It’s no secret that home prices, as well as mortgage rates, have been steadily rising (you can see the lowest mortgage rates for which you may qualify here). Nationally, home prices rose 20% in April 2022, compared to the same month last year, according to CoreLogic, and that there is an affordability crunch backed up by a number of other data sources. As Black Knight wrote in a recent mortgage report: “When comparing rising housing costs to current income levels, it now takes 33.7% of median household income to purchase a mid-priced home, within a whisper of an all-time high of 34.1% at its peak in June 2006.” Moreover, the majority of US housing markets are now overvalued, according to the latest data from CoreLogic. However, of the 20 largest markets, two large housing markets are actually “normal,” CoreLogic found.
These two are Chicago and St. Louis, which reflects the fact that buyers in the same city can generally buy homes in the area. Meanwhile, an “overvalued” housing market occurs when prices exceed the general ability of buyers in the same city to purchase a home; Buyers from outside the region and large investors have often driven up prices in these markets.
Does this mean you should move to Windy City or West Gate? Well, not so fast: Here’s what might happen in these markets.
In the case of Chicago, prices continue to rise as well, but at least one factor is normalizing the market: apartments. One of the quirks of the Chicago housing market is the sheer number of condos located downtown — at least 6,000 units are on the market now, according to Realtor.com — and that’s one factor driving the average home price down. For example, this apartment in the second city has been listed several times, and since its inclusion, the price has been reduced more than once.
Condominiums are very popular in crowded metro areas, which is why they are so abundant in Chicago, but after the pandemic began, people sought more space. Apartments are more valuable to buyers now if they have a balcony and access to the gym.
In the case of St. Louis, it could be an example of a city that could be a victim of market inefficiency, says Tony Nepert, an expert on development, public transportation and public policy in St. Louis. In simple terms, this means that home prices in the city seem lower than you should think about the amenities that the city provides, and when compared to similar cities. St. Louis has walkable neighborhoods, robust public transportation, a great food scene, professional sports teams, dazzling city vistas and more.
St. Louis housing prices continue to rise like most other cities in the United States; And readers should note that in northern St. Louis County, investors are said to be already buying a record share of homes at above-demand prices. However, on average, prices in the larger metro area continue to exceed those in the city proper, which is a rare occurrence.