Home prices in the Chicago metro area rose steadily over the last year or so. Additional, yet modest, gains are expected in 2017 as well. This is based on several forecasts and predictions for the Chicago real estate market in 2017.
Current Trends Across the Metro Area
Median home prices and sales activity both increased in June. According to the Illinois Association of Realtors, 13,620 homes were sold in the Chicago metro area this June, which is an increase of 2.1% from the same time last year.
Meanwhile, the median price paid for a home in the Chicago area rose 4.6% in June, compared to last year. The median sales price rose to $242,500 in June 2016. Again, that’s for the entire metro area.
Currently, the Chicago housing market favors sellers over buyers. According to Mike Drews, president of Illinois REALTORS: “Sellers continue to reap the rewards of a summer market where buyers are choosing from a greatly diminished pool of properties.” He added that housing supply is struggling to “keep pace with buyer demand.”
These trends no doubt fuel the Chicago housing market predictions for 2017, some of which call for additional price gains over the next year or so.
Zillow Forecast for Chicago Housing Market, Through July 2017
Zillow has forecast additional home-price gains for the Chicago housing market, between now and the summer of 2017. By their estimation, house values within the city will rise by 1.7% over the next 12 months (roughly, July 2016 – July 2017).
That’s for the city itself. Their one-year forecast for the broader metro area calls for a gain of 2.5%, during the same 12-month time frame. On July 27, 2016, the company issued this statement on its website: “Chicago Metro home values have gone up 3.3% over the past year and Zillow predicts they will rise 2.5% within the next year.”
That’s one positive real estate market forecast for Chicago in 2017. Here’s another that comes out of the University of Illinois:
Short-Range Prediction for Chicago Home Prices
In July 2016, the Illinois Association of Realtors published a short-range housing market forecast for the Chicago metro area, looking out over the next few months. It was based on data and analysis provided by Geoffrey Hewings, director of the Regional Economics Applications Laboratory (REAL) at the University of Illinois.
In the Chicago metro area, median home prices are expected to rise 7.1% in August 2016, compared to the same time last year. In September, prices are expected to be up 5.2% year over year.
The REAL housing price index (HPI) predicts even stronger growth in the coming months. According to the report: “The REAL HPI [for the Chicago metro area] is forecast to rise by 8.2% in July, 10.3% in August and 10.3% in September .”
So we have positive real estate market predictions in both the short and long-term, from two different sources. While no one can predict what the housing market will do with complete accuracy, the general consensus appears to be that Chicago metro-area home prices will continue to rise in 2017, but a modest pace.
Case-Shiller Index: 3.7% Annual Gain in May 2016
According to the latest S&P/Case-Shiller Home Price Index, published on July 26, house values in Chicago rose 3.7% from May 2015 to May 2016. They rose 1.8% from April to May alone.
The fact that the one-month gain from April – May 2016 is nearly half of the annual gain suggests that home-price appreciation accelerated in the spring of this year. That would jive with Zillow’s forecast for the city of Chicago, which calls for larger gains between now and July 2017, compared to the last 12 months.
No matter how you measure it, the Chicago real estate market has experienced home-price appreciation in recent months. And the trend is expected to continue, to some degree, through the end of this year and into 2017.
Freddie Mac Outlook: Mortgage Rates Rising in 2017
Mortgage rates are also expected to rise in 2017. That’s the latest forecast offered by the economists at Freddie Mac, the government-controlled buyer of mortgage loans.
Here is their forecast for 30-year loan rates between now and the end of 2017. These are the average rates they expect to see during each quarter.
- Q2, 2016: 3.9%
- Q3, 2016: 4.2%
- Q4, 2016: 4.4%
- Q1, 2017: 4.5%
- Q2, 2017: 4.7%
- Q3, 2017: 4.9%
- Q4, 2017: 5.1%
As shown here, the economists at Freddie Mac feel that 30-year mortgage rates will rise steadily later this year and into 2017.
When this article was published, in July 2016, the average rate for a 30-year mortgage was 3.48%, according to the Freddie Mac weekly market survey.
Granted, this outlook is the equivalent of an educated guess. So you probably shouldn’t “bank” on it. The key takeaway here is that the company’s economists expect rates to rise gradually over the coming months.
Disclaimer: This article includes forward-looking statements (forecasts and predictions) relating to the Chicago real estate market. Such statements were provided by third-party sources not associated with our company. As a general rule, the Home Buying Institute does not make assertions or guarantees about future housing conditions.