Fixed mortgage rates have been on the rise for the past seven weeks, according to home mortgage company Freddie Mac. Last week, the 30-year fixed-rate average reached its highest point (4.40 percent) since April 2014. Freddie Mac expects the upward trend to continue.

In comparison, the 30-year fixed-rate average was 4.38 percent in the previous week and 4.16 last year, according to a Chicago Tribune report on the Freddie Mac data. The 15-year fixed-rate average and five-year adjustable rate average also increased over the past year.

The Federal Reserve, which does influence mortgage rates, is expected to further drive short-term rates upward next month, according to the report. 

The Rise of Home Prices

As mortgage rates are rising, so are home prices. This is naturally leading to a dip in home sales.

"It is not shocking to see that home sales are declining and falling short of expectations. Mortgage rates continue to rise as well as home prices. Between those two mechanics, affordability is going to get squeezed,” Brian Surgener of BBMC Mortgage told the Chicago Tribune.

In Illinois, home prices rose significantly over the past year. In January 2017, the median home price in the state was $171,000. The median sale price rose 8.2 percent to $185,000 in January 2018, according to Illinois Realtors.

Home prices also increased in the Chicago Primary Metropolitan Statistical Area (PMSA) and Chicago proper. In January 2018, the average home price in the Chicago PMSA was $224,000, up 7.2 percent from $209,000. In Chicago, the median sales price crept up 3.9 percent from $255,000 in January 2017 to $265,000 in January 2018.

The Fall of Home Sales 

On the other hand, sales of single-family homes and condos dropped in Illinois, the Chicago PMSA, and Chicago. Statewide sales dipped 6.1 percent from 8,683 in January 2017 to 8,156 in January 2018. Home sales in the Chicago PMSA dropped 8 percent over the same period, going from 6,277 homes sold to 5,777 homes sold. Sales dropped even more in Chicago (10.2 percent) from 1,574 in January 2017 to 1,414 in January 2018. 

Time on the Market 

Though sales are down, the time homes are spending on the market has decreased. Buyers who found a home in January snatched them up in an average of 65 days compared to an average of 69 days in 2017. A dwindling inventory of available homes for sale (12 percent smaller compared to last year) means tight competition and buyers who are willing to pay more.

“Based on the present trends in the housing market, we anticipate a competitive spring for buyers. With decreasing market time, sellers will need to be mindful of pricing strategically. If their home is not moving quickly, a proactive price adjustment may help them protect their overall investment without risking the stigma of a longer-than-average market time,” Rebecca Thompson, president of the Chicago Association of Realtors, said in the Illinois Realtors report.