Illinois home prices will increase again this year, but not at the varied rates of 2021. Even if the ranges are more moderate, home prices are still expected to be high by historical standards, said Dr. Daniel McMillen, head of the Stuart Handler Department of Real Estate at the University of Illinois at Chicago, in his 2022 Housing Market Forecast for Illinois REALTORS^®. Nationally, economic experts are predicting the annual median home price will increase by 5.7 percent, said National Association of REALTORS® Chief Economist Lawrence Yun at NAR’s REAL Estate Forecast Summit.

Nationally, home sales could continue to grow by as much 6.6 percent this year as more Millennials enter the homebuying market, according to realtor.com’s 2022 Housing Forecast. Expect Illinois home sales to be more tempered with moderate increases at different times of the year, Dr. McMillen says.

Low inventory has been one of the biggest issues facing the housing market for several years, but there could be some positive growth on the horizon, according to realtor.com economists. Nationally, inventory is expected to increase 0.3 percent on average this year and more sellers are expected to list their homes, according to realtor.com’s forecast.

Even with the end of foreclosure moratoriums around the country, CoreLogic Chief Economist Dr. Frank Nothaft is expecting only a small uptick in mortgage delinquencies and distressed sales in 2022, according to his 2022 Housing Outlook. The same will likely hold true in Illinois as well, says Dr. McMillen. Even if there is a bump in Illinois foreclosures, it would still be on the low side by historical standards, he said.

The current inflation situation may have more to do with global supply bottlenecks not keeping pace with consumer demand of durable goods than the traditional definition of a steady overall increase in prices, says Dr. McMillen. Consumer demand is currently driving up prices, but it is likely to be short-term, he said in his 2022 forecast. One side effect of inflation, however, is higher interest rates and that could have an impact on the housing market, he said.

Mortgage interest rates remained consistently low throughout 2021, with the 30-year, fixed rate often hovering just above and below 3 percent. Don’t be surprised if interest rates begin to head higher this year. Yun said he expects the 30-year, fixed rate to increase to 3.5 percent this year. Freddie Mac Chief Economist Sam Khater has also said rates are likely to rise, but added, “the push of the first-time homebuyer demographic that’s been propelling the purchase market will continue in 2022 and beyond.”

Nationally, look for rent prices to grow as much as 7.1 percent in 2022, putting rent costs ahead of home price growth, according to the realtor.com forecast. Rents grew at a double-digit pace in 2021 in some markets while the rental vacancy rates hovered near historic lows.

Consumers with a history of on-time rent payments could find it easier to build their credit and qualify for home loans. New underwriting guidelines from Fannie Mae and Freddie Mac allow lenders to consider positive rent payment histories when determining someone’s creditworthiness and that, in turn, could make it easier for more renters to get mortgages and become homeowners.

Sources:
Illinois REALTORS® 2022 Housing Market Forecast with Dr. Daniel McMillen – bit.ly/3JJVeBW
NAR Real Estate Forecast Summit – bit.ly/3mZraZk
Realtor.com 2022 Housing Forecast – bit.ly/3qQZBSR
CoreLogic 2022 Housing Outlook – bit.ly/3321moj