11-Jan-16 – The stock market may look cloudy early in the New Year because of economic problems in China, and instability in the Middle East, but experts see brightness on the horizon for house hunters in Chicago because of a vastly improved job market and low interest rates.

Experts say the following factors will influence the housing market in 2016…

Job gains. The American employment machine was running smoothly at the end of 2015, with the federal government reporting the creation of 292,000 jobs in December. The unemployment rate held steady at five percent for the final quarter of the year.

In Chicago, the lion’s share of new jobs were tech positions downtown, where increasing numbers of Millennials – college-educated residents 18 to 33 years old – are contributing to a robust job market.

Mortgage interest rates. Benchmark 30-year fixed home loan rates fell back to an average of 3.97 percent on January 7 after ending the year at 4.01 percent, reported Freddie Mac’s Primary Mortgage Market Survey. A year ago, the 30-year loan averaged 3.73 percent.

“Concerns about overseas economic developments have dominated financial markets to start the year,” said Sean Becketti (left), Freddie Mac’s chief economist. In mid-December, the Federal Reserve raised its benchmark short-term federal funds interest rate a quarter of one percent, the first Fed rate hike in nine years.

Financial analysts said the modest rate increase will put upward pressure on interest rates in 2016 for a wide assortment of consumer and business loans – from home equity loans and mortgages to auto loans and student borrowing.

30-year fixed mortgages may rise to 4.5 percent or 5.0 percent by the end of 2016, predicted Lawrence Yun, economist for National Association of Realtors.

Home prices on the rise. Home and condominium prices in Chicago have weathered the Great Recession, and should start to appreciate above 2008 levels, experts say.

Adjusted for inflation, existing home and condo prices in Chicago have rebounded to 84 percent of their November 2008 levels. At the current rate of price growth, complete recovery could happen in the next 12 to 18 months, predicts economists for Illinois Association of Realtors (IAR).

The median price of homes and condos in Chicago rose 2.2 percent to $235,000 in November 2015. A year earlier, the median price – a typical market price where half the homes sold for more and half sold for less – was $230,000, the IAR said.

Rising prices will nudge more first-time buyers off the fence, experts predict.

Higher property taxes. When Mayor Rahm Emanuel’s $500 million property tax increase kicks in this year, home and condo owners in wealthy north side neighborhoods are expected to be bashed with hefty real estate tax bills – assessment increases of 28 to 48 percent, estimates Cook County Assessor Joseph Berrios.

(Right) Condominiums in Streeterville, including River East Center (left) and Parkview West (right) on January 2.

In Wicker Park and Ukrainian Village, assessments are up about 28 percent. Goose Island property owners were slapped with an unbelievable 48 percent assessment increase.

Higher apartment rents. Once the property tax increases hit landlords, steep rent hikes are expected to follow in high-demand north side neighborhoods. Rent increases could match those seen in 2014, when they skyrocketed 14 percent on the Near North Side, rose 6.5 percent in Lincoln Park, 6.0 percent in West Town, and 5.0 percent in Logan Square and Lincoln Square.

With apartment rents on the rise, experts say more young renters will realize the benefits of home and condo ownership in 2016.