July 18, 2022 – With inflation and interest rates on the rise, the once booming market for existing homes on Chicago’s North Side suddenly is a forgotten memory.

Historically low inventory levels in June were responsible for a drop in home sales and units under contract for the fourth consecutive month, reported Baird & Warner’s July 2022 Market Analysis, which focuses on four key neighborhoods – Lake View, Lincoln Park, North Center, and Near North Side.

Despite an abundance of buyers, year-to-date home sales have declined 2.1 percent compared with the first six months of 2021, and inventory levels plummeted 34.9 percent, noted John Irwin, veteran broker with Baird & Warner.

“Rising interest rates and a plunging stock market have driven some buyers to the sidelines,” said Irwin (left). “Homes that are priced well are selling quickly, but there is not enough inventory to match last year’s sales numbers. This looks like it will be the new normal for the foreseeable future.”

Mortgage rates rise again

Freddie Mac’s Primary Mortgage Market Survey reported on July 14 that benchmark 30-year fixed home loan rates nationwide averaged 5.51 percent, up from 5.30 percent a week earlier. Last year at this time, the 30-year fixed loans averaged 2.88 percent.

Fifteen-year fixed rate loans rose to an average of 4.67 percent, from 4.5 percent a week earlier. A year ago, the average 15-year fixed mortgage averaged 2.22 percent.

“Mortgage rates are volatile as economic growth slows due to fiscal and monetary drags,” said Sam Khater (right), Freddie Mac’s chief economist. “With rates at the highest level in more than a decade, home prices at escalated levels, and inflation continuing to impact consumers, affordability remains the main obstacle to homeownership for many Americans.”

Prices inching higher

North Side home prices already are being impacted by higher interest rates. Home resale prices rose 8.6 percent in June 2022, compared with June a year ago. Meanwhile, market times have dropped 33.7 percent to 51 days during that same time period.

In June, median sale prices in all four surveyed neighborhoods rose, compared with June a year ago, according to Baird & Warner:

• Lake View. Overall median prices rose a solid 9.3 percent in June. However, prices on luxury homes in the $1-2 million bracket slipped 4.6 percent. On the sales side, the number of Lake View units closed plummeted by 18.8 percent.

• Lincoln Park. Overall median prices in the neighborhood rose 6.7 percent in June. However, homes sold in the upscale price range of $500,000 to $1 million declined 0.8 percent. On the sales side, the number of Lincoln Park units closed slipped by 22.1 percent. • Near North. Overall median home prices rose 3.4 percent in June, while units priced under $500,000 fell 4.8 percent. On the sales side, the number of Near North homes closed slipped by 9.0 percent. Photo by Jon Bilous

• North Center. Overall median prices in this hot neighborhood – which includes the popular St. Ben’s area – rose a hefty 13.5 percent in June. However, the median price of homes priced at more than $2 million declined by 0.9 percent. On the sales side, the number of North Center units closed rose by 7.6 percent.

“COVID, inflation, the stock market, interest rates, supply chain issues, rising crime, and city financial issues are just some of the variables both buyers and sellers are trying to analyze before getting into the market,” Irwin noted.