Chicago Home Resale Market In Tailspin Because Of COVID-19 Virus
Buying a home during the COVID-19 crisis may not be a life or death situation, but the market currently is coming out of a coma.
“There is no denying that a comparison of the April 2019 and April 2020, sales numbers are devastating,” noted Realtor John Irwin of Baird & Warner in a May 2020 Market Analysis for Chicago’s North Side.
“Despite the negative effect that the crisis has had on our lives, Chicago’s North Side real estate market is showing some positive trends and generating cautious optimism,” Irwin said.
The Chicago Association of Realtors reported that between April 1 and April 18 only 330 homes went under contract in Chicago, compared with 674 units prior to the virus crisis in the week ended on March 7. During the same period, property listings fell to 586 homes from 1,313 units.
After the initial shock of Gov. J.B Pritzker’s “shelter-in-place order” buyers are starting to shop for homes, Irwin noted.
House hunters this spring include people with stable jobs, those with life-style changes involving marriage, divorce, children in school, and those changing jobs and relocating to Chicago from out-of-town.
“Despite the crisis, there has been very little price erosion,” said Realtor Sara E. Benson, president of Chicago-based Benson Stanley Realty. “Even the market for luxury homes priced between $1-million and $2-million is keeping pace with more affordable units.”
The Baird & Warner report cited the following reasons for the resurgence:
• Psychological stress. Many would-be buyers have grown accustomed to living with the virus threat. Some are becoming impatient or bored with the current shelter-in-place order and want to get back into the house-hunt market.
• Buyer urgency. Whether relocating for schools, growing families or business, there are some pent-up-demand life-style situations that cannot wait.
• Record-low rates. As mortgage rates continue to fall to new record lows, affordable interest charges continue to be a major buyer motivator. “No one knows what is going to happen to interest rates in the future,” Irwin said.
On May 7, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed home-loan rates averaged 3.26%, up only slightly from a week earlier when it averaged 3.23%—the lowest rate in the survey’s history which dates back to 1971. A year ago, 30-year fixed loans averaged 4.10%. According to a May 8 survey by RateSeeker.com, Chicago borrowers can lock up 30-year fixed loans at rates as low as 3.126%.
“Mortgage rates stayed at or near record lows for the fifth straight week and homeowners are taking advantage with refinance activity remaining high,” said Sam Khater, Freddie Mac’s Chief Economist. “Although purchase demand declined 35% year-over-year in mid-April, demand has improved modestly over the last three weeks.”
If you hope to buy a home in 2020, experts suggest the following:
• Get pre-approved for a loan, not just pre-qualified. Pre-approval includes the lender’s verification of borrower income, employment and assets. This will put you in a stronger bargaining position—largely equivalent to a “cash” buyer.
• Strengthen your credit score. Some lenders are requiring higher credit scores and a larger down payment. Don’t buy a new car or make a major credit-card purchase for jewelry, furniture or other household items before you close the deal.
• Great Depression-era advice. Only purchase what you can eat.
Because of the pandemic’s effect on the economy, a market roller-coaster ride will ripple into 2021. Economist predict home sales will decline 2% to 3% over the next year.
However, a market rebound is predicted in spring of 2021 to pre-virus levels—or beyond.
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.