26-Aug-16 – Home loan interest rates are quietly slipping back toward the record low hit in 2012, less than four years ago, experts say.

“Average 30-year fixed-rate mortgage rates fell two basis points to 3.43 percent on August 18,” noted Sean Becketti (right), chief economist for Freddie Mac. “Inflation is not adding any upward pressure on interest rates.”

A local Bankrate survey of banks and mortgage companies reported on August 19 that 30-year fixed-rate mortgage rates ranged from 3.376 percent to 3.526 percent.

Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year mortgage rates have ranged between 3.41 percent and 3.48 percent nationwide for eight consecutive weeks. A year ago at this time, 30-year fixed loans averaged 3.93 percent.

15-year fixed mortgages averaged 2.74 percent on August 18, down from 2.76 percent a week earlier. A year ago at this time, the 15-year fixed loans averaged 3.15 percent.

Rates not just low, they are historic

Mortgage rates hit a historical rock bottom on November 21, 2012, when the benchmark 30-year fixed mortgage average hit 3.31 percent, while 15-year fixed loans edged downward to 2.63 percent, Freddie Mac reported.

17 years ago, in August 1999, when many of today’s Millennial borrowers were in grammar school, lenders were quoting 8.15 percent on a 30-year fixed mortgage.

However, to really appreciate today’s historically low interest rates, housing experts say home buyers need only to look at what banks and mortgage lenders where charging more than three decades ago in the early 1980s. According to Freddie Mac, benchmark 30-year mortgage rates peaked at a whopping 18.45 percent in October 1981 during the Great Recession of the 1980s. Rates fell below 10 percent in April 1986, and then bounced in the 9 to 10 percent range during the balance of the 1980s.

Archives of the now-defunct Federal Housing Finance Board show long-term mortgage rates were relatively affordable five decades ago at 5.81 to 5.94 percent between 1963 and 1965.

In 1966 and 1967, borrowers paid an average of 6.3 to 6.4 percent. In the 1960s, rates last dipped below 6.5 percent in January 1968, when the national average hit 6.41 percent. Between 1971 and 1977, the now-defunct Illinois Usury Law held rates in the 7.6 to 9 percent range.

Low rates push home prices higher

Home-buyer demand and low mortgage rates drove sales and prices higher, marking a strong first half of the year for the Illinois housing market, reported Illinois Realtors, a trade association with more than 44,000 members.

“A combination of low mortgage rates and a limited number of properties on the market is pushing median prices higher, a continuation of a trend we have seen for much of the warm-weather selling season,” said Dan Wagner (right), president of Chicago Association of Realtors.

“Chicago home buyers have to work harder to find properties which meet their criteria and budget,” Wagner noted.

A total of 18,593 single-family homes and condominiums were sold statewide in June, up 1.4 percent from June 2015. Year-to-date, Illinois home sales totaled 78,547 homes sold, an increase of 5.5 percent compared with the first six months of 2015.

Some 3,210 homes and condos were sold in Chicago in June, a 0.2 percent gain over June 2015. The median price of a home sold in Chicago in June was $300,000, up 4.1 percent from June 2015.

A total of 13,953 homes and condos were sold in Chicago in the first half of 2016, a 4.1 percent increase over the first half of last year.

“Sellers continue to reap the rewards of a summer market where buyers are choosing from a greatly diminished pool of properties,” said Mike Drews (left), president of Illinois Realtors. “The market dynamics we have experienced throughout the spring and early summer persist as the number of homes for sale struggle to keep pace with buyer demand.”

Jack Kreider, executive vice president and regional director of RE/MAX Northern Illinois, says the environment for sellers is “excellent,” with prices trending upward and market times shortening. “We hope the second half of this year will see a noticeable growth in inventory, especially of moderately priced homes, which is the segment of the market in which the supply is the tightest right now,” said Kreider (right).