How the Kendall County housing market has been impacted by interest rate moves

Potential homebuyers and sellers across Kendall County are unsure just how or when the Federal Reserve’s gradual decrease of interest rates will impact the local housing market. But they agree it will have an impact.

Brenda Weaver, a Yorkville-based real estate agent with Baird & Warner, said while she expects housing across the county to remain a seller’s market, the lowered rates should return some purchasing power back to homebuyers.

“I’ve been doing this for over 20 years, it’s been a seller’s market for longer than I can ever remember,” Weaver said. “Since 2020, it’s amazing how many single-family homes have received multiple offers driving prices up. We need to see a little bit more housing inventory for prices to adjust a little better for consumers. We are still seeing multiple offers on homes, but they are now sitting on the market a little longer than before.”

Homebuyers and sellers are keeping a close eye on the Fed’s actions because, along with other economic factors like the unemployment rate, interest rates indirectly influence mortgage rates, the treasury market and bond market, all of which contribute into housing costs.

With inflation cooled to just above the Fed’s target of 2%, down from a four-decade high of 8% in 2022, the Fed felt comfortable pausing their recent trend of rate cuts. The previous cuts from September through December, 2024, lowered the federal funds rate banks charge each other for borrowing money from a range of 5.25%-5.5% down to 4.5%-4.25%.

Weaver said because the Fed’s interest rates affect the broader economy, like the cost of student and car loans, and home equity lines of credit, more than they directly affect housing values, she expects any measurable impact to take time.

She said in Kendall County, the 30-year fixed mortgage annual percentage rate came down about a month before the Fed’s interest rate cuts before rising again once the Fed made its first big move. Since a peak of 8% last year, she said the mortgage rate finished 2024 with a more balanced rate of around 6.5%. She said that rate is more friendly for both homeowners growing equity and consumers. She does not expect mortgage rates to return to the 2-3% range experienced during the COVID-19 pandemic.

While the Federal Reserve’s economic “soft landing” coming out of the pandemic has brought the housing market greater stability, the fates of future homebuyers will remain dependent on the economy’s continued improvement.

Scott Gajewski, a Yorkville-based loan officer with Fairway Independent Mortgage Corporation, said the key to lower mortgage rates will be inflation rates and the labor market. He said if those factors are strong, it will lower the bond market which decreases mortgage rates. Gajewski said while the election caused some market uncertainty, he expects the large housing inventory in Kendall County to keep housing strong throughout 2025.

“When the Fed cut interest rates, we actually saw mortgage rates go up, which was the opposite effect people thought would happen in the market on the purchase side of things,” Gajewski said. “There hasn’t been a lot of clear cut data why that happened. Year over year from Oct. 23, we have seen a 3% drop in loan applications, with refinances increasing significantly.”

Gajewski said while the county’s housing inventory is spiking a little, the number is still below pre-pandemic levels by about 25%. He said this has created a market where multiple offers are common, but not on every single house like it used to be. Over time, this should cool prices for buyers.

According to Midwest Real Estate Data, a real estate data aggregator based in Lisle, new listings in Kendall County were recorded as being up 6.5% from Nov. 2024 to Nov. 2023.

Over the same time period, across Kendall County, average sales prices for single-family homes increased about 5.8%. Average time on the market went down from 39 to 36 days on average over the same time period. Overall, total homes sold were down 2% between Nov. 2024 and Nov. 2023 with a median price of $360,000, according to Midwest Real Estate Data.

Weaver said while the county experienced a lot of subdivision construction during the downturn, the total housing stock of newly constructed single-family homes has only increased by a small factor.

Weaver said a good way to measure the health of Kendall County’s housing market is by monitoring its attractiveness to buyers from more expensive areas like DuPage County. She said the area’s booming population is mirrored by the fact you can buy a much larger house for the same price as something smaller in DuPage County. She said Kendall’s open agricultural lands remain attractive for developers compared with suburbs where all their land is already developed.

Kendall’s unique development opportunities result in existing homes sitting a little longer on the market because of the availability of new construction.

First-time buyers

Weaver said she expects some of the first-time homebuyers who were discouraged during the rate hikes to become active once again now that the economy is settling in a better place.

“For first-time home buyers, the interest rate changes are going to be impactful for them because interest rates can affect their payments quite a bit,” Weaver said. “I had someone I was working for quite a while. Not only were home prices going up but we had to find a great place and make multiple offers. She decided to bite the bullet a year later with the higher interest rates.”

Weaver said she always reminds her clients that they can refinance later when rates come back down.

Gajewski said contributing to the difficulties first-time home buyers face is the lack of affordable housing. He said there are very few $200,000- to $350,000-priced starter homes. He said the challenges are compounded by the combination of consumers’ credit card debt being at an all time high and the fact that even though the increase in housing rates is slowing, the dream of homeownership still is out of reach for many buyers.

“This has been a struggle for a very long time, especially with inventory being tight,” Gajewski said. “It’s hard to get offers accepted. Investors are often coming in and buying houses with cash. There’s often many offers on the cheaper homes. Recently, I’ve seen some of my buyers get their offers accepted. That’s great to see because those buyers weren’t winning just a year ago.”

Gajewski said he expects the outlook for buyers to continue improving as long as housing inventory in the county continues increasing.

Weaver said she expects as the Fed continues to lower interest rates, the economy and the bond market will stay optimal for a more accessible housing market for both buyers and sellers. She said the inventory of available homes also will increase due to the aging Baby Boomer generation downsizing and moving out of their homes. She thinks all market signs point towards continued increase in new housing inventory that will help continue shifting purchasing power to potential homebuyers.