21-Apr-17 – Over the past five weeks, home loan rates have slipped a third of one percentage point from a high of 4.30 percent in mid-March. On April 20, the benchmark 30-year mortgage average hit 3.97 percent, down from 4.08 percent a week earlier, reported Freddie Mac’s Primary Mortgage Market Survey.

“The 30-year mortgage rate fell 11 basis points this week to 3.97 percent, dropping below the psychologically important four-percent level for the first time since mid-November,” said Sean Becketti (right), Freddie Mac’s chief economist.

“Weak economic data and growing international tensions are driving investors out of riskier sectors and into Treasury securities,” Becketti said. “This shift in investment sentiment has propelled rates lower.”

The current average 30-year mortgage rate is the lowest since November 17, 2016, when the average was 3.94 percent. A year ago at this time, 30-year fixed-rate loans averaged 3.59 percent.

Meanwhile, 15-year fixed loans averaged 3.23 percent on April 20, down from 3.34 percent a week ago. A year ago at this time, the 15-year fixed loan average was 2.85 percent.

If rates hold at these levels, experts say there likely will be a burst of home sales and refinances this spring as fence-sitters try to beat further expected rate increases by the Federal Reserve Board.

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

A Bankrate.com survey showed Chicago-area lenders were charging a range of 3.756 to 3.887 percent on benchmark 30-year fixed loans on April 21.

In August 1999 – when many of today’s young borrowers were shooting marbles in their grammar school playground – lenders were quoting 8.15 percent on a 30-year fixed mortgage.

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 9-10 percent range during the balance of the 1980s.

Lower rates mean more home sales

Lower than expected home loan rates in March sparked a surge in the sale of existing homes, according to Illinois Realtors.

A total of 2,478 single-family homes and condominiums were sold in Chicago in March, a 15.3 percent sales increase over 2,149 units marketed in March 2016. The median price of a home in the city in March was $295,000, up a hefty 9.7 percent from $269,000 in March 2016. Single-family home and condominium sales in March in the nine-county Chicago area totaled 9,661 units, up 13.1 percent from 8,540 units sold in March 2016. The median price was $231,000 in March in the Chicago area, a whopping increase of 10 percent from $210,000 in March 2016.

“Consumers this spring have no choice but to be nimble as they find fewer homes on the market and increased competition for those properties,” said Doug Carpenter (right), president of Illinois Realtors. “Many Realtors are reporting an increase in multiple-offer situations, which means buyers can’t dawdle when they find what they want. They may want to make sure any offer they bring is an aggressive one.”

Statewide, it took an average of 67 days to sell a home in March, down from 77 days a year ago. Available Illinois housing inventory totaled 52,826 homes for sale, a 15.5 percent decline from March 2016 when there were 62,492 homes on the market.

“In inflation adjusted terms, both the Illinois and Chicago housing markets have recovered to their pre-recession levels,” noted Geoffrey J.D. Hewings (left), an economist at University of Illinois.

“Home sales were stronger than usual throughout historically slower months, and now, with the spring market in full swing, the numbers are proving to be more robust than anticipated,” said Matt Silver (right), president of Chicago Association of Realtors.

“With an improving economy, demand continues to grow,” Silver said. “While inventory shortages will possibly play a larger role, for now, we are seeing strong and favorable selling conditions. Those who are looking to buy a home should be prepared to move quickly and decisively.”