By Kevin Haas
Rock River Current
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ROCKFORD — Rebecca Bailey stepped into the housing market at one of the most challenging times for buyers.
It was late summer, and Bailey was moving back to Rockford from Wisconsin. But she was shopping for her first home at a time when prices in the Rockford region were at an all-time high and homes were selling at a dizzying pace.
“Some of them we had on the list to go look at already had an accepted offer before we could even go look at them,” she said. “It was definitely a frustrating process. I don’t think buying a house is fun at all, but once you actually officially get the keys that’s the fun day.”
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After about three months of searching, things finally cooled down enough for Bailey to find her home. She closed on the purchase in mid-October, a month that new housing data shows the emergence of two trends local Realtors haven’t seen in months: homes are taking longer to sell and there’s a bigger inventory of houses on the market.
“It’s definitely cooled off quite a bit. We are seeing some price reductions and homes sitting a little longer than a couple hours on the market, but things are still warm,” said Kelsey Fagan, a Realtor with Dickerson & Nieman who guided Bailey through home buying. “Things are still selling pretty quickly and selling for a good selling price.”
Data released Wednesday shows it took an average of 19 days for a home to sell in the region in October, according to the NorthWest Illinois Alliance of Realtors. That’s up from a record low of 10 days in July and the slowest pace since an average of 23 days in April.
At the same time, the inventory of homes for sale grew from an all-time low of 255 in February and March to 464 in October. However, that is still the lowest-ever number of homes for sale in October and is down 15.5% from 549 in October 2021.
“With inflation and rising mortgage interest rates weighing heavily on the minds of consumers, homes started selling less quickly in October,” said Conor Brown, CEO of NorthWest Illinois Alliance of Realtors. “The fact that homes sold on average within 19 days indicates that it is still a good time to sell.”
For Bailey, a single mother who is raising her 11-year-old son Kaiden, buying was still a worthwhile investment long-term despite higher prices and mortgage rates. Data from the National Association of Realtors show that first-time buyers like Bailey were responsible for 28% of sales in October. However, first-time buyers should make up roughly 34% of buyers in a balanced market, according to the organization.
“Rent is also at an all-time high, so why don’t I put some roots down,” she said. “It doesn’t look like it’s going to slow down any time soon. My theory was why rent for the next five or 10 years when I could be putting it into something that’s gaining value.”
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The market’s slight cooling also provided a more level playing field for Bailey, who was utilizing a Federal Housing Administration loan. FHA loans require lower credit scores and down payments than many conventional loans, making them popular with first-time buyers, but they also come with contingencies such as inspection and appraisal requirements.
“When the market was so crazy you were seeing a lot of cash buyers that would drop all contingencies,” Fagan said. Now, “there’s a better opportunity for someone with an FHA loan or any kind of contingency to have a fair playing field.”
Price growth in Boone, Winnebago and Ogle counties has also cooled this fall. After hitting an all-time high of $193,577 in August, the three-month-rolling-average price fell to $192,298 in September and $188,798 in October.
“We are actually still seeing quite a bit of cash buyers, but it is not a buying frenzy like we were seeing before,” Fagan said.
Prices are cooling as mortgage rates continue to rise. The average 30-year fixed-rate mortgage was 6.9% in October, up from 3.07% in the same month a year ago. The higher rates can squeeze out first-time buyers, Brown said.
Prices are up about 5% in October from the same month in 2021, but the pace of price growth has slowed. For example, the record high prices in August were up about 9% from the same month a year earlier.
“The somewhat higher level of price growth we had earlier this year has slowed a bit,” Brown said. “It’s welcome news. It brings back a little balance.”
This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on Twitter at @KevinMHaas or Instagram @thekevinhaas.