Chicago Housing Market Glance - February - March 2009
Tax Credits, 5% Down Condo Loans, Low Interest Rates, and Short Sales… Here’s the Skinny on What’s Happening in Chicago Real Estate.
Home inventory levels in Chicago are still high (over 71,000 according to one report recently mentioned on Forbes.com). But as Spring temperatures start to rise, real estate agents have seen signs of the market warming, too. Buyers are becoming more active, many showing serious interest in purchasing instead of just looking casually. Falling prices, low loan rates, and new federal tax incentives have caught the attention of home buyers. However, the down economy, unstable job market, and strict mortgage qualifications are still making it hard for many Americans to achieve the American Dream of owning a home.
U.S. existing home sales went up 5.1% in February from January, according to the National Association of Realtors. There was also a slight climb in construction starts for the same month. Despite the up tick in sales, there’s still a nine to eleven month housing supply in most areas across the country. Five to seven months is considered a balanced market. The large number of houses and condos for sale means buyers have an excellent selection to choose from right now. Downtown Chicago offers everything from brand new developments to vintage units. Condo shoppers can find anything they want, although average prices for condos in the city haven’t dropped as much as for detached properties in the suburbs.
Short sales, REOs and foreclosures are adding to the surplus of inventory right now. Distressed properties often have reduced prices but can require long waiting periods for offer approval from the bank. So the trade-off for a good deal is usually months of not knowing when you’re going to close or whether the transaction will go through at all.
Interest rates have fallen to record lows, presenting excellent opportunities for buyers to lock in mortgages at affordable rates. According to Freddie Mac’s weekly primary mortgage market survey, averages for 30-year fixed-rates fell to 4.85% in late March (dropping even more to 4.78% in early April). Industry analysts say the falling rates were triggered by the Fed’s promise to buy up $300 billion in Treasuries and mortgage bonds. It spurred a flood of refi applications from homeowners looking to lower their monthly mortgage payments.
New loan apps have also increased, however stringent lending restrictions make it tougher for borrowers get approval. The good news for Chicago condo buyers is some lenders are offering 5% down conventional loans for condos. This can help those who have saved up some cash, but don’t have enough to put 20% down. New construction developments and conversion projects need to pre-sell at least 70% of the units to qualify and rentals cannot exceed 30%. Individual applicants must have a credit score of 720 or higher and maximum debt-to-income ratio of 41%.
The new first-time home buyer tax credit has inspired many buyers to consider purchasing in 2009. The credit is available through November 30 and is offered to first-time buyers or those who have not owned a primary residence in the three years prior to purchase. Buyers who qualify can get a tax credit for 10% of their home’s purchase price, up to $8,000. Income limits apply and the home cannot be resold within three years.
There is a lot of opportunity for home buyers right now who have money for a down payment, great credit scores, secure jobs and plans to stay put for awhile.
