Illinois home sales moving in the right direction, more jobs needed

Illinois home sales have been trending up in the last four months and so have median home sale prices since March, despite a dip in consumer confidence over higher gas prices and lackluster job creation.

In the May Illinois housing market report out today from the Illinois Association of REALTORS®, homes sales were up 13.9 percent from April, although down year-over-year. Similarly, the statewide median home sale price moved up from April to $140,000 while down from a year ago in May.

These year-over-year sales comparisons are expected to turn positive for both Illinois and the Chicago region in July and August as the effect of the homebuyer tax credit—which accelerated sales in the first half of last year—fades away, according to the forecast prepared by economists from the University of Illinois Regional Economics Applications Laboratory (REAL).

High affordability conditions continue with low mortgage interest rates and lower home prices making this an opportune time for buyers, although Illinois brokers across the state are reporting among the biggest road blocks for getting a home loan secured today is overly strict and cumbersome lending requirements.

This is happening nationwide. “There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – this overreaction is clearly holding back the recovery,” said economist Lawrence Yun in the National Association of REALTORS® home sales report also issued today.

A growing chorus of market analysts are saying a healthy job market fuels the housing market, and that housing creates jobs.

  • Moody’s Analytics chief economist Mark Zandi was quoted in CNN Money: “The economy can move forward without housing. But I don’t think it can flourish and create enough jobs to bring down unemployment in a significant way without a revival of the housing market.”
  • Fannie Mae chief economist Doug Duncan: “Ultimately, the labor market holds the key to a housing recovery, but job growth is needed in order to activate housing demand.”
  • IAR’s recently released study on housing’s economic impact shows just one home sale in Illinois generates $28,581 in direct expenditures made by both the seller and the buyer. The resulting ripple effect across multiple industries for home improvements, moving and warehousing and others adds up to $7.9 billion a year in direct and indirect expenditures fueling the Illinois economy plus 85,677 jobs.

Homebuyer tax credit expires April 30 for U.S. service members

Qualifying U.S. military personnel and certain other federal employees serving overseas need to move quickly to take advantage of the federal homebuyer tax credit of up to $8,000 for first-time buyers and $6,500 for long-time homeowners that is set to expire on April 30, 2011.

Members of the U.S. military, foreign service and intelligence communities were given an extra year to claim the tax credit, which expired in 2010 for all other homebuyers.

The Internal Revenue Service offers these details of the tax credit:

  • Who qualifies? Members of the uniformed services, members of the Foreign Service and employees of the intelligence community who served on qualified official extended duty service outside the U.S. for at least 90 days during the period beginning after Dec. 31, 2008 and ending before May 1, 2010.
  • First-time buyers receive up to 10 percent of the cost of the home up to a maximum credit of $8,000 (or $4,000 for a married individual filing separately). Long-time homeowners receive 10 percent of the purchase price up to $6,500 (or $3,250 for a married individual filing separately).
  • Eligible homebuyers must enter into a binding contract to buy a principal residence on or before April 30, 2011. The taxpayer has until June 30, 2011 to close on the purchase.
  • Eligible properties include single-family homes (including condos, co-ops and townhouses) that will be used as the taxpayer’s primary residence. Vacation homes and homes with a purchase price exceeding $800,000 do not qualify for the tax credit.
  • Only one spouse must be overseas on official extended duty for the requisite amount of time for either spouse to be eligible for the 2011 extension of time to purchase a principal residence and claim the credit.

Download this flyer to learn more about the tax credit extension. And for specific questions or further assistance, contact a tax professional or the Internal Revenue Service at 800-829-1040.

By the Numbers: Today’s Buyers and Sellers

Did you know that 50 percent of all recent home sales were to first-time buyers, an increase from 47 percent in 2009? Or how about the fact that 88 percent of sellers were assisted by a real estate agent when selling their home?

The 2010 National Association of REALTORS® Profile of Home Buyers and Sellers offers a peek inside the home buying and selling patterns of today’s consumers. It also affirms the value of long-term homeownership.

The survey found that even with recent price declines, the typical seller who had lived in their home eight years saw a median equity gain of 24 percent, while sellers who had lived in their homes 11 to 15 years experienced a gain of 40 percent.

The survey also showed the value of working with a REALTOR®. Eighty-three percent of buyers used a real estate agent or broker to purchase their home. When it comes to sellers, 84 percent said they would use that real estate agent again or recommend to others.

Other interesting highlights from the survey:

  • 71 percent of all homebuyers and 92 percent of first-time buyers used the homebuyer tax credit during their home purchase.
  • The typical first-time homebuyer was 30 years old, while the typical repeat buyer was 49 years old.
  • 57 percent of sellers reported they reduced the asking price at least once.
  • The share of home sellers who sold their home without the assistance of a real estate agent was 9 percent down from 11 percent in 2009. The share of homes sold without professional representation has trended down since reaching a cyclical peak of 18 percent in 1997.
  • 89 percent of buyers searched for a home on the Internet. For more than one-third of home buyers, the first step in the home-buying process was looking online for properties.

Illinois REALTOR® heroes

After attending the Heroes Welcome Home educational program earlier this year I was inspired to share the tips and resources for helping U.S. military veterans and service members with readers of Illinois REALTOR® Magazine. Below are a few of the resources mentioned in the story.

There are specific housing programs for military veterans and special considerations for dealing with someone who may have a disability. Heroes Welcome Home covered these and more as part of a pilot project of the Chicago Association of REALTORS® supported by the National Association of REALTORS®, Illinois Associations of REALTORS®, and local boards including Mainstreet, North Shore-Barrington and NorthWest Chicagoland. Photo collage of Illinois REALTOR® Veterans

I am especially proud of the Illinois REALTOR® Heroes page where we show photos of some members of the Illinois Association of REALTORS® who have served our country so well. If you are an IAR member and have served in the armed forces please let us know at iarnews@iar.org. We want to honor all of you who take defending property rights to a new level! Thank you for all you have done for us!

Illinois home sales continued strong in June

Home prices in Illinois are showing signs of stabilizing according to the June home sales report released today by the Illinois Association of REALTORS®. The homebuyer tax credit has proven to be a boost to the housing market with 10 straight months of year-over-year gains in home sales activity statewide, and a full year of mostly double-digit gains in the nine-county Chicago region.

Going forward University of Illinois economist Dr. Geoffrey J.D. Hewings expects sales to continue posting year-over-year gains through September. This gain in sales activity may be due to a residual effect of the sales of homes purchased using the homebuyer tax credit which ended April 30 and the extension of the closing deadline to September 30 of this year.

Jobs remain the key factor affecting consumer confidence, the overall economy and the housing market.

Said Dr. Hewings in his July forecast: “The economy is certainly not helping the housing market; the loss of over 200,000 temporary census jobs overwhelmed the private sector gains of 83,000 jobs.” As reported by Federal Reserve Chairman Ben Bernanke yesterday in his testimony to Congress, slower economic growth is on the horizon along with a prolonged sluggish recovery in the labor market.

Both the national and Illinois unemployment rates lowered a bit in June (from 9.7% in May to 9.5% nationwide and from 10.8% in May to 10.4% in Illinois). However, according to the forecast: “There is some concern that the surge in employment nationally may be slowing, dampening prospects for growth in Illinois.”

Dr. Hewings noted rental leasing rates have increased about 1% from a year ago: “Over time, if rental rates continue to increase, this may generate some renewed expectation that renters will explore becoming homeowners.”

Here’s a snapshot from IAR’s June Illinois home sales report:

Illinois

  • 10th month in a row for home sales increases; sales up 18.3%
  • June 2010 median price up 2.5% to $170,000 compared to June 2009 (the fourth month for median price increases statewide since January 2010)

Chicago PMSA*

  • 12th month in a row for sales increases; sales up 27.2%
  • June 2010 median price down -1.2% to $207,500 compared to June 2009
  • Grundy, Kendall and Lake all reported median price increases

*The Chicago PMSA region includes the counties of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will.