Experts in Chicago's housing market are feeling optimistic as mortgage rates trend down.
On Friday, the average rate on a 30-year fixed mortgage dropped 22 basis points to 6.4%, according to Mortgage News Daily, the lowest rate since April 2023.
"It's not as exciting as you'd think it would be given the fact we had such artificially low rates during COVID," said Danny O’Donoghue, a real estate broker with Compass.
"We’re on the right path and kind of in that normal range again."
"Now that we’re into the sixes, we're below the historical 30-year mortgage average. We're in a good spot," said O'Donoghue.
Home sales have continued to fall amid record high prices and interest rates.
In June, existing home sales fell 5.4%, as the median sales price climbed to the highest price ever recorded, according to the National Association of Realtors.
Erika Villegas, the president of the Chicago Association of Realtors, anticipates lower interest rates will alleviate pressure in the market.
"It’s taking an average of 37 days for each home to sell in Chicagoland," said Villegas, a broker at RE/MAX Mi Casa.
"We actually asked a lot of our agents to reengage with our clients to update them on what’s happening."
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Friday's mortgage rate drop followed a weaker-than-expected monthly jobs report. As rates trend lower, lenders are taking more calls.
"Truth be told, there’s a big difference between 6.38% and 5%, but it's better than 8%," said Todd Williams, a senior vice president at American Community Bank.
Williams said mortgage applications are down at least 10% from 2023, which was already a much slower year than 2022. He says a dramatic drop in rates could reenergize the market.
"I haven’t seen any rise in delinquencies. That’s what makes the bankers nervous."
"Am I optimistic? Absolutely, as long as delinquencies stay low and rates continue to move in the right direction."
Lower rates will help with affordability; however, supply remains a significant issue in Chicago.
"We have two really different types of markets. Downtown condos, there's still a decent amount of supply," said O'Donoghue. "Once you get away from downtown, into the neighborhoods, or especially the suburban markets, it's very much still a seller's market."
"We’re seeing multiple offers still, even during the summer. July and August historically are slower months as far as showing activity, offers written," he said.
He says as rates come down, the hope in the industry is current homeowners, locked into low rates, will be more enticed to sell, unlocking inventory that hasn't been able to meet demand.
Todd Williams is noticing a similar trend.
"There’s not enough supply out there because people are staying put. If rates were at 3% tomorrow you’d see a glut of properties for sale," said Williams.
Experts encourage those in the market for a new home, to prepare now. They say talk to a trusted lender or broker to get a plan in place ahead of what's expected to be a very busy spring season.
"When there’s more demand, prices will increase because of it," said Villegas.
