Mortgage-Rate Break Offered By Fed In Time For Autumn Home Market
Autumn house hunters are benefiting from home-loan bargains because a nervous Federal Reserve Board held off on a widely expected interest-rate increase.
The Fed was influenced by China’s economic slowdown and a weak U.S. jobs report, analysts said.
“The sputtering U.S. economy added only 142,000 jobs in September. To make matters worse, there were downward revisions to the prior two months,” noted Sean Becketti, chief economist for Freddie Mac. Hourly wages were flat, and the labor force participation rate fell to 62.4 percent, the lowest rate since 1977.
In response, Treasury yields dipped below 2 percent causing lenders to lower the benchmark 30-year fixed mortgage rate to 3.76 percent on October 8th, down from 3.85 percent a week earlier. A year ago at this time, they averaged 4.19 percent.
Freddie Mac’s Primary Mortgage Market Survey reported that average 30-year home-loan rates have stayed below the 4-percent level for 11 consecutive weeks.
And, 15-year fixed loans averaged 2.99 percent on October 8th, down from 3.07 percent a week earlier. It was the first time 15-year loans fell below 3 percent since last April. A year ago at this time, they loans averaged 3.36 percent.
“These low mortgage rates have supported strong home sales, and 2015 is on pace to have the highest residential sales total since 2007,” noted Becketti.
Stable and lower home-loan rates have sparked increased home sales and rising prices across the Chicagoland area in August, according to the Illinois Association of Realtors (IAR).
The city of Chicago saw sales of 2,629 existing homes in August of 2015, up 6.3 percent from last year when 2,474 units were sold. The median price of a home in Chicago was $270,000, up 0.2 percent over August of 2014 when the median price was $269,500.
“It’s taking a phenomenally short time to sell a home in the city of Chicago,” said Hugh Rider, president of the Chicago Association of Realtors and co-president of Realty and Mortgage Co. in Chicago. “Buyers have a short window to swoop in and make an offer because there are so many others looking for properties even this late into the selling season.”
Across the nine-county Chicago area, existing single-family home and condominiums sales in August of 2015 totaled 10,854 units, an increase of 2.8 percent from the 10,554 sales in August of 2014.
The median price in August in the Chicago area was $220,900, up 2.7 percent from $215,000 in August of 2014.
“The rising median prices seen in this summer’s market has coaxed many sellers to overcome lingering reluctance and list properties,” said Jim Kinney, president of the IAR and vice president for luxury sales for Baird & Warner in Chicago.
“There is still an abundance of demand even at elevated prices as potential buyers choose from a diminished pool of homes at a rapid rate,” Kinney said.
Geoffrey J.D. Hewings, an economist at the University of Illinois, said home sales returned to a more modest long-term annual growth rate in August while prices continued to increase.
“In Chicago, the median price of non-foreclosed properties remained virtually unchanged while the median price for foreclosed properties increased, contributing to the modest overall price increase,” Hewings noted.
“The percentage of distressed sales among the total sales for the Chicago area was 13.5 percent in August of 2015,” Hewings said. “However, the good news is that it was the lowest August reading since 2009 and much lower than the peak (23.7 percent) in 2010.”
Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. For more information, visit www.escapingcondojail.com.