Chicago Housing Outlook Brighter With Record-Low Rates
Now is the time to gaze into the crystal ball and look ahead at the future of residential real estate in Chicago, and gaze back at 2020, the mind-bending year of the pandemic.
The Dow Jones stock average hit a record high of 30,606 points at yearend, meaning wealthy home purchasers likely have plenty of cash in their pockets.
Benchmark 30-year-fixed mortgage interest rates ended the year at an extremely affordable 2.67% on December 31st, reported Freddie Mac’s Primary Mortgage Market Survey.
With home-loan rates breaking to record lows for a whopping 16 times in 2020, thousands of first-time home buyers likely have smiles on their faces. A year ago, the 30-year fixed mortgage rates averaged 3.72%.
“All eyes have been on mortgage rates this year, especially the 30-year fixed-rate, which has dropped more than 1 percentage point over the last 12 months, driving housing market activity in 2020,” said Sam Khater, Freddie Mac’s chief economist.
On December 31st, lenders nationwide were charging an average of 2.17% on 15-year-fixed loans, down from 2.19% a week earlier. A year ago, the 15-year fixed mortgages averaged 3.16%. On January 1st, Gateway Capital Mortgage was quoting 2.667% on 30-year loans and 2.125% on 15-year mortgages, reported RateSeeker.com.
The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit.
“Heading into 2021 we expect rates to remain flat, potentially rising modestly off of their record low, but solid purchase demand and tight inventory will continue to put pressure on housing markets as well as house-price growth,” Khater predicted.
At its December policy meeting, the Federal Reserve Board said it expects to keep its short-term benchmark interest rate near zero through at least 2023. The Fed has held its key rate there since March of 2020, when it took a range of extraordinary steps to fight the pandemic recession by keeping credit flowing.
Lawrence Yun, chief economist of the National Association of Realtors, believes that 2021 will be another record-breaking year for real estate.
The “December 2020 North Side Market Analysis,” drafted by Chicago Realtor John Irwin of Baird & Warner, pinpointed the following trends:
Despite the pandemic, social unrest, massive unemployment and unprecedented government financial problems, Chicagoland home sales volume rose 6.3% in 2020 compared with the prior year.
The Lakeview and North Center neighborhoods posted 2020 home-unit sales increases over last year while Lincoln Park and the Near North Side experienced decreases.
Condominium and townhome sales in the Gold Coast, Streeterville and River North have declined 18.4% from 2019 and inventories have risen 15.2%. There are currently 12.5 months of supply of inventory. “Social unrest and aging inventory with high assessments are partially responsible,” Irwin observed.
Restrictions of the COVID-19 crisis have changed priorities of many homeowners. “Working from home has made the need for more space and a home office more important than proximity to the company office,” Irwin said. “Many people are looking to move away from the trendy neighborhoods with a new eye on Lincoln Park, Lakeview and Bucktown neighborhoods, where they can get more space.”
While some families are opting to move to the suburbs, it does not appear to be having a significant affect on the North Side real-estate market.
“A smooth Presidential transition and positive news about a COVID-19 vaccine are the first big steps in re-establishing stability that the real estate market needs, in order to take full advantage of the pent-up demand on the North Side,” Irwin said.
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.