Q: I am wondering what will happen with the current real estate market in Chicago based on world events and an economic recession. Do you think it’s a smart to buy now or do you see prices declining over the next year or two?
I know that interest rates are favorable, but I wonder about property prices. Any insight would be greatly appreciated.
A: No one really knows what will happen with real estate property prices over the short term. Over the long run, however, prices should continue to climb. So in ten years, the house you purchase today will probably be worth more.
How much more? On average, property appreciates at average rate of 3 percent per year, or just ahead of inflation. But during the second half of the 1990s, property appreciated at a rate far above that in some areas, and inflation was much lower. That could mean those areas might see property prices drop a bit and then hold steady before moving forward again.
My best guess is that we’ll have a serious slow down in some parts of the real estate market. As long as interest rates hover around the 7 percent mark, the first-time market will continue to be strong. But we’ve already seen the market for more expensive homes, priced at $500,000 and above slow down.
As the recession continues, some sellers will lose their jobs and be forced to sell. Others will watch their homes go into foreclosure. In fact, the number of foreclosures in certain markets, like Atlanta, is hitting record numbers. These factors, and others, will produce bargains because some sellers will be too nervous to wait it out.
If that’s the case, and you’re ready, you can swoop in to buy something great at a more reasonable price.
Published: Feb 28, 2001