Eight years after the Great Recession hit the nation’s housing market, it appears that home and condominium buyers are America’s most cautious consumer group.
Young prospective first-time buyers who sat on the fence during 2016 were shocked when mortgage rates vaulted above 4 percent following a long-anticipated interest rate hike in December by the Federal Reserve Board.
In mid-February, benchmark 30-year fixed mortgage rates rose to 4.17 percent. A year ago at this time, the 30-year loan rates averaged 3.65 percent.
Now, home and condo hunters are scrambling to buy before rates move above a forecasted 4.5 percent by year’s end. Apparently some buyers are finding the American Dream. A whopping 1,956 homes and condos were sold in January in Chicago, the highest number of transactions since January of 2008.
Wealthy Americans were happy when the stock market rallied after the election of President Donald Trump. Now, with the Dow Jones average bouncing well above 20,000, wealthy Chicago home sellers and developers are wondering when the luxury housing market will take off.
Belgravia Group, one Chicago developer that has had great success in the new-construction boutique condo niche, is bullish. The company recently launched 360 West Erie, a 38-unit development in River North, where 3-bedroom units are price from $1.2 million.
To spark sales, several developers of luxury condos in downtown Chicago are offering incentives in early 2017. Here is a sampling of current deals:
• Webster Square Condominiums. Purchasers who buy a condo and a parking space now will receive a second parking space free. The Sandz Development project at 2205 N. Geneva Terrace in Lincoln Park is offering 1-bedroom to 4-bedroom units ranging in price from $459,000 to $2.3 million.
• The Legacy at Millennium Park. Mesa Development’s 2017 sales incentive is a free parking space and close-out pricing. Two-bedroom units are priced from $640,000, and 3-bedroom layouts start at $935,000. The 355-unit high-rise, at 60 E. Monroe Street in the Loop, overlooks Millennium Park.
• Ritz-Carlton Residences. Ultra-luxe condo shoppers will find a wide assortment of elegant amenities at this “Magnificent Mile” high-rise tower at 118 E. Erie in the Gold Coast.
In the Landmark Club, residents are offered everything from tea service to a private chef experience. The 24-hour concierge service can arrange every luxury from climate-controlled wine storage and butler service to dog walking, in-home housekeeping and personal training. Prices start at $810,000 for a 1-bedroom unit, at $1.1 million for 2-bedrooms, and at $1.77 million for 3-bedroom layouts.
West Coast Prices Rebounding
Nationwide, home sellers in 2016 pocketed the highest profits since 2007—an average gain of 21 percent or $38,206, reported the Year-End 2016 U.S. Home Sales Report by ATTOM Data Solutions.
While California home sellers in San Jose and San Francisco realized the highest home-price gain at 69 percent and prices skyrocketed 49 percent in Los Angeles and Seattle, WA, folks in Chicago were not as lucky.
In Chicago, the median price of a home rose only 4.2 percent in 2016 to $272,000 from $261,000 in 2015, reported Midwest Real Estate Data LLC.
“Three months after the presidential election, measures of consumer optimism regarding personal financial prospects and the economy are at or near the highest levels we’ve seen in nearly seven years,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.
However, housing experts are wondering if the feel-good outlook is strong enough to overcome limited housing affordability in hot markets like California?
Since 2012, the average median-home price nationwide has grown 60 percent, while average weekly wages have increased only 1 percent, according to the ATTOM Data Solutions report.
Housing affordability has declined so sharply since the beginning of the Great Recession that the average home buyer now needs to set aside 36.9 percent of their monthly income to afford a typical median-priced home.
“If consumers’ anticipation of further increases in home prices and mortgage rates materialize over the next 12 months we may see housing affordability tighten even more,” warned Duncan.
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.