Summer could end hot, with a surge of homes in the Chicago area in the next few months, according to a new report.
Applications for mortgages and mortgage pre-approval spiked in the Chicago metro area during the second quarter of the year, according to data released today by Attom, an online real estate information service.
If large numbers of them go to the next step, purchasing a home, “we expect the Chicago area to be one of the hottest in the nation in the third quarter,” Daren Blomquist, Attom’s senior vice president wrote in an email.
The Chicago area ranked second only to Colorado Springs in Attom’s study of “pre-movers,” or people who own houses but apply for a purchase mortgage or pre-approval. (Refinances are not counted.) The index for Chicago was 241, and for Colorado Springs, 249. Nationwide, the index was 100, which means Chicago-area homeowners were more than twice as likely to buy a house than homeowners nationwide.
Attom’s study reports only an index figure, not raw numbers of mortgages.
Blomquist said the growth in interested buyers in the Chicago area may come from two key factors. First is that home prices are more affordable here than in “overheated markets such as San Francisco and San Jose,” where moving up may not be an option for many homeowners at the moment. Second is that as the housing recovery brings more Chicago-area homeowners into the positive-equity zone on their mortgages, they’re finally able to consider selling for a move to their next home.
Most of the mortgage activity in the first quarter would convert to purchases in July, August and September. Sales data for July, also released today, showed a decline in sales volume throughout the region.
But Blomquist noted that Chicago homeowners showed a similar surge in mortgage applications in the first quarter of the year, and it played out as an increase in home sales of about eight percent the following quarter. In the same period, sales were down three percent nationally.
If the same thing happens during the current quarter, Blomquist said, it’s “a healthy sign of upward mobility available to current homeowners and prospective homeowners” in the Chicago area, and “something many of the red-hot coastal markets are missing in this housing boom.”
The figures derive from mortgage applications submitted during the second quarter of 2017, offering a glimpse of home sales just ahead. The index is compiled by comparing the number of homes flagged in mortgage applications to the total number of homes in a given market.
Because the data come from applications submitted from April through June, they include some transactions that have already closed and some that are still pending. The index offers faster feedback than data pulled from recorded sales, according to Blomquist.
The report offers clues to where buyers are finding a greater supply of affordable homes.
“Within regional markets, we’re seeing some similar patterns to the last housing boom, where it became drive until you qualify,” Blomquist said, referring to the real estate adage urging home hunters to go where they can afford to buy. Home loans are harder to get this time around, he added, but housing market activity appears most robust in “the outlying counties further from jobs, but also less expensive.”