29-Sep-17 – Some of the most affordable home-loan interest rates in months could not lure Chicago house hunters off the beach in late summer, analysts say.

Illinois REALTORS reported that Chicago home sales declined 4.5 percent to 2,716 units in August from 2,844 units in August 2016. The median price of a home in Chicago rose 5.2 percent to $285,000 in August compared with $271,000 in August 2016.

Some 11,660 single-family homes and condominiums were sold in the nine-county Chicago area in August 2017, down 3.9 percent from 12,139 units in August 2016. The median price in August 2017 was $239,900 in the Chicago area, an increase of 4.3 percent from $230,000 in August 2016.

“The summer selling season was marked by high demand and lower-than-ideal inventories,” said Doug Carpenter (left), president of Illinois REALTORS. “The data show homes are selling at a lightning-fast pace, which speaks to how quickly consumers are prepared to move to get the home they want.”

The time it took to sell a home in August averaged only 48 days, down from 55 days in the same month a year ago. Available statewide housing inventory totaled 60,462 units for sale, an 11.4 percent decline from August 2016, when there were 68,240 units on the market.

Statewide home sales in August 2017 – including single-family homes and condominiums – totaled 16,196 units sold, down 3.4 percent from 16,771 units in August 2016.

The statewide median price in August was $200,456, up five percent from August 2016, when the median price was $191,000. The median is a typical market price where half the homes sold for more and half sold for less.

Sales and price information are generated from Multiple Listing Service closed sales reported by Illinois REALTORS and include data from Midwest Real Estate Data, LLC.

“With the improvement in the economy, people decided to enjoy their summer and the disposable income in their pockets,” said Matt Silver (right), president of Chicago Association of Realtors. “While this contributed to a slight slowdown in year-over-year sales, the market is on track and poised for a strong autumn. Days on market continue to decline and our year-to-date sales are higher than last year’s.”

Much of the dampening of housing demand is due to the state’s uncertain economy, says University of Illinois economist Geoffrey J.D. Hewings, in contrast to a generally positive outlook in the rest of the country. “At the same time, declines in inventory are still exerting upward pressure on housing prices and thus reducing affordability,” said Hewings (left).

Mortgage rates are coming back up

Despite the summer home sales doldrums, the recent period of generally declining interest rates may be over, experts said.

Freddie Mac’s Primary Mortgage Market Survey reported on September 7 that the average interest rate on benchmark 30-year fixed home loans inched upwards to 3.83 percent from 3.78 percent a week earlier. It was the first increase in 30-year fixed mortgage rates in seven weeks. A year ago, at this time, the benchmark 30-year rate averaged 3.48 percent.

15-year fixed rate loans averaged 3.13 percent, up from 3.08 percent a week earlier. A year ago, 15-year fixed mortgages averaged 2.76 percent.

“The 10-year Treasury yield continued its upward trend, rising seven basis points last week,” noted Freddie Mac chief economist Sean Becketti (right). “As we expected, the 30-year mortgage rate followed suit, increasing five basis points to 3.83 percent. This week’s uptick in the 30-year mortgage rate ends a nearly two-month streak of declines.”

Although the Federal Reserve Board has raised short-term interest rates four times since the financial crisis took rates to zero, its investment balance sheet has held steady at $4.5 billion.

To normalize monetary policy following nearly a decade of easing, analysts say the Fed now plans to start reducing the size of its holdings. To move toward normalization, the Fed plans to allow $6 billion of Treasury securities and $4 billion in mortgage-backed securities to roll off the balance sheet each month. This normalization is expected to place upward pressure on longer-term interest rates, including home mortgages, experts predict.