this year? Many people, from economists to would-be home buyers and their Realtors, are wondering whether we'll see an increase in inventory and a cooling of prices. Recent economic developments and Federal Reserve policies offer some insights into what buyers and sellers can expect in the coming months.
Lower Inflation and Its Impact
The Federal Reserve has expressed satisfaction with the recent trend in lowering inflation. As of July 11, 2024, the U.S. inflation rate for the 12 months ending in June was 3%, a decrease from the previous rate of 3.3%, marking three consecutive months of slowing inflation. This decline is significant, as it has influenced treasury yields and subsequently impacted mortgage interest rates.
Mortgage Rates and Refinancing Surge
With lower inflation, treasury yields have dropped, leading to a decrease in mortgage interest rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances recently fell to 6.87% from 7.00%. This drop has prompted a surge in refinancing applications, which jumped 15% last week (also a 2 year high) compared to the previous week. Homeowners locked into higher rates from the past year are eager to refinance, taking advantage of the lower rates. Perhaps if this continues we will see would-be home sellers consider selling their homes instead of holding onto them and their low rates.
Future Rate Cuts
Looking ahead, many are speculating about further rate cuts. The Federal Reserve has indicated that it does not intend to wait until inflation hits its 2% target before cutting rates. Instead, rate cuts may begin sooner, as suggested by the CME FedWatch tool, which shows a 100% likelihood of a rate cut in September. This anticipation of lower rates could lead to increased mortgage applications and a more active real estate market.
Market Volatility and the Presidential Election
The fall real estate market is also set against the backdrop of a contentious presidential election. While elections often bring some market volatility, the potential for improving economic conditions may buoy consumer confidence. Polling indicates that Americans are keenly aware of economic trends, and any signs of improvement are likely to be welcomed.
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Inventory and Pricing Trends
With the potential for lower mortgage rates, we might see an increase in home buying and selling activity. This could lead to more inventory as homeowners look to capitalize on favorable conditions. However, the balance between supply and demand will be critical in determining whether prices cool off or continue to rise.
Here in Chicago, which has been one of the best and most consistent overall real estate markets over the past few years and continues to be one of the most affordable across-the -board marketplaces, an increase in inventory is needed and would be welcomed. You can view all of our current Chicagoland home offerings from Evanston to East Village here.
The fall real estate market in 2024 is poised for dynamic changes. Lower inflation, anticipated rate cuts, and the influence of the upcoming presidential election will all play pivotal roles. For buyers and sellers, staying informed and agile will be key to navigating this evolving landscape. If you’d like to discuss any of this and how it may impact you, we are only a phone call or e-mail away!
You can reach Charlie Wood at charlie.wood@compass.com or 773-470-9873
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