Bargain-Rate Home Loans Could Spark Chicago Housing Revival In 2020

Bargain-rate mortgages could be the spark that ignites Chicago’s 2020 housing market.

On January 23rd, benchmark 30-year-fixed home-loan rates declined to 3.60%—the lowest level since early November, reported Freddie Mac’s Primary Mortgage Market Survey.

“Rates fell to the lowest level in three months and are about a quarter point above all-time lows,” said Sam Khater, Freddie Mac’s Chief Economist. “The very low rate environment has clearly had an impact on the housing market as both new construction and home sales have surged in response to the decline in rates, the rebound in the economy and improving financial market sentiment.”

Mortgage rates hit a historical rock bottom on November 21, 2012, when the 30-year fixed mortgage average hit 3.31%, according to Freddie Mac’s archives.

“The combination of low mortgage rates, a solid jobs market and an expanded inventory boosted by new units coming online seems to be having a positive impact, and those conditions are likely to hold through at least the first half of 2020,” predicted veteran North Side broker Mary Jo Nathan of the Charese David Team based in the Compass office at 2044 W. Roscoe St. in Roscoe Village.

Freddie Mac reported that the national benchmark 30-year-fixed rate average fell to 3.6% from 3.65% a week earlier. A year ago at this time 30-year-fixed loans averaged 4.45%.

On January 24th, Chicago lenders were quoting a range of 3.575% to 3.677% on 30-year-fixed mortgages, according to rateSeeker.com.

2019 North Side Market Report

Sales for the year totaled 9,403 units across the North Side, down 5.9% from the prior year, while the median sales price was unchanged at $360,000, according to the quarterly Chicago North Side Market Report prepared by Nathan and Compass.

Fourth-quarter activity for 2019 rose 1.6% on 1,834 sales, while the median price for the quarter gained 6.9% to $363,500 compared to the same three-month period in 2018.

The North Side Market Report tracks home sales in nine community areas: Edgewater, Lake View, Lincoln Park, Lincoln Square, Near North Side, North Center, Rogers Park, Uptown and West Ridge.

On an annual basis, only Lincoln Park recorded an overall increase in home sales, with activity up 5.1%, Nathan noted. Edgewater had the steepest decline at -10.3%.

On the other hand, the median sales price rose in six of the nine communities, led by gains of 5.2% in Lincoln Square, 4.6% in West Ridge and 4.3% in Uptown.

“The North Side housing market’s performance may have been stronger than it appears because our analysis shows a real correlation between the listing inventory and the resulting sales total,” explained Nathan.

“The best example might be Lincoln Park, where strong sales seemed to reflect the fact that the inventory there was quite substantial compared to other North Side areas, due in good part to a significant amount of new construction,” she said.

At the end of the year, the inventory of single-family detached homes in Lincoln Park was equal to 40.5% of 2019 sales. Comparable numbers are 28.8% in Lake View, 17.2% in North Center, 18.3% in Lincoln Square and 25% in Edgewater. The inventory difference in the attached category was less dramatic. Lincoln Park’s year-end attached-home inventory equaled 23% of sales, compared to 20.9% in Lake View, 13.1% in Uptown and 20.2% in Edgewater.

The sales data cited by the Compass survey was collected by Midwest Real Estate Data, LLC, the regional multiple listing service.

Detached home sales

Sales of detached single-family homes delivered positive results in the final quarter of 2019, rising 3.8% to 189 units, but for the full year sales were down 6.6% to 958 units.

It was a different story with the median sales price, which was up 8.3% for the full year to $986,619. The median price gained 21% in fourth quarter to finish 2019 at $1.01 million—the first time the fourth-quarter median has ever topped $1 million.

“We see this as another impact of the inventory issue in the detached category,” said Nathan. “There is a lack of moderately priced properties across much of the North Side, and as a result, the median price skews higher.”

The average number of days a home took to find a buyer after listing in 2019 was 116 days, a day less than in the prior year.

Attached home sales

The attached market, which consists primarily of condominiums and townhomes, was down 5.8% for the full year to 8,444 units, while gaining 1.4% in the fourth quarter on 1,654 sales. The median price hardly budged in 2019, dipping 0.2% to $330,250. It did gain 6.1% in the final quarter to $331,000, up from $312,000 a year earlier.

Average market time for attached properties in 2019 was 83 days, up 11 days from the prior year.

“The combination of low mortgage rates, a solid jobs market and an expanded inventory boosted by new units coming online seems to be having a positive impact, and those conditions are likely to hold through at least the first half of 2020,” Nathan predicted.

RE/MAX outlook

“2020 is off to a strong start with our firm reporting record-setting house tours,” said Hasani Steele of RE/MAX Premier Properties and Steele Consulting Group. “The mild winter along with a decrease in housing supply are contributing factors. Luxury prices are holding steady.”

Nonetheless, Steele said RE/MAX is expecting an impact from recent property tax increases.

“First and second-time home buyers are willing to purchase in unfamiliar neighborhoods with unwavering patience to obtain their must-have properties. Our firm is anticipating rising demand for updated properties in emerging neighborhoods,” Steele said.

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.