Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=186990
Story Retrieval Date: 6/19/2013 3:12:01 AM CST
Mortgage applications fell 4 percent in the week ended May 27, according to the weekly survey released by the Mortgage Bankers Association. Fewer people applied for loans nationwide despite a drop in interest rates and the lowest home prices since 2002.
“Unemployment is a factor,” said Amir Syed, a director at the Illinois Mortgage Bankers Association and president of American Street Mortgage Co. in Chicago. “People are not 100 percent confident in their work stability, which is always a driving force in applications.”
Genie Birch, immediate past president of the Chicago Association of Realtors, isn’t surprised the number of mortgage applications fell because she said rules and regulations make it just too difficult to obtain a loan in the current market.
“After someone completes an application, there’s always one more document, one more piece of information banks need,” Birch said. “Even people with an 820 credit score and a stable job don’t get loans.”
In Chicago, however, there are signs that people are getting back in the market to buy homes. Jeffrey Walker of Chicago Bancorp Inc. said he sees strong application volume from potential buyers.
“In the last 60 days there’s been a large resurgence,” said Walker, president of Chicago Bancorp Direct, the company’s direct-to-consumer lending unit. “Our volume [in mortgage closings] is up about 15 percent over the last month.”
Walker attributes the boost to favorable interest rates and the company’s expanded programs for first-time homebuyers.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.58 percent from 4.69 percent, according to the mortgage bankers’ survey. The 30-year rate is the lowest since last November. Still, Syed of the Illinois mortgage bankers group believes interest rates may need to be even lower to boost the housing market.
“People took advantage of low rates in 2010. The rates recently dipped, but it’s not substantial enough for people to get back in the market,” Syed said. “We need to see a more significant drop in interest rates and some positive news about home values.”
Home prices are at their lowest levels since 2002, according to the S&P/Case-Shiller Home Price Index, which tracks changes in the value of U.S. residential real estate. In the Chicago metropolitan area, the average home price during March was $114,960, the lowest since July 2001 when the average home price was $144,220, seasonally adjusted.
Loretta Alonzo, president-elect of the Illinois Association of Realtors, said more people are buying lower-priced homes and distressed properties. The portion of Chicagoans buying homes valued under $100,000 was 26.8 percent in April, significantly higher compared to 18.6 percent last year, according to the National Association of Realtors.
“Here in Illinois, the number of transactions from last year to this year is down. Month over month, though, I’ve seen an increase in transactions within the company,” said Alonzo, who owns a Century 21 franchise in LaGrange Park. “Things are progressing slowly, but it’s all relative to the economy.”