While it is hard to believe we are one quarter of the way through 2025, I also do believe it because the first three months of the year have been action packed! As we look ahead to the remainder of the year, I always like to reflect back on the market thus far, which many times is a great way to help predict what is in store for Q2-Q4.
Anecdotally, my team and I see a big difference between this year and last in the amount of overall activity with our clients. We are busy this spring like we have been in years prior, working with both buyers and sellers across Chicagoland. Below is a short analysis of several key indicators, comparing Q1 2024 and 2025.
Mortgage Rates
Last year at this time mortgage rates were relatively high, averaging around 6.91% for a 30-year fixed-rate loan. As a result, borrowing was more expensive, and therefore slowed down home purchases. This year rates have slightly decreased to around 6.5%, providing some relief to buyers, however, the reduction hasn't been significant enough to drastically change the market dynamics.
Hme Prices
In 2024 we saw the momentum from 2023 continue with continued price increases driven by high demand and low inventory. The median existing home sales price increased by 4.7% year-over-year to $406,100. This year we’re seeing more stabilization while prices remain high. We are also seeing a slight cooling effect due to the economic uncertainties and cautious consumer behavior. In Chicago though, the market is much more neighborhood-specific, and some neighborhoods like Lincoln Park have not experienced any sort of cooling down.
Housing Inventory
Last year we saw historically low inventory, which contributed to the rise in home prices. Many buyers faced challenges finding available homes, and therefore did not buy. While inventory levels are still low, there is a slight improvement as more sellers enter the market. This is partly due to the pent-up demand from the previous year. Increased inventory helps both buyers and sellers, as we saw many sellers sit instead of sell because they had nowhere to go if they sold.
Buyer and Seller Behavior
In 2024, buyers were eager, but faced affordability issues due to high mortgage rates and rising prices. Sellers on the other hand were in a stronger position, often receiving multiple offers. Overall this year so far buyer and seller behaviors remain consistent with 2024, though we do see signs of improvement with the decrease in mortgage rates and stabilization of home prices. Economic uncertainties always make a rebound slower and more difficult.
Stock Market Trends
The stock market experienced significant growth last year, driven by falling inflation and good news economic information around the market. The AI boom particularly boosted tech stocks in the first part of the year. The market continues to perform well this year, with the S&P 500 posting a 25% return for 2024. However, non-US stocks and fixed income assets have struggled – which is actually common in Q1 after an election year.
Consumer Insights
Consumer confidence was high in 2024, supported by strong job growth, economic stability and spending on technology and consumer goods. When consumers feel that things are stable, they are more likely to make a big life change such as buying or selling a home. Consumer sentiment remains positive this year, but there are signs of caution due to economic uncertainties and mixed signals from the Fed. Spending is still strong, but more focused on essential goods and services.
As I mentioned, Chicago’s real estate market is strongly driven by the neighborhood – what we see in Lincoln Park is not the same as what is happening in the Gold Coast. As a Chicago Realtor, it is my job to stay up-to-date with all things buying and selling in Chicago! If you are interested in more information, or have a specific question, please reach out anytime!
