By Holly Whisler

The phrase “these unprecedented times” has been overused this year, yet still rings true. When the Federal Reserve cut interest rates to near zero in March, the area economy responded. Consumer lending – specifically, home and auto loans – gained momentum over the summer months, despite high levels of unemployment and uncertainty resulting from the pandemic.

Jeff Ambrose, CEFCU Member Center manager and senior business loan officer said, “Immediately following COVID-19 restrictions and government-mandated shutdowns, CEFCU did see a drop in loan applications and loan closing volume. Starting in June, as the local economy began to reopen, CEFCU experienced strong demand for consumer loan volume and vehicle loan applications.” According to Ambrose, June and July were record months for consumer loan volume at CEFCU and continue to be in strong demand.

Lori Ernst, vice president of lending at Heartland Credit Union, echoed the same sentiment. Ernst said, “When dealerships opened last spring after the stay-at-home order, May was slow, but then we saw several good months of credit union members applying for auto loans. Auto loan rates are low and this has created a market for refinancing existing car loans as well.” Ernst is optimistic that “auto loan rates will stay in line with home loan rates, maybe into 2023.”

Auto loan rates are at all-time lows, dealerships are open and people are ready to buy; however, inventory of both new and used vehicles is too low to keep up with demand. Ernst said that new car inventory was lower than usual at the beginning of 2020 due to the fact that manufacturing facilities went on strike at the end of 2019, and that existing inventory sold quickly.

Pete Sander, president of the Illinois Automobile Dealers Association, corroborated Ernst’s comments and said, “Inventory is improving, but not where dealers would like to have it. Inventory levels remain low as all manufacturers had shut down in early spring due to the coronavirus pandemic. The industry has rebounded, as best it can, but not quite like it did in 2019.” Sander said consumers are buying sport utility vehicles, trucks and crossovers, more so than cars. Sander predicted that fourth quarter sales will be good, but inventory will remain an issue.

Sander explained that used car inventory is also low, in part due to “a high percentage of vehicle leases scheduled to expire in the spring that were extended. Once those leases expire, some of those vehicles will supply used car inventories,” he said.

Mortgage loan rates are also at all-time lows and this has helped spur the Springfield-area real estate market. Data from Illinois REALTORS® showed the Illinois housing market was so strong over the summer months that the surge lasted through August.

Sangamon and Menard counties reported a combined 7.65% increase in units sold and a 6.9% increase in the median price, according to Illinois REALTORS®. The median is a typical market price where half the homes sold for more and half sold for less. The statewide median price is at its highest level, compared to previous years.

Ambrose remarked, “Similar to vehicle loan applications, CEFCU has seen very strong demand with both home loan purchases and refinance applications.  Rates have been at record low levels, driving the refinance market and also making it affordable for individuals to purchase a home.”

Jason LeMasters, mortgage loan officer and vice president at Marine Bank said, “Refinance loan applications are still coming in at a high rate. This is due to interest rates remaining at record lows. Purchase loan applications from June-August were steady as well.” LeMasters noted that a lot of buyers who were on the fence about moving chose to do so because of the low interest rates, which helped increase their purchasing power.

Other trends this year include an increase in customers applying for loans online, which many lending institutions put into place during the stay-at-home orders. In addition, Ernst added that Heartland Credit Union is also “seeing shrinking home equity loans as people are paying off debt.”

Ernst said, “People are still hesitant to spend large sums of money due to the uncertainty of what the future holds,” and noted that consumers are spending less overall. The good news is that even with all the lingering uncertainty, the local economy is showing strong levels of consumer confidence when it comes to purchasing homes and autos.

Holly Whisler is a freelance writer from Springfield who previously worked in the real estate business.