In recent years, the inability to access higher-priced mortgages left many Chicago residents – especially those pursuing properties valued above the area’s conforming loan limit – without the option of moving up to newer, larger homes.
But this barrier was breached in 2013 when the availability of jumbo loans returned, giving Chicago residents in high-priced areas access to the move-up market.
"We have this situation in Chicago, where our conforming loan limit is $417,000," said Matt Farrell, president of the Chicago Association of Realtors and managing partner of Urban Real Estate. But, he says, unlike cities such as San Francisco or New York, Chicago properties in high-priced areas are generally averaged in with other lower-cost areas, setting the conforming loan limit ceiling much lower.
This in turn makes it almost impossible for higher-tiered buyers to access larger conforming loans. And because of this situation, a lack of jumbo loans caused many homeowners to get stuck in recent years, Farrell explained.
But that all changed in 2013, according to the Chicago Association of Realtors and the Illinois Association of Realtors (IAR).
"Investors started getting back out there and creating a secondary market for these jumbo loans," said Farrell. "The availability of the jumbo loan allowed people to ‘buy up.’ "
And buy-up they did, leading to a 23.4% jump in year-over-year home sales in the City of Chicago last month, the Illinois Association of Realtors said. IAR recorded 2,352 Chicago sales last month, compared to 1,906 in 2012.
The median Chicago home price also shot up 22.6%, hitting $231,000 in September, compared to $188,400 a year earlier.
Looking at the overall Chicago Primary Metropolitan Statistical Area, which includes nine counties, home sales hit 9,583 in Sept., up 25.6% from 7,629 last year.
Farrell is already calling 2013 a "turnaround year for the city of Chicago."
The median home price is up 20%, while inventory is down 30% from year ago levels, he explained.
The surge is not just tied to the re-emergence of jumbo loans. Farrell tells HousingWire pent-up demand hit the market in 2013, with many buyers finally breaking away from the sidelines and snatching up properties.
Even with interest rates rising in September, Illinois continued to experience housing gains.
"September homebuyers showed they were not going to be deterred by slight interest rate increases or the possibility of a federal government shutdown," said Phil Chiles, president of the Illinois Association of Realtors. "The numbers reflect a strong end to the warm weather selling season, and provide good momentum into the final quarter of the year."
The average 30-year, fixed-rate mortgage in the state’s North Central region reached 4.50% in September, up from 4.44% in August and a significant jump from 3.49% last year.
IAR data also shows home sales statewide rising from 10,866 in September 2012 to 13,108 last month.