After a slow year for the residential real estate market in 2023, with persistent high mortgage rates and low inventory keeping buyers and sellers sidelined, industry experts are optimistic for the 2024 local and national markets.

       For Chicago and statewide, housing market trends in the final three months of 2023 continued to show declines in home sales compared with 2022 — apart from in the month of December when Chicago saw a slight increase — with prices staying elevated year-over-year, according to data from Illinois Realtors, a trade association for real estate agents.

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       Nationally, in December, the number of existing-home sales, which does not include new construction, fell to their lowest levels in nearly 30 years, with the median price reaching a record high of $389,800, according to the National Association of Realtors.

       But as mortgage rates have ticked down from their 2023 surge in October when they approached 8% — levels not seen in about two decades — activity in the real estate market has picked back up, with some buyers and sellers reengaging. Real estate experts anticipate that more buyers and sellers will continue to enter into the housing market heading into the busier season for real estate transactions in the spring.

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       “I think we are going to see rates go down (in 2024). That will really bring sellers back to the market who are finally able to say ‘OK I can do this rate. I am giving up that other one’ ... and inventory will increase,” said Drussy Hernandez, president of the Chicago Association of Realtors and vice president of brokerage services at Coldwell Banker, in an interview with the Tribune. “So now with more inventory, and buyers more comfortable if we see those rates being consistently lower, I think everyone will see a market that will improve in 2024.”

       In 2023, closed sales came in at a total of 132,120 across the state, an 18.3% drop from homes sold in 2022. Of these sales, 89,482 were in the Chicago metropolitan area, a 20.1% decrease from 2022, and 22,400 were in the city, a 20.9% decrease from 2022.

       The annual median price of a home statewide was $269,000 in 2023, a 3.5% increase from the median price in 2022. For the Chicago metro area, this number was $324,900 in 2023, a 4.6% increase from the previous year. And inside the city limits, the annual price for 2023 came in at $330,000, a 1.5% decrease from 2022.

       Redfin and Zillow are both predicting a slight increase in affordability for homebuyers in 2024.

       Joanna Olszynska, a Compass real estate broker, walks through a single-family row house during an open house on Jan. 21, 2024. (Eileen T. Meslar/Chicago Tribune)

       Dan Close, a Chicago real estate agent for Redfin, said he has several listings ready to hit the market in the coming weeks and throughout the rest of the first quarter.

       “People who were casually house hunting when rates were higher are getting serious now,” Close said in a January news release. “Buyers are feeling more confident that they can get good value for their money, and many first-timers are jumping in because Chicago rents are still rising. Homeowners who were waiting for the holidays to be over and rates to come down before selling are getting ready to list.”

       Freddie Mac data shows the 30-year fixed-rate mortgage average reached a high of 7.79% in October 2023 before falling to 6.61% in December.

       “Buyers found significant savings as rates fell,” said Skylar Olsen, a chief economist at Zillow, in a January news release. “But mortgage rates are fickle things, as we’ve seen in recent weeks, and they’ll play a massive role in determining appreciation and affordability — especially for first-time buyers — going forward in 2024.”

       Mortgage rates are expected to continue to hover between 6% and 7% this year, with the new normal likely around 6.5%, said Lawrence Yun, chief economist for the National Association of Realtors, in an interview with the Tribune.

       Yun said in addition to lower mortgage rates, he also expects national home prices to remain stable this year — as he anticipates there will be an increase in supply to keep up with demand — as well as the labor market to remain strong with jobs being created and wages increasing, all of which will help with housing affordability.

       “The key is mortgage rates falling and home prices remaining stable so that they don’t outpace people’s income growth,” Yun said.

       Single-family row houses on South Ellis Street in Woodlawn on Jan. 21, 2024. (Eileen T. Meslar/Chicago Tribune)

       In December 2023, typical monthly 30-year fixed-rate mortgage payments in the Chicago metro area for homebuyers who purchased with a 5% down payment and a 6% mortgage rate show a monthly payment of $2,299, requiring an annual income of $91,960, according to Zillow data. This monthly payment goes up to $2,474 with a 7% rate, requiring an annual income of $98,960.

       If a homebuyer makes a 20% down payment with a 6% mortgage rate, the monthly mortgage payment goes down to $1,880, requiring an annual income of $75,200, according to Zillow. This monthly payment goes up to $2,027 with a 7% rate, requiring an annual income of $81,080.

       The data is based on Zillow’s Home Value Index for the Chicago metro area, which has December’s assumed purchase price at $279,118.

       Naja Morris, a real estate broker with @properties Christie’s International Real Estate in Chicago, said she is seeing that people are less sensitive to interest rate levels and are leaning into the fact that they can refinance later if rates fall.

       “I think that it’s going to be a robust spring market,” Morris said. “I think we are going to have more activity than we did last year.”

       ekane@chicagotribune.com