Extension of Tax Credit Is On the Table

Posted at 7:58 AM, Sep. 18, 2009

Last night a bi-partisian bill was introduced before the Senate to extend the current first time homebuyers tax credit of $8,000.  To date, over a half of million people have qualified for this credit.

The National Association of Realtors has requested that the bill be extend to June 1st of 2010 versus it's current expiration of November 30th of 2009. Most buyers (and agents alike) are feeling it is crunch time given how many transactions are taking 45-60 days to close.  So the absolute latest date to write an offer is October 15th. 

In addition to a postponed date, the NAR is asking changes to the bill including raising the income caps and opening it up to all buyers, not just first timers, in order to help stimulate the move-up buyers who would be most responsible for the housing recovery. 

I will keep you posted on the results.  Let's hope they do extend it. 

Appraisals Still an Issue

Posted at 8:56 AM, Sep. 16, 2009

As you know, one of the biggest challenges that Realtors and lenders wrestle with these days is getting good appraisals. In less than two years, we’ve gone from a time where many properties were ridiculously overvalued to the complete opposite – and neither extreme is good for us as an industry. The attached article is a good discussion of the issue and what’s being done to try and reach a sensible alternative.

Market Trends In Chicago

Posted at 8:52 AM, Sep. 14, 2009

Are we seeing signs of recovery yet?  Not according to David Hanna.

Illinois In Top 10 for Foreclosures

Posted at 6:25 AM, Jul. 31, 2009

According to RealtyTrac who monitors foreclosure activity, Illinois ranks number 8 out of 10 for the highest foreclosures, with well over 68,000 files against homeowners.  California, Florida and Arizona were the top three.

Nation wide, statistics show an increase in filings in the first six months of 2009; up 9% since the previous six month period and a total increase of 15% since 2008.  That breaks down to 1 in every 84 homes are in trouble. 

Leading experts state that unemployment and oppressed housing prices have been the leading cause.  Read more.

This Buyer's Market Is Showing Signs of an End

Posted at 5:59 AM, Jul. 29, 2009

While we still can anticipate more months of a buyer's market, it is showing signs of closure.  According to the National Association of Realtors, the national supply of housing peaked in November of 2008 with an 11-month supply.  However, as of May of 2009, the supply has dropped to 9.6 months.  Granted that every market is subject to it's own inventory statistics, but we can see from these overall facts that the gap between supply and demand is shrinking. 

What does that mean for the consumer?  Well, if the inventory continues to shrink, thus reducing supply, we can anticipate that housing prices will rise or even flatline in some areas and sellers can anticipate offers closer to list price and less time sitting in the market. 

So, if you are a buyer that is still sitting on the fence looking for the "right time", here's your clue.

Credit Card Curtail

Posted at 6:37 AM, May. 22, 2009

This is a step in the right direction.  Congress has now passed a bill that will prevent banks from arbitrarily raising interest rates on consumers. 

The new regulations would make it harder to get credit to those under the age 21 and banks would not be able to raise interest rates unless a consumer was no less than sixty days delinquent and to reinstate previous rates if the consumer has paid the minimum payment on time for at least six months following.

Banks on the other hand, argue that this is a tremendous blow to the economy for it will force them to raise the bar of interest rates to all credit card holders and to bring back annual fees.  The claim is it will make credit even harder to acquire. 

It's about time. 

The Housing Market Playground

Posted at 4:09 AM, Apr. 24, 2009

It seems that the new vicious playground is housing blogs where plenty of people are finding their voices, and none to kind.  Their popularity allow those from various perspectives to bash homes for sale, namely those of upper price brackets.  Why one might ask?  Perhaps the frustration that many would be buyers have towards markets in cities where housing is still expensive, even with foreclosures, short sales and otherwise, desperate sellers.  I see both buyers, sellers, agents and the population as a whole are in need of a reality check instead of throwing stones.  Taste is still subjective and motives can cause cloudy vision.  More importantly, we all need to keep a positive mind and mouth.

Highlights of the Stimulus Bill

Posted at 9:53 AM, Feb. 23, 2009

Here is why Realtors are cheering!

Stimulus bill includes boosts for housing. The American Recovery and Reinvestment Act of 2009 (H.R. 1) increases the first-time homebuyer tax credit to $8,000 and eliminates the repayment requirement for buyers who purchase a home between Jan. 1, 2009 and Dec. 1, 2009 (See how the tax credit works). Other housing measures in the bill include:

• FHA, Fannie and Freddie loan limits - Higher 2008 limits will be reinstated for 2009, except in communities where the 2009 limit is already higher. (Link to NAR estimates.)
• Foreclosure mitigation and neighborhood stabilization – Funding will be given to states and municipalities that are recipients of Community Development Block Grant dollars to stabilize neighborhoods and redevelop abandoned and foreclosed homes.

Chicago Condo Market Report

Posted at 9:36 AM, Feb. 18, 2009

Here is the latest stats provided by Chicago Condo Online about current market conditions.  Find out what has been affecting the sales in 2008.

Energy Saving Tip #10

Posted at 12:02 PM, Nov. 14, 2008

Dial Down- You may have to bundle up, but lowering your thermostat about 10% can also lower your heating bill by 10% (for example, reducing your home's temperature from 74 degrees to 68 degrees).  A programmable thermostat is highly recommended and can also help lower heat bills tremendously.

www.homeimprovementmag.com

Energy Saving Tip #9

Posted at 12:00 PM, Nov. 7, 2008

Schedule Seasonal Check-Ups- Have your heating and cooling system checked seasonally.  The cost for a typical service call to clean a unit and change filters is about $75-$100.  Maintaining the "health" and extending the life of your heating and cooling system will be well worth the service fee.

www.homeimprovementmag.com

Getting a Loan Will Get Even Harder for Buyers

Posted at 10:11 AM, Nov. 6, 2008

If you are among the many buyers who are waiting things out, you are in for rude awakening.  Opportunity with great real estate prices may continue, but obtaining a mortgage will not.  If you are not considered a prime buyer, now is the time to act and get your foot in the door before it's too late.  Read the latest from Steven Levitt, Vice President of Lending at Guaranteed Rate.

Latest From : The Levitt Report

Planning To Buy A Home In 2009? Expect A Tougher Mortgage Road Ahead. Posted: 05 Nov 2008 09:45 AM CST The Federal Reserve confirmed what most of us already knew -- getting qualified for a "prime mortgage" is increasingly more difficult. In a quarterly survey of 84 banks, 75 percent of respondent banks tightened mortgage guidelines over the last 3 months for the most qualified of home loan applicants. "Prime" is a vague term when it comes to mortgages, but, historically, a prime borrower is one that can document: A well-documented credit history Very high credit scores Very low debt-to-incomes Historically, banks bent over backwards to lend money to this class of borrower. Today, they're thinking twice. The chart's steep ascent reinforces that members of all tax brackets face consequences from the current credit market turmoil. And, although some corners of credit looked poised to recover -- interbank lending, for one -- the mortgage market is yet unaffected and should be among the last to thaw. All prospective home buyers should prepare for the likelihood that mortgage guidelines continue to toughen before they start to ease. Mortgage applicants on the cusp of being approved today will almost certainly be turned down for a mortgage in 2009. Owning real estate can require a tremendous amount of advance planning and, sometimes, looking at the past is the best way to prepare for what's coming ahead. According to the Federal Reserve's survey, what's coming ahead is more mortgage application scrutiny.

Energy Saving Tip #8

Posted at 11:57 AM, Oct. 24, 2008

FANtastic Idea to Stay Warmer for Less- Since heat rises you can put your ceiling fan to work (in reverse) for only pennies a day.  Turning your ceiling fans on low and in the downwards position re-circulates warm air back down into the room.  This makes the room feel warmer so you can lower your thermostate and save 5% on your heating bill.

www.homeimprovementmag.com

Energy Saving Tip #7

Posted at 11:54 AM, Oct. 17, 2008

Duct, Duct, Seal- Leaky duct work can increase heating and cooling costs by hundreds of dollars a year.  By sealing leaky ducts you save two fold.  Your system doestn't have to work as hard when ducts are properly sealed.  The second being is that you can lower your thermostat setting by a few degrees and your home will feel just as warm. 

www.homeimprovementmag.com

Energy Saving Tip #6

Posted at 11:40 AM, Oct. 13, 2008

A Little Star Makes A Big Difference- Buy appliances that feature the Energy Star Label.  They cost a little more, but they are worth it.  Current models are 40% more efficient than older ones and can save up to $15 per month.  Believe it or not, the US Dept. of Energy says that using a energy efficient dishwasher is better than hand washing a sink full of dirty dishes.  Additional tips include using cold water to wash clothes, gas ranges are more efficient that electric and stacked fridge-freezer models use 10-25% less energy than side-by-side models.

www.homeimprovementmag.com

Proposed Change-Limited Time Sale

Posted at 2:35 PM, Oct. 8, 2008

For those not familiar with what I am talking about, as of October 1, 2008 FHA backed loans are no longer eligible for seller financing concessions.  Meaning, the seller of a property is no longer able to help the buyer with their down payment and/or closing costs.  This could equal up to 6% of the cost of the property.  I can tell you from experience, buyers were out in droves trying to take advantage of this opportunity before it was too late.  There were some who did not even need it but considered it an instant "rebate" on buying.  Couple that with sellers anxious to sell, many complied (and this is not a platform for the argument of inflated appraisals either).

Now I do not claim to be any financial expert and perhaps my idea is in vain, but what if it were possible for the mortgage industry (banks) where able to cooperate with the housing market by offering from now until say December 31st, 2008 locked in fixed rates from 4.5-5.25% for those that qualify (income verification and reasonable assests required) to only homebuyers.  I believe this would create an environment that would encourage those that can buy to get off the fence knowing the rates will be for a limited time.  By doing so, our current housing inventory can potentially be absorbed and thus, prices stabilize. 

Now I do think there needs to be restrictions so that the market isn't flooded with re-fis, which special rates could be offer to those in "potential" high risk similar to that of the incentive for those facing foreclosure with risky arms.  By loosening the financial "hold" of the cost of housing, confidence will increase and people will be less scared to spend.  This may even be more beneficial after the elections which is when I think many might regain their hope.  This also will prevent those from dumping their overpaid properties back into the market since price will still be king and for those selling under the 5 year bench mark but most assuredly take a loss.

When the basic law of supply and demand is back in balance, we will witness stable housing prices, moderate inventory, and consumer spending less restrictive.  Hence, jobs will be created, investments will go up and our economic equilibrium is restored. 

Any thoughts?

Energy Saving Tip #5

Posted at 11:38 AM, Oct. 3, 2008

Chill Out- Lowering the temperature setting on your hot water heater to 120 degrees can save up to $50 annually.  Tankless water heaters are an amazing innovation.  Water is heated on demand instead of constantly, saving hundreds of dollars a year.

www.homeimprovementmag.com

Chicago Market Update

Posted at 5:07 AM, Oct. 2, 2008

Here is our latest stats from the Chicago Association of Realtors and MRED.

We are still seeing a steady decline in prices since 2006.  The hardest hit was Multi-Units. 

Insights from a Mortgage Professional

Posted at 4:10 AM, Sep. 30, 2008

Here is an insight provided from Jamie Simpson from Guaranteed Rate to help consumers and real estate professionals gain some clairity to the scare of recent headlines.  Feel free to give him a call with any questions.

I want to provide insight to the credit crisis of last week because I know there is a lot of confusion based upon scary headlines of the past several days.  My hope is to clarify some terms and explain what actually happened, what it means for the economy, the real estate market and your mortgage for the next 6-9 months.

What Happened: The Treasury Purchased Assets, Not a Bail Out, Taxpayer Might Profit

Under normal circumstances, the government would let AIG and Fannie Mae and Freddie Mac fail.  Lehman Brothers was allowed to fail (its CEO Fuld sold his shares for only 20 cents each and lost $145,000,000 since January), and Bear Sterns was bought by JP Morgan with a collar loan from the Treasury.  But these were not normal circumstances. The government bought assets totaling $700B in delinquent mortgages because no other institution was willing to buy these highly leveraged bad debts, nor did any other institution have a balance sheet large enough to absorb them.  Institutional banks stopped lending to each other and hoarded cash because they feared they would not get paid back. Only the Treasury was trusted to pay them back.  The troubled assets were simply too large, too complex, and too leveraged, sometimes 40:1.  They need to be de-leveraged and appraised to allow for an orderly trade of these assets.  Once clearing prices are set, institutions will trade them.  Capital of approximately $350M will need to be raised.  The Treasury valued the assets at $700B, which is at a discounted par value of $1 trillion.  It represents 10% of the system's mortgage exposure, and 100% of the delinquent mortgage exposure.  The Treasury borrowed money to buy these assets, and might make or lose money when these assets are sold.  The difference is what we taxpayers are responsible for.

What It Means for Inflation, Credit, and Housing; Good News, Bad News

Whenever the government borrows massive amounts of money, it crowds out other players such as small businesses who need cash to run their business.  So the problems on Wall Street will trickle down to Main Street.  The good news is that because the assets need to be de-leveraged, this will be deflationary.  You can expect low inflation in the next 6-9 months, as well as low mortgage rates.  The bad news is that the consumer is under stress, he feels that tighter credit has eroded his wealth, and unemployment is now rising.  He will cut back on discretionary consumption.  The key driver of inflation is unit labor costs, and in this down business cycle labor costs will be deflated because of the contraction in employment.  The risks are thus higher for a contraction in the economy.

The key is the stabilization of prices in the housing market, which has been occurring nationally.  Housing inventory has slowly been absorbed over the past 14 months, and it does take fewer months to sell today.  The National Association of Realtors believes housing will begin to turn around in earnest in 1Q2009.  Prices are firming, we are nearing a bottom, and auction inventory is reducing.  The Treasury's sale of troubled assets will speed the dissolution of housing inventory. Nonetheless, government policy may be necessary to limit the downside, possibly through more liquidity of reserves into the system, and fiscal stimulus.  It does not appear that the Fed needs to lower its Fed Funds rate of 2% because its real rate is actually negative because inflation is higher than 2%, so businesses and banks are borrowing for free.  It seems to be stimulative enough for now.  If the Fed adds liquidity into the system and the liquidity is not going to goods and services (like the stimulus earlier in the spring), but instead goes to purchase assets, this is not inflationary.

Bottom-line, it is rare to see low mortgage rates and low housing prices.  Usually the two are inverse to each other -- high prices, low rates and vice-versa.  It is a great time to buy, and the market will come back sooner than expected.  Get ready because the opportunities are plentiful now.  If you have good credit and income, you can get almost any loan.  If your credit needs repair, please call me because lenders are charging up to 1% higher rates for FICOs less than 660.

The costly restrictions by Fannie Mae and Freddie Mac on investment properties need to be removed to sell more property.  Today, it can cost an investor up to 4% in points to buy a condo or a 4 flat when in February it was only 1.5%.  Also, as of January 1 2009 no investor with more than 4 mortgages can get an investor loan from Fannie and Freddie.  As long as the investor has 20% down and 640 FICO scores, this makes no sense in this market.

Where We Go From Here: GDP Here and Abroad, Taxes, Undisciplined Government Spending

The current financial crisis, Boeing strike, HP layoffs, and the remnants from Hurricane Ike will be felt and we will likely have a volatile period immediately following these announcements, but the underlying trend for most companies is strong today.  Except for the financial sector (Fannie Mae and Freddie Mac were replaced by two other companies) and some discretionary consumer-based companies, the cash flow and earnings of businesses is generally strong for the 3rd Quarter. The GDP was 3.3% in the 2nd Quarter ending June 30.  Yet the risks are still higher for a contraction in the economy going forward.

The US is farther along in the downward global business cycle than is Japan and Europe.  As their economies stall, look to the ECB to consider lowering its rates from 5% to be closer to our own 2%.  The interest rate differential is not favorable now but look for the ECB to change that. The US is also likely to exit from this downward business cycle faster than Japan and Europe.  But our exports will be hurt, and that has been a bright spot for the US.

More tax revenue than ever was brought into the Treasury's coffers in 2007 and 2008, yet the federal budget deficit is out of control, currently about $500B.  That means the government is borrowing almost $1 out of every $5 it spends.  The government has to get its spending under control because plenty of tax revenue is generated by the taxpayer, and the taxpayer is tapped out.  The national debt is also approaching $10 trillion, which means that rising interest payments are being made overseas to pay the coupon on the Treasuries held by foreigners.  Tax increases by Herbert Hoover in 1932 from 28% to 63% on the top earners to end the Depression actually prolonged it. We're not in a Depression, which had a 40% foreclosure rate, but clearly any tax policy going forward also needs massive cuts in spending to reduce the budget deficit.

Jamie Simpson
VP of Mortgage Lending
Guaranteed Rate, Inc
P. (773) 290-0525
C. (773) 251-7187
F. (773) 435-0623
jamie@guaranteedrate.com
 

Energy Saving Tip #4

Posted at 10:51 AM, Sep. 26, 2008

Windy Windows & Drafty Doors- Replacing old drafty windows and doors with new airtight or thermo-pane windows can help reduce your home's heat loss by half and increase your energy efficiency by 70%.  If new windows aren't in the budget, weather stripping and plastic insulation kits are quick, easy & economical solutions that can save up to 10% annually.

www.homeimprovementmag.com