Monday, March 31, 2008

AFFORDABLE PRICES AND LOW INTEREST RATES ON HORIZON FOR SPRING

If you are shopping for a home or condo this spring, now may be one of the best times in years to step up across the threshold of the American Dream and lock in an affordable fixed-rate mortgage, experts say.

In late March, interest rates on benchmark 30-year fixed home loans averaged 5.85 percent, down from 5.87 percent a week earlier, according to Freddie Mac. Last year at this time, the 30-year fixed loans averaged 6.16 percent.

With the recent declines, a 5.85-percent home-loan rate is only 0.64 of 1 percentage point above the 40-year historical rock-bottom of the market—5.21 percent in June of 2003, analysts say.

According to a recent report from the National Association of Realtors, chief economist Lawrence Yun said: “Subprime loans and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales.”

Despite lower interest rates sparked by recent Federal Reserve Board rate cuts, critics say some banks have not been passing all of their interest-rate savings to borrowers.

And, some lenders allegedly are restricting loans only to the most creditworthy, documented applicants, and they have cut the total amount they are willing to lend.

On the positive side, the National Association of Realtors reported that its home affordability index was at the highest level in nearly five years, as existing home sales picked up in February for the first time in months.

“Realtors are seeing some signs of the spring market with increased activity and interest from potential buyers,” said Realtor Kay Wirth, president of the Illinois Association of Realtors.

“If people have good credit, their finances in order, and are looking for a home for the long haul, they should get in the market with confidence,” Wirth said.

“Conditions in many local markets are good and present opportunities for first-time and move-up buyers.”

In Chicago, condominium sales fared comparatively well in February with 1,047 units sold, down just 9.7 percent from the same month last year when 1,160 units were sold. The condo median price in Chicago rose a whopping 10.5 percent to $314,900 from February 2007.

“In Chicago condominium transactions continue to lead our sales activity,” said David Hanna, president-elect of the Chicago Association of Realtors.

“The 10.5 percent increase in the median price for February shows buyers are finding great value in the city,” Hanna said. “We see this increase as further proof of the resilience of the Chicago marketplace, and expect the smart buyer here to prosper from taking advantage of historical low interest rates and abundant inventory to find their next home.”

Resale home prices in the Chicago area are stable. The median home sale price was $240,230 in February, up 0.1 percent from $240,000 in February of 2007. However, only 4,310 total home sales were logged in February, down 26.9 percent from 5,894 home sales in the same month of 2007. The Chicago area survey includes the counties of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will.

“Illinois is bucking the national trend in the first quarter of the year,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois.