Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=176772
Story Retrieval Date: 5/24/2013 1:59:45 AM CST
National Association of Realtors/Megan Jonas/MEDILL
Existing home sales remained 2.9 percent below December 2009’s 5.44 million homes sold.
Home sales in Illinois were also up, 11.1 percent over November’s numbers, with sales in Chicago up 26.2 percent, according to the Illinois Association of Realtors. Statewide sales were down 7.3 percent from December 2009. The Illinois data includes both existing home sales and sales of new homes listed through realtors, unlike the national figures which do not include any new home sales.
Chicago Bancorp Inc. President John Calk says that his mortgage bankers are seeing the evidence of sales growth on the streets. The week after Christmas is traditionally a dead time for the mortgage business. “I was pleasantly surprised that we were really busy,” he said. “That has continued into the first two weeks of January.”
He attributes the rise in interest to media reports of low interest rates and changes in the mortgage market. “People are thinking, probably correctly, that interest rates have bottomed out. There’s also an impression out there that you’re going to have to start putting 30 percent down in order to get a mortgage,” said Calk. "That is simply not true."
According to the National Associaton of Realtors, first-time homebuyers accounted for 33 percent of sales in December 2010, down 10 percentage points from the previous year, while investment buyers accounted for 20 percent. Association spokesman Walter Molony explained that this could account for the lower numbers
of first-time buyers, especially buyers of below-market housing, like foreclosures and bank-owned properties.
“First-time buyers need to be patient in the current environment,” he said. The investment buyer, who pays in cash, will usually win in a bidding process. But the high level of investment buyers “helps absorb excess inventory,” he said, which is good for the market overall.
The best thing that could happen for first-time buyer is a relaxation of the credit markets, said Malony. “If credit was at a normal level, home sales would rise around 15 percent,” he said.
Craig Furfine, a professor of real estate finance at Northwestern’s Kellogg School of Management, agrees that the level of credit available can restrain first-time buyers. “Underwriting standards are a little bit tougher now than they were in the boom years. The only people eligible to buy are people who have considerable equity in their current home plus good credit,” he said.
Looking forward, the National Association of Realtors expects the economy to continue its recovery. “Historically low mortgage interest rates, stable home prices, and pent-up demand are drawing home buyers into the market,” said association president Ron Phipps in a release. The current 30-year fixed mortgage rate is 4.78 percent, down from a yearly high of 5.2 percent last year, according to Bankrate.
The market in Illinois will be more complicated this year, in part because of the recent income tax increase passed by the state legislature. “If workers and businesses are convinced that these actions will go some way to solving part of the state’s fiscal crises, then the outcome may be positive,” said Illinois Association of Realtors Geoffrey Hewings in a release.