When inflation spiked two years ago, the Federal Reserve responded by raising interest rates, hoping to mitigate home-price increases. However, the Chicago area has been impervious to this move, experiencing steady home-price growth, whereas other markets have grappled with plummeting home values.
In the first two months of 2024 alone, median home prices in the Chicago area surged by over 10 percent compared to the same periods last year, Crain’s reported, citing data from Illinois Realtors.
In January, prices were 10.1 percent higher year-on-year, followed by a 10.3 percent increase in February, significantly outpacing the nationwide average by roughly 5 percent.
“We’re going against historical norms,” Illinois Realtors president Matt Silver told the outlet. “There used to be two or three paths, but it feels like we’re blazing a different pathway now.”
Despite concerns about long-term affordability, prospective buyers are still entering the market, driven by factors such as stock market gains and the perception of favorable interest rates.
However, the affordability crisis is not lost on the electorate, with over half of homeowners and renters considering it a significant factor in the November presidential election, according to a Redfin report. Daryl Fairweather, Redfin’s chief economist, underscored the disconnect between economic indicators and lived experiences, as many struggle to afford desired housing options despite overall economic strength.
Tassos Malliaris, a professor of economics, pointed to a generational divide, with younger demographics feeling the pinch of exorbitant housing prices. Nonetheless, he remains optimistic, anticipating a shift in market dynamics as older homeowners eventually divest their properties.
“It’s the same thing people do with cars and vacations,” Malliaris said. “We want to go to Paris, but it’s too expensive, so we’re going to Michigan.”
The Chicago housing market’s resilience is underpinned by various factors, including its relative affordability compared to other major cities and robust employment figures. Malliaris stressed that optimism currently outweighs pessimism, as confidence in the resilience of the economy continues to drive growth in the housing sector.
With median home prices in the metro area soaring to $320,000 in February, traditionally a weaker month, the gap between pre-pandemic levels is stark, as the median price never exceeded $265,000.
In contrast, the city of Chicago saw a more modest increase, with a median price of $330,000 in February, compared to $315,000 in the summers of 2018 and 2019, reflecting a more stable market, the outlet reported.
—Quinn Donoghue
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