Sharp Drop in Mortgage Rates Encouraging Sign for Housing Market

December 23, 2008
FOR IMMEDIATE RELEASE

Contact:
Mary Schaefer/Ann Londrigan
217/529-2600

SPRINGFIELD, Ill. — With the recent Federal Reserve Board action resulting in lower mortgage interest rates in the 4 percent range, the Illinois Association of REALTORS® is optimistic this will be an encouraging incentive for homebuyers in the new year, states Illinois Association of REALTORS® President Pat Callan. According to the Illinois Association of REALTORS® (IAR) latest report, total home sales (which include single-family homes and condominiums) were down 33.9 percent in November 2008 to 6,076 sales compared to November 2007 sales of 9,191. Year-to-date January through November 2008 sales were down 24.1 percent to 100,435 homes sold compared to 132,388 homes sold in the same 11-month period in 2007.

Year-to-date January through November 2008, the median price was down 7.9 percent to $186,000 compared to $202,000 in 2007. The median is a typical market price where half the homes sold for more, half sold for less. For the month of November, the Illinois median price was $165,000, down 13.2 percent from $190,000 in 2007.

“The housing market was stalled in November due to a deepening recession which hit our economy with blunt force this fall. No one should be surprised at these figures given what happened with the financial markets in the past few months,” said Callan, broker-owner of Realty Executives Premiere in Wheaton. “Looking ahead, we are encouraged by the Federal Reserve Board’s action last week to get our economy moving again with the announcement to lower the federal funds rate. The REALTOR® Association has been calling for mortgage rate reductions and recent action to drive down interest rates should be attractive to home buyers who have been waiting on the sidelines to enter the market. With interest rates the best they have been in 50 years and peak inventory levels, there are unique buying opportunities.”

The REALTOR® Association also supports making the $7,500 tax credit for first-time home buyers—part of the Housing and Economic Recovery Act that took effect last July – available to all home buyers and eliminate the repayment requirements associated with the tax credit.

The Association also supports making the 2008 FHA, Fannie Mae and Freddie Mac loan limits permanent to expand mortgage affordability at a time when home sales and refinancing activity are required to stabilize the housing market.

“Now is not the time to limit mortgage availability if we want to see improvement in the housing market,” Callan stated in response to the fact that new rules for 2009 will reduce FHA loan limits. “FHA-backed loans are quickly becoming the mortgage option of choice for many homebuyers, particularly first-time homebuyers. We would like to see the limits stay at the current 125 percent of the HUD published median price and not reduced down to a lesser amount as scheduled on January 1, 2009.”

The monthly average commitment rate for a 30-year, fixed-rate mortgage for the North Central region was 6.13 percent in November 2008, down 0.12 points from the 6.25 average rate the previous month, according to the Federal Home Loan Mortgage Corporation. Last year in November it averaged 6.25 percent.  The December 18th mortgage market survey report issued by Freddie Mac reported 30-year, fixed rate mortgages were at 5.19 percent (the lowest since the survey began in April 1971).

According to the IAR report, median home prices were up in 35 of 101 Illinois counties reporting in November including DeKalb, up 1.7 percent to $183,000; Effingham, up 6.0 percent to $83,750; Kankakee, up 0.3 percent to $129,900; Marion, up 3.4 percent to $62,000; Rock Island, up 8.3 percent to $109,900; Saint Clair, up 6.0 percent to $124,500; and Stephenson, up 6.7 percent to $84,000.

“The combination of lower mortgage interest rates and a major infrastructure investment program that is anticipated from the Obama administration offer the best hope for some turnaround in the housing market in the next year,” said Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois. “Of concern, Illinois forecasts for the next 12 months suggest job declines of the order of 50,000 to 55,000.”

In the Chicagoland Primary Metropolitan Statistical Area (PMSA) home sales (which include single-family and condominiums) totaled 3,910, down 32.3 percent from 5,774 home sales in November 2007. The Chicagoland PMSA, as defined by the U.S. Census Bureau, includes Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will counties. Year-to-date January through November 2008 sales for the Chicagoland PMSA were down 26.5 percent to 64,445 homes sold compared to 87,624 homes sold in the same 11-month period in 2007.

The year-to-date median price was down 4.9 percent to $242,000 compared to $254,500 in the period January through November 2007. In the month of November, the median home sale price for the Chicagoland PMSA was $207,745, down 15.9 percent from $247,000 in November 2007.

In the city of Chicago, November total home sales (single-family and condominiums) were down 41.3 percent to 1,057 sales compared to November 2007 sales of 1,801. The city of Chicago median price in November was $222,500, down 23.3 percent from $290,000 in November 2007.

David Hanna, president of the Chicago Association of REALTORS® echoes Callan’s concerns: “The REALTOR® Association is calling upon the federal government and mortgage industry to address continuing problems that are impeding the delivery of mortgage credit to potential homebuyers. Mortgage insurers need to make sure they have not over-corrected and added unnecessarily strict underwriting standards preventing people from qualifying for a mortgage. The lack of practical and affordable loans will continue to stymie the recovery effort.”

Sales and price information is generated from a survey of Multiple Listing Service sales reported by 35 participating Illinois REALTOR® local boards and associations.

The Illinois Association of REALTORS® is a voluntary trade association whose 58,000 members are engaged in all facets of the real estate industry. In addition to serving the professional needs of its members, the Illinois Association of REALTORS® works to protect the rights of private property owners in the state by recommending and promoting legislation that safeguards and advances the interest of real property ownership.

Find Illinois market stats data at www.illinoisrealtor.org , click on Market Stats.