Hard News

While you weren't watching ...... mortgage rates were tumbling

But joining the refi rush won't be so easy this time

By Michael Oneal and Mary Umberger | TRIBUNE REPORTERS
January 26, 2008

With long-term mortgage rates sinking to their lowest level since March 2004, it looked like one of those golden opportunities to refinance the home or condo this week.

But many who rushed out to their banker or mortgage broker discovered that it is much more difficult to borrow money than it was even a few months ago.

The real estate crisis dragging down the rest of the U.S. economy has frozen the market for many borrowers. As prices fall and lenders wallow in a sea of losses, only those with gold-plated credit ratings and ample equity in their homes are sailing through the application process, mortgage bankers said.

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"There's a widening gap between those people who can qualify for a mortgage and get great rates and those who can't," said Barton Pitts, president of Professional Mortgage Partners in Downers Grove. "It's a totally different world."

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What's happened is that banks and mortgage lenders have not only clamped down on exotic, subprime loans they can't sell in the secondary market, but they also have tightened rules or raised the cost for medium quality and jumbo loans that make up a big part of the market. They have demanded more equity, tougher appraisals, and higher credit scores.

Here it is. The coffin of the housing market is being hammered shut. Even here in the "it's different here" Chicago. With out getting a loan to match those crazy asking prices, the market will tumble.

The "tougher appraisals" are the two harshest words in the whole article. What I in vision here is the new and improved appraiser will under cut the sellers outrageous asking price. The Greedy Seller won't budge on the asking price. The foolish buyer will tell the bank that they really need that house. The bank will agree, but the 30 year fixed loan will be for the appraisal. A bonus loan at a much higher rate will be given to make up for the difference. We shall see.

Mostly gone are the once-popular "no doc" loans that required little or no proof of income or assets. And new requirements demand more equity as a percentage of home value in weak markets.

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"What has gone away is you can't come in and lie to me," said Ken Perlmutter of Perl Mortgage in Chicago.

As if the mortgage broker was the victim! The once "popular no doc loan" is fraud, pure and simple. Both side of that contract should the imprisoned and fined.

Dirty is as Dirty Does

No big surprise here: Chicago zoning procedure is corrupt.

Chicago Tribune Investigation (video)

Poor, poor frmr. Ald Matlak. Of all the dirty Chicago pols, why is he singled out? I suspect he got his fair share for all the re-zoning favors he did for his business pals.

But on the flip side where were the voices of dissent when those projects were elevating Lincoln Pk, Bucktown, Wicker Pk, and the eastern edge of Humboldt Pk to the highest home prices of all of Chicago? Also, imagine all the additional property taxes those developments brought the County! Remember, each condo unit's property taxes are assessed at its SALES PRICE. Many of the old buildings in those neighborhoods probably had very low assessed values. They should be happy to help.

Well, I guess in the end Matlak should just be happy the Feds did not sneak in one night and try to shove a Silver Shovel up his..........................

A Sign of Things To Come?

What neighborhood is this in?




Englewood?

Washington Park?

Roseland?

West Pullman?

Garfield Park?

Hegewisch?

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Nope, sorry the correct answer is Detroit, MI. Sure looks like a Chicago-style Queen Ann Bungalow, right? Would you believe that Remax is selling it for ............ $1.00?! No joke. That house is for sale for ONE U.S. Dollar! And it is STILL for sale. That means, by my accord, if nobody will buy it for $1.00, it must be worth less than one dollar. How much less? 75 cents? 50 cents?

7727 RADCLIFFE ST
DETROIT, MI 48210
MLS ID# 27219986

Most People, Not All

Housing crashes through floor

Sales decline picks up speed in 4th quarter; a tough spring ahead

Sales of new homes in the Chicago area fell even faster in the fourth quarter, and with the economy on the brink of recession, homebuilders face another tough spring selling season.

Builders sold 2,196 units in the quarter, a 51% decline from the year-earlier period and the biggest quarterly drop since the residential slump began more than two years ago, according to Tracy Cross & Associates Inc., a Schaumburg-based real estate consulting firm. Homes sold in the quarter at the slowest pace in 15 years, the firm says.

"It's frightening, it's nerve-wracking — it's a lot of things," says Jerry Thiel, president of G. W. Thiel Inc., a Rolling Meadows-based carpentry contractor that employs about 30 carpenters now, down from 275 in 2005.

Sorry, the Golden Age of the construction worker has ended. Back to business as usual. Did they really think it would go on forever??

The housing downturn, longer and deeper than most people expected, has rippled through the local economy, hitting businesses like Warrenville-based Neumann Homes Inc., which filed for Chapter 11 bankruptcy protection in November, and USG Corp. of Chicago, which saw its third-quarter profit plunge 95% amid weak demand for its wallboard, a key residential construction material. Chicago-based publisher Tribune Co. has seen a steep drop-off in real estate-related advertising. And big-box retailers Target Corp. and Home Depot Inc. are tapping the brakes on plans to expand in the suburbs as residential development slows (Crain's, Dec. 24).

Ya, I suppose they did.

The market "is probably worse than it was in the early '90s," he says.

Well, It did go UP much farther than the 90's too. Shame on you for not getting out while the getting was good. Nothing last forever. Nothing.

Many People About to be Schooled

A return to old school standards for lending

January 18, 2008

BY SALLY DUROS Real Estate Editor, Sun-Times

James D. Shilling is a professor in the Department of Finance in DePaul College of Commerce and the Michael J. Horne Chair in Real Estate Studies at DePaul University.

The lenders today are going back to the old school and old standards. The old standards say that you cannot buy more than four times your income. So I believe the current lending standards are going to force prices down.

Four times income is too high. Talk to your parents. Real Old School is THREE times income. But ofcourse that will drive prices even further down. And NOBODY wants that do they??

Why are housing prices in Chicago so high?

They are so high in part because of zoning and in part because of tougher permit laws; the increased regulation causes prices to be higher. That is coupled with a substantial increase in income over time that has caused the run-up in housing prices.

All of these fees in lieu of property taxes have caused prices in general in Chicago to increase.

No, prices are high because people are crazy. Some people, many people really thought that a 900 sq ft shoebox ranch was worth $450,000. Or that a Northside 1 bedroom condo is worth $250,000. People were bidding against each other driving prices up to get stuck in a loan thay cannot afford in a house they cannot fit in.

Mabye they learned something by now.

Ah ....... the Truth Rings Out

This article might be the most significant housing article to come out of a Chicago news outlet. It seems that if "now is a good time to buy", then tomorrow will be better.

Silver lining: Good credit can earn home savings

January 13, 2008
BY J.W. ELPHINS Associated Press

The upside to a housing slump is cheaper homes. But many prospective buyers don't see bargains yet, especially as stricter lending standards qualify only the cream of the credit crop.

Read that first sentence over. Ok, one more time. CHEAPER HOMES ARE GOOD! It's a HOUSE PEOPLE! It is not an investment vehicle. An investment vehicle does not need new roofs, new hot water heaters, and upgraded electricity in fear or burning down the investment vehicle. A houses is a depreciating asset. They get old and break down. Then you have to spend money on fixes.

''The apartment dwellers and those just looking for a change are holding back, either afraid to buy right now, or are waiting for prices to drop,'' he said. ''Few are looking to upgrade until this whole thing shakes out.''

Renters Italo and Alexandra Subbarao are biding their time in what they call a pricey Chicago market. They want to buy a two-bedroom condo close to downtown by next summer, but are torn about what to do.

''If the prices came down a little bit more we'd certainly be more apt to go for it without hesitation,'' said Italo, a physician. ''But we know it's a significant investment. There is uncertainty in the market and that gives us uncertainty.''

It's good to know that there are a few people that are still smart with their money.

Read the rest of the article. It has a lot of good points.

Eat It!

Target 5: Could Housing Incentives Harm Some Customers?

PLAINFIELD, Ill. -- The drooping housing market is forcing some homebuilders to offer huge incentives just to get customers in the door.

It's a much different housing market than in years past.

When profits were high, builders would offer some free upgrades, or maybe a new television.

But hard times call for desperate measures and the incentive game is like never before.

But these incentives can come at the cost of other customers, like Bill and Meredith Rogers, who left Chicago for a bigger piece of the pie in suburbia.

They began building nearly one year ago with Gladstone builders in a new Plainfield neighborhood.

Just several months after moving in, the Rogers found an ad offering $100,000 off the base price of homes in their neighborhood.

The couple was shocked -- and immediately worried about their huge investment.

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The Rogerses understand the struggle, but still want an explanation from the builder with whom they trusted their biggest investment.

"That $100,000 is a lot of money to take from us. It may not be in paper, but it's taken the value from what we put in here," said Meredith Rogers.

Worried about what? That they are fools for overpaying for a house. Tough bananas. You have not seen anything yet!

I don't know how important THIS couple is to warrant a news story about THEM. But, I do know they are not even smart enough to keep their mouths shut. Look people, just sit there and look smart. Can you handle that? Probably not.

Not So Fast!

Pretty interesting development.

A court in Buffalo is trying to make the banks responsible for the physical maintenance of foreclosed properties that revert back to the lender. There is noway a former owner of a now foreclosed property would be responsible with what happens to a house after he was forced out. But it does not surprise me that the banks are trying to change the rules.


Dirty deeds

As housing crisis deepens, cities fight lenders over abandoned homes

By Michael Orey

updated 8:21 a.m. CT, Mon., Jan. 7, 2008

On Dec. 17 in a windowless Buffalo courtroom, Cindy T. Cooper, a prosecutor for the city, buzzes among a dozen men in suits, cutting deals. "You've got to unboard [the house], go in, and clean it out," she tells one. "If all the repairs are done quickly, I wouldn't ask for any fines." To another, she says, "the gutters weren't done right," and asks to see receipts for the work. It's "Bank Day" in Judge Henry J. Nowak's housing courtroom, more typically a venue where landlords and tenants duke it out over evictions and back rent. Instead, Cooper is asking lawyers for CitiFinancial, JPMorgan Chase, and Countrywide Financial to fix problems like peeling paint, broken masonry, and overgrown or trash-filled yards at houses the city says the banks are responsible for maintaining. It may be surprising to find these financial-services giants hauled before this obscure local tribunal.

This next part REALLY scares me.

That opens up a dispute over who is responsible for taxes and maintenance. Even when lenders do complete the foreclosure, they may walk away from the property, leaving it to be taken by a city for unpaid taxes, a process that can take years.

Anyone who has personal dealing with the City of Chicago or Cook County bureaucracy knows that this would be a terrible disaster! I could not imagine trying to negotiate with some city or county pawn over the price of some run-down ranch. Ugh.

This is good too.

Those charged with violations by Cooper include participants all along the complex mortgage-industry food chain, from loan originators to servicers to the Wall Street trusts that buy up the vast majority of home loans and then securitize them. A similar initiative is under way in Cleveland, where Judge Raymond L. Pianka puts lenders on trial in absentia when they fail to respond to charges.

Do they want to totally destroy the MBS market?? Imagine that you are holding a MBS. You are hoping beyond all hope that the market will turn around next spring. Many of the investment vehic...er i mean homes go into foreclosure. And now the originating lender points its finger at YOU! Because YOU are the owner of the property now.

Wow, rough times ahead.

Happy New Year!

Reality check for prices

Reality check for prices

COMMENTARY

Fed gives market its lump of coal

December 23, 2007

BY JOHN F. WASIK

The Federal Reserve's quarter-point cut of its benchmark rate to 4.25 percent last week looks like a big lump of coal in the stocking of the U.S. housing market.

While some buyers and refinancers might benefit, home prices could be headed for more declines in the most overheated markets, no matter what the Fed does.

It is more to do with housing prices way to high in comparison with wages. Period.