Low Mortgage Rates Finally Spark Home-Sales Awakening On North Side
Chicago’s existing home market in four North Side lakefront neighborhoods suddenly awoke in December after a year-long snooze.
Baird & Warner’s “January 2020 Market Analysis for Chicago’s North Side” reported a whopping 41.9% increase in used home sales on the Near North Side, Lincoln Park, Lakeview and North Center—after a 25 consecutive-month streak of decreases.
Housing analysts noted that affordable home-loan rates likely were the spark that final got the market ignited. On November 7, 2019, benchmark 30-year-fixed mortgages averaged 3.69%, down from 3.78% in late October of 2019, reported Freddie Mac’s Primary Mortgage Market Survey. A year ago, rates averaged 4.94%.
Rates have stayed low throughout November and December, fueling the year-end market boom. On January 9, 2020, Freddie Mac reported that lenders were quoting an average of 3.64% on 30-year-fixed loans. A year ago, the 30-year-fixed loan average was 4.45%.
“Mortgage rates fell to the lowest level in 13 weeks, as investors sought the quality and safety of the U.S. Treasury fixed income markets,” said Sam Khater, Freddie Mac’s Chief Economist. “The drop in mortgage rates, combined with the strong labor market, should propel a continued rise in home-buyer demand in 2020.”
“The results of one month do not represent a trend,” said veteran Baird & Warner broker John Irwin, who prepared the market analysis. “However, the December home sales increases came as a big surprise, leading many to pause or revise their 2020 North Side real estate forecasts and projections.”
Most of the home sales that closed in December went under contract in November, Irwin noted.
Here are the highlights of Baird & Warner’s market analysis, which the firm compiled directly from the Chicago Multiple Listing Service:
• Home sales. While residential sales were down 6.4% in all of 2019, December transactions on the Near North Side posted a whopping 59.8% gain, compared with the same month last year. Transactions spiked 52.2% in Lakeview, followed by a 34.2% increase in Lincoln Park, and a 17.9% gain in North Center.
• Median prices. While North Side 2019 median existing home prices showed a slight 1.1% decrease compared with 2018, in December, 2019 prices rose 1.5% over December of 2018—a bright spot in the analysis.
For the year, North Center posted a 3.4% median price gain, followed by Lincoln Park with 1.7%. Median prices in 2019 declined 3% on the Near North Side, and slipped 4.1% in Lakeview. (The median is a typical market price where half the homes sold for more and half sold for less.)
“With all of the changes that we have seen in the market in 2019, North Side median prices remain generally healthy,” Irwin noted.
• Listing inventory. In 2019, inventory levels rose 9% over 2018. Due to the increase in December sales, inventory levels for the month dropped 3.9% for the first decline in two years.
This also helped slow the 15.5% rise in 2019 listing inventory (also known as Months Of Supply Of Inventory). A shortage of listings has taken its toll on the market this year, analysts say. December inventory dropped 2.6% to 3.7 months of supply.
“Inventory levels have been and will continue to be one of the most important indicators for real estate health in 2020,” Irwin said.
• Market time. Despite the positive December numbers market times continue to increase. December saw an 8.7% rise in market time which was significantly higher than 3.4% for all of 2019.
For more information on Baird & Warner’s January 2020 Market Analysis for Chicago’s North Side, contact John Irwin via email: john@johnirwinChicago.com, or call 773-294-8664.
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.