Monday, July 13, 2009

IS THERE LIGHT AT END OF THE TUNNEL FOR CHICAGO’S HOUSING MARKET?

Is there light at the end of the tunnel, or is that just another train headed toward the nation’s housing market?

Residential real estate and the home-loan business has taken such a hit over the past year that some home buyers and sellers, and several Chicago-areas Realtors and developers are worried that it will take years for the market to bounce back from the current recession, experts say.

With home foreclosures on nearly every block, and unemployment skyrocketing, lenders are eyeing solid mortgage borrowers as if they are future bankruptcy candidates. However, there are several of the positive blips on housing’s radar and now is the time to look at some of the changes that have evolved from the recession and the accompanying subprime loan debacle:

• Mortgage rates are the lowest in more than 40 years. Conventional 30-year fixed-rate loans dipped to 4.78-percent in April, reported Freddie Mac’s Primary Mortgage Market Survey. In early July, lenders were quoting an average of 5.32 percent on 30-year fixed-rate mortgages, still close to the historical low.

• On the heels of the Obama Stimulus plan, several Chicago developers have unveiled their own housing stimulus programs to spark sales and pull the market out of its tailspin. One of the most aggressive is American Invsco’s program offering 2.5 percent simple-interest mortgages for the next 50 buyers at 200 N. Dearborn, a 47-story condominium conversion in Chicago’s Loop.

• Nationally, it appears home-price erosion is stabilizing. Home prices in April showed the smallest monthly decline since June of 2008, reported the Standard & Poors/Case-Shiller home price index released in early July.

• In the city of Chicago, May total home sales (single-family and condominiums) were up 11.5 percent to 1,537 sales compared to April, 2009 sales of 1,378. Median prices in the city increased 2.3 percent to $225,000 in May compared with $220,000 in April 2009.

• First-time buyers have flooded the market to take advantage of the low interest rates, moderated home prices and the $8,000 Obama Stimulus tax credit available until December 1.

• Congress overwhelmingly passed the Credit Cardholders’ Bill of Rights Act in late May and President Obama signed it into law. The bill will curb some of the most arbitrary, abusive and unfair credit-card lending practices that trap consumers in a vicious cycle of debt.

• Worried about potential job loss and wringing their hands about falling home prices and stock market declines, Americans are saving more money. Savings rates have inched up to more than 4 percent of after-tax income in early 2009 from practically zero.

What will stimulate the housing market for the next 10 years and beyond?

According to a new report from Harvard University’s Joint Center for Housing Studies, there is reason for optimism in the housing sector because of the coming Echo Boom, as the children of the Baby Boomers enter their house-hold formation years, age 25 to 44 years.

There currently are more than 45 million Echo Boomers in America. That’s 5 million more members than the Baby Boomers had in the 1970s.