Chicago-Area Existing Home Market Moving Into Low Gear For Autumn
Rising mortgage rates and soaring property taxes could spark a steep decline in Chicago-area existing home sales this autumn, forecasters say.
The metropolitan Chicago housing market experienced a marked decline in September home sales activity that led to a 3% fall in total home sales during the third quarter of 2018 when compared with the same period last year, reports a new analysis by RE/MAX Northern Illinois. Sales for the quarter totaled 31,454 units.
“Based on our research, the September sales slowdown, with sales declining 10.9% from the year-earlier total, seems primarily to be the result of two factors,” explained Jeff LaGrange, vice president of the RE/MAX Northern Illinois Region.
While housing costs have been rising in 2018, mortgage interest rates are up both locally and nationally, and the Chicago area has seen some significant increases in property taxes, LaGrange noted.
Benchmark 30-year fixed mortgage rates eased slightly to 4.85% on October 18th after hitting 4.90% a week earlier, reported Freddie Mac’s Primary Mortgage Market Survey. The 4.90% average was the highest level since the week of April 14, 2011. A year ago, the 30-year loan average was 3.88%.
On October 18th Chicago-area lenders were charging a range of 4.785% to 4.863% for 30-year fixed rate home loans, according to rateSeeker.com.
Forecasters say mortgage rates are likely to go much higher, putting a further damper on the housing market. On September 26th the Federal Reserve Board lifted its short-term federal funds rate to a range of 2% to 2.25%, the eighth hike since late 2015.
The central bank plans to raise interest rates one more time in 2018, three times in 2019 and once in 2020, ultimately pushing its benchmark federal-funds rate to a range of 3.25% and 3.5%.
If the Fed continues its current rate-hike policy to manage growth and control inflation, experts say home buyers should expect to pay close to 6% for a mortgage by late 2019. Gloomy tax outlook
The outlook for property tax increases in Chicago next year is even gloomier. The recent skyrocketing reassessment of North Township—which includes the wealthy Gold Coast and the upscale neighborhoods of Old Town and Lincoln Park—has left thousands of long-time property owners flabbergasted.
Announcing that the “real estate market is healthy again,” Cook County Assessor Joseph Berrios decreed that the market value for homes, townhomes and apartment buildings with six units or less surged to $1.3 million from $1.1 million—an appreciation of more than 18% in only three years.
As a result of the assessor’s new, improved “state-of-the-art” reassessment model, Berrios declared that the median assessed value of one to six-unit properties increased to $129,082—a whopping gain of 23.32%.
Meanwhile, RE/MAX reported the median sales price of homes in the metro Chicago area increased just 12% over the last three years. The report concluded that housing affordability has declined in the metro area in 2018.
“Some potential buyers are more hesitant these days,” LaGrange said. “RE/MAX brokers are reporting that buyers generally want homes that are move-in ready. Those homes often attract multiple offers, but homes that need considerable work can struggle to find a buyer.”
The September slowdown was especially notable among homes selling for less than $500,000, where sales dropped 13% compared with September 2017. Sales of homes priced at $500,000 or more declined just 25 units or only 2.4%.
“At the higher price points, it’s more a question of how much buyers are comfortable spending,” said LaGrange. “However, for entry-level buyers, if the numbers don’t work, they’re likely to keep renting.”
Home prices continued to climb at a gentle pace over the past few months. The median Chicago-area home sales price rose 3.9% in September to $240,000, while for the third quarter it was up 2.3% to $246,500.
Sales data used by RE/MAX is collected by MRED, the regional multiple listing service. It covers detached and attached homes in the Illinois counties of Cook, DuPage, Kane, Kendall, Lake, McHenry and Will. Detached homes are typically stand-alone single-family dwellings.
Third-quarter sales activity fell 3% in Cook County and 3.8% in Chicago. The median sales price for the third quarter rose 2.6% in Chicago. Average market time for the third quarter was 63 days, five days less than in 2017.
RE/MAX reported that detached-home sales were relatively resilient during the third quarter in the metro area, declining 2% to 19,988 units. Home sales declined 8.8% in September to 5,416 units. The median price rose moderately, up 3% for the quarter to $267,900, while gaining 4% in September to $260,000. Monthly median prices in the Chicago area tend to peak in June and then fall gradually. Condo sales slowdown
The attached-home market, which showed significant strength earlier in 2018, slowed considerably during the third quarter, with sales falling 4.6% to 11,466 units in the metro area, RE/MAX said. Median sales prices gaining just 0.7% of 1 percentage point to $203,000.
Attached homes sales include condominium and cooperative apartments along with townhouses. Attached sales flagged notably in September, declining 14.4% to 3,050 units in the metro area. Condo and townhome sales in Chicago fell 16.5%, while Cook County as a whole had a 12.3% decline.
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.