WOODSTOCK – Buying a home was a daunting task for the Carey family.
The family of seven – including five girls 12 years old or younger – had been living in a cramped two-bedroom duplex for years when Erin and Sean Carey decided it was time to purchase a home.
The Woodstock couple saved for a down payment and worked on keeping their credit scores solid. They went in for a loan. They were denied.
“We were paralyzed by the thought of being rejected again,” Erin Carey said. “We probably delayed when we could have bought a home more than a year because we were so scared to be rejected again.”
First-time homebuyers aren’t returning to the market. They usually help drive rebounds in home sales. First-time buyers accounted for 29 percent of home sales in July compared to the 40 percent level consistent with a healthy market, according to a report from the National Association of Realtors. By comparison, Investors made up 16 percent of purchases, down from a recent peak of 22 percent in February. The smaller proportion of investors suggests the market is slowly returning to normal.
With sales on the rise, and interest rates relatively low, real estate agents say now is the time for residents searching for a new home – a process the Carey family knows all too well.
The family eventually re-entered the market after spending more than six months getting financially comfortable enough to place another offer on a home.
In January, the family got a loan and moved into a four-bedroom, two-and-a-half-bathroom home in Woodstock.
“We have a house we never could have purchased when we first were attempting to buy a home,” Carey said. “We were denied at a time when people were upside down in their mortgages. We would have been in that same situation. It was a blessing.”
McHenry County home sales have rebounded over the past two years, according to a market report prepared for the Northwest Herald by Rob Schaid, managing broker and owner of Re/Max Plaza in McHenry. Some 517 homes were sold last month.
That’s a 70 percent increase compared to 305 in August 2011, and a 29 percent increase compared to August 2012, when 400 were sold.
“A lot of times you talk to buyers and they are waiting for the bottom, but you never know what that is until it has passed,” Schaid said. “It has passed, and now is the time to buy before prices go up and you miss out.”
As sales have increased, there has been a sharp decline in the number of available properties.
A total of 4,128 homes were listed sale in August 2011. Since then, the supply has dropped by nearly a third. Last month, 2,774 homes were listed for sale, a 32.8 percent decline from August 2011, data shows.
“We’re selling more because the economy is improving and buyers are getting off the fence and interest rates are low,” Schaid said. “Buyers are realizing they may have already missed out and are trying to jump on everything that is left.”
Months’ supply of inventory – or how many months it would take to sell all of the homes currently listed for sale – is a key factor in determining the health of the market. A balanced market has six months of supply, meaning buyers have enough homes to look at and sellers have enough time to sell.
The months supply of inventory peaked at 11.2 months in August 2011, dipped to 7.6 months in August 2012, and was cut in half to 3.9 months last month, data shows.
“Two years ago there was a lot of properties on the market and no one was buying,” Schaid said. “This is a dramatic change. It makes it very competitive again.”
Illinois home sales increased by 17.3 percent over previous-year levels in August and median prices increased 13.6 percent, according to the Illinois Association of Realtors. Statewide home sales in August – including single-family homes and condominiums – totaled 15,814 homes sold, up from 13,485 in August 2012.
The statewide median price in August ($167,000) was up 13.6 percent compared to August 2012 ($147,000), numbers show. The median is a typical market price where half the homes sold for more and half sold for less.
Those preparing to purchase a home should attempt to pay all their bills on time to keep their credit clean and keep credit card balances low in relation to limits, said Martin Sloan, an Island Lake-based mortgage originator.
Although closing on a home has become more complicated than it was five years ago, it is still a manageable, straightforward process.
“Rates are historically low even though they are rising,” Sloan said. “There are a lot of opportunities to purchase, and the guidelines have loosened for foreclosures and short sales.”
Having a game plan and talking to people who have already purchased a home can ease the stress of entering the housing market.
“If you are afraid of it, get over the hump and talk to people who can help,” Carey said. “Getting over that emotional hurdle is a huge deal.”
The average rate on a 30-year fixed mortgage was 4.57 percent last week, more than a full percentage point higher than in May, when Federal Reserve Chairman Ben Bernanke suggest that the Fed could soon scale back its $85-billion-a-month bond purchase program, which is meant to keep interest rates low. The Fed last week decided against reducing its purchases due to the sharp increase in mortgage and other interest rates, among other things. Pulling back on its bond purchases could have sent rates even higher.
The Associated Press contributed to this report.
The highest and lowest priced homes for sale in McHenry County:
The highest priced home on the market last week was a 20-acre estate at 19802 Dunham Road, Woodstock. It was listed at $6.75 million. The 22,000-square-foot home has 5 to 7 bedrooms and 9.3 bathrooms. It has a large kitchen, library, theater room, outdoor pool and cabana, hot tub and therapy room, sauna, exercise room, office, laundry center, a second caterers kitchen, two caretaker suites, upper and lower-level entertaining areas, and a freight/service elevator in addition to the main elevator.
The lowest priced listing last week was a two-bedroom, two-bathroom home in foreclosure at 119 Valley View, Lakemoor. It was listed at $12,900.
Source: Midwest Real Estate Data LLC