Saturday, February 27, 2010

Chicago-area home sales post year-over-year gain - But sales are lower than December, and prices have dropped

Chicago-area home sales post year-over-year gain - But sales are lower than December, and prices have dropped
By Mary Ellen Podmolik
Copyright © 2010, Chicago Tribune
12:04 a.m. CST, February 27, 2010,0,3115805,full.story

Chicago-area sales of existing homes posted a seventh consecutive month of year-over-year gains in January, but fell far short of December's sales pace.

While there were 3,922 sales of area single-family homes and condominiums last month, a 29.2 percent increase from January 2009, the sales volume dropped 32.1 percent from December. Within the city of Chicago, January sales were up 31.1 percent from a year ago but down 32 percent from December, and the median sales price dropped 7.1 percent in a month's time, the Illinois Association of Realtors said Friday.

That same pattern, sales better than a year ago but worse since last month, is occurring elsewhere in the nation and is raising concerns over whether a housing recovery — one subsidized by the federal government — is taking hold. Many economists worry that buyers rushed to take advantage of tax credits, bargain prices and low interest rates late last year, in effect borrowing from future demand.

"The latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery," said Lawrence Yun, chief economist at the National Association of Realtors.

Compared with a year ago, the local housing market is much-improved. Sales are up, the number of homes on the market is down and real estate agents say consumers remain interested in taking advantage of federal homebuyer tax incentives. In order to receive tax credits of up to $6,500 for repeat buyers and $8,000 for first-time buyers, eligible consumers must have a sales contract signed by April 30 and the purchase closed by June 30.

"You're seeing year-over-year [sales] gains in many markets at the expense of pricing," said Mike Larson, an economist at Weiss Research. "That's the dynamic you're going to see for the rest of 2010."

Compared with a year ago, local prices are declining but at a slower rate. The median price of a single-family home or condo in the Chicago area fell 5.4 percent between January 2009 and January 2010, to $175,000, while the median price within the city fell 4.9 percent to $195,000. The median price means half the homes were sold for more and half for less.

In January 2009, median prices for the Chicago area and for the city itself had fallen 22.8 percent and 28.9 percent, respectively, from January 2008 levels.

Industry watchers worry that incentives used to spark consumer demand are losing their appeal and momentum is fading. "I'm getting a lot of showings," said Genie Birch, president of the Chicago Association of Realtors. "I still have people on the fence. People are still taking their time."

Since January 2009, the Federal Reserve has purchased mortgage-backed securities but has said it will end its $1.25 trillion of purchases March 31. That has prompted fears that without the government's financial support of the mortgage market, interest rates will rise sharply.

Freddie Mac reported Thursday that the rate for a 30-year, fixed-rate mortgage averaged 5.05 percent with 0.7 points for the week ended Thursday, up from 4.93 percent last week.

"At the end of last year, interest rates weren't even a factor," said Jim Merrion, regional director of Re/Max Northern Illinois. "Now what we're seeing is more questions about interest rates."

Earlier this month, Fannie Mae and Freddie Mac said they would boost their purchase of delinquent home mortgages by acquiring loans that are behind at least 120 days. As a result, economists expect the rate on a 30-year, fixed-rate mortgage to remain under 6 percent.

"Rates may bump a bit but not enough to disturb many buyers' plans," said Keith Gumbinger, vice president of HSH Associates, a publisher of consumer loan data. "I don't think we're going to make 6 percent in the next few months."

In recent weeks, there have been increasing calls to extend the credit once again to carry it through the traditional home-buying season. Experts say if the home-buying marketplace remains fragile, that may happen, particularly given that it's an election year.


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