Real Estate

U.S. Home Prices to Rise 5% This Year, More Modestly Next

U.S. home prices will rise a bit faster this year than previously expected due to limited available supply, according to analysts polled by Reuters, who saw affordable properties coming to market remaining below levels of demand in coming years, Reuters reported. Interest-rate sensitive house prices, which surged 45% during the pandemic, have risen around 8% since early 2023, wiping out a 5% dip in the second half of 2022, caused in part by the 525 basis points of rate rises from the U.S. Federal Reserve. Despite elevated mortgage rates — and expectations among forecasters that the first cut will come in September at the earliest, and priced for November by markets — home prices were expected to continue their upward march. Average prices defied predictions of a decline last year, rising nearly 6%, and are expected to increase another 5% in 2024, according to the median of forecasts from 28 analysts in a Reuters poll. Forecasts were based on the S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas. That was an upgrade from 3.3% predicted three months ago and higher than the average consumer price inflation forecast for this year of 3.2% in a separate Reuters survey, but home price rises are expected to slow to 3.3% in 2025 and 3.4% in 2026, the latest survey showed, despite more than 200 basis points of interest-rate cuts expected by then. Mortgage rates are forecast to dip a little more than a full percentage point from the current 7% but to stay well above the rates many existing homeowners pay on standard 30-year deals.
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Chicago to Offer Most Generous Subsidies in U.S. to Save Its Downtown

Chicago gave birth to the skyscraper in the late 19th century. Now, local developers and politicians are trying to keep many of today’s office towers from dying off, the Wall Street Journal reported. The city is going beyond any other in providing public subsidies to convert obsolete office space into apartments and hotels, despite enormous budgetary challenges. Even Chicago’s politically progressive mayor signed on last month. The city’s office market has been hurt by weakening demand, higher interest rates and difficulties in refinancing. Big companies such as Citadel and Boeing have moved their headquarters elsewhere, and Chicago commercial-property values have plummeted. While these economic trends have afflicted central business districts in other major U.S. cities, by one measure Chicago’s is the hardest-hit. Three-quarters of the mortgages backing its office space that were converted into securities are either in default or are at risk of default, the highest of any major metropolitan area in the nation, according to credit research firm KBRA Analytics. Chicago’s office-vacancy rate has soared to 16.3% from 11.9% in early 2020, and it is notably higher than the U.S. average of 13.8%, according to data firm CoStar Group. Some downtown office buildings have sold for less than one-quarter of what they were valued at a few years ago. (Subscription required.)
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