Home sales rally expected to continue through January

October’s double-digit jump in sales reported in today’s IAR housing data release can be credited to many factors including record low mortgage interest rates, the federal first-time homebuyer tax credit and more affordable home prices.

Economist, University of Illinois Regional Economics Applications Laboratory

Economist Geoff Hewings, University of Illinois REAL

And these gains are expected to continue through January, according to economist Geoff Hewings, director of the University of Illinois Regional Economics Applications Laboratory (REAL), in his latest forecast. “Forecasts for the housing market for the months of November and December 2009 and January 2010 continue the positive news. For both Illinois and Chicago*, the sales are forecast to grow at double-digit rates when the month in 2009 (2010 for January) is compared with the same month in 2008 (2009 for January).”

Particularly in the Chicago region, distressed property sales continue to exert downward pressure on prices but overall in Illinois and the Chicago area, the price declines are declining. Meaning we are seeing some leveling out of the prices over time. As inventories decline we should see some stabilizing related to prices but we still have a ways to go.

Says Hewings in his forecast: “Median prices will continue to trend down in the 3% to 5% range for both Illinois and the Chicago region over the next three months, although a modest uptick is noted for January 2010 in Illinois. These changes are in stark contrast to the double-digit declines for the same three months last year.”

Job losses present an ongoing threat to a housing market recovery. Illinois official unemployment rate reached 11.0% in October, higher than the national rate of 10.2%. Employment forecasts for the next 12 months suggest continuing erosion in the 180,000 to 200,000 range for Illinois.

“With interest rates at 5 percent for 30-year loans, housing supply strong, the uptick in sales should continue,” said Hewings in the forecast. “However, many potential buyers have either too much debt or are unemployed precluding their participating in this buyer’s market.”

*The Chicago region in the IAR Market Stats reports includes Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will counties.

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