Monday, August 03, 2009

LOW MORTGAGE RATES AND UPBEAT ECONOMIC REPORTS BOUY HOUSING MARKET

Housing experts have been lecturing us for months that the nation currently is positioned for the best home-buying market in decades, and it appears the message is beginning to reach recession-battered consumers.

Upbeat economic reports and the Federal Reserve Board’s forecast that monetary policy will remain focused economic recovery translates into a clear message—interest rates likely will remain very low for the foreseeable future. An increase in building permits and housing starts along with three consecutive months of gains in the Leading Economic Indicator Index indicate that housing and the economy may be finally stabilizing, reports Hanley Wood Market Intelligence.

Housing starts rose a better than expected 3.6 percent in June to a seasonally-adjusted annual rate of 582,000 units. This was the busiest construction activity has been since November of 2008. Most of the gains were driven by the single-family segment which surged 14.4 percent from the previous month to a seasonally-adjusted annual rate of 470,000 units.

The rise in home-building activity was likely sparked by President Obama’s $8,000 tax credit for first-time buyers, which expires November 30th, experts say.

In late-July, benchmark 30-year fixed mortgage rates averaged 5.2 percent, according to Freddie Mac’s Primary Mortgage Market Survey. A year ago, 30-year fixed mortgages averaged 6.63 percent.

In Illinois, more sellers entered the housing market in June and buyers took advantage of low interest rates and affordable prices with double-digit sales increases marking the fifth consecutive month-to-month increase in home sales statewide and in the Chicago area, according to a report by the Illinois Association of Realtors (IAR).

It was the fourth monthly increase in median home sale price for the state as a whole, the IAR report said.

In the Chicago area, home sales were up 25.8 percent to 7,140 homes sold in June 2009 compared with 5,674 home sales in May 2009. However, sales were down 8.5 percent from 7,806 home sales in June of 2008.

The median home sale price for the Chicago area was $210,000 in June 2009, up 5 percent from $200,000 in May of 2009. However, the median price was down 18 percent from $256,000 in June of 2008.

In the city of Chicago, June total home sales (single-family and condominiums) were up 27.2 percent to 1,982 sales compared with May 2009 sales of 1,558. However, sales were still down 13.1 percent from 2,282 homes sold in June of 2008.

Median price increased 7.7 percent in Chicago to $242,275 in June compared to $225,000 in May 2009. However, media prices were still down 21.8 percent from $309,945 a year ago in June of 2008.

“The pendulum has swung from condominiums to single-family home sales which have rebounded to 2008 levels,” noted Pat Callan, president of the IAR. Chicago area single-family home sales in June were up 0.7 of 1 percent from a year ago and up 21.3 percent in the city of Chicago.

“Buyers are beginning to realize that the combination of favorable home prices, historic low mortgage interest rates and the first-time home-buyer tax credit incentive may not be around next year,” Callan said.

Illinois Realtors are continuing to urge first-time buyers to shop for homes and place one under contract by the end of September to ensure a closing before the December 1st tax-credit deadline, Callan noted.

“More sellers are returning to the market as evidenced by the increase in listings. While sales have exhibited a rebound, there has been no rebound in prices—a phenomenon observed nationally and not just confined to Illinois and Chicago,” observed Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois.