Happy Days! Are they here again for the Housing Market, here in Chicago, and elsewhere across the U.S.? Or, will purchase fall back to earth next year, as Fed Tax Incentives end, and Mortgage Interest Rates rise as predicted?
According to data compiled by the National Association of Realtors, and as reported by Kelly Evans in today's Wall Street Journal, residential resales increased to an annual level o 6.54 Million units last month - far higher than they originally predicted, and 39% over last November's total.
Lawrence Yun, NAR's Chief Economist, revealed that 51% of November buyers were first-time purchasers, aided by the Fed $8,000 First Time Homebuyer Tax Credit. This credit was originally slated to expire the end of last month, but was since extended to all first-time buyer purchases, and a few repeat purchases for a credit of up to $6,500, through April 30, 2010.
Some Real Estate Practitioners feel, however, that the uncertainty whether the credit would be extended - it wasn't lengthened until November 6th - persuaded many buyers to act quickly, perhaps inflating the rands of new home purchasers last month.
Yun further estimates that foreclosures, short sales, or other distressed properties made up as much as 33% of all home resale purchases last month.
Also on the positive side, NAR's estimate of Homes For Sale Inventory fell 1.3% in November, to just over 3.5 Million Resale Units. That is an estimated 6.5 months supply nationally, as compared to a 7 month supply in October. Here in Chicago, across the North and Northwest Side Neighborhoods our Real Estate Team serves with great frequency, average inventory is a higher 9.1 months.
Median Home Prices have also continued to moderate! Nationwide, the median sale price for an existing single-family detached home or condo was $172,600. That's 4.3% lower than one year before, but a marked improvement from the 7.6% year-over-year median price decline in October.
But do these key indicators indicate storm clouds might be on the horizon? See Mark Gongloff's story in Yesterday's Wall Street Journal.
- A large percentage of those buying took advantage of a substantial government incentive. When these fall away, will resales fall as well. This was the case in the automobile market, after the vaunted "Cash for Clunkers" program ended last summer, leaving New Car Dealers with a huge hangover in the months that followed.
- Mortgage Interest Rates rose again last week, for the third consecutive week, according to Bankrate.com data, as reported in our latest Chicago IL Real Estate Stats Pack post, via BlogChicagoHomes.com. Experts predict rates will begin to climb next year as the economy beans to improve, and the Fed's program to purchase Mortgage-Backed Securities is scaled back.
- According to the Mortgage Bankers Association, home purchase applications have fallen 21% since the first week in October, and 16% from November, 2008. Seasonal fluctuation here, or a longer-term trend as interest rates begin to come back up?
- Many of last month's home sales were distressed, selling, in some cases, at bargain-basement prices. Will this continuing falling price trend - an average of 7% down nationally since this time last year - keep conventional home sellers, or those not forced to sell - away from the market? Home seller hesitance to market their homes could drop median prices even more!
In the U.S. Housing Market, it is clear that the incentives, the low rates, the more modest home prices have not, in and of themselves, jump-started the moribund market in what many feel to be a more permanent, sustainable way. Will the expiration of the incentives, and the expected upward creep of Mortgage Interest Rates in 2010, re-apply the brakes?
Recent history says it is possible. Very possible!
Here's a link to our post today via BlogChicagoHomes.com.
DEAN & DEAN'S TEAM CHICAGO