The price of a house in Chicago took a big step down in January, a time when they’re usually rising.
The median price of houses sold in the city was $261,000 in January, down 10% from the same time a year earlier. That’s according to data posted Feb. 14 by the Chicago Association of Realtors. The drop is considerably larger than price declines in the condo market and in surrounding counties — in those counties where prices were down in January.
It's a strong sign of how hard fast-rising interest rates and other economic jitters of late 2022 impacted the city’s real estate market. Most home sales that closed in January would have been negotiated in the last months of the old year.
“You have to think about what was going on” in the fall, said Lauren Mitrick Wood, a Compass agent. “Interest rates were up, there was uncertainty about where inflation was going.”
Danny Glick, an @properties Christies International Real Estate agent, said interest rates have taken a bite out of prices. In late 2021, when January 2022 deals were being made, interest rates were in the low 3% range. A year later, when Januar 2023 deals were being made, they were at or above 6%. The difference would jack up the payment on a $400,000 loan by $570, or 34%.
“That certainly had an impact,” Glick said.
It’s also true that the lower prices of January 2023 are in part a reflection of the craziness in the market in early 2022. As the market cooled in the subsequent year, prices couldn’t keep up.
Notably, all of those factors were also plaguing the market in the rest of the Chicago metro area, but without dealing such a severe blow to prices. In Lake County, the median price of homes sold in January was up 7% from a year before, and in DuPage County, it was off 2.5%. In the city, the price of attached homes, or condos and townhouses, was essentially flat, down 0.4% from a year ago.
Clearly, the city’s house market is a weak spot in the overall metro-area real estate market right now. It’s hard to determine what could be the cause.
One big difference between the city and its surrounding suburbs is that there’s a mayoral election going on that could alter the direction of the city. But if uncertainty over the mayoral election were the underlying reason, the condo market would likely be dipping low like the house market.
The 10% drop in city house prices followed declines of 6.8% in December and 7% in November.
In each of the previous 11 Januarys, including both the recent boom years and the fallow years before that, the median price of Chicago houses was up. The increases ranged from 2.2% in January 2013 when the climb out of the last housing bust was gaining steam, to 22% in January 2021, when the Covid-era housing boom was in full force.
On the bright side, prices were so nice, Wood’s clients bought twice.
They picked up two separate but neighboring properties on Windsor Avenue in Portage Park, both at discounts of 20% or more from what the sellers had been asking earlier in 2022. The larger house, which they bought for $842,500, has very little yard, so they paid another $275,000 for a smaller house next door that they’ll tear down to create yard space.
Jody Haile, a Coldwell Banker agent based in Lincoln Park, also has clients who benefitted from the low prices. They closed on a house on Kirkwood Avenue in Forest Glen at $490,000, or 79% of the sellers’ initial September asking price of $620,000.
“They were in the right place at the right time,” Haile says. While the couple had received 8 offers on the house they sold, "they were the only offer on this one" that they bought.
When Haile saw the January data come out, Haile was concerned.
“It’s really a big drop, and it’s unsettling,” Haile said.
Basic economics might say that prices went down because the supply was more plentiful than before, but that doesn’t apply here. There were 461 houses sold in Chicago in January, down nearly 38% from January 2022’s tally of 764 sales.
Both Glick and Wood said January deals, which will close in February and later, look better. That’s largely because interest rates have eased up some since peaking in the fall, as have inflation and talk of a recession.
Even late December was starting to look better than the gloomy fall.
Just as one example: A bungalow on Talman Avenue in West Ridge hit the market the day after Christmas at $375,000. By New Year’s Eve it was under contract to a buyer. The sale closed January 27 at $405,000, or 8% over asking.