Tax credit, low interest rates give area home sales a boost
REAL ESTATE | Buyers get off the fence, sellers get real on pricing
What a difference a tax credit makes: Home sales spiked 33.3 percent in the Chicago metropolitan area in October from a year earlier, the fourth straight month of year-over-year increases, helped by record-low mortgage interest rates and a tax credit incentive that had been close to expiring.
But the median price sank 15.6 percent, according to the monthly report from the Illinois Association of Realtors released Monday.
(AP)
There were 7,286 existing single-family and condominium homes sold in the Chicago area last month, up from 5,467 in October 2008. The median price was $190,000, down from $225,000.
"I think it's largely attributable to that [$8,000] first-time home buyers tax credit," said Realtor Mike Onorato, president of the association and broker/owner of Onorato Real Estate, which serves Will and Grundy counties.
"What we saw in our office in the month of October was a lot of activity and a high percentage were buyers who were anticipating that the tax credit would not be extended. I don't know how that's going to translate over the next 30 to 60 days. Maybe we borrowed some of those buyers in October."
Alan Shultz, associate broker with Coldwell Banker's Gold Coast office, said his October business doubled from a year ago. One of those deals was with a first-time home buyer, whose initial offer to buy the home was rejected by the seller because of the price. But in the end, the seller called back and agreed to the reduced price, he said.
In the city of Chicago, sales jumped 28.5 percent in October to 2,012, compared with 1,566 sold a year earlier. The median price dropped 18 percent to $215,000 from $262,250.
Statewide, sales rose 24.2 percent to 10,986, while the median price fell 7.6 percent to $157,000.
The October report reflects home purchases by many buyers who had been sitting on the fence waiting out the economic downturn and more home sellers coming to terms with pricing levels required in this market, Onorato said.
Indeed, Chris Shirkey, who recently sold his three-bedroom, one-bathroom home in Coal City, said the 800 square-foot home had been on the market roughly five months. He bought the home four years ago for $137,900 and initially priced it to sell at $147,900. But he settled for a price of $129,500 after dropping the price three to four times. He believes lowering the price helped attract more first-time home buyers, looking to take advantage of the credit.
"I think it helped out," he said of the credit. "Our house was in the price range for first-time buyers."
The credit had been set to expire Nov. 30, but was extended and expanded. Buyers who have owned their current homes at least five years are now eligible for tax credits of up to $6,500. First-time home buyers or anyone who hasn't owned a home in the last three years can still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.
The October report was labeled "encouraging" and "an early indication of a cessation of price declines in Illinois," by Geoffrey Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois. But he cautioned volatility still continues month-to-month, making it tough to detect a longer term trend.
Nationally, home sales far exceeded expectations last month, surging to the highest level in 2½ years. The National Association of Realtors said home resales rose 23.5 percent to a seasonally adjusted annual rate of 6.1 million in October, from 4.94 million in October 2008. The median price fell 7.1 percent to $173,100.