Monday, May 04, 2009

CHICAGO-AREA HOUSING MARKET MAY BE PULLING OUT OF ITS DIVE AT LAST

Bargain hunters and first-time buyers seeking to take advantage of President Obama’s tax credit deal are credited with starting to pull the Chicago-area housing market out of its deep dive, analysts say.

Apparently existing home prices are stabilizing and even beginning to appreciate again after months of dismal results, reported the Illinois Association of Realtors’(IAR).

In the wacky world of home loans, interest rates continued to fall in late April. Benchmark 30-year fixed loans slid to an average of 4.80 percent, a lower rate that lenders were charging on 1-year Treasury-indexed adjustable rate mortgages.

“For the past two weeks rates on 1-year ARMs exceeded those for 30-year fixed-rate mortgages,” noted Frank Nothaft, chief economist for Freddie Mac.

“This is the first time this has happened since Freddie Mac began collecting data for ARMs in January of 1984.”

The median existing home sale prices in March in the Chicago Metropolitan area rose 5.7 percent to $194,000 from $183,500 in February of 2009. Some 4,260 homes were sold in the metro area in March, up a whopping 38.3 percent from 3,081 homes in February.

In Chicago, total March home sales (single-family and condominiums) were up 40.6 percent to 1,181 sales compared with February sales of 840 units. Median prices also rose 0.8 of 1 percent to $220,000 in March compared with $218,125 in February.

Nationally, housing prices rose for the second consecutive month in February, the first back-to-back increase since April of 2007, noted Nothaft.

“For the first time in over a year, there are several positive signals in the housing market as inventories declined and sales recorded modest increases,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois.

“Home sales activity is definitely on the rise at the low end of the market where foreclosures are attracting a lot of bargain hunters,” said Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network.

Among 77 Chicago neighborhoods surveyed, 41 posted an increase in the number of detached homes sold during the first quarter of the year when compared with the same period a year ago, RE/MAX reported.

“We are cautiously optimistic about second quarter sales and median pricing in the Chicago market,” said David Hanna, president of the Chicago Association of Realtors. “While pricing has continued to make this a buyer’s market, we will need several months of increasing sales, declining inventory and continuous absorption of distressed properties if this is to be called a recovery.”

“Interest rates remain near record lows while recent reports on housing affordability, the pending home sales index and home builder confidence are on the rise,” said Pat Callan, president of the IAR. “Stabilized prices will lead the way to a housing market recovery.”

However, Callan believes more must be done to help qualified buyers finance their homes. “Federal Housing Administration-insured loans now account for more than 30 percent of the mortgage financing market,” Callan said. “Potential buyers would benefit if the FHA made it easier to purchase a condominium and if first-time buyers were allowed to use the new $8,000 tax credit upfront as down payment assistance.”