National, Illinois Mortgage Rates Force Buyers to Consider Options
On recent evenings, Pat Wendelken goes online and peeks at the posted mortgage rates. She winces at what she sees.
“I watch the rates going up every week,” said Wendelken, who must decide soon the best way to finance a home she and her husband are building in Elgin. “I’m wondering where they’re going to go.”
When Wendelken began tracking the rates in April, they were around 6 percent for a 30-year, fixed-rate loan. On Thursday, they averaged 6.8 percent across the country, according to a survey by Bankrate.com.
Freddie Mac put the average slightly lower - 6.7 percent - and noted that it was the fifth straight week of increases. Rates have been bounding upward more than one-half of 1 percent, on average, since May 15.
And though the rates probably aren’t news to many homeowners who are mortgage refinancing to get out of surging adjustable-rate loans, the change still apparently hasn’t sunk in for the average home buyer.
“I don’t think consumers are aware of what’s happening,” said Dan Green, a loan officer for Mobium Mortgage in Chicago. “It’s just starting to become front-page news. Forty-five days ago, I was quoting 5.8 percent to people, and now I’m saying 6.6 percent.”
It’s a difference of about $156 a month on a $300,000 loan, and many real estate agents say that it’s not enough to pull notoriously picky shoppers off the fence and into a serious buying mood.
“They don’t seem to be really moved by the fact that rates are going up. They figure that rates will come down again,” said Oak Park agent Norma Rixter. “And the inventory [of homes for sale] is so high, they figure the homes will still be here.”
And at lower prices: Rixter and others say that after a disappointing spring season, sales have picked up somewhat in the past few weeks, though that’s likely due more to reduced asking prices inspiring mortgage loan seekers to make offers.
“We’ve seen a change, and it’s not what we would like it to be, but it’s a change, nonetheless,” Rixter said last week. “We’ve had 12 properties go under contract in the past week, and that’s double what we were seeing recently.
The inventory of unsold homes continues to vex the market, and analysts worry that rising rates will put further downward pressure on prices, which have managed to stay flat in the Illinois housing market, while declining in other parts of the country.
Naperville appraiser Chip Wagner, whose firm compiles a monthly analysis of home sales around the Chicago region, said about 44,000 single-family homes were for sale here last July. It was about the same April 1. But on June 13, there were more than 58,000.
“What really jumps out at me from the previous quarter is that we’ve seen the average listing price drop almost $27,000 in the region,” Wagner said. “At the same time, we see all these new listings. That’s a scary number to me - 58,000 is a 9.2-month supply [of homes for sale]. I was taken aback when I saw it.”
Park Ridge agent Paula LaBree said higher interest rates may be, perversely, just what the housing market needs to get rolling again.
“I think the best thing is that interest rates could tick up,” La Bree said. “There’s no sense of urgency [among buyers]. If something else could create a sense of urgency - a third party, like interest rates - there would be a viable reason to buy now.”
Chicagoans Mike and Kristin Egan shopped for more than six months before making an offer about a week ago on a house in Libertyville. Though rates were a factor in the first-time Illinois mortgage applicants’ decision to act now, they were secondary to just purchasing something.
“We knew we needed to buy because we’re losing our shirts on taxes by not having any deductions,” Egan said. “But we’re trying to work on the best rate possible. Rates went up about half a point a few days ago. I am not pleased.”
Keith Gumbinger, an analyst for HSH Associates, a financial publisher that tracks home mortgage rates in Pompton Plains, N.J., said in some respects, it’s a replay of last year.”The bad news is that interest rates have risen. The good news is that they’re still below last year’s levels,” he said. “On June 30 a year ago, the average interest rate was 6.98 percent, and we’re around 6.8 percent at the moment, so we’re measurably below last year. There’s no indication we’re going to break out of that 6.98 percent range. As we roll forward into the summer, we probably will see some reasonable stability of rates.”
Even so, the rates may be a wake-up call, analysts said.
“First-time buyers generally will shop for nine to 12 months,” said Green. “And nine to 12 months ago, the payments looked manageable. Suddenly those payments are not so manageable. It does push some people into saying, well, it’s not so bad for me to rent.
SOURCE: The Chicago Tribune