Illinois REALTOR® Magazine | October 2013
Illinois’ Foreclosure Inventory Moves Closer to Pre-Recession Levels
Economists weigh in on what’s needed for a housing recovery.
By Stephanie Sievers | Associate Editor
Illinois home sales and prices saw strong year-over-year gains over the summer and the trend is expected to continue into the fall. Median prices and sales are forecast to rise through October, according to the University of Illinois Regional Economics Applications Laboratory (REAL).
One ongoing factor in the recovering Illinois market is the foreclosure inventory. Foreclosures may have deterred some sellers from listing their homes, but distressed inventory is moving closer to pre-recession levels, said Dr. Geoffrey J.D. Hewings, director of REAL. How soon that might happen depends on the ratio of foreclosure starts to foreclosure closes, which reflect the speed of adding or removing the foreclosures from the inventory. Depending on the ratio, the foreclosure inventory could return to the pre-bubble levels by September 2013, December 2013 or September 2014, according to REAL.
Here’s what economists and others are saying about the overall housing market:
- “More housing demand from first-timers is vital for the recovery of the single-family housing market. Much of the market’s improvement to date has come from investors who bought mainly distressed property with cash. These bargains are largely gone, however, and investor demand will soon wane. Without more households stepping into the market to buy their first homes, the housing recovery could falter.” - Mark Zandi, chief economist at Moody’s Analytics (8/6/13) www.economy.com
- “I anticipate mortgage rates will continue to climb. I think they could reach perhaps five percent by year end or by spring of next year so there will be clearly an upward movement in mortgage rates and rising mortgage rates will reduce the pool of eligible home buyers.” - NAR’s Lawrence Yun. He says increased inventory, job creation and banks beginning to ease on mortgage underwriting standards could offset rising rates. (8/21/13) www.realtor.org
- “Gains in the housing market will continue throughout the duration of the year, adding to a strong 2013 start. That’s especially good news, as it will help make up for softer government spending and export growth, which had been the stalwarts of the economic recovery. Look for housing to add at least half a percentage point to GDP this year, with all the major indicators of growth rising. It’ll be just the second year since 2005 that all measurements see positive gains, although growth will be unevenly distributed across states, where housing is in different stages of recovery.” Kiplinger’s Economic Outlooks (7/26/13) www.kiplinger.com
- “The housing recovery appears to have weathered some of the uncertainty, although additional growth is expected to be modest rather than robust while the market awaits an easing of credit conditions in the presence of rising interest rates. The rise in mortgage rates has led to a drop-off in refinance activity but does not appear to have had much impact on home purchase activity to this point. Home prices are expected to continue to climb, although the pace should slow significantly from the dramatic levels seen during the past 12 months.” Fannie Mae (8/21/13) www.fanniemae.com