Soaring Mortgage Rates, Response to Surging Inflation

Soaring mortgage, other interest rates are response to surging inflation. August 2022 figures show that prices of items contained in the widely-followed Consumer Price Index (CPI) have risen 8.8% in the Chicago region over the 12-month period from August 2021. At the same time, the prices of many items, led by energy and groceries, within the overall index basket of goods and services are rising at a double-digit pace. Few Illinois workers have received pay increases that enable them to keep up with current inflation levels.


Inflation is also driving up Illinois and global interest rates. As of Tuesday, September 2022, the aggregation website Bankrate was reporting a median rate of 6.70% for a 30-year fixed interest mortgage. Rising mortgage rates fall hardest on first-time home buyers. Changes in mortgage rates are making it more difficult for many middle-class households to buy a home in Illinois.


A recent nationwide analysis of real estate listings and closing prices has identified 10 top states where closing prices are falling short of the asking price. Illinois is no. 9 on the list of 10 states, indicating cooling price points and the dampening of what had a sharp spike upward in home prices and values.


Experts pointed out the likelihood of a period of consolidation following the upward home-price-spike of 2021, in which many properties were sold immediately upon listing. In a sellers’ market, multiple buyers converge upon a single seller and the winning buyer often has to pay a premium. In 2022 so far, according to data analyst RubyHome, Illinois single-family residential closing prices are 97.57% of the asking price, indicating a significant number of discounted transactions. Real estate sales are down 8% from their peak in June 2022, and analysts warn of possible sharp price actions in the Chicago area.