Low interest rates and inventory fuel home sales
Existing-home sales in the Chicago area turn in their best October since 2006
November 19, 2012|By Mary Ellen Podmolik, Chicago Tribune reporter
More homes were sold in the Chicago area last month than in any October since 2006, fueled by low interest rates and buyer sentiment that prices may finally be stabilizing and, in some areas, moving off the bottom.
Sales of existing single-family homes and condominiums in the nine-county Chicago area totaled 8,326 properties in October, according to figures released Monday by the Illinois Association of Realtors. While below some of the monthly sales totals recorded earlier in the year, the volume was an increase of 11.3 percent over September and 44.1 percent higher than the 5,776 homes sold in October 2011.
Within the city of Chicago, 2,009 homes were sold in October, an improvement of 8.8 percent over September and up 53.1 percent from October 2011.
The strong sales continued to remove inventory from the market, a requirement before prices can rise. The number of Chicago-area homes listed for sale is at its lowest in five years, according to Midwest Real Estate Data LLC, the local multiple listing provider.
“Buyer confidence is up,” said Robert John Anderson, a Baird & Warner real estate agent. “I was running around Saturday and Sunday and bumping into the same brokers and they all looked tired and busy. It’s exciting.”
The shortage of inventory, while lessening the choices for potential homebuyers, assists the market’s recovery, and not only because it will drive up prices of available homes. When those homes sell, the benefit also will extend to nearby underwater homeowners, making them a little less underwater, noted Gene Amromin, senior financial economist at the Federal Reserve Bank of Chicago.
Meanwhile, the number of pending home sales in the Chicago area, meaning properties that are under contract but have not closed, totaled 10,364 in October, the highest it has ever been except for April 2010, when home sales benefited from federal homebuyer tax credit programs, according to Midwest Real Estate Data.
“If something is priced well and it shows well, it’s going to sell,” said Missy Jerfita, an agent at Koenig & Strey Real Living who has two offers on a home she listed just two weeks ago. “I tell people leave it on the market. There isn’t a lot of competition. If you wait until the spring, there’ll be a lot of competition.”
For the Chicago area as a whole, the median price of a home was $153,000, the lowest it has been since March but still ahead 2.1 percent from October 2011’s $149,900.
Within the city, the median price rose to $175,000, up 8 percent from a year earlier, but again the lowest monthly price recorded since March. In the condo market, the median price fell 8.7 percent from September, to $210,000. However, that sum was a 13.5 percent increase from October 2011.
The median is the point at which half the homes are sold for more and half for less.
Real estate investor Mike Kaplun calls the condo market “a little iffy,” but he’s still scouting for potential properties that he can buy low now and rent as apart ments, with an eye toward selling them as condos when the market stabilizes.
Why not wait?
“Then you miss out completely,” he said. “Right now you can get properties in good, affluent areas.”
Geoffrey J.D. Hewings, a University of Illinois economist, attributed the improved sales performance to a slowly improving economy, stronger consumer confidence and continued low mortgage rates.
The monthly average commitment rate for the benchmark 30-year, fixed-rate mortgage in the Chicago area was 3.36 percent in October, compared with 3.49 percent in September and 4.07 percent in October 2011, according to the Federal Home Loan Mortgage Corp.
However, financing will remain a hurdle for some would-be buyers. The average FICO score on closed first mortgages was a very high 750 in October, the same as it was in August and September, according to Ellie Mae, a provider of mortgage origination services.
On a national level, existing-home sales rose 2.1 percent to a seasonally adjusted annual rate of 4.79 million, the National Association of Realtors reported Monday. October’s median home price of $178,600 was an increase of 11.1 percent from a year earlier.
“Our housing market has momentum it hasn’t seen in years,” U.S. Housing and Urban Development Secretary Shaun Donovan said in a conference call with reporters Monday.