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It's hard to believe, but yet another year has flown by here in the Chicagoland area. Today, we thought we would take a look back at what we saw in real estate in 2014, and what it means moving forward.
Over the last 12 months, home prices in Illinois appreciated by 3.6%. Since the peak of the market in 2007, home prices are down 19.9%. During the bubble, in the 2003 to 2007 range, we saw a national appreciation rate of 7% annually. During the bust, we saw homes depreciate at a rate of 5.1%, before making a strong recovery. Currently, the national average for annual appreciation is back to a steady 5.9%! Illinois's recovery has been a bit slower, but we are certainly getting closer to pre-recession levels.
Over the next three to four years, appreciation is projected to occur at about 3.2% annually. Of course, appreciation occurs at very different rates depending on the price bracket. For example, homes under $100,000 depreciated by 6% in 2014, whereas homes in the $1 million+ range appreciated by 16.2% nationwide! In Illinois, we're seeing somewhat similar trends, but our luxury homes haven't been appreciating anywhere near as fast as the national average.
There is some good news: interest rates are still low. Why does that matter? Well, the higher the rate, the fewer the potential buyers - higher rates mean higher monthly payments, which directly affect debt-to-income ratios. The National Association of Realtors, The Mortgage Brokers Association, Fannie Mae, and Freddie Mac are all expecting interest rates to increase anywhere from a quarter of a point to an entire point over the next year. That's not a huge rise, but it could cost you thousands of dollars over the life of a loan, so it's something to keep an eye on.

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