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Chicago Buyers Still Seeking The Affordable American Dream

Will the American Dream of homeownership ever be affordable again in Chicago?


“Many home buyers want to believe that 3% mortgage interest rates may come again. However, we don’t expect to see that,” said Nadia Evangelou, senior economist for the National Association of Realtors (NAR).


On the other hand, some up-beat economists are beginning to forecast mortgage rates returning to the 4%-range as soon as the spring of 2024.


On January 19th, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed home loans averaged 6.15% nationwide, down from 6.33% a week earlier. A year ago, the average 30-year mortgage rate was 3.56%.


The new Freddie Mac report shows mortgage rates have fallen almost a full percentage point since October 27, 2022, when the 30-year home-loan average hit 7.08%.



“As inflation continues to moderate, mortgage rates declined again last week,” said Sam Khater, Freddie Mac’s chief economist. “Rates are at their lowest level since September of 2022, boosting both home-buyer demand and home-builder sentiment.”


Borrowers who shop around may find better deals. For example, on January 20th, Mutual of Omaha was quoting 5.911% on 30-year fixed loans with a 20% down payment and a fee of $850.


The Freddie Mac survey also reported that 15-year fixed-rate mortgages nationwide fell to an average of 5.28%, down from 5.52% a week earlier. A year ago, the average 15-year fixed mortgage rate was 2.79%.


“Declining rates are providing a much-needed boost to the housing market,” Khater said, “but the supply of homes remains a persistent concern.”


The survey is focused on conventional, conforming, fully amortizing home-purchase loans for borrowers who place a 20% down payment and have excellent credit.


Here are other 2023 forecasts from the Federal Reserve Board and the Mortgage Bankers Association:

  • “High inflation is easing, but we will have to keep interest rates elevated for some time to curb price growth,” noted Fed vice chairman Lael Brainard.

  • A recent forecast by the MBA predicted 30-year fixed mortgage rates will decrease to 5.6% in the second quarter of 2023, 5.5% in the third quarter, and 5.2% by year’s end.

  • The MBA’s 2024 forecast sees 30-year rates slipping to 4.7% by the second quarter of next year, and an affordable 4.4% by the third and fourth quarters. The MBA noted that today’s mortgage rates are still near the lowest level in two decades.

Mortgage-rate history

Thirty-year fixed-rate mortgage interest charges ended 2020 at a rock-bottom 2.65%—the lowest level in the Freddie Mac survey history, which began in 1971.


Loan rates set new record lows an amazing 16 times in 2020, and tens of thousands of homeowners refinanced.


Archives of the now-defunct Federal Housing Finance Board show long-term mortgage rates in the 1960s were not much higher than the Great Depression, when lenders were charging 5% on five-year balloon loans.


Nearly six decades ago, between 1963 and 1965 you could get a mortgage at 5.81% to 5.94%. Between 1971 and 1977, the now-defunct Illinois Usury Law held rates in the 7.6%-to-9% range.


In the early 1980s, run-away inflation caused home-loan rates to skyrocket into the stratosphere. According to Freddie Mac, benchmark 30-year mortgage rates peaked at a jaw-dropping 18.45% in October of 1981 during that Great Recession.


Rates finally fell below 10% in April of 1986, and then bounced in the 9%-to-10% range during the balance of the 1980s. Twenty-three years ago—in August of 1999—when some of today’s Millennial borrowers were still in diapers, lenders were quoting 8.15%.


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.

Comments


“The book is Escaping Condo Jail by Sara Benson and Don DeBat. I would say that anybody thinking about buying a condo, or even anybody serving on a condo board, or anybody who has any connection to a condo, this is must reading—all 600 and something pages. Thanks a lot for a great book!”

 

Steve Sanders, “Your Money Matters” WGN TV, December 22, 2014

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