5-Mar-18 – Mortgage interest rates and existing home resale prices continue to increase in Chicago in early 2018, making the dream of homeownership more elusive for young, first-time buyers.

The median price of homes and condominiums in Chicago rose 3.9 percent to $265,000 in January 2018, compared with $255,000 in January 2017, reported a survey by Illinois Realtors.

A shortage of inventory in Chicago caused a year-over-year home and condo sales decline to 1,114 units in January, compared with 1,574 units in January 2017.

Meanwhile, in early March, lenders were charging an average of 4.43 percent for benchmark 30-year fixed-rate mortgages, reported Freddie Mac’s Primary Mortgage Market Survey. It is the eighth consecutive week that the 30-year fixed-loan average rose. A week earlier the average was 4.4 percent. A year ago at this time it was 4.1 percent.

“The 30-year rate has been on a tear in 2018, climbing 48 basis points since the start of the year,” noted Len Kiefer (left), Freddie Mac’s deputy chief economist. “Historically when mortgage rates surge, housing swoons. But we think strength in the economy and pent-up housing demand should allow U.S. housing markets to post modest growth this year even with higher mortgage rates.”

Analysts are waiting for housing markets nationwide to heat up this spring, but early indications are that demand for homes and condos remains robust regardless of interest rate increases. A weekly Mortgage Banking Association survey reported that home purchase mortgage originations were up three percent from a year ago.

Fewer used homes for sale means buyers must move quickly

The cloud of used-home inventory shortages and sharply higher prices continues to hang over the Chicago-area market, realty experts say.

According to the Illinois Realtors survey, single-family home and condo sales in the nine-county Chicago area totaled 5,777 units in January 2018, down eight percent from January 2017 when 6,277 units changed hands.

The median price for a used home or condo was $224,000 in the Chicago area in January, a hefty increase of 7.2 percent from $209,000 in January 2017. “January home buyers who were successful in finding a home had to move quickly to make an offer and were definitely willing to pay more,” said Matt Difanis (right), president of Illinois Realtors.

Sellers, meanwhile, need to price strategically. Rebecca Thomson, president of Chicago Association of Realtors predicts homes will soon be selling faster.

“Based on the present trends in the housing market, we anticipate a competitive spring for buyers,” predicted Thomson (left). “If [a] home is not moving quickly, a proactive price adjustment may help...protect [the] overall investment without risking the stigma of a longer-than-average market time. With how quickly inventory is moving, an overpriced listing could get left behind.”

Statewide, 8,156 single-family homes and condos were sold in January, down 6.1 percent from 8,683 units in January 2017. The statewide median price in January was $185,000, up 8.2 percent from January 2017, when the median price was $171,000. The median is a typical market price where half the homes sold for more and half sold for less.

January sales and price information were generated by Midwest Real Estate Data LLC and closed sales reported by 27 participating Illinois Realtor multiple listing boards and associations.

“January sales in 2016 and 2017 were buoyed by relatively mild weather in the Chicago area,” noted Jeff LaGrange (right), Region Vice President at RE/MAX. “This year, we had a much more normal January temperature-wise. Our experience is that especially in the first quarter of the year, home sales are strongly influenced by temperature trends, so fewer sales in January often mean more sales in February or March.”

LaGrange also pointed to the continuing decline in the inventory of listings for sale as a factor in restraining total sales, with total listings falling 8.6 percent compared with the year-earlier level.

“The impact of low inventory was apparent throughout the second half of 2017, and we expect it to have a similar effect going forward unless inventory expands,” LaGrange said. “The number of homes for sale in the Chicago area was 20 percent lower at the end of January this year than at the same point in 2016.”

Statewide, the time it took to sell a home in January averaged 65 days, down from 69 days a year ago. Available housing inventory totaled 45,726 homes for sale, a 12 percent decline from January 2017, when there were 51,978 homes on the market, the Illinois Realtors survey reported.

“While prices and month-over-month sales are forecast to increase over the next three months, there is some concern about the continuing inventory challenge,” said economist Geoffrey J.D. Hewings (left) of the University of Illinois. “However, the pending-sales index in January found more homes under contract than a year ago.”