Monday, January 19, 2009

FORECLOSURES EASE AS LOAN RATES FALL AND HOME PRICES STABILIZE

The housing outlook for 2009 in Chicago may not be as bleak as some of the nation’s economists are predicting as foreclosures begin to ease, mortgage rates fall and home prices begin to stabilize, experts say.

The pace of foreclosures nationwide has finally slowed and we should see a significant decline in 2009 as buyers return to the marketplace, pushing home prices up and fueling a real estate recovery, predicts a 2009 Outlook from Foreclosures.com.

The latest U.S. Foreclosure Index by ForeclosureS.com shows a decline to 84,534 in the number of properties repossessed by lenders following foreclosure in November. The new total is nearly 21 percent below September’s 106,415 filings.

“Recovery is underway and affordability is back in the housing market,” said real estate expert Alexis McGee, president of ForeclosureS.com. “In 2009, housing not only will recover, but we’ll see buyers leap into this market in droves, depleting our housing oversupply, and actually put higher price pressures on the market.”

With some lenders offering fixed-rate mortgages 4.5 percent, home prices lower than they were before the housing bubble, tax credits available for home buyers, and the government eager to stimulate our economy, McGee said: “For the first time in years I can see prices rising again in 2009.”

Supporting these observations, median home and condominium resale prices in nearly a dozen Chicago neighborhoods inched upwards in for the first time in months in the third quarter of 2008, according to public-record market data compiled by Record Information Services.

While the 2008 resale price gains charted at the end of the third quarter may be small, and mostly focused along the city’s lakefront, it may be an indication that the worst may be over for battered home values, real estate experts say.

Values appear to be on the rise in the South Loop and Near South Side, just south of where President Obama held his Grant Park victory rally after the November election. Median values along the lakefront between Roosevelt and Cermak roads rose to $393,250 on 398 transactions in the third quarter of 2008, up from $313,000 on 521 deals during the same period in 2007.

Home and condo resale values also rose in two neighborhoods that are targeted as future development sites for the 2016 Olympic Summer Games. Median resale prices rose to $286,500 on 10 transactions compared with $272,500 on 12 deals in Kenwood/Oakland, between 35th and 47th streets along the South Side lakefront.

The area is south of the proposed 37-acre Olympic Village at Michael Reese Hospital.

In Washington Park, the site of a proposed Olympic Stadium, median home values rose to $249,000 on 41 transactions in the third quarter from $220,000 on 61 deals in the year-ago quarter.

On the Near North Side, median resale prices rose to $395,000 on 794 transactions from $345,000 on 1,023 deals in the quarter a year earlier.

In Lincoln Park, median home values rose to $475,000 on 457 transactions, compared with $455,000 on 631 deals in the third quarter of 2007. Values also rose to $352,500 on 174 transactions from $293,000 on 245 deals in the Lincoln Square neighborhood, and median prices edged higher in Edgewater to $258,500 on 226 transactions from 252,000 on 315 deals in the third quarter of 2007.

Meanwhile, home-loan rates continue to fall in early 2009. Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed-rate mortgages averaged 5.01 percent in early January, down from 5.10 percent a week earlier.

Last year at this time, 30-year loans averaged 5.87 percent. The 30-year fixed mortgage average has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

The recent rate decline came after Federal Reserve announced plans to purchase $500 billion in mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae, noted Frank Nothaft, Freddie Mac vice president and chief economist.

Since the end of October 2008, rates have declined by almost 1.5 percentage points, saving borrowers about $184 a month on a $200,000 fixed-rate loan. Some lenders are offering 30-year loans as low as 4.5 percent.